STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

F & M CONCRETE COMPANY, )

)

Petitioner, )

)

vs. ) CASE NO. 89-1861

) DEPARTMENT OF TRANSPORTATION, )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing was held in this case in Tampa, Florida on October 11, 1989, before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings.

APPEARANCES

For the Petitioner: W. Eddie Fletcher, President

F. & M. Concrete Company, Inc. Post Office Box 938

Plant City, Florida 34289-0938

For the Respondent: Ruth Dillard, Esquire

Department of Transportation Hayden Burns Bldg., MS-58 Tallahassee, Florida 32399-0458

STATEMENT OF THE ISSUES

The issue for consideration in this case was whether Petitioner, F & M Concrete Company, Inc., should be recertified as a disadvantaged business enterprise, pursuant to Chapter 14-78, F.A.C.

PRELIMINARY STATEMENT

By letter dated March 14, 1989, Pete Davis, DBE Certification Coordinator for the Department of Transportation, notified the Petitioner that its application for recertification as a disadvantaged business enterprise, (DBE), was denied and advised Petitioner of its right to request a formal hearing. By letter dated March 20, 1989, Petitioner requested a hearing, and by letter dated March 14, 1989, which, it claims, "supersedes" it's March 20, 1989 letter, Petitioner requested an informal hearing and outlined various alleged procedural errors by the Department of Transportation, (Department), which Petitioner claims, discriminated against its ownership.

On April 3, 1989, the Department forwarded the file to the Division of Administrative Hearings for appointment of a Hearing Officer, and by a Notice of Hearing dated May 15, 1989, James E. Bradwell, Hearing Officer, set the case for hearing in Tampa on July 11, 1989. However, on May 22, 1989, Petitioner

requested a continuance which Mr. Bradwell granted on July 5, 1989. By Second Notice of Hearing dated the same day, Mr. Bradwell set the hearing for August 24, 1989 in Tampa, but on August 9, 1989, Petitioner again requested a continuance which was granted by Mr. Bradwell on August 11, 1989 by Order in which he set the case for hearing on October 11, 1989. The hearing was held as so scheduled by the undersigned to whom, the case was transferred in the interim.

At the hearing, Petitioner presented the testimony of W. Eddie Fletcher, President of F & M Concrete Company, Inc., and introduced Petitioner's Exhibits

1 through 5. Respondent presented the testimony of Mr. Donnie Alford, an engineer with the Department of Transportation and a member of the District DBE Certification Committee, and introduced Respondent's Exhibits A through G.

A transcript was provided and Respondent submitted Proposed Findings of Fact which have been ruled upon in the Appendix to this Recommended Order.

Petitioner, who was not represented by counsel at the hearing, submitted a memorandum of law and argument prepared by counsel who filed no appearance in this matter. Since it does not contain Proposed Findings of Fact, it was considered as argument and legal citation, but references to ultimate facts which may be contained therein are not ruled upon herein.

FINDINGS OF FACT

1. At all times pertinent to the issues herein, Petitioner, F & M Concrete Company, Inc., was a bridge and culvert construction company doing business in the State of Florida with principal offices in Plant City. Respondent, Department of Transportation, is the state agency responsible for certifying minority and disadvantaged business enterprises for bid award purposes with the Department.

   
   

2. Prior to February 3, 1988, the Petitioner had been certified by the Department as a minority business enterprise, (women owned). Petitioner's stock is owned as follows:

   
   

   1. Jaretha Fletcher,. 43.3%

   2. Kathleen Fletcher,. 33.0%

   3. Jennifer Fletcher Prado,......21.67%, and

   4. Vesta Thomas,. 2.0%.

      
      

3. All of the above, with the exception of Ms. Thomas, the retired bookkeeper, are members of the Fletcher family. Kathleen is W. Eddie Fletcher's mother, Jaretha is his wife, and Jennifer Fletcher Prado, is his sister. W. Eddie Fletcher is the President of F & M Concrete Company, Inc., and Chief Operating Officer. Kathleen Fletcher is Chairman of the Board of Directors.

   
   

4. For approximately 15 years prior to the last 2 years, the stock owned by Jaretha Fletcher was owned in joint tenancy with W. Eddie Fletcher. Approximately 2 years ago, the ownership was transferred to Jaretha Fletcher alone. There is no evidence as to the consideration for that transfer. Mr. Fletcher claims he is not his wife's heir, and will not inherit her stock should she predecease him.

   
   

5. Kathleen Fletcher, Mr. Fletcher's mother, has had tuberculosis for many years, and is incapable of taking a substantial, active part in the business.

   However, she comes to the office approximately once a week, and speaks with Jaretha by phone periodically. Jaretha is employed in the corporate office in a training capacity.

