91-004787 Melbourne Sand Company, Inc. vs. Department Of Transportation Status: Closed Recommended Order on Thursday, October 31, 1991.

Summary: Petitioner failed ot establish the socially and economically disadvantaged owners have the knowledge, training or experience to run the company.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MELBOURNE SAND TRANSPORT COMPANY, )

)

Petitioner, )

)

vs. ) CASE NO. 91-4787

)

DEPARTMENT OF TRANSPORTATION, )

)

Respondent. )

_____________________________________)

RCOMMENDED ORDER

Pursuant to notice, a final hearing in the above-styled matter was held on

September 19, 1991, in Melbourne, Florida, before Joyous D. Parrish, a

designated Hearing Officer of the Division of Administrative Hearings. The

parties were represented at the hearing as follows:

APPEARANCES

For Petitioner: Vincent G. Torpy, Jr.

FRESE, FALLACE, NASH & TORPY, P.A.

930 South Harbor City Boulevard, No. 505

Melbourne, Florida 32901

For Respondent: Pamela A. Arthur

Assistant General Counsel

Pamela S. Leslie

Deputy General Counsel

Department of Transportation

605 Suwannee Street, Mail Station 58

Tallahassee, Florida 32399-0458

STATEMENT OF THE ISSUES

The central issue in this case is whether Petitioner is entitled to be

certified as a disadvantaged business enterprise pursuant to Rule 14-78.005,

Florida Administrative Code.

PRELIMINARY STATEMENT

This case began on July 3, 1991, when the Department of Transportation

(Department) notified the Petitioner that its application for certification as a

disadvantaged business enterprise was denied. The basis for the denial was

stated to be Rule 14-78.005, Florida Administrative Code, which requires that

ownership and control of the applicant be exercised by socially and economically

disadvantaged individuals. On July 18, 1991, the Petitioner timely filed a

request for an administrative hearing on the denial and the matter was forwarded

to the Division of Administrative Hearings for formal proceedings on July 30,

1991.

At the hearing, the Petitioner presented the testimony of the following

witnesses: Jane Waelti, Eloise Waelti, and Rick Waelti. Petitioner's exhibits

numbered 1 and 2 were received into evidence. Juanita Moore and Thomas S.

Kayser testified on behalf of the Department and its exhibits numbered 1 through

10 were admitted into evidence. The Department also filed the deposition

testimony of Jane Waelti, Eloise Waelti, and Rick Waelti to be considered as a

part of this record.

After the hearing, the parties were granted ten days leave from the filing

of the transcript within which to file proposed recommended orders. The

transcript of the proceedings was filed with the Division of Administrative

Hearings on October 3, 1991. Subsequently, the Department filed a motion for

time extension to file proposed findings of fact and conclusions of law to which

the Petitioner agreed.

By order entered October 8, 1991, the parties were given until October 28,

1991, to file their proposed recommended orders. Those proposals have been

considered in the preparation of this order. Specific rulings on the proposed

findings of fact are included in the attached appendix.

FINDINGS OF FACT

Based upon the testimony of the witnesses and the documentary evidence

received at the hearing, the following findings of fact are made:

1. Jane, Rick and Eloise Waelti are the owners of all stock issued by

Melbourne Sand Transport Company, Inc., the Petitioner in this case.

2. Petitioner is, therefore, a private, family-owned entity and is one of

four affiliated companies owned and managed by the Waelti family.

3. Together, Jane and Eloise Waelti own 59 percent of the Petitioner's

stock. Consequently, a majority of the Petitioner's stock is owned by women, a

category of socially and economically disadvantaged individuals as described in

Rule 14-78.002, Florida Administrative Code. Rick and Eloise Waelti, brother

and sister, each own 41 percent of the Petitioner's stock. Jane, their mother,

currently owns 18 percent of the stock.

4. In 1962, Jane and Melvin Waelti moved their family to Brevard County,

Florida and purchased Melbourne Sand Company. Over the years that enterprise

grew and evolved into four related companies, all involved in the business of

selling sand and aggregate, and the short and long range hauling of it. The

companies are: Melbourne Sand Company, Inc. responsible for marketing and

management; Melbourne Sand Transport Company, Inc. responsible for long range

trucking; Melbourne Sand Supply Company responsible for short range trucking;

and Melbourne Sand Mining Company, the entity that owns the physical plant and

buildings from which all Waelti operations are run.

5. After her husband Melvin's death in 1978, Jane Waelti became the

majority stockholder in all Waelti family businesses. Jane Waelti has worked

full and part-time in the businesses since 1965.

