STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AL RASKA CONTRACTORS, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 82-363

) DEPARTMENT OF TRANSPORTATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, R. L. Caleen, Jr., held a formal hearing in this case on August 5, 1982, in Tampa, Florida.

APPEARANCES

For Petitioner: Eugenio Ramos, President

Al Raska Contractors, Inc. Post Office Box 14236 Tampa, Florida 33690

For Respondent: Vernon L. Whittier, Jr., Esquire

Ella Jane P. Davis, Esquire Department of Transportation 605 Suwannee Street

Tallahassee, Florida 32301 ISSUE

Whether petitioner's application for certification as a Minority Business Enterprise should be granted, or denied on the ground that the minority owner does not control the day-to-day management and other related functions of the corporation.

INTRODUCTION

On January 18, 1982, respondent Department of Transportation ("Department") informed petitioner Al Raska Contractors, Inc. ("the Company") that its application for certification as a Minority Business Enterprise was denied pursuant to Rule 14-78.05, Florida Administrative Code, because the "day-to-day management and other related functions [of the Company] are not controlled by the minority owner.

The Company disputed this allegation and requested a hearing. On February 5, 1982, this case was referred to the Division of Administrative Hearings for assignment of a hearing officer to conduct the requested hearing.

At hearing, the Company called the following witnesses: Al Raska, Jack Williams, Tyrone Reddish, Sunil B. Nath, and Eugenio Ramos. It also offered Petitioner's 1/ Exhibits No. 1-5 into evidence, each of which was received. The Department called Sunil B. Nath, Eugenio Ramos, and Al Raska as its witnesses and introduced Respondents' Exhibit No. 1 into evidence.

The transcript of hearing was filed on August 26, 1982. The Department submitted proposed findings of fact and conclusions of law on September 7, 1982.

Based on the evidence presented at hearing, the following facts are determined:

FINDINGS OF FACT I.

1. The Company, Al Raska Contractors, Inc., located at 503 South MacDill Avenue, Tampa, Florida, is a contractor which specializes in installing highway guardrails, rip rap, slope pavement, and signs. Between 1970 and 1980, it was owned by Al Raska and operated as a sole proprietorship. In February, 1980, it was incorporated by Al Raska, Jack Williams, and Dan Fisher, with Al Raska as president. (Testimony of Raska, R-1.)

   
   

2. The Company began to experience financial difficulties. Mr. Raska concluded that it needed additional capital and new leadership. He realized that he "was not the one to carry the leadership of it. . . ." (Tr. 39.) Mr. Raska looked to Eugenio Ramos for help. (Testimony of Raska.)

   
   

3. They reached an agreement. As a result, Eugenio Ramos -- an Hispanic residing in Texas -- became president and majority (51 percent) owner of the Company in September, 1980. In exchange, Mr. Ramos contributed $25,000 to the Company and established an additional $25,000 letter of credit. (The Company used the $25,000, in cash, to purchase equipment and defray operating expenses.) Mr. Raska became vice-president:

   
   

   . . . I stepped aside [to] do what I could do best, work in the field rather than run [the Company]. . .

   
   

   (Tr. 39.) Jack Williams remained as secretary-treasurer of the Company. (Testimony of Raska, Ramos, Williams.)

   
   

   II.

   
   

4. Since September, 1980, Eugenio Ramos, 506 Lake Park, Waxahachie, Texas, has possessed the power to direct the management and policies of the Company, including the power to make day-to-day as well as major business decisions. In practice, he delegated authority to Mr. Raska and, to a lesser extent, to Mr. Williams to supervise and carry out the day-to-day operations of the Company. Mr. Raska, as the supervisor of field operations, corks at the Company's job sites, trains employees, does drawings, develops job estimates, signs payroll, schedules jobs, and maintains close contact with prime contractors. Because of Mr. Raska's years of experience and expertise, Mr. Ramos relies heavily on his advice. Mr. Williams also supervises the various job sites and assists in preparing estimates. (Testimony of Raska, Ramos, Williams.)

5. All major business decisions, however, are made by Mr. Ramos, ordinarily after considering the advice of Mr. Raska. While job estimates are prepared by Mr. Raska, the decision to bid on a project is made by Mr. Ramos. No written contracts are signed without Mr. Ramos' approval. Mr. Raska and Mr. Williams, who Supervise field operations, were hired by and serve at the pleasure of Mr. Ramos. No heavy equipment may be purchased without Mr. Ramos' approval. (Testimony of Ramos, Raska.)

   
   

6. Mr. Ramos communicates with Mr. Raska and Mr. Williams frequently, despite Mr. Ramos' residence in Texas. He visits the Company seven or eight times a year to meet with his Supervisors and discuss ongoing work. He spends approximately 97 percent of his time in Texas. But he communicates by telephone with the Company office on almost a daily or weekly basis. During one month, his telephone bill was $900. (Testimony of Raska, Ramos; P-5.)

   
   

7. The Company has, under contract, jobs worth more than two million dollars. There are three projects now under construction. Although at hearing Mr. Ramos was familiar with the projects under construction, he could not recall some of the pertinent details. (Testimony of Ramos.)

