vs. ) CASE NO. 82-361
Respondent. )
Pursuant to notice, a hearing was held before Charles C. Adams, a Hearing Officer with the Division of Administrative Hearings. This hearing was conducted on December 13, 1982, in Jacksonville, Florida. The Recommended Order is being entered following receipt of the transcript on December 20, 1982 1/ .
For Petitioner: Elliott J. Safer, Esquire
For Respondent: Vernon L. Whittier, Jr., Esquire
Mark Linsky, Esquire Department of Transportation The Haydon Burns Building Tallahassee, Florida 32301
The issues presented here concern the entitlement of the petitioner to be certified as a Minority Business Enterprise (female) in keeping with Rule 14- 78.05, Florida Administrative Code. In particular, it is to be decided whether the request for certification should be denied premised upon Respondent's assertion that: (1) Princess Construction Company is lacking in independent business status; and (2) that the female owners do not have bona fide control of the operations of Princess Construction Company.
Princess Construction Company, Petitioner, was incorporated on February 3, 1981, upon the filing of its articles of incorporation as a Florida corporation. The directors of the corporation were, and remain, Lucy B. Jensen, Mary Anna Jensen and Stephen F. Jensen, and they are individually the holders of 1,000 shares of stock and serve as officers in the capacity of president, secretary and treasurer, respectively. Minutes of the corporation
organizational meeting held in Jacksonville, Florida, on February 3, 1981, show the election of the officers. See Respondent's Exhibit 2.
As shown in Respondent's Exhibit 2, which is the application for Minority Business Enterprise certification, hereinafter referred to as MBE certification, Petitioner is engaged in the business of constructing concrete sidewalks, curb and gutter and ditch paving. The corporation also is involved in priming and sanding and equipment leasing.
The minority ownership of the corporation consists of two (2) Caucasian females who own 66.6 percent of the corporation. Lucy B. Jensen, President, is one of the female employees and has additional employment as Secretary of Jensen of Jacksonville, Inc. That latter corporation pays her a salary of $300.00 per week and petitioner pays her $5.00 per week, with her time of employment being equally divided between the employers. The second female owner of the Princess Construction Company is Mary Anna Jensen who is an Assistant Secretary of Jensen of Jacksonville, Inc., and is paid $260.00 by Jensen and $5.00 by Petitioner. Her time is divided 75 percent with Princess Construction and 25 percent with Jensen. The third member of the ownership group in Princess is Stephen F. Jensen who is an Assistant Treasurer of Jensen of Jacksonville, Inc. Lucy B. Jensen is the mother of Mary Anna Jensen and Stephen F. Jensen, and her husband is the principal authority in Jensen of Jacksonville.
Schedule A of the application for MBE certification, which schedule is part of Respondent's Exhibit 2, indicates that policy-making in Princess Construction is done by all owners; that financial decisions are made by Stephen Jensen; that dismissal of management personnel is a function of Lucy Jensen; that decisions to bid jobs are made by Stephen Jensen, as well as job estimating; that purchase of equipment and supervision of field operations are handled by Stephen Jensen and Mary Jensen; that payrolls are signed by any of the three (3) owners and that surety and insurance bonds are signed by Lucy Jensen. At the time of the initial application, Schedule A indicated that the firm owned and/or leased no equipment and had not completed any projects.
By the date of hearing, there had been some changes in the overall responsibility of the principal officers within Princess Construction. Lucy Jensen was then the individual involved with the day-to-day operation of Princess Construction, including review of the work with the job foreman or field supervisor, one Caesar Moultrie. She also was primarily responsible for estimating for priming and sanding and had had occasion to fire an employee of the corporation.
At the point of hearing, Mary Anna Jensen was involved in liaison with the field operations of the corporation and office functions. She had on occasion operated the concrete curb machine on a contract completed by the Petitioner corporation, handled payroll matters and had done estimating work on concrete projects. In addition, she was responsible for handling problems that might arise concerning the delivery of the concrete material to the job sites, by contacting the materials supplier.
Stephen Jensen was taking a less active role in the corporation on December 13, 1982, in view of his enrollment in a university program. At present he only participates in major policy decisions, in the routine affairs of the corporation.
At the point of hearing, Princess Construction owned a crew-cab truck and two (2) heavier trucks that were being prepared to assist in the work
activities of the corporation. These vehicles are variously depicted in Petitioner's Exhibits 8 through 12, which are photographs of the equipment.
The application for certification at Schedule A, Respondent's Exhibit 2, shows that Lucy B. Jensen has been a corporate secretary of Jensen of Jacksonville, Inc., and in charge of office management and some field scheduling in the years 1967 through 1981. It is also shown that she had held various secretarial and clerical jobs in construction and manufacturing industries in the years 1949 through 1967.
