STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

UNION TRUCKING, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 91-7714

) DEPARTMENT OF MANAGEMENT SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

The final hearing in the above-styled matter was heard pursuant to notice by Stephen F. Dean, assigned Hearing Officer of the Division of Administrative Hearings, on July 24, 1992, in Lake City, Florida.

APPEARANCES

FOR PETITIONER: Mr. Frank M. Gafford

Post Office Box 1789 Lake City, FL 32056-1789

FOR RESPONDENT: Joan Van Arsdall

Department of Management Services Office of the General Counsel Koger Executive Center

Suite 309, Knight Building 2737 Centerview Drive

Tallahassee, FL 32399-0950 STATEMENT OF THE ISSUES

The ultimate issue is whether the Petitioner's application for designation as a Minority Business Enterprise should be approved. In the instant case, the factual dispute centers on the independence of the applicant given its financial and other relationships with a non-MBE business.

PRELIMINARY STATEMENT

On July 1. 1991, the Petitioner, Union Trucking, Inc., filed a request for certfication as a Minority Business Enterprise (MBE) with the Department of General Services, now the Department of Management Services. The Department notified the Petitioner of its intent to deny the request, and the Petitioner requested a formal hearing. The Department forwarded the case to the Division of Administrative Hearings where the case was noticed and heard. The Petitioner called three witnesses and presented no exhibits. The Respondent called two witnesses and entered 22 exhibits. Following the hearing both parties filed proposed findings which were read and considered. Appendix A states which of the proposed findings were adopted, and which were rejected and why.

FINDINGS OF FACT APPLICATION FOR MBE STATUS

1. On July 1, 1991, the Petitioner filed an application for certification as a MBE. Upon review of the application the Respondent denied the application and notified the Petitioner. The Petitioner subsequently provided additional information; however, the Department's position remained unaltered, and the Petitioner requested a formal hearing in November of 1991.

   
   

   ESTABLISHMENT OF THE APPLICANT BUSINESS

   
   

2. Union Trucking, Inc., (Union) was established as a Florida corporation on February 5, 1986. Union is in the business of hauling construction aggregates and construction material in dump trucks. Warren Lee, a Black American, is the President of Union. From February 5, 1986 until April 1, 1991, Union, Warren Lee owned jointly 51% of Union with Denise Willis, an American woman, who owned 49% of Union. Denise Willis was the stepdaughter of M.H. Prichett who is discussed below. In April 1991, Robin Wilson, an Amercian woman, bought Denise Willis' interest in Union. The purchase price was covered by an unsecured note upon which Wilson has made no payments on the principal, and an undetermined amount in interest payments. Robin Wilson is the daughter of M. H. Pritchett, a white male. Currently, Robin Wilson is Secretary/Treasurer of Union, and handles all bidding and financial aspects of the company.

   
   

   FINANCIAL RELATIONSHIPS

   
   

3. Startup money for Union was provided by a $4,000 loan from M.H. Pritchett. Conflicting testimony was received as to whom the loan was made, but the application reflects it was a loan to the corporation.

   
   

4. Subsequently, Union has borrowed additional money from M.H. Pritchett, as follows:

   
   

   1. In 1986, $16,862.40 was borrowed from Pritchett at 11.5% interest to purchase a used trailer from Pritchett.

      
      

   2. In 1989, $12,000 was borrowed from Pritchett at 12.5% interest to purchase another used trailer from Pritchett.

      
      

   3. Prior to December 31, 1990, $2,000 was borrowed from Pritchett, and was not repaid during the year 1991. While this might have been part of the orginal start up loan, the applicant presented no evidence to indicate this on its financial statement.

      
      

   4. Prior to December 31, 1990, another $1,000 was borrowed from G.P. Materials, a company owned by M.H. Pritchett. This loan is listed on Union's financial statements for a year, but no evidence was presented that had been repaid.

      
      

5. Warren Lee deposits savings from each of his paychecks into the M.H. Pritchett Special Account and receives no interest from his contributions to this account.

   
   

6. The bank signature card submitted by Union still contains the signature of Denise Willis who no longer has an interest in the business.

   COMMON OWNERSHIP

   
   

7. Mr. M.H. Pritchett owns all or part of several businesses including Pritchett Trucking, Inc, a trucking firm; Bulldog Trucking, Inc., a truck brokerage firm; Pritchett, Inc., a financing company; and G.P. Materials, a privately owned business. In addition, Mr.Pritchett maintains the M.H. Pritchett Special Account, a personal bank account, from which he loans and receives money from various truckers for purchases and for operating expenses. None of these businesses are certified as MBE's. Wilson is a corporate officer (secretary) of one of the Pritchett corporations, and owns stock in the other companies given to her by her father.

   
   

8. Pritchett operates more than 100 tractor-trailer units and a large truck terminal. The terminal sells fuels, tires, and service to truckers in the Lake Butler area. His trucks haul, among other things, construction aggregates.

   
   

9. Pritchett has sold and financed trailers and other equipment to various people and firms to include Lee and Union.

   
   

   COMMON EMPLOYEES

   
   

10. Immediately prior to starting Union, Warren Lee worked full time for Pritchett Trucking.

    
    

11. Union had gross receipts of $214,935.89 in 1990. Warren Lee makes

    $5.00/ hour driving a truck for Union. This is a take home pay of approximately

    $16,000/ year. He is not compensated for his work maintaining Union's equipment. Union had corporate earnings in 1991 of $24,000 and most of its gross profits are put back into the business for purchasing capital equipment. The net worth of the company has increased significantly. Gross receipts in 1991 were $479,000, with corporate profits of $24,000.

