STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

THREE RIVER CONTRACTING, INC., )

)

Petitioner, )

vs. ) CASE NO. 89-0976

) DEPARTMENT OF TRANSPORTATION, )

)

Respondent. )

)

RECOMMENDED ORDER

This matter came on for hearing in Marianna, Florida, before Robert T. Benton, II, Hearing Officer of the Division of Administrative Hearings on August 2, 1989. The Division of Administrative Hearings received a transcript of the proceedings on August 21, 1989. The parties have filed proposed recommended orders. The attached appendix addresses proposed findings of fact by number.

APPEARANCES

For Petitioner: Will J. Richardson

Richardson Law Office, P.A. Post Office Drawer 12669 Tallahassee, Florida 32317

For Respondent: Ruth Dillard

Haydon Burns Building

M.S. 58

Tallahassee, Florida 32399-0458 STATEMENT OF THE ISSUE

Whether Three River Contracting, Inc. is entitled to certification as a disadvantaged business enterprise under Rule 14-78.005, Florida Administrative Code?

PRELIMINARY STATEMENT

In response to the Department of Transportation's announced intention to deny its application for certification as a disadvantaged business enterprise, petitioner Three River Contracting, Inc. instituted formal administrative proceedings by filing its petition, containing a request for hearing.

In its amended letter of denial, respondent Department of Transportation set out the grounds on which it proposed to deny petitioner's application, stating that petitioner's president, Ms. Eunice Odom "is not involved in technical aspects of operations ... [and] does not appear to have the experience or expertise to control the day-to-day operation of a construction firm"; that petitioner's president said her duties with petitioner were "the same ... as

they were in other family businesses ... [in which she held] Secretary/treasurer positions"; and that her son, while owning only 20% of the business, received much more money from the company in 1987 than she did.

FINDINGS OF FACT

1. When, on April 7, 1986, Eunice Odom organized petitioner Three River Contracting, Inc. (Three River) and became its first president, she kept 60 percent of the common stock for herself and gave 20 percent to each of her two children, John Howard "Butch" Odom and Sandra Steward.

   
   

2. Ms. Odom organized Three River in order to do specialty contracting with the Department of Transportation (DOT), in fields with which she was not intimately familiar. Three River "do[es] pile jacketing and guniting, and ... a lot of joint seals on bridges .. sandblasting and painting." T.29.

   
   

3. But Ms. Odom had considerable experience with other businesses, including one that painted and sandblasted bridges. Respondent's Exhibit No. 4. Over a period of three and a half decades, as secretary and/or treasurer of a succession of family-owned corporations, Ms. Odom has made financial decisions and worked on a daily basis with enterprises that installed septic tanks, dug graves, erected monuments, moved cemeteries, dug ditches, sandblasted and repaired municipal water tanks, and recycled plastic and lead.

   
   

4. While Three River's original president, Ms. Odom hired Red Nichols and Dale Harris as Superintendents and foremen, giving them authority to hire and fire their crews. She also "hired a Mr. Lee as estimator for a short period of time." T.75.

   
   

5. When Three River came into existence, her son was managing a truck stop at an interstate highway exchange. Only after he sold the truck stop in August of 1986, did he go to work for Three River as an estimator, the job he still held at the time of hearing. Among other significant business experience, he brought eight to ten year's experience as an estimator to Three River.

   
   

6. Because the secretary-treasured of Three River, Ms. Odom's daughter, Sandra Steward, also had her own business, she was seldom at Three River's offices. This proved inconvenient, when papers had to be signed both by the corporate president and by the company's secretary-treasurer. At a meeting of the three stockholders, Ms. Odom relinquished the presidency in favor of John Howard and became Secretary-treasured of the corporation, in Ms. Steward's stead.

   
   

7. Paragraphs four through seven of the parties' prehearing stipulation consist of the following:

   
   

   1. Eunice Odom's power is not subject to any formal or informal restrictions evidenced by bylaws, partnership agreements, trust agreements, stock voting agreements, contracts, or any other agreement enforceable in a court of law, of which DOT is aware. See FAC 14-78.005(7)(e).

