STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JUPITER ENVIRONMENTAL )

LABORATORIES, INC., )

)

Petitioner, )

)

vs. ) Case No. 97-2982

)

DEPARTMENT OF LABOR AND )

EMPLOYMENT SECURITY, )

MINORITY BUSINESS ADVOCACY )

AND ASSISTANCE OFFICE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case by telephonic conference on October 28, 1997, at West Palm Beach, before Susan B. Kirkland , a duly designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Glynda E. Russell, President

Jupiter Environmental Laboratories, Inc.

220 Venus Street, Suite 16 Jupiter, Florida 33458

For Respondent: Joseph L. Shields, Esquire

Department of Labor and Employment Security Hartman Building, Suite 307

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2189

STATEMENT OF THE ISSUES

Whether Petitioner should be certified by Respondent as a minority business enterprise.

PRELIMINARY STATEMENT

By letter dated June 3, 1997, Respondent, Department of Labor and Employment Security, Minority Business Advocacy and Assistance Office (Office), denied the request of Petitioner, Jupiter Environmental Laboratories, Inc. (Jupiter), for certification as a minority business enterprise. The reasons given for the denial was that Petitioner did not qualify as a minority business enterprise within the meaning of Section 288.703(1), Florida Statutes, and Rules 38A-20.005(2)(c), (3)(c), (3)(d); 38A-20.005(3)(d)1, (3)(d)4, (3)(d)6, and

38A-20.005(4)(a), Florida Administrative Code.

Jupiter requested an administrative hearing by letter dated June 20, 1997. The case was forwarded to the Division of Administrative Hearings for assignment to an administrative law judge.

The final hearing was conducted by telephonic conference. At the final hearing, Glynda E. Russell, President of Jupiter,

testified on behalf of the Petitioner. Petitioner's Exhibits 1-5 were admitted in evidence.

Respondent called Sharon Garlington and Lloyd Ringgold as its witnesses. Respondent's Exhibit 1-11 were admitted in evidence.

The parties agreed to file proposed recommended orders within ten days of the close of the final hearing. The parties filed their proposed recommended orders on November 7, 1997.

FINDINGS OF FACT

1. Petitioner, Jupiter Environmental Laboratories, Inc. (Jupiter), is an environmental testing laboratory established in October 1995. The services performed by Jupiter include testing samples of water, oil, soil, and waste water in accordance with the Environmental Protection Agency standards. Jupiter also tests for inorganic and organic compounds by mass spectrography and gas chromatography.

2. Jupiter is owned 70 percent by Glynda Russell, a female, and 30 percent by her husband, Edward Dabrea, who is a non- minority.

3. Prior to forming Jupiter, Ms. Russell had not worked in a laboratory such as Jupiter. Her work experience had been in real estate and selling women's apparel. According to Ms. Russell she did gain some knowledge and experience in environmental testing because she was a customer of testing laboratories while she was in the real estate business. She became familiar with the Environmental Protection Agency's requirements while she was investigating environmental impacts when she was a realtor.

4. Mr. Dubrea has a degree in earth science (geology) and has done post graduate studies in geoscience (organic geochemistry). He has extensive work experience in environmental testing laboratories.

5. Both Ms. Russell and Mr. Dabrea are jointly liable for a

   
   

   $50,000 loan from the Small Business Administration and a $15,000

   line of credit. Ms. Russell has also incurred debt of over

   
   

   $100,000 on her personal credit card for Jupiter's expenses. The company has three equipment leases which Ms. Russell signed and indicated she was personally liable. Ms. Russell also signed the lease for the space occupied by the business.

6. Ms. Russell is the president of the corporation. Her duties include directing all marketing, sales, and financial operations. She is responsible for recruiting and hiring personnel, maintaining state certifications, prioritization of work flow (sample pick-up, sample log-in and report generation), bid pricing, selection of subcontracting laboratories, customer service and purchasing of supplies.

7. Mr. Dabrea is the Technical Director for the company. In addition to working for Jupiter, he does freelance research. His resume states that his work at Jupiter includes the following:

   Planned and organized all technical details for new laboratory, including equipment requirements and analytical supplies.

   Received and setup instrumentation, performs necessary calibrations.

   Coordinates information with Laboratory Director and QA/QC Officer.

   Develops new methods and provides research assistance to clients with unusual assessments.

   Coordinates between laboratory and governmental agency to ensure compliance. Submits performance evaluation studies to E.

