STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

TED'S AUTO PARTS, )

)

Petitioner, )

)

vs. ) Case No. 98-4444

) DEPARTMENT OF LABOR AND EMPLOYMENT ) SECURITY, MINORITY BUSINESS ) ADVOCACY AND ASSISTANCE OFFICE, )

)

Respondent. )

)

RECOMMENDED ORDER

Upon due notice, William R. Cave, an Administrative Law Judge for the Division of Administrative Hearings, held a formal hearing in this matter on February 9, 1999, Bartow, Florida.

APPEARANCES

For Petitioner: Janice A. Serdynski, pro se

Ted's Auto Parts

190 Second Avenue South Bartow, Florida 33830

For Respondent: Joseph L. Shield, Senior Attorney

Department of Labor and Employment Security

307 Hartman Building

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2189

STATEMENT OF THE ISSUE

Is Petitioner entitled to certification as a Minority Business Enterprise pursuant to Rule 38A-20.005, Florida Administrative Code?

PRELIMINARY STATEMENT

On March 10, 1998, Janice A. Serdyski, as minority owner of Ted's Auto Parts, Inc., filed an application with the Department of Labor and Employment Security, Minority Business Advocacy and Assistance Office (Department) for certification of Ted's Auto Parts as a Minority Business Enterprise (MBE).

By letter dated August 26, 1998, the Department advised Petitioner that the application, supporting documents, and telephone interview established that Janice A. Serdynski, as the minority owner of Ted's Auto Parts, did not: (a) share profits and risks commensurate with her percentage of ownership and therefore, her ownership was not real, substantial, and continuing; (b) did not control the management and daily operations of the business; (c) hold majority ownership in the business for two years subsequent to the ownership being transferred from Teddy L. Serdynski, a non-minority family member and; (d) did not have authority from the Board of Directors to control the corporate affairs of the business. Additionally, the decision to deny the application was based on Petitioner's failure to meet the specifications of

Rules 38A-20.005(2)(b)(c)(e) and (3)(a)(b)(c)(d)1.2.3.5. and 6.,

Florida Administrative Code. By letter dated September 25, 1998, Petitioner protested the denial of the application for MBE status and requested a formal administrative hearing. By letter dated October 5, 1998, the Department referred the matter to the Division of Administrative Hearings (Division) for the assignment

of an Administrative Law Judge and for the conduct of a formal hearing.

At the hearing, Petitioner presented the testimony of Janice

1. Serdynski. Petitioner's Exhibit 1 was received as evidence. The Department presented the testimony of Lloyd Ringgold. Department's Exhibits 1 through 7 were received as evidence.

   There was no transcript of this proceeding filed with the Division. The Department timely filed its Proposed Recommended Order. The Petitioner elected not to file a proposed recommended order.

   FINDINGS OF FACT

   
   

   Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made:

   1. On February 12, 1998, Teddy L. Serdynski and Janice A. Serdynski entered into a Partnership Agreement which in pertinent part provides as follows:

      1. NAME: The name of the partnership shall be known as "Ted's Auto Parts."

      2. PURPOSE: The purpose of the partnership shall be the operation of an automobile parts business and related enterprises.

         * * *

         1. COMMENCEMENT: The partnership shall officially commence upon execution of this agreement.

         2. DURATION: The partnership shall continue until dissolved, either by the parties or by legal proceedings, or by liquidation.

         3. CAPITAL: The capital of the partnership shall be contributed in amounts equalling 51% by JANICE A. SERDYNSKI and 49% by TEDDY L. SERDYNSKI, thereby granting to the said

            JANICE A. SERDYNSKI the controlling interest of said partnership.

         4. WITHDRAWAL: No partner shall withdraw any invested capital without the consent of the other partner.

         5. CAPITAL GAINS AND LOSSES: Capital gains and losses shall be shared in a proportionate amount of their investment and ownership interest.

         * * *

         1. MANAGEMENT: Although JANICE A. SERDYNSKI is the owner of a controlling interest in the partnership, each shall have equal voice in the management of the affairs of the partnership. Both parties shall administer to the general affairs of the partnership and shall carry out and put into effect the general policies and specific instructions of their decision on any given matter.

         2. BANK ACCOUNTS: The partnership shall maintain checking and other accounts in such bank or banks as the partners shall agree upon. Withdrawals and writing of checks on the partnership account may be done jointly and/or singly.

         1. PROFITS AND LOSSES: The partners shall share in accordance with their ownership interest in the profits and losses. . . .

         2. LIMITATIONS ON PARTNER: No partner, without the consent of the other partner, shall borrow money in the partnership name for partnership purposes or utilize collateral owned by the partnership as security for such loans, assign, transfer, pledge, compromise or release any of the claims or debts due to the partnership except on payment in full; consent to the arbitration of any dispute or controversy of the partnership; transfer firm assets; make, execute or deliver any assignment for the benefit of creditors; maker, execute or deliver any bond, confession of judgment, guaranty bond, indemnity bond, or surety bond or any contract to sell, bill of sale, deed, mortgage, lease relating to any substantial part of the partnership assets or his/her interest therein; or engage in any business or occupation without the consent of the other partner.