   2. It is customary in the construction industry for owners to hire estimators to assist owners of construction companies in submitting competitive bids.

   3. It is customary in the construction industry for owners to hire project managers to direct the day-to-day operations of construction projects on job sites.

   4. The salaries for Eunice Odom, John H. Odom and Sandra Steward are as follows:

      
      

      1986 Eunice Odom	$5,250.00
      John Odom	9,500.00
      Sandra Steward	2,050.00
      1987
      Eunice Odom	$20,800.00
      John Odom	52,700.00
      Sandra Steward	7,800.00

      
      

      1988

      Eunice Odom $61,400.00

      John Odom 65,200.00

      
      

      The 1988 salaries reflect changes accomplished after Three River had made application for certification as a disadvantaged business enterprise.

      
      

8. After DOT indicated its intention to deny Three River's application, John Howard Odom resigned as president and Ms. Odom resumed the presidency, on the advice of counsel. Whatever her title, Ms. Odom has spent 40 hours a week in Three River's office. Depending on what estimates he needed to prepare, John Howard worked from 20 to 100 hours a week.

   
   

9. Ms. Odom has final say on which jobs Three River bids on. Neither Ms. Odom nor her son has ever fired any Three River employee. On the job, supervisors have authority to hire and fire workmen. Ms. Odom has full authority to and has in fact hired all of Three River's managers.

   
   

10. John Howard was authorized to and did in fact borrow money for Three River, obtaining bank loans secured by a certificate of deposit, in one instance, and by two pick up trucks, in another. But John Manor, the banker whose bank made these loans, testified that he looked to Ms. Odom as the person he "consider[ed] to be the responsible individual," (T.16) "the financially responsible person in that corporation." T.20.

    
    

11. She and Mr. Manor had agreed to the loan secured by the certificate of deposit before John Howard came into the bank and executed the papers. The loan secured by the trucks occurred without Mr. Manor's knowledge. Because of the nature of the collateral, a consumer loan officer handled the transaction without involving other bank officers.

    
    

12. The evidence did not show who owned the certificate of deposit. Aside from these two secured loans, totalling approximately $46,000, petitioner's application reports indebtedness of another $32,000, and puts the value of the company at $500,000.

    
    

13. John Howard testified without contradiction that his mother has the final say on major equipment purchases, and that she had rejected his suggestions that the company acquire a light plane to facilitate estimating jobs

    downstate; and that Three River buy, instead of lease, a "supersnooper," a truck Specially equipped with "an arm that comes out with a man in it, and ... goes underneath the bridge." T.30.

    
    

    CONCLUSIONS OF LAW

    
    

14. The courts view it "as fundamental that an applicant for a license or permit carries `the ultimate burden of persuasion' of entitlement through all proceedings, of whatever nature, until such time as final action has been taken by the agency." Florida Department of Transportation v. J.W.C. Co., Inc., 396 So.2d 778, 787 (Fla. 1st DCA 1981); Zemour, Inc., v. State Division of Beverage,

    347 So.2d 1102 (Fla. 1st DCA 1977)(lack of good moral character found "from evidence submitted by the applicant"). See generally Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1st DCA 1977). Applicants for certification as disadvantaged business enterprises are also so burdened.

    
    

15. In their prehearing stipulation, the parties identify as provisions of Chapter 14-78, Florida Administrative Code, still in contention, the following:

    
    

    1. The firm must be at least 51 percent owned and controlled by one or more socially and economically disadvantaged individuals, or, in the case of a publicly owned business,

       at least 51 percent of the stock must be owned and controlled by one or more socially and economically individuals.

       1. Members of the groups named in Rule

          14-78.002(1) are presumed to be socially and economically [including women] disadvantaged; provided, however this presumption is rebuttable.