   P. A. for certification on quarterly basis. Responsible for ensuring adequate instrument capacity for continued growth of the company.

8. Cliff Ross, a non-minority, is the Laboratory Director

   and works part-time for Jupiter.

   
   

9. Start-up funds for Jupiter were contributed by Ms. Russell and Mr. Dabrea. Ms. Russell contributed $25,000 in cash, and computer equipment worth approximately $8,000. Mr. Dabrea contributed an $11,000 truck and $5,000 in computer equipment. Ms. Russell contributed 67 percent and Mr. Dabrea contributed 32 percent.

10. Jupiter is certified in certain categories of environmental water testing by the State of Florida, Department of Health, pursuant to Chapter 403, Florida Statutes. In order to acquire such certification, tests must be performed in the laboratory by qualified technical personnel with the proper educational credentials. In order to acquire the certification for Jupiter, the tests were performed by Mr. Dabrea and Mr. Ross. Ms. Russell is not technically or educationally qualified to perform the tests required for certification. It is not necessary to have the certification to operate an environmental laboratory, but many companies acquire the certification as a marketing tool. Ms. Russell indicated in her response to the denial of her certification that "current market conditions make it all but impossible to get work without it." (Petitioner's Exhibit No. 1.)

11. Ms. Russell can perform the extractions. Once the extractions are done for certain types of testing, the testing is automated. She cannot do chromatography.

12. The Quality Assurance Director for Jupiter is Pamela Shore-Loeb. Her duties include responsibilities for all quality assurance and quality control requirements to ensure continued State of Florida laboratory certifications and project management to a growing client list. She, along with Ms. Russell, developed the quality assurance manual used by the business.

    CONCLUSIONS OF LAW

    
    

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

14. Respondent, Minority Business Advocacy and Assistance Office (Office), has the responsibility to certify minority business enterprises. Section 287.0943(4)(a), Florida Statutes.

15. The Office denied certification to Petitioner, stating that Petitioner did not meet the requirements of Rule

    38A-20.005(2)(c), Florida Administrative Code, which provides:

    
    

    (2) An applicant business must satisfy paragraphs (a), (b), (c), (d), and (e) below in order to be considered 51 percent owned by minority persons. The ownership exercised by the minority persons shall be real, substantial, and continuing, and shall go beyond mere pro forma ownership of the firm as reflected in its ownership documents. In its analysis, the Office may also consider the transferral of ownership percentages with no exchange of capital at fair market value.

    * * *

    1. The minority owners must demonstrate that they share in all the risks assumed by the business firm. Such sharing of business risks shall be demonstrated through the minority owners' primary role in decision- making, and negotiation and execution of

       related transaction documents either as individuals or as officers of the business. The minority owners' sharing in business risks shall be commensurate with their percentage of ownership, including but not limited to, start-up costs and contributions, acquisition of additional ownership interests, third party agreements, bonding applications and other liabilities. Start-up contributions may be space, cash, equipment, real estate, inventory, or services estimated at fair market value. All contributions of capital by the minority owners must be real and substantial. The following are presumed not to be real and substantial contributions:

       1. promises to contribute capital;

       2. notes payable to applicant business;

       3. notes payable to non-minority owners or to the non-minority family members of any owners;

       4. past services rendered by the minority persons as an employee, rather than as a decision maker.

    
    

16. Jupiter has established that the minority owner's contribution toward start-up costs was commensurate with her ownership percentage. She owns 70 percent of the business and contributed 67 percent of the start-up costs, the majority of which was cash. Additionally, Ms. Russell is personally liable for a $50,000 Small Business Administration loan, a $15,000 line of credit, $100,000 in credit card debt, and three equipment leases. Mr. Dabrea cosigned for the $50,000 loan and the $15,000 line of credit. The risks she has incurred is commensurate with her ownership interests. Jupiter has met the requirements of Rule 38A-20.005(2)(c), Florida Administrative Code.

17. The Office denied certification stating that Petitioner did not meet the requirements of Rules 38A-20.005(3)(c) and(d),

    Florida Administrative Code, which provide:

    
    

    (3) An applicant must establish that the minority owners possess the authority to control and exercise dominant control over the management and daily operations of the business.

    * * *

    1. The minority owners must exercise sufficient management and technical responsibilities and capabilities to maintain control of the business. If the owners of the business who are not minority persons are disproportionately responsible for the operations of the business, then the business is not controlled by the minority owners.