         * * *

         17. DISPUTES: That the parties agree that all disputes and differences, if any, which shall arise between the parties, shall be referred to and decided by two indifferent, competent persons in or well acquainted with the trade, one person to be chosen by each party, or to submit to arbitration by a recognized arbitration service, and his/her or their decisions shall, in all respect, be final and conclusive on all parties.

   2. Ted's Auto Parts was a sole proprietorship from May 1, 1985 until February 11, 1998. From May 1, 1985, until

      February 11, 1998, Janice A. Serdynski shared ownership in Ted's Auto Parts equally with her husband, Teddy L. Serdynski, a non- minority.

   3. Janice A. Serdynski does not share income from Ted's Auto Parts commensurate with her 51 percent ownership.

   4. Decision-making, withdrawal of funds, borrowing of money, and the day-to-day management of Ted's Auto Parts are shared equally between Janice A. Serdynski and Teddy L. Serdynski.

   5. Ted's Auto Parts is a family operated business with duties, responsibilities, and decision-making occurring jointly, and, at time, mutually among family members.

   6. Both Janice A. Serdynski and Teddy L. Serdynski are authorized to sign checks on the account of Ted's Auto Parts.

      CONCLUSIONS OF LAW

      
      

   7. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding

      pursuant to Sections 120.57(1), Florida Statutes.

      
      

   8. The burden of proof is on the party asserting the affirmative of an issue before an administrative tribunal. Florida Department of Transportation v. J.W.C. Company, Inc.,

396 So. 2d 778 (Fla. 1st DCA 1981). To meet this burden, the Petitioner must establish facts upon which her allegations for entitlement to minority business enterprise certification is based by a preponderance of the evidence. Section 120.57(1)(h), Florida Statutes.

9. Rules 38A-20.005(2)(b)(c)(e) and (3)(a)(c)

1. 1.2.3.5.6., Florida Administrative Code, provide as follows:

   
   

   (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 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 income, earnings, and any other benefits from the business concern which are accorded to any other owner. The minority owners' share of income, earnings and benefits shall be commensurate with the percentage of their ownership in the business concern, including, but not limited to, salaries, draws, bonuses, commissions, insurance coverage, proceeds from business investments and properties, and profit sharing, and other benefits.

   2. 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, acquisitions 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 capital contributions:

      1. promises to contribute capital,

      2. notes payable to applicant business,

      3. notes payable to the non-minority owners or to the non-minority family members of any owner, and

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

* * *

(e) The minority owners shall not have acquired their majority ownership of at least

51 percent of the applicant business through transferral of ownership occurring within a minimum of two years, when the previous majority ownership interest in the business was by a non-minority who is or was a relative, former employer, or current employer of the minority persons on who eligibility is based. This requirement shall not apply to minority persons who are otherwise eligible who take 51 percent or greater interest in a business that requires professional licensure to operate and who will be the qualifying license holder for the firm when certified.

(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.

(a) The discretion of the minority owners shall not be subject to any formal or

informal restrictions (including, but not limited to, by-law provisions, purchase agreements or voting rights, whether cumulative or otherwise), which would vary or usurp managerial discretion customary in the industry.

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 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 and non- 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 their execution of delegation of duties the minority owners' demonstration of control may not be affected. The minority 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.

2. The minority owners shall control the hiring, firing and supervision of all

   employees, and the setting of employment policies, wages, benefits and other employment conditions. In instances where minority owners have delegated the hiring and firing of employees, the minority owners shall demonstrate that their knowledge and capability is sufficient to evaluate the employees' performance in the given industry.

3. The minority owners shall have knowledge and control of all financial affairs of the business. The ability of any non-minority owner or employee to sign checks and enter into financial transactions on behalf of the business shall be considered in determining financial control. The minority owners shall expressly control the investments, loans, payroll, and establishment of lines of credit.

10. A review of the record in the light most favorable to Petitioner, including the Partnership Agreement and the testimony of Janice A. Serdynski, clearly shows that Petitioner does not meet the requirements of the above-quoted rules. Therefore, Petitioner has failed to meet its burden to show that it is entitled to certification as a Minority Business Enterprise.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it recommended that the Department enter a final order finding that Petitioner has failed to meet the requirements for Minority Business Enterprise certification and dismiss the petition filed by Petitioner.

DONE AND ENTERED this 22nd day of March, 1999, in Tallahassee, Leon County, Florida.

WILLIAM R. CAVE

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6947 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 22nd of March, 1999.

COPIES FURNISHED:

Douglas I. 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

Janice A. Serdynski Ted's Auto Parts

190 Second Avenue, South Bartow, Florida 33830

Joseph L. Shields, Senior Attorney Department of Labor and

Employment Security

307 Hartman Building

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2189

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: 98-004444

Orders for Case No: 98-004444