98-002961 Ameriseal Of Northeast Florida, Inc. vs. Department Of Transportation Status: Closed Recommended Order on Wednesday, August 11, 1999.

Summary: Under the rules adopted by the Department, the Petitioner failed to show she was qualified.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AMERISEAL OF NORTHEAST FLORIDA, INC., )

)

Petitioner, )

)

vs. ) Case No. 98-2961

)

DEPARTMENT OF TRANSPORTATION, )

)

Respondent. )

______________________________________)

RECOMMENDED ORDER

This case was heard pursuant to notice by Stephen F. Dean,

Administrative Law Judge of the Division of Administrative

Hearings, on January 27 and 28, 1999, in Jacksonville, Florida,

and on April 16, 1999, in Tallahassee, Florida.

APPEARANCES

For Petitioner: August Quesada, Esquire

Bishop Square, Suite 104

5700 St. Augustine Road

Jacksonville, Florida 32207

For Respondent: Kelly A. Bennett, Esquire

Department of Transportation

Haydon Burns Building

Mail Station 58

605 Suwannee Street

Tallahassee, Florida 32399-0458

STATEMENT OF THE ISSUE

Whether the Petitioner is properly qualified to participate

in the disadvantaged business enterprise program.

PRELIMINARY STATEMENT

The Department of Transportation gave notice to the

Petitioner of the Department's intent to deny certification as a

disadvantaged business enterprise (DBE) on May 14, 1998. On

June 3, 1998, the Petitioner requested a formal hearing on the

Department's decision. The Department referred the matter to the

Division of Administrative Hearings on July 6, 1998. By notice

dated August 7, 1998, the matter was set for hearing on

September 25, 1998, in St. Augustine, Florida.

On or about September 18, 1998, a telephone conference was

held to consider all pending motions. The Department withdrew

its discovery motion, and the parties agreed to continue the

hearing until November 2, 1998, in Tallahassee, Florida. On or

about November 10, 1998, a telephone conference was held to

consider pending motions. The parties resolved pending discovery

issues and the Department's motion for continuance was granted.

The case was rescheduled for hearing on January 28 and 29, 1999,

in Jacksonville, Florida, and was held further on April 16, 1999,

in Tallahassee, Florida.

At the formal hearing, the Petitioner called as witnesses

John Smith, Robert Maxwell, Robert Theus, Terry Caldwell, Melvin

Carter, Sheran Carter, and Mary Miller. The Petitioner filed as

late-filed exhibits a composite attached to its notice of filing

which was filed with the Division of Administrative Hearings

pursuant to the Order entered June 3, 1999. The Department

called Glenda Carter and Mary Miller and entered 13 exhibits into

the record.

Both parties filed proposed findings of fact and the

Department was permitted to file a response to the Petitioner's

proposed findings which was received on July 20, 1999. The post-

hearing pleadings of both parties have been read and considered.

FINDINGS OF FACT

1. Ameriseal of Northeast Florida, Inc. is an active

Florida corporation engaged in the business of highway striping

and marking. Ameriseal of Northeast Florida, Inc., was

considered for re-certification by the Department of

Transportation as a DBE.

2. Sheran Carter is the president and majority stock holder

of Ameriseal of Northeast Florida, Inc. She is a white female,

and in charge of administration of the corporation.

3. Her husband, Melvin Carter, a white male, is the

minority shareholder of the corporation and is described by

various witnesses as an individual with a broad range of

experience and knowledge in the business in which the Petitioner

engages and is the key operational employee of the company

supervising the operational activities of the corporation.

4. The relationship of Sheran Carter and Melvin Carter is a

normal, close relationship in which business is mutually

discussed and suggestions are exchanged.

5. The Department asserts that there are many reasons for

denying DBE status to the Petitioner, to include: lack of

adequate capital contribution to the company by Sheran Carter,

lack of control by Ms. Carter as that term is defined by the

rules, filing of false documents by the Petitioner with the

Department, failure to reveal "affiliated" companies, and the

assertion that Sheran Carter's financial contributions to the

corporation were loans.