6. Rick Waelti became president of Melbourne Sand Company at his father's

death. Rick took charge of the operations side of the family businesses while

Jane continued to handle office matters including personnel functions. Also at

that time, Eloise Waelti was recruited to work in the businesses because of her

prior banking experience. To that end, Eloise took over the fiscal

responsibilities for the family businesses.

7. Currently, responsibilities related to the day-to-day operations of the

Petitioner have been delegated to nonowner employees of the company. For

example, Petitioner employs a dispatcher who is responsible for assuring

vehicles are dispatched to job locations as may be required. That individual

also interviews and hires drivers for the company's trucks.

8. Similarly, another nonowner employee solicits work for the company and

prepares bids for submission on jobs. That employee also coordinates projects

with the dispatcher so that jobs are completed in a timely manner.

9. Rick, Eloise, and Jane Waelti are in the office to assure that all

others are performing their respective jobs appropriately. t s e i f i h r v k c i R  e e

operations are being conducted correctly; Eloise serves as comptroller verifying

funds are available for projects, acquisitions, or repairs; and Jane coordinates

personnel and insurance concerns.

10. Thus, decisions regarding problems affecting the Petitioner are dealt

with by the Waeltis as a committee. They meet on an almost daily basis to

resolve any policy or business decision collectively. For example, if a repair

is needed in order to get a vehicle back in service, the trio will meet to

decide the pros and cons of having the vehicle repaired.

11. In 1990, the Petitioner applied for and received a Small Business

Administration Loan in the amount of $800,000. To qualify for the loan, Jane

Waelti pledged land valued at $1.6 million. Rick and Eloise also signed

personally to guarantee the loan but did not provide collateral. This loan

allowed the Petitioner to remain solvent and to keep control of its fleet of

trucks.

12. In 1991, Rick resigned as president of Petitioner and Eloise was

selected to succeed him. Jane is tapering off her hours and responsibilities

with the company as she is eligible for Social Security benefits which she wants

to begin drawing.

13. During 1990, Rick was state president of the Jaycees and was

unavailable to supervise work for the Petitioner. During that time, Petitioner

conducted business without hardship. Petitioner's nonowner employees, who Rick

trained, have taken over many responsibilities for the company.

CONCLUSIONS OF LAW

14. The Division of Administrative Hearings has jurisdiction over the

parties to and the subject matter of these proceedings.

15. Pursuant to law, the Department administers a program to certify

applicants as disadvantaged business enterprises ( DBEs). DBEs are given a

competitive advantage since they become eligible to participate in programs set

aside for DBE contract goals.

16. Because federal funding is involved in DBE projects, the Department

must assure that federal standards are met when certifying DBEs.

17. An applicant for DBE certification bears the burden of establishing it

is entitled to such certification.

18. Chapter 14-78, Florida Administrative Code, provides, in pertinent

part:

14-78.002 Definitions. Throughout this rule

chapter, the following words and phrases shall

have the respective meanings set forth below

unless a different meaning is plainly required

by the context:

(1) "Socially and Economically

Disadvantaged Individuals" means those

individuals:

(a) Who are citizens of the United States or

lawfully admitted permanent residents and who are

women. . . Individuals in the following groups

are presumed to be socially and economically

disadvantaged; provided, however, this

presumption is rebuttable:

* * *

5. Women.

* * *

(3) "Disadvantaged Business Enterprise" or

" DBE" means a small business concern:

(a) Which is at least 51 percent owned by one

or more socially and economically disadvantaged

individuals, . . . and

(b) Whose management and daily business

operations are controlled by one or more of

the socially and economically disadvantaged

individuals who own it.

14-78.005 Standards for Certification of DBEs.

(1) To ensure that this rule chapter benefits

only small business concerns which are at least

51 percent owned and controlled in both form

and substance by one or more socially and

economically disadvantaged individuals, the

Department shall certify firms who wish to

participate as DBEs under this rule chapter.

* * *

(7) A firm seeking certification and

recertification as a DBE shall meet the

following standards. A firm which does not

fulfill all the Department's criteria for

certification shall not be considered a

Disadvantaged Business Enterprise.

* * *

1. The ownership and control exercised by

socially and economically disadvantaged

individuals shall be real, substantial, and

continuing, and shall go beyond mere pro forma

ownership of the firm, as reflected in its

ownership documents.

* * *

(e) To be certified under this rule chapter,

the DBE shall be one in which the socially and

economically disadvantaged owner shall also

possess the power to direct or cause the

direction of the management, policies, and

operations of the firm and to make day-to-day

as well as major business decisions concerning

the firm's management, policy, and operation.

* * *

2. In assessing the power of the minority owner

to direct or cause the direction of the firm,

the Department will look past stock ownership and

consider the minority applicant's ownership

interest, knowledge of the particular business,

background, involvement in the business on a

day-to-day basis, expertise, involvement by the

non-minority owners, employees or non-employees,

other full or part-time employment by the minority

applicant and the size of the applicant's business.