    2. The control exercised by the minority owners shall be real, substantial, and continuing. In instances where the applicant business is found to be a family-operated business, with duties, responsibilities and decision-making occurring either jointly and mutually among owners and principals, or severally along managerial and operational lines between minority owners or principals, the minority owners shall not be considered as controlling the business. Where the minority owners substantiate that the assumption of duties is not based on their lack of knowledge or capability to independently make decisions regarding the business' management and day-to-day operations, but on the execution of their delegation of duties the minority owners' demonstration of control may not be affected. The minority owners shall establish that they have dominant responsibility for the management and daily operations of the business as follows:

       1. The minority owners shall control the

    purchase of goods, equipment, business inventory and services needed in the day-to- day operation of the business. The minority owners' control of purchasing shall be evidence of their knowledge of products, brands, manufacturers, types of equipment and products and their uses, etc. rather than merely reflective of the minority owners' ministerial execution of the ordering/acquisition of goods.

    * * *

    4. The minority owners shall have managerial capability, knowledge, training, education, and experience required to make decisions regarding the operations of the business. In determining the applicant business' eligibility, the Office will review the prior employment and educational backgrounds of the minority owners, the professional skills, training and/or licenses required for the given industry, the previous and existing managerial relationship between and among all owners, especially those who are familiarly related, and the timing and purpose of management changes. If the minority owners have delegated management and technical responsibility to others, the minority owners must substantiate that they have caused the direction of the management and the technical responsibilities of the business. When the applicant business provides services which require the business and/or its professional qualifier be licensed, the minority owner shall hold the requisite license issued by the State of Florida or local licensing entity. The minority license holder, need not be the controlling owner of the business, but must hold an ownership interest.

    * * *

    6. The minority owners shall substantiate personal direction and actual involvement with all major aspects of the applicant business. The major aspects shall be defined as those tasks essential to accomplish all objectives and operations related to those services or commodities for which the applicant business requests certification.

18. Ms. Russell has delegated the technical responsibilities of the business to her husband and to Cliff Roberts. She has not demonstrated that she has the educational background or the experience to operate the technical side of the company. Although she may have dealt with environmental laboratories when she was a realtor, that relationship as

    described by Ms. Russell is insufficient to demonstrate that she is capable of running the technical operations. She did indicate that she could perform some of the tests which were automated; however, she also indicated that she could not perform some of the other tests.

19. Although water testing certification by the State of Florida Department of Health is not necessary to operate an environmental laboratory, it is necessary if the laboratory performs certain water tests. Ms. Russell chose to have the company certified, and she was not qualified to perform the tests necessary for that certification.

20. Jupiter had failed to demonstrate that it meets the requirements of Rule 38A-20.005(3)(c) and (d)1, 4 and 6, Florida Administrative Code.

21. The Office denied certification stating that Petitioner failed to meet the requirements of Rule 38A-20.005(4)(a), Florida Administrative Code, which provides:

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

22. Petitioner has failed to demonstrate that it meets the requirements of Rule 38A-20.005(4)(a), Florida Administrative Code. She is dependent on two non-minorities, Mr. Dabrea and Mr. Ross, for the technical aspects of the business

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding that Petitioner, Jupiter Environmental Laboratories, Inc., meets the requirements of Rule 38A-20.005(2)(c), Florida Administrative Code, but does not meet the requirements of Rules 38A- 20.005(3)(c), (d)1, 4 and (6) and (4)(a), Florida Administrative Code. Consequently, the final order should deny Jupiter Environmental Laboratories, Inc.'s application for certification as a minority business enterprise.

DONE AND ENTERED this 1st day of December, 1997, in Tallahassee, Leon County, Florida.

SUSAN B. KIRKLAND

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(904) 488-9675 SUNCOM 278-9675

Fax Filing (904) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 1st day of December, 1997.

COPIES FURNISHED:

Joseph L. Shields, Esquire Department of Labor and

Employment Security Hartman Building, Suite 307

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2189

Glynda E. Russell, President

Jupiter Environmental Laboratories, Inc.

220 Venus Street, Suite 16 Jupiter, Florida 33458

Douglas L. Jamerson, Secretary Department of Labor and

Employment Security

303 Hartman Building

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152

Edward A. Dion, General Counsel Department of Labor and

Employment Security

307 Hartman Building

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152

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.

Docket for Case No: 97-002982

Orders for Case No: 97-002982