   
   

6. Jennifer Fletcher Prado works for the Hillsborough County Road Department as an inspector, and in the course of her travels about the county, periodically sees Petitioner's crews at work. Though she does not interfere with or become involved in the supervision of those crews, if she sees something that causes her to question the crew's performance, she will phone Mr. Fletcher and demand an explanation. This is the extent of her participation in the operation of the business with the exception of serving as a member of the Board of Directors. When she retires from her position with the county, because of her experience, she will be eligible to work with Petitioner corporation but would have to spend some time gaining experience in the contracting end of the business before she could assume any managerial position.

   
   

7. On November 1, 1988, Jaretha Fletcher, as Assistant Secretary of F & M Concrete Company, Inc., submitted the corporation's application for DBE certification. The application indicates that the firm was established in September, 1956, and is engaged in the business of building bridges, concrete pavements, curbs, sea walls, storm drainage systems, and culverts. It has 35 full time employees, of whom 57% are minority, and it serves the geographical areas incorporating numerous counties in the central part of the state. The firm is 100% woman owned in that the four individuals mentioned above own 100% of the 100 shares of stock authorized and issued.

   
   

8. The firm is managed by a President, Vice President, Assistant Secretary, and Secretary-Treasurer. W. Eddie Fletcher is President. W. Randall Fletcher is Vice President. Jaretha Fletcher is Assistant Secretary, and Dori

   M. Keeler is Secretary- Treasurer. The Board of Directors is made up of the three Fletcher women. W. Eddie Fletcher received a salary of $33,800.00 in 1987; W. Randall Fletcher received $28,600.00; Dori Keeler received $20,800.00; Kathleen Fletcher received $13,520.00; Jaretha Fletcher received $7,800.00, and David L. Cox, General Manager, received $28,600.00.

   
   

9. Question 18 of the application for recertification reflects that policy making and financial decisions are made by Kathleen Fletcher as Chairman of the Board, Jaretha Fletcher, and Jennifer Prado. Management personnel are hired and fired by the Board. Hourly personnel are hired and fired by Mr. Cox and the four job foremen.

   
   

10. At question 19 of the application, Petitioner indicates that any decision to bid on a job is made by W. Eddie Fletcher as President and Jaretha Fletcher as Assistant Secretary. Since Mrs. Fletcher is currently serving the corporation as a trainee, her contribution to the decision making process must be minimal. Job estimating is done by W. Eddie Fletcher and David Cox. Purchases of equipment are approved by the Board upon the recommendation of W. Eddie Fletcher. Supervision of field operations is accomplished by Mr. Cox.

    
    

11. Jaretha Fletcher, as Assistant Secretary, along with Randall Fletcher, shop foreman and Vice President; W. Eddie Fletcher, President; and Dori M. Keeler, Secretary-Treasurer, all sign the payroll checks.

    
    

12. The application was mailed to the Department by certified package delivery on November 1, 1988 and was received by it on November 2, 1988. This was 94 days before the Petitioner's then current certification expired. On December 2, 1988, the Department mailed a letter to the Petitioner requesting

    additional information. This was 31 days after the date of receipt of the application, which exceeds the rule period of 30 days or requesting additional information. However, Petitioner responded to the request on December 7, 1988, one day after receipt. The additional information requested by the Department was forwarded to it by Petitioner on December 21, 1988, with the exception of two forms that had to be procured from the Department of State.

    
    

13. After all the requested information was submitted, the Department set up an onsite review of the Petitioner's operation. According to Petitioner, though the rule governing MBE certification requires that the Department conduct the on- site review within 60 days of receipt of application, it was not done in this case until the 98th day after the application was submitted. The rule also states that approval or denial must be announced within a 90 day period from application. This was not done here until March 14, 1989, when Mr. Pete Davis, DBE Certification Coordinator for the Department, notified the Petitioner by certified mail that its application had been denied. Since the application was submitted on November 1, 1988 and received on November 2, 1988, March 14, 1989 terminates a period of 132 days from the date of receipt of application.

    
    

14. Mr. Donnie Alford, an engineer, works for the Department's construction office and is a member of the DBE Certification Committee which considered Petitioner's application. This committee, which consists of three voting members and one nonvoting member, reviewed Petitioner's file. The application was reviewed by all committee members before a vote was taken and Mr. Alford, as a voting member, considered all the information in the file including such items as gross receipts, ownership, directorship, the officers, their salaries, the ethnic status and span of control of the ownership and other personnel, and all other matters mandated for consideration by Rule 14-78 F.A.C.

    
    

15. Mr. Alford noted that Jaretha Fletcher, the majority stockholder, was paid the smallest salary of any salaried employee. This indicates to him that the rule in question, which dictates that salary should be consistent with ownership and job responsibility, was not followed.

