C. MECHANICAL CONTRACTORS, INC., )
vs. ) Case No. 97-2981
Respondent. )
Pursuant to notice, a hearing was held in Jacksonville, Florida, on March 3, 1998, by Stephen F. Dean, assigned Administrative Law Judge of the Division of Administrative Hearings.
For Petitioner: John R. Steifel, Jr., Esquire
For Respondent: Joseph L. Shields, Esquire
The issue is whether the Petitioner meets the criteria for certification as a minority business enterprise by the Office of Minority Economic and Business Development, Department of Labor.
On February 3, 1997, the Petitioner applied to the Respondent's office for certification as a Minority Business Enterprise (MBE). By letter dated June 3, 1997, the Respondent denied the Petitioner's application for MBE status. The reason given for denial of certification was that the Petitioner did not qualify as a minority business enterprise within the meaning of Section 288.701(1), Florida Statutes, and Rule 38A-20.005(4) (a),(b), and (c), Florida Administrative Code.
The Petitioner filed a Petition for hearing on June 25, 1997, and the Department referred the case to the Division of Administrative Hearings. An Initial Order was issued by the Division on July 13, 1997. After receiving the responses of the parties, a formal hearing was scheduled for March 3, 1998, and held as noticed.
At the hearing, the Petitioner offered his testimony and the testimony of his accountant regarding the structure and activities of his business. The Department offered the testimony of its investigator. The Petitioner offered late filed exhibits, BC 1 through BC9.
The parties submitted proposed Findings of Facts which were read and considered. A transcript of the proceedings was not ordered.
The applicant corporation, B. C. Mechanical Contractors, Inc. (BC), is owned by Benjamin Clark, Darlena Clark, his wife, and Florida Mechanical Systems, Inc. (FMS). BC is a Florida corporation incorporated on March 17, 1995.
Mr. And Mrs. Clark supplied $5,000 each and FMS supplied
$5,000, for a total capitalization of $15,000 for B.C. Mr. and Mrs. Clark each own 33 1/3% of the outstanding shares or a total of 66 2/3% of the outstanding shares, and FMS owns 33 1/3% of the outstanding shares of B.C.
Both Mr. and Mrs. Clark are minorities. At the time Mr. Clark formed BC Mechanical Contractor, Inc., he entered into
an agreement giving him the option to buy-out the shares of stock owned by FMS for $5,000.00 plus 10% interest per annum.
Mr. Clark holds a mechanical contractor's license with the State of Florida.
FMS is not owned by minorities. FMS lists its "General Nature of Business" as "Heating and Cooling" with Florida's Secretary of State, Division of Corporations. However, FMS no longer participates in the business of mechanical contracting. It is now provides equipment and real estate leasing together with personnel services to contractors.
Mr. W. W. Gay owns a major interest in FMS.
Mr. Clark worked for W. W. Gay Mechanical Contractor, Inc. (W. W. Gay, Inc.), from September 1975 to September 1997. Mr. W. W. Gay owns a major interest in W. W. Gay, Inc.
Messrs. W. W. Gay, Roger Painter, and Robert Gay are all non-minorities and all are officers or directors of FMS.
Mr. W. W. Gay is the licensed qualifier for W. W. Gay Mechanical Contractor, Inc. Mr. W. W. Gay qualifies the corporation as a mechanical contractor.
Roger Painter is the corporate secretary of BC, and is authorized to sign checks on its accounts. Uncontroverted testimony was received that Painter has never signed a check on BC’s accounts and is authorized to sign checks as an emergency measure in case Benjamin Clark should become incapacitated.
FMS has minority ownership interests in six to seven companies, some of which are in the contracting business.
FMS has a net worth exceeding $10 million.
FMS does not engage in the same business as the applicant.
The financial statements of BC, Exhibit BC 3, and its tax returns, BC Exhibits 4 and 5, demonstrate that BC is a business that generates less than $100,000.00 a year.
The net worth of BC is significantly less than $3 million.
Ben Clark is the only director of BC. Although Roger
W. Painter is corporate secretary for BC, Mr. Painter has no control over the corporation.
Roger Painter is President of FMS.
Mr. Clark and his wife control BC.
Mr. Clark demonstrated that BC is a small business concern.
BC is not an "affiliate" of FMS because FMS must have control over the affiliated entity.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter pursuant to Section 120.57(1), Florida Statutes.
The Department's grounds for denying the certification of BC as a minority business enterprise is BC’s failure to show that it is not an affiliate of a non-minority business or shares common ownership, directors, management, employees, facilities, inventory, financial resources and expenses, equipment or business operations with a non-minority person or business which is in the same or an associated field of operation. See Rule 38A-20.005(4), Florida Administrative Code.
The aforementioned rule must be read pari materia with Rule 38A-20.001 and Rule 38A-20.004(2) and (3), Florida Administrative Code. When read together with these other provisions, Rule 38A-20.005(4)(b), Florida Administrative Code, requires an applicant to show that it is not an affiliate of a non-minority business, or share resources with a non-minority business. The applicant in this case has made such a showing.
The Petitioner demonstrated that it is independent and free of control by any other company. The Petitioner
demonstrated that 66 and 2/3% of its stock is owned by minority persons, and that its only director and chief operating officer is a minority who controls the operation of the business. The only issue factually is whether the Petitioner “shares” common ownership, directors, management, employees, facilities, inventory, financial resources and expenses, equipment of business operations with a non-minority person or business concern which is in the same or as associated field of operation.
There are two separate areas of inquiry involved with this issue: 1) whether the enumerated items are shared, and 2) whether the non-minority business is in the same or an associated field. The Petitioner’s corporate secretary is the officer of the non-minority business which owns one-third of Petitioner’s stock. The Petitioner rents office space and office services from that non-minority business. Therefore, it can be argued that Petitioner “shares” ownership, management, facilities, and financial resources with the non-minority business.
The facts show that Petitioner pays full value for the leased space and services which it obtains from its non-minority landlord, who owns one-third of Petitioner's stock. A service for which one pays is not “shared.” The facts show that corporate secretary does not control the business, but functions to ensure that corporate minutes and records are properly kept. Further, the corporate secretary has never written a check on Petitioner’s account and is authorized to draw checks on
Petitioner’s bank account in case of emergencies. There is no evidence that equipment, inventory or operations are shared with FMS. Taken as a whole, the facts do not support a finding of shared activity.
Regarding whether FMS is in the same or an associated field of business, the Department presented evidence that its corporation papers filed with the Secretary of State’s office reflect that it is in the business of “heating and cooling.” This was the only evidence that FMS engages in the same or associated field of operations as BC.
The overwhelming weight of the evidence is that FMS has evolved from a “heating and cooling” business, into a service company which rents equipment, real property and business services to those who engage in the contracting business. FMS now makes over $10 million a year in its service business which is not the same or associated with the mechanical contracting business.
W. W. Gay, Inc. is the company which now engages in the mechanical contracting business and which once employed Ben Clark. Although Mr. W. W. Gay is a major owner and director of FMS, neither he nor W. W. Gay, Inc. is affiliated with or shares any management, employees, facilities, inventory, expenses or operations with the Petitioner. Because FMS does not engage in the same or an associated business, Rule 38A-20.004, Florida Administrative Code does not apply to the applicant.