3. In further determining whether the socially

and economically disadvantaged owners also possess

the power to direct or cause the direction of the

management, policies and operations of the firm

and have the requisite decision-making authority,

the Department may look to the control lodged in

the owners who are not socially and economically

disadvantaged individuals. If the owners who are

not socially and economically disadvantaged

individuals are disproportionately or primarily

responsible for the operation of the enterprise

or if there exists any requirement which prevents

the socially and economically disadvantaged owners

from making business decisions without concurrence

of any owner or employee who is not a socially

and economically disadvantaged individual, then

the enterprise, for purposes of this rule chapter,

is not controlled by socially and economically

disadvantaged individuals and shall not be

considered a DBE within the meaning of this rule

chapter.

19. In this case, the issue is whether the socially and economically

disadvantaged owners, Jane and Eloise Waelti, possess the requisite control

dictated by the rule. Clearly, as majority stockholders they have the ability

to control, by voting their shares together, the operations of the Petitioner's

business. However, the rule also speaks to whether the owners possess the

operational expertise to manage the business. In this case, the record

establishes that the Waeltis collectively make decisions regarding the business,

that Rick is instrumental in the training of key employees to whom

responsibility has been delegated and that he is responsible for assuring such

individuals perform as directed, that Jane and Eloise have little experience in

the bidding or soliciting for jobs, and that Jane and Eloise are primarily

responsible for office activities. Accordingly, Petitioner has failed to

establish that the socially and economically disadvantaged owners have the

knowledge, training or experience to direct the overall operations of the

Petitioner without assistance from the owner who is not socially and

economically disadvantaged.

RECOMMENDATION

Based on the foregoing, it is

RECOMMENDED:

That the Department of Transportation enter a final order denying the DBE

certification requested by the Petitioner.

DONE and ENTERED this 31stday of October, 1991, in Tallahassee, Leon

County, Florida.

___________________________________

JOYOUS D. PARRISH

Hearing Officer

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32301

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 31st day of October, 1991.

APPENDIX TO CASE NO. 91-4787

RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY THE PETITIONER:

1. Paragraphs 1 through 6 are accepted.

2. To the extent that paragraph 7 states that Jane owned the majority of

stock and, therefore, could "out vote" her children, paragraph 7 is accepted;

otherwise, rejected as contrary to the weight of the evidence since it is clear

Rick had the expertise necessary to keep his mother's business running smoothly.

3. Paragraphs 8 and 9 are accepted.

RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY THE RESPONDENT:

1. Paragraphs 1 through 16 are accepted.

2. Paragraph 17 is rejected as contrary to the weight of the evidence.

3. Paragraphs 18 through 24 are accepted.

4. Paragraph 25 is rejected as irrelevant.

5. Paragraph 26 is accepted to the extent it finds Eloise has little

expertise or experience in the operational areas of the Petitioner; otherwise

rejected as argument.

6. Paragraphs 27 through 29 are accepted.

7. Paragraph 30 is accepted to the extent that it finds Rick has the

operational expertise for the Petitioner; otherwise rejected as argument.

8. Paragraphs 31 and 32 are accepted.

9. Paragraph 33 is rejected as contrary to the weight of the evidence;

however, such areas are critical but so are others-one would not operate without

the other.

10. Paragraphs 34 through 39 are accepted.

11. Paragraph 40 is accepted but is irrelevant.

12. Paragraph 41 is rejected as not supported by the weight of the

evidence or argument.

COPIES FURNISHED:

Ben G. Watts, Secretary

Department of Transportation

ATTN: Eleanor F. Turner, M.S. 58

Haydon Burns Building

605 Suwannee Street

Tallahassee, Florida 32399-0458

Thornton J. Williams

General Counsel

Department of Transportation

562 Haydon Burns Building

Tallahassee, Florida 32399-0458

Pamela S. Leslie

Deputy General Counsel

Department of Transportation

605 Suwannee Street, M.S. 58

Tallahassee, Florida 32399-0458

Vincent G. Torpy, Jr.

FRESE, FALLACE, NASH & TORPY, P.A.

930 S. Harbor City Boulevard, #505

Melbourne, Florida 32901

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended

Order. All agencies allow each party at least 10 days in which to submit

written exceptions. Some agencies allow a larger period within which to submit

written exceptions. You should contact the agency that will issue the final

order in this case concerning agency rules on the deadline for filing exceptions

to this Recommended Order. Any exceptions to this Recommended Order should be

filed with the agency that will issue the final order in this case.