    
    

12. Robin Wilson works full time for Pritchett Trucking, and part time for Union. She receives $425/ month for scheduling trucks and preparing bids and similar financial documents. In doing this, she uses Pritchett office equipment. She does not list her work for Union on her personal resume.

    
    

13. Carol Murhee works full time for Pritchett as a bookkeeper, and part time for Union keeping its books. She keeps Union's books at night at her home upon equipment purchased for her by Union.

    
    

14. Union employs one other full time driver, Sammie Bullington, who works part time for Bulldog Trucking, Inc., a Pritchett company. A part time driver, Greg Baker, also works for Pritchett Trucking, Inc.

    
    

    COMMON OFFICES AND EQUIPMENT

    
    

15. Although Wilson dispatches trucks and prepares bids for Union at Pritchett's, Union does not pay Pritchett for office space or use of the copying machine and facsimile machine. Although Union does pay for the telephone used by Wilson to conduct Union business, it sits on Wilson's desk at Pritchett's office. Union does not reimburse Pritchett for the time which Wilson spends upon Union's business. Lee comes to Pritchett's building to confer with Wilson and to sign bids and contracts.

    COMMON OPERATIONS

    
    

16. Union's trucks are leased by Union to Pritchett when Union has no jobs, and Union leases Pritchett's trucks when it has a contract which it cannot fill with its existing capacity. Such arrangements are common in this business. As a result, each company carries liability insurance covering leased vehicles.

    
    

17. Union purchases fuel, equipment, tires and service from Pritchett. Pritchett has the largest truck terminal in the area, and provides Union with these products and services at competitive prices. Pritchett extends credit to Union without problem.

    
    

18. Union either purchases its workman's compensation insurance through Pritchett, or does not have coverage.

    
    

    CONCLUSIONS OF LAW

    
    

19. The Division of Administrative Hearings has jurisdiction over the parties and subject matter in this proceeding. Section 120.57, Florida Statutes. The Petitioner must prove its entitlement to certification as a Minority Business Enterprise by a preponderance of the evidence. The Petitioner has the burden to go forward and the burden of proof.

    
    

20. Section 287.0943 of Chapter 92-279, Law of Florida, places the duty upon the Department of Management Services (DMS) to certify minority business enterprises as defined in Section 288.703, Florida Statutes. DMS has promulgated rules and has developed a process for reviewing applications for certification of MBEs. The Hearing Officer officially recognized Rules 13A-2 and 13-4, Florida Administrative Code.

    
    

21. Rule 13A-2.005,(4),(a) and (b), Florida Administrative Code, states in pertinent part:

    
    

    1. To establish that it is a small business concern, the applicant shall:

       
       

       1. demonstrate that it is an independently owned and operated business concern. In assessing business independence, the Office shall consider all relevant factors, including the date the firm was established, the adequacy of its resources, and the degree to which financial

          relationships exist with other persons and/or business concerns. For puposes of this rule, the Office's consideration of such financial relationships shall not be affected by business' inability to secure traditional capitalization through banks, lending institutions or others.

          
          

       2. not be an affiliate of a non- minority business nor share (on an individual or combined basis) common ownership, directors, management, employees, facilities, inventory, financial resources and expenses, equipement, or business operations with a non-minority

    person and/or business concern which is in the same or an associated field of operation.

    
    

22. Union is financially dependent on M. H. Pritchett. While a co-owner of the applicant is Pritchett's daughter and a natural subject of his goodwill and generosity, such a relationship is prohibited by the statute. Similarly, her service as a director of a Pritchett corporation and carrying on Union's business from her desk at Pritchett trucking is natural, but establishes a prohibited relationship. See Aloha Dredging and Construction co. v Heatherly, 661 F. Supp. 738 (D.D.C. 1987).

    
    

23. The affiliation of Union and Pritchett through Wilson, albeit a natural outgrowth of familial affection between Pritchett and the owner of only 49% of Union, would disqualify Union from designation as a MBE under the applicable statutes. The loans to Union by M. H. Pritchett and deposits by Lee to the Pritchett Special Account together with the shared leases show a business affiliation between Lee and a non-minority businessman which is equally disqualifying.

RECOMMENDATION

Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is therefore,

RECOMMENDED that the Petitioner's application for certification as a Minority Business Enterprise be denied.

DONE AND ENTERED this 9th day of September, 1992, in Tallahassee, Leon County, Florida.

STEPHEN F. DEAN

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 9th day of September, 1992.

APPENDIX A

Both parties submitted proposed findings which were read and considered. The following states which of the proposals was adopted and which was rejected and why:

PETITIONER'S PROPOSED FINDINGS:

Para 1 RO para 1

Para 2 RO para 2

Para 3a-e RO para 4

Para 3f RO para 11

Para 4 RO para 12

Para 5 RO para 15

Para 6 RO para 13

Para 7 RO para 17 RESPONDENT'S PROPOSED FINDINGS:

COPIES FURNISHED:

Joan Van Arsdall Staff Attorney

Department of Management Services Office of General Counsel

Knight Building, Suite 309 Koger Executive Center 2737 Centerview Drive

Tallahassee, FL 32399-0950

Frank Gafford, Esquire Post Office Box 1789 Lake City, FL 32056-1789

Larry Strong, Acting Secretary Department of Management Services

307 Knight Building 2737 Centerview Drive

Tallahassee, FL 32399-0950

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.

Docket for Case No: 91-007714

Orders for Case No: 91-007714