    2. To be certified under this rule chapter, a DBE shall be an independent business entity.

    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. The socially and economically disadvantaged owners shall enjoy the customary incidence (sic) of ownership and shall share in the risks and profits commensurate with their ownership interests, as demonstrated by an examination of the substance rather than form of financial and managerial arrangements. In assessing business independence, the Department shall consider all relevant factors, including the date the firm was established, the adequacy of the resources, and the degree to which financial relationships, equipment leasing, and other business relationships with non-DBE firms vary from industry practice.

    1. 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 major firm and to make day- to-day as well as major business decisions concerning the firm's management, policy and operation. The discretion of the socially and economically disadvantaged owners shall not be subject to any formal or informal restrictions (including, but not limited to, bylaw provisions, partnership agreements, trust agreements or charter requirements for cumulative voting rights or otherwise) which would vary managerial discretion customary in the industry.

       In determining whether the socially and economically disadvantaged owners also possess the power to direct or cause the direction of the management, policies and operation 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. Where the actual management 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 be considered as controlling the enterprise for the purposes of this rule chapter.

    2. To be certified under this rule chapter, the DBE shall be one in which the contributions of capital or expertise invested by the socially and economically disadvantaged individual owners are real and substantial. Examples of insufficient contributions include, but are not limited to, a promise to contribute capital, a note payable to the DBE enterprise or its owners who are neither socially and economically disadvantaged individuals, or the mere participation as an employee, rather than as a decision-maker.

    Rule 14-78.005(7), Florida Administrative Code. DOT did not seek to rebut the presumption that Ms. Odom and her daughter, who between them own 80 percent of Three River, are socially and economically disadvantaged individuals, on account of their gender. The evidence revealed much more than pro forma ownership on Ms. Odom's part. She is involved day to day and has effective control, as far as the record reveals.

    
    

16. Ms. Odom brought substantial, relevant business experience to the enterprise. According to Three River's application, the company is worth

$500,000 but, aside from bank loans totalling less than $78,000, the evidence is unclear about sources of this capital. But, even though the parties' prehearing stipulation adverts to Rule 14-78.005(7)(f), Florida Administrative Code, neither the stipulation nor DOT's amended letter of denial puts petitioner on notice of any dispute concerning the "reality or substantiality" of the women's contributions of capital.

RECOMMENDATION

It is, accordingly, RECOMMENDED:

That respondent grant petitioner's application for certification as a disadvantaged business enterprise.

DONE and ENTERED this 17th day of November, 1989, at Tallahassee, Florida.

ROBERT T. BENTON, II

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 17th day of November, 1989.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 89-0976

With respect to petitioner's proposed finding of fact No. 1, the evidence was unclear which month Butch started to work for Three River.

Petitioner's proposed findings of fact Nos. 2 through 15, 17, 18, 20, 21,

23, 24, 25, 30, 31, and 34 have been adopted, in substance, insofar as material.

With respect to petitioner's proposed findings of fact Nos. 16 and 19, Butch so testified.

Petitioner's proposed findings of fact Nos. 22, 26 through 29, 32, and 33 pertain to subordinate matters.

Respondent's proposed findings of fact Nos. 1 through 4 relate to free form proceedings that became immaterial, except to frame the issues, once formal proceedings were requested.

Respondent's proposed findings of fact Nos. 5, 6, and 8 through 14 have been adopted, in substance, insofar as material.

With respect to respondent's proposed finding of fact No. 7, Ms. Odom's experience included some DOT contracting.

COPIES FURNISHED:

Ruth B. Dillard, Esquire Department of Transportation Haydon Burns Building, M.S. 58 605 Suwannee Street

Tallahassee, Florida 32399-0458

Pete Davis, Minority Programs Office Department of Transportation

605 Suwannee Street

Tallahassee, Florida 32399-0458

James J. Richardson, Esquire Iamonia Farms Road

Post Office Box 12669 Tallahassee, Florida 32317

Docket for Case No: 89-000976

Orders for Case No: 89-000976