   
   

8. Sunil B. Nath administers the Department's Minority Business Enterprise Liaison Office. Chapter 14-78 is the Department's rule governing certification of minority business enterprises. Mr. Nath interprets this rule as requiring the minority owner to carry out the day-to-day operations of a company; in his view, a minority owner cannot delegate day-to-day management and retain eligibility for Minority Business Certification. (Tr. 150.) No basis was presented for this conclusion other than the language of the rule. (Testimony of Nath.)

   
   

   CONCLUSIONS OF LAW

   
   

9. The Division of Administrative Hearings has jurisdiction of the parties and subject matter of this proceeding. Section 120.57(1), Florida Statutes (1981).

   
   

10. Rule 14-78.05(3), Florida Administrative Code, contains standards for granting or denying certification as a Minority Business Enterprise:

    
    

    (3) In certifying a firm as an MBE [Minority Business Enterprise], the Department shall consider but shall not be limited to the following standards:

    (b) An eligible minority business enterprise under this rule shall be an independent business entity, the real, substantial, and continuing ownership and control of which shall be by minorities or women and go beyond mere pro forma ownership of the firm as reflected in its ownership documents. The minority or women owners shall enjoy the customary incidence of ownership and shall share in the risks and profits commensurate with

    their ownership interests, as demon-

    strated by an examination of the substance rather than form of finan- cial and managerial arrangements.

    (d) An eligible minority business enterprise under this rule shall be one in which the minority or women owners shall also possess the power to direct or cause the direction of the management and policies of the MBE and to make day- to-day as well as major business

    decisions concerning the MBEs manage- ment policy and operation. The discretion of the minority or women owners shall not be subject to any formal or informal restrictions (including, but not limited to, bylaw provisions, partnership agreements,

    or charter requirements for cumulative voting rights or otherwise) which would vary managerial discretion cus- tomary in the industry.

    In determining whether the minority or women owners also possess the power to direct or cause the direction of the management and poli- cies of the MBE and have the requisite decision making authority, the Depart- ment may look to the control lodged

    in the owners who are not minorities or women. If the owners who are not minorities or women are disproportion- ately responsible for the operation

    of the enterprise or if there exists any requirement which prevents the minority or women owners from making business decisions without concur- rence of any owner or employee who is not a minority or a woman, then the enterprise is not controlled by minorities or women and shall not be considered an MBE within the meaning of this rule. Where the actual man-

    agement of the enterprise is contracted out to individuals other than the owner(s), those persons who have the ultimate power to hire and fire the managers can, for the purposes of

    this rule be considered as controlling the enterprise.

    
    

11. Under these standards, the Company has proven that it is entitled to certification as a Minority Business Enterprise. The sole reason the Department denied the Company's application was the fact that Mr. Ramos had delegated the day-to-day management of the Company to subordinates. This is not a basis for denial under Chapter 14-78. The test is whether the minority owner possesses the power to direct the management and policies of the enterprise, Section 14-

    78.05(3)(d), supra, whether the minority owner has continuing membership and control beyond mere pro forma membership whether he enjoys the customary incidence of membership Section 14-78.05(3)(b). The rule specifically prohibits restrictions on the discretion of the minority owner which "would vary managerial discretion in the industry" Section 14-78.05(3)(d), Florida Administrative Code.

    
    

12. Here, the Company meets these standards. The minority owner has the power to direct the management and policies of the Company. He has chosen to exercise this power by delegating to subordinates day-to-day management decisions and deserving unto himself control over all major decisions. To construe Chapter 14-78 as depriving him of this choice would be to single him out and place an exceptional restriction on his discretion, a restriction not permitted under Rule 14-78.05(3)(d) 2/ . The minority owner's demonstrated inability to recall details concerning the Company's planned and pending projects is consistent with his delegation of day-to-day management to his subordinates.

    
    

13. To the extent the Department's proposed findings of fact are incorporated herein, they are adopted. Otherwise, they are rejected as unsupported by a preponderance of the evidence or unnecessary to resolution of the issue presented.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED:

That the Company's application for certification as a Minority Business Enterprise be granted.

DONE and RECOMMENDED this 12th day of October, 1982, in Tallahassee, Leon County, Florida.

R. L. CALEEN, JR. Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 12th day of October, 1982.

ENDNOTES

1/ Petitioner's and Respondent's Exhibits will be referred to as "P- " and "R- ", respectively. Pages of the transcript will be referred to as "Tr.

2/ Delegation of authority by management is, of course, a common practice. At hearing, the Department's Minority Programs Coordinator asserted that he is

responsible for the Minority Programs Office and supervises its 15 employees. (Tr. 78-79.) Yet, most of the employees are located at distant offices in Fort Lauderdale and Lakeland -- offices which he visits only four to five times a year. He acknowledged that he doesn't conduct the day-to-day operations of these offices, but has delegated his authority to the office managers.

COPIES FURNISHED:

Eugenio Ramos, President Al Raska Contractors, Inc. Post Office Box 14236 Tampa, Florida 33690

Vernon L. Whittier, Jr., Esquire Ella Jane P. Davis, Esquire Department of Transportation

605 Suwannee Street

Tallahassee, Florida 32301

Paul N. Pappas, Secretary Department of Transportation 605 Suwannee Street

Tallahassee, Florida 32301

Docket for Case No: 82-000363

Orders for Case No: 82-000363