6. The facts reveal that Melvin Carter, Dennie Carter, and

Henry Allen engaged in a paving business in the 1980s which was

successful, and gradually came to specialize in resurfacing

airport runways. The company was very successful. However, in

1988 and 1989 changes in federal funding for the maintenance of

airports resulted in a drastic downturn in the company's

business. As a result thereof, their company suffered financial

reverses and was in danger of financial collapse.

7. At or about this time, Ameriseal of Northeast Florida,

Inc., was formed. The owners and principal officers of the

company were the wives of Melvin Carter, Dennie Carter, and Henry

Allen. Certain unencumbered assets of the predecessor

corporation were transferred to the wives in repayment for loans

made by the wives to the predecessor corporation. In turn, these

assets became part of the capital contribution of the wives to

the establishment of Ameriseal of Northeast Florida, Inc.

8. After its formation, Ameriseal of Northeast Florida,

Inc., engaged in highway striping and marking. The operations of

Ameriseal of Northeast Florida, Inc., were significantly smaller

than its predecessor corporation, and after a couple of years'

operation, it was determined that its activities could not

support the three families.

9. There is competent evidence to establish that the monies

loaned by Sheran Carter to the predecessor corporation were

jointly held funds belonging to Sheran Carter and her husband,

Melvin Carter. On this basis, Melvin Carter would be considered

one-half owner of the one-third share transferred to Sheran

Carter. However, the testimony of the corporation's accountant

establishes that Sheran Carter purchased with personal funds

belonging to her the shares and corporation owned by Sharon

Allen. Upon completion of this purchase, Sheran Carter owned 50%

of the corporation, her husband owned 16 2/3% of the corporation

and Glenda Carter, the wife of Dennie Carter, owned 33 1/3% of

the corporation.

10. A controversy developed regarding the purchase and

transfer of the shares owned by Glenda Carter in Ameriseal of

Northeast Florida, Inc. Glenda Carter filed a civil action

against Melvin Carter and Ameriseal of Northeast Florida, Inc.,

alleging that her name had been forged on transfer documents

indicating the purchase of her shares by the corporation. This

action was eventually settled upon payment of additional funds to

Glenda Carter. The testimony of the corporation's accountant

establishes that Sheran Carter paid her personal funds to settle

the suit with Glenda Carter and received a bill of sale for

transfer of Glenda Carter's shares in the corporation.

11. Upon settlement with Glenda Carter, Sheran Carter owned

83 1/3% of the corporation. Testimony was also received that

Sheran Carter transferred sufficient shares in the corporation to

Melvin Carter such that Melvin Carter owns 25% of the corporation

and Sheran Carter owns 75% of the corporation.

12. At all times relevant to the pending denial, Sheran

Carter was a majority share holder of the corporation.

13. Evidence was received that over the years Melvin

Carter, Dennie Carter, and Henry Allen in various combinations

owned various corporations. However, there is no evidence that

any of these corporations are affiliated with or do business in

any manner with Ameriseal of Northeast Florida, Inc. Because

Melvin Carter, a minority stock holder in Ameriseal of Northeast

Florida, Inc., was also a stock holder or officer in these other

corporations, it may have been appropriate to have reported them

as affiliated corporations in filings with the Department;

however, the evidence is that none of these corporations is

currently active.

14. The Department asserts that the formation of Ameriseal

of Northeast Florida, Inc. was to establish the corporation as a

DBE. While creation of the corporation and the transfer of

assets from the predecessor corporation to Ameriseal of Northeast

Florida, Inc., may have been an effort to protect assets from

potential creditors upon the demise of the predecessor

corporation, there is no evidence that it was created for the

purpose of establishing the new corporation as an DBE. The

creation of the corporation preceded by a couple of years'

consideration of obtaining DBE status.

15. At or about the time of the purchase of the shares from

Dennie and Glenda Carter and Sharon and Henry Allen, Sheran

Carter took an increasingly active role in the management in the

corporation.

16. As that participation has evolved, she is responsible

for administration of the office and financial activities of the

corporation, and Melvin Carter is responsible for the field

operations of the company. They mutually manage their family

company. Although there is evidence that Melvin Carter's

participation in the activities of the corporation are

decreasing, the evidence is that the couple's sons are taking an

increasingly active role in the business. They are white males.