    
    

16. The committee also examined the resumes of the officers and directors with a view toward minority owners. Mr. Alford noted that prior to 1986, two years before the application in question, Mrs. Jaretha Fletcher had been a housewife, and he was concerned that her background did not qualify her to make business decisions. According to Mr. Fletcher, Jaretha signs all checks issued by the corporation though she does not prepare them. She has worked on the preparation of at least one bid. She has acted as signatory for insurance policies covering the operation of the business. She was a personal guarantor on the last capital loan taken out by the business. In addition, the company has developed a computer program which would enable Jaretha to prepare bids on all curb related projects. This, has not yet been implemented, and absent a showing of how much independent judgement and authority she would exercise, by itself, it is not particularly probative of anything. She is also assuming more responsibility in the bidding process though she is not yet qualified to prepare a bid. She has learned to take company owned equipment charges and the daily reports received from the field foremen to prepare reports for the comptroller. She works with the comptroller in determining who of the various business creditors get paid at any given time, and she has begun to serve as a liaison between the corporation and the various contractors who utilize its services. Further, she is in training to use the computer to prepare the weekly payroll. On the other hand, Jaretha is not qualified to go into the field by herself as a supervisor and by her own admission, is "afraid to drive outside the Plant City

    area." She works in the office daily from 8:00 AM to 3:00 PM except on those days when she has to be with her children.

    
    

17. There is substantial evidence to indicate that the participation in business control and operation by Kathleen Fletcher and Jennifer Fletcher Prado is minimal, other than as members of the Board.

    
    

18. The Board of Directors' primary function is to set policy for the operation of the Petitioner's business. The business is operated by W. Eddie Fletcher who is employed by the Board as President. He makes the day to day business decisions and decides what matters should be taken to the Board for ratification and approval. It is quite clear from the evidence as presented and all the permissible inferences and presumptions which may be drawn therefrom, that the operation and control of F & M Concrete Company, Inc., is exercised by

    W. Eddie Fletcher, and the Board of Directors does what he requests of it and provides what he asks. There is evidence, for example, that though the Board must provide for the purchase of major equipment, it "gives approval for whatever Eddie wants." In fact, two contracts, introduced by Respondent, which were prepared and executed by Petitioner with others in the operation of its business, for substantial sums and major projects, failed to reveal the signature or participation of any of the minority owners. All execution was accomplished by W. Eddie Fletcher on behalf of the corporation.

    
    

19. After considering all the available information, the Department's committee voted to deny Petitioner recertification. The vote of the committee is not, however, binding on the Director of Administration who has final discretion to approve or disapprove the application for certification.

    
    

20. Here the application for recertification was disapproved primarily because it was evident to the committee members and the Director of Administration, that the minority owners did not exercise the requisite amount of control over the operation of the business required under the intent and language of the rule governing minority business enterprise certification.

    
    

21. The Department does not claim that the arrangement between the minority owners of the Petitioner corporation and Mr. Fletcher is in any way inappropriate or improper, nor does it deny that Jaretha Fletcher is now learning to participate in the operate in the operation of the business. However, the degree of control over the day to day operations of the business by the minority ownership, notwithstanding the propriety of the delegation of management to Mr. Fletcher, is not sufficient to qualify Petitioner as a minority owned business enterprise. Rule 14-78, F.A.C., allows management to be contracted out, but it does not allow delegation of the policy making function. Here, the committee and the Director of Administration concluded, and it is so found, that the owners of F & M Concrete Company, Inc. did not exercise sufficient control over the business to qualify it for certification.

    
    

22. It is abundantly clear from the evidence adduced at the hearing, that Mr. Fletcher is, in fact, F & M Concrete Company, Inc. This conclusion is drawn from the fact that he is closely related by blood and marriage to the three principal owners; that prior to 1987 he owned 43.3% of the stock in the corporation jointly with Jaretha; that none of the principal owners other than Jaretha participate in the decision making process except as members of the Board; and that the Board does not engage in operating the business. Bids are not approved by the Board and operating decisions are within the exclusive province of the management team headed by Mr. Fletcher. Notwithstanding that the terms of the employment agreement between Mr. Fletcher and the Board provide

    that it may be terminated by the Board at any time for cause, from a pragmatic standpoint, with the Board's makeup being so closely related to Mr. Fletcher, the likelihood of this happening is remote.

    
    

23. Instead, it becomes abundantly clear that the attempt to divest Mr. Fletcher from ownership of the corporation and demonstrate a bona fide minority owned and operated business enterprise is in form only and a sham and while the organization is in no way illegal or improper, it is not, in reality, a minority operated business so as to qualify for certification as such.

    
    

    CONCLUSIONS OF LAW

    
    

24. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter in this case. Section 120.57(1), Florida Statutes.

    
    

25. The burden of proof to establish its qualification for certification as a minority owned business enterprise rests upon the Petitioner which must satisfy this burden by a preponderance of the evidence. Florida Department of Transportation v. J. W. C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981).

    
    

26. The provisions of Rule 14-78, F.A.C. set forth the criteria which must be followed by applicants to successfully attain the status of minority or disadvantaged business enterprises. Not only must the enterprise be owned by the minority members, but the fundamental control of the business