Mary Anna Jensen is shown to have been employed with Jensen of Jacksonville, Inc., as payroll supervisor and safety director or as assistant secretary, responsible for payroll and safety programs and a certified multi- media Red Cross instructor in the years 1978 through 1981. It is indicated that Mary Anna Jensen has held various summer employment positions with Jensen of Jacksonville, as a job clerk, and other clerical positions and as a laborer. This was in the years 1974 through 1978. Within that same time frame, she achieved a Bachelor of Science degree from the University of Florida with an emphasis on health, business management and recreation.
Stephen F. Jensen, in the key profile portion of Schedule A is identified as having various summer employment with Jensen of Jacksonville, Inc., as laborer, operator and supervisor and as having worked on various co-op endeavors with companies in Georgia and Europe, in the years 1975 through 1980. At the time of the preparation of the schedule, Stephen Jensen was shown to have graduated from Georgia Institute of Technology with a BS degree in Civil Engineering, emphasis on construction and management. The time spent in achieving this degree was between the years 1976 and 1981.
When the hearing was convened, the profile related to the corporate owners, who are the Key personnel in the corporation, had changed to the extent of increased or decreased job responsibilities within the corporation which have been previously discussed and which will be subsequently mentioned in these fact's.
Following receipt of the application for certification as Minority Business Enterprise, a copy of which is found as Respondent's Exhibit 2, a desk audit was performed on that application. The desk audit was done by Sunil B. Nath, presently Supervisor of Budget and Planning for the Department of Transportation, who was an MBE liaison officer with that Department at the time of the application. Following the audit, Nath determined that the application should be denied for lack of independent business status, in that the Petitioner was linked to another business, namely Jensen of Jacksonville, Inc., and was sharing facilities, equipment, etc.; for lack of equipment on the part of Princess Construction; for lack of capability; for lack of minority owned control in the "day-to-day" sense of that term; and for lack of experience and technical know how to enable the corporation to control and train its employees.
On January 13, 1982, the formal statement of denial was mailed to the corporation, setting forth those items indicated in the Issues statement of this Recommended Order as the basis for the denial of the application. A copy of that letter of notification may be found as Respondent's Exhibit 1, admitted into evidence.
Petitioner did not accept the proposed agency disposition of the application and the formal hearing was conducted following the Department's
request that the Division of Administrative Hearings conduct a formal Subsection 120.57(1), Florida Statutes, hearing.
In addition to the general observations which have been made about the business posture of the corporation at the point of application and at the time of hearing, a number of more specific facts concerning the corporation's status were established through witnesses who appeared at the final hearing. One (1) of these persons who gave testimony on the question of entitlement to certification was Charles P. Caddell, President of Caddell Construction Company of Jacksonville, Florida. Caddell has known Mr. Jensen, the husband of Lucy Jensen and father of the other two (2) Principals to Princess Construction, for a period of approximately fifteen (15) Years. During that time, Jensen of Jacksonville and Caddell Construction have pursued joint ventures related to Department of Transportation projects. Caddell is knowledgeable of the fact of Lucy B. Jensen and Mary Anna Jensen's work experience in the construction industry related to office operations. He is also aware of the field experience of Mary Anna Jensen related to the teaching of a first aid course. In particular, Caddell has had involvement with the female contingent of Princess Construction while they were working with Jensen of Jacksonville and Princess, in the area of bookkeeping, cost data, rental of equipment and crews and movement of equipment.
Charles H. Barco who is the President of C. H. Barco Contracting Company, testified on the subject of two (2) contracts which he had ventured with Princess Construction Company. One (1) of these contracts in 1981, has been completed and the second one is still underway. The completed project was fully performed by Princess Construction.
Barco has known Lucy Jensen for twenty to twenty-five (20-25) years and has worked with her husband in an unrelated company. One of the two projects mentioned, which is referred to as the southside connector project, was one in which Barco's knowledge of Lucy B. Jensen's participation related to her involvement with general administrative matters on the project. He had no knowledge of the exact participation of Mary Anna Jensen.
Eugene F. Fulgham, Sales Manager and Vice President of M. D. Moody and Sons, indicated that Lucy B. Jensen recently purchased sand spreading equipment for the Petitioner corporation. This refers to items installed or to be installed on the heavy trucks depicted in the photographs that have been previously identified. Fulgham has been involved with Jensen of Jacksonville since 1968, in establishing purchasing and payment schedules for equipment related to that corporation. Lucy B. Jensen has contacted Fulgham in the past on the topic of acquisition of equipment from Moody for the benefit of Jensen of Jacksonville. He knows of Mary Anna Jensen through her work with Jensen of Jacksonville while in high school. That work pertained to transportation of parts. At princess she has been involved in the solicitation of quotations of rental equipment related to the activities of the corporation, and the delivery of equipment. At the time of hearing, Princess had no lease arrangements with Moody and Sons; however, Fulgham stated that he would lease or rent equipment to Petitioner in the future.
Minna Strickland, Assistant Vice President with Florida National Bank of Jacksonville, testified on the topic of loans which were made to Princess Construction for the purchase of two (2) Mack Trucks, the two (2) heavier work trucks which are shown in the aforementioned photographs. The loan was secured by the trucks following a down payment of 10 to 20 percent and personally endorsed by Lucy Jensen. Princess, to the knowledge of Strickland, has no other
loans with that bank. Strickland had also dealt with Lucy B. Jensen in connection with Jensen of Jacksonville, which has an account with the Florida National Bank; however, this arrangement by Jensen of Jacksonville was not a determining factor in deciding to loan the money for the purchase of Petitioner's trucks.
A. B. Lynch, Jr., Vice President of Surety Associates, which is a banking company, indicated that his company had issued a bid bond in the amount of $10,000.00 to $15,000.00, for the benefit of Princess Construction. His involvement with Lucy B. Jensen has been in the administrative and financial realm related to bonding. He has known Mrs. Jensen for fifteen (15) years or more and has dealt with her on the projects of Jensen of Jacksonville concerning bonds. Petitioner's bonding capacity is in the range of $100,000.00 to
$150,000.00.
Stanley L. Storey, an insurance agent with C. W. Powell and Company, gave testimony on the subject of the insurance coverage provided for Princess Construction Company. Storey also has regular business dealings with Jensen of Jacksonville through Lucy B. Jensen. He has no knowledge of Mrs. Jensen's abilities in the construction industry other than as they relate to the administrative function, such as provision of insurance coverage.
In each instance of affiliation as related by the various witnesses, identified before, it was the opinion of those individuals that Princess Construction Company is a viable business entity.
Caesar Moultrie, the foreman of Princess Construction Company, testified. Moultrie is a minority male but he does not have ownership interest in Princess Construction Company. He has served as foreman for a period of four
or five (5) months and has worked for the company for seven (7) months. He supervises a crew of five (5) men normally and the work activities of Moultrie and his crew include the installation of curbs, working gutter, sidewalks, ditch paving, other paving, flag work and driveways. He supervises the men in the field in the sense of instructing them about jobs to be performed. He also orders concrete and other necessary material. He is visited on the job sites by the three (3) principals in the corporation, the Jensens, and inquiry is made of him to establish if the job is going smoothly. According to Moultrie, Lucy B. Jensen visits the job site on a routine basis. Lucy B. Jensen is his immediate supervisor and on one (1) occasion when it was necessary to dismiss a crew member, that dismissal was made by Lucy B. Jensen, upon recommendation of Moultrie. (This is the personnel action spoken of before.) As established by Moultrie, Lucy B. Jensen does not involve herself in the technical aspects of the job, i.e., the ongoing operations of the corporation in its field operations.
Mary Anna Jensen's testimony at the hearing established that she is the payroll clerk for Princess Construction. Furthermore, her principal training for her position with Princess Construction came through her involvement with Jensen of Jacksonville. In the way of field operations, she has operated the concrete machine for three (3) or four (4) days on one project and has run concrete for curb and gutter on other projects for two (2) days.
She relies on Moultrie when questions arise on the technical aspects of the job in the field, to the extent of indicating that she depends "very heavily" on his expertise related to field operations.
Mary Anna Jensen's testimony pointed out that Princess Construction Company is located at 5334 Whitney Street, Jacksonville, Florida, and shares
office space with Jensen of Jacksonville, for which fifteen dollars ($15.00) per month is paid and the primary equipment is constituted of a kitchen table and file cabinet. Her testimony established that, while at Jensen of Jacksonville she has done accounts payable, been involved with the payroll, typed letters and answered the phone; however, her involvement has not included supervision of field operations or job estimating. With Princess, she has estimated concrete work and prepared the estimates related to contracts in evidence as Petitioner's Exhibit 1 and 2. She visits the job site two (2) or three (3) times a week to check the progress of work on the ongoing Princess job and to inquire on the topic of the employees' satisfaction with their positions. She coordinates and deals with problems that might arise with the delivery of concrete by dealing with the material supplier. Finally, Mary Anna Jensen is familiar with the overall capabilities of the equipment owned by Princess Construction.
Lucy B. Jensen's testimony described the office location of the construction company as being the residence of her family. In addition to the items which have been spoken to concerning her duties with Princess Construction, she mentioned writing crew letters, answering complaints and filling out forms. She clarified her status as Secretary with Jensen of Jacksonville by establishing that she was the office manager and a board member of that corporation, but without any stock ownership. She indicated that Princess had owed money to Jensen of Jacksonville in the past, however, no debt is outstanding at present.
Her management duties are performed by conferring with Moultrie on the night before the work day, and sometimes on the day of job assignments. She has specific understanding of priming and sanding through the use of a distributor truck and this is an activity which Princess would like to be engaged in but has yet to undertake.
Princess Construction has been certified pursuant to Section 337.14, Florida Statutes, in the work class ratings minor bridges, grading and flexible paving. See Petitioner's Exhibit 7, admitted into evidence.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action. See Section 120.57(1), Florida Statutes.
Ruling was reserved on the question of the admissibility of Petitioner's Exhibit 7, for identification. Following the opportunity for the submission of memoranda on this question, which opportunity was accepted, Petitioner's Exhibit 7 is admitted.
Pursuant to Rule 28-6.08, Florida Administrative Code, when a licensing agency has timely set forth the written grounds for a denial of a license, in this instance, denial of certification, the burden of establishing entitlement resides with the petitioning applicant. Here there was a timely notification of grounds for license denial, making it incumbent on Petitioner to demonstrate entitlement to licensure.
The entitlement issue is decided in keeping with the theory expressed in Rule 17-78.05(,3), Florida Administrative Code, which states:
In certifying a firm as an MBE, the Department shall consider but shall not
be limited to the following standards:
Bona fide minority group member- ship shall be established on the basis of the individual's claim that he or she is a member of a minority group and is so regarded by that particular minority community. However, the Department is not required to accept this claim if it determines the claim invalid.
An eligible minority business enterprise under this rule shall be an independent business entity, the real, substantial, and continuing ownership and control of which shall be by minorities or women and go beyond mere pro forma ownership of the firm as reflected in its
ownership documents. The minority or women owners shall enjoy the customary incidence of ownership and shall share in the risks and profits commensurate with their owner- ship interests, as demonstrated by an examination of the substance rather than form of financial and managerial arrange- ments. In assessing business independence the Department shall consider all relevant factors, including but not limited to the date the MBE applicant was established, the adequacy of its resources and the degree
to which financial relationships, equip- ment leasing, and other business relation- ships with nonminority firms vary from industry practice.
For purposes of establishing a corporation as a certified MBE under this rule, all securities which constitute owner- ship or control by minorities or women
shall be held directly by minorities or women. No securities held in trust, or
by any guardian for a minor, shall be con- sidered as held by a minority or by women in determining the ownership or control
of a corporation. Recognition of the enterprise as a separate entity for tax or corporate purposes is not necessarily sufficient for certification as a minority business enterprise under this rule.
An eligible minority business enterprise under this rule shall be one in which the minority or women owners shall also possess the power to direct or cause the direction of the management and policies of the MBE and to make day-to-day as well
as major business decisions concerning
the MBEs management, policy, and operation. The discretion of the minority or women owners shall not be subject to any formal or informal restrictions (including, but
not limited to, bylaw provisions, partner- ship agreements, or charter requirements for cumulative voting rights or otherwise) which would vary managerial discretion customary in the industry.
In determining whether the minority or women owners also possess the power to direct or cause the direction of the manage- ment and policies of the MBE and have the requisite decision-making authority, the Department may look to the control lodged in the owners who are not minorities or women. If the owners who are not minorities or women are disproportionately responsible
for the operation of the enterprise or
if there exists any requirement which pre- vents the minority or women owners from making business decisions without concur- rence of any owner or employee who is not a minority or a woman, then the enterprise
is not controlled by minorities or women
and shall not be considered an MBE within the meaning of this rule. 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, for the purposes of this rule be considered as controlling the enterprise.
An eligible minority business enterprise under this rule shall be one in which the contributions of capital or ex- pertise invested by the minority or women owners in order to acquire their interest(s) in the enterprise are real and substantial.
Examples of insufficient contributions include a promise to contribute capital, a note pay- able to the enterprise or its owners who
are neither socially nor economically dis- advantaged, or the mere participation as
an employee, rather than as a decision-maker.
In addition to the above standards, the Department shall give special considera- tion to the following circumstances in determining eligibility under this section:
Newly formed firms and firms whose ownership or control has changed since the date of the advertisement of the contract shall be closely scrutinized to determine the reasons for the timing of the forma- tion of or change in the firm.
A previous or continuing employer- employee relationship between or among present owners shall be carefully reviewed to ensure that the employee-owner has suf- ficient management responsibilities and capabilities.
Any relationship between an applicant and a business which is not an eligible MBE which has an interest in the enterprise seeking certification shall be carefully reviewed to determine if the interest of the non-MBE conflicts with the ownership and control requirements of this rule.
A joint venture is eligible under this rule if the MBE partner of the joint venture meets the standards for an eligible MBE set forth above and the MBE partner
is responsible for a clearly defined por- tion of the work to be performed and shares in the ownership, control, management responsibilities, risks, and profits of the joint venture.
A business wishing to be certified
as an MBE or joint venture MBE shall cooper- ate with the Department by timely supply- ing additional information which may be requested in order to determine eligibility for certification.
Department certification of MBE
status shall be for a maximum of one calendar year. Any certification is conditioned
upon continued eligibility. Once certified, an MBE shall update its submission annually by submitting a new Schedule A and if a joint venture a new Schedule B or certify- ing that the schedule(s) on file is still accurate. At any time there is a change in ownership or control of the firm the MBE shall submit a new Schedule A and if a
joint venture a new Schedule B to the Depart- ment for review and approval.
To satisfactorily prove its claim, it is only necessary for Petitioner to address those agency reservations dealing with Petitioner's independent business status and the matter of the bona fide control of the operations of Princess Construction Company on the part of its female owners, in view of the fact that these are the grounds for license denial.
On the issue of the independent business status of Petitioner, it is true that the minority members of that organization have employment responsibilities of an administrative nature for the Petitioner and for Jensen of Jacksonville, a non-minority firm, which is controlled by Lucy Jensen's husband. In addition, the major portion of compensation for the benefit of the minority members of Princess Construction comes from their employment with Jensen. Office space is shared between the two (2) corporations. It is also agreed that Princess Construction is a company in its infancy. Nonetheless, Princess Construction is a viable construction firm which has a history in the construction business, however limited, independent of Jensen of Jacksonville. The female officials within Princess Construction devote a considerable amount of their time to the business of that company and they are the majority, real, substantial, and continuing owners of the corporation and that ownership is not pro forma. These women enjoy the customary incidents of the ownership and have shared in the risk and profits. The equipment for Princess Construction is its
own. The financing arrangements for that equipment is independent. The responsibilities which the women have in the Jensen corporation are not such that they would cause any irreconcilable conflict with the ownership and control of the applicant corporation. Management and control of Jensen of Jacksonville is not tantamount to management and control of Princess Construction Company.
Finally, the women owners of the corporation have the necessary power in law to direct or cause the direction of management and policies of this enterprise, and the power in law to control the operations of the corporation. This is true, notwithstanding the rights to participation by a non-female member of the corporation, i.e., Stephen Jensen. His involvement in the corporation does not afford him effective control of corporate affairs to the exclusion of the women participants.
The question of operations of the corporation and the bona fide control of the female owners of that corporation of the operational aspects of the business is stated as a second ground for denial of this application and has been generally addressed in the preceding paragraph. More particularly, while it is recognized that the expertise of the female members of the firm is somewhat limited in the area of technical field operations and that the decision making responsibility in this phase of business performance resides with the foreman of the corporation; the female members have the power in law to make
day-to-day and major business decisions concerning operations of the corporation in the field and otherwise, even if those decisions are not well informed in fact, and this quality of power is sufficient to meet the established criterion for licensure. See Rule Section 14-78.05 (3)(d) , Florida Administrative Code, supra.
In Summary, Petitioner has met the burden of establishing entitlement to certification as a Minority Business Enterprise related to its independent business status, bona fide control of operations and other matters of proof. It is therefore,
That a final order be entered granting the request for certification as Minority Business Enterprise.
DONE and ENTERED this 20th day of January, 1983, in Tallahassee, Florida.
CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings The Oakland Building
Filed with the Clerk of the Division of Administrative Hearings this 20th day of January, 1983.
1/ The parties, in the person of counsel, have offered proposed recommended orders. These proposals have been reviewed prior to the entry of this order.
To the extent that the proposals are consistent with this order they, have been utilized. To the extent that the proposals are inconsistent with this order they are rejected.
Elliott J. Safer, Esquire KAORMAN and SAFER
Vernon L. Whittier, Jr., Esquire Mark Linsky, Esquire
Department of Transportation The Haydon Burns Building Tallahassee, Florida 32301
Paul A. Pappas, Secretary Department of Transportation The Haydon Burns Building Tallahassee, Florida 32301