17. Sheran Carter demonstrated technical expertise and

possesses knowledge and understanding of the technical aspects of

the company's operations and functions.

CONCLUSIONS OF LAW

18. The Division of Administrative Hearings has

jurisdiction over the subject matter and the parties in this

case. This Recommended Order is entered pursuant to Section

120.57, Florida Statutes.

19. The Petitioner in this case has the burden of proof to

show that it is qualified as a disadvantaged business enterprise.

The Department of Transportation asserted many reasons for

denying DBE status to the Petitioner. The reasons included lack

of adequate capital contribution to the company by Sheran Carter;

the assertion that Sheran Carter's contributions were in the form

of a loan company; the filing of false documents by the

Petitioner; the failure to reveal "affiliated" companies; the

assertion that Petitioner was formed for the specific purpose of

qualifying as a DBE; and the lack of control by Sheran Carter as

that term is defined by the Department's rules. All of these

reasons, with the exception of the latter, were addressed

satisfactorily by the Petitioner or were of minimal consequence.

20. The Petitioner demonstrated that the minority owner had

at least 51% of the ownership of the corporation. The Petitioner

showed that the minority owner had the technical knowledge and

expertise to qualify. The facts surrounding the formation of the

corporation indicate that it was not created for the purpose of

participating in the DBE program. The "affiliated" corporations

were shown to be inactive and not a concern as it relates to the

Petitioner. However, Rule 14-78.005(7)(c), Florida

Administrative Code, provides:

That a DBE shall be an independent business

entity and that the Department shall consider

all relevant factors, including the date the

firm was established, the adequacy of its

resources, and degree to which financial

relationship, equipment leasing, and other

business relationship with non-DBE firms may

vary from industry practice.

(1) The ownership and control exercised by

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.

Where the applicant business is found to be a

family-operated business, and when the firm's

duties, responsibilities and decision making

are occurring jointly and mutually among the

owners and principals, or occurring severally

or individually along managerial and

operational lines between disadvantaged and

non-disadvantaged owners, in such instances

the disadvantaged owner shall not be

considered as controlling the business.

(Emphasis supplied.)

21. The facts of the organization and operation of the

corporation taken in a manner most favorable to the Petitioner

show that the disadvantaged owner controls the administrative and

financial functions of the corporation and her white, male

husband controls the field operations of the corporation. The

picture painted by the various witnesses indicates that, in this

family-owned business, duties, responsibilities, and decision-

making are occurring jointly and mutually among the owners and

principals and occurring severally and individually along

managerial and operational lines between the disadvantaged and

non-disadvantaged owners. Therefore, under the rule cited, the

disadvantaged owner shall not be considered as controlling the

business.

22. Based upon the provisions of the cited rule, the

Department must deny the Petitioner DBE status.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of

Law set forth herein, it is

RECOMMENDED:

That the Department enter a final order finding that the

Petitioner's application for re-certification as a disadvantaged

business enterprise be denied.

DONE AND ENTERED this 11th day of August, 1999, in

Tallahassee, Leon County, Florida.

STEPHEN F. DEAN

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 11th day of August, 1999.

COPIES FURNISHED:

August Quesada, Esquire

Bishop Square, Suite 104

5700 St. Augustine Road

Jacksonville, Florida 32207

Kelly A. Bennett, Esquire

Department of Transportation

Haydon Burns Building

Mail Station 58

605 Suwannee Street

Tallahassee, Florida 32399-0458

Thomas F. Barry, Secretary

Attn: James C. Myers

Clerk of Agency Proceedings

Department of Transportation

Haydon Burns Building

Mail Station 58

605 Suwannee Street

Tallahassee, Florida 32399-0458

Pamela Leslie, General Counsel

Department of Transportation

Haydon Burns Building

Mail Station 58

605 Suwannee Street

Tallahassee, Florida 32399-0458

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this recommended order. Any exceptions to

this recommended order should be filed with the agency that will

issue the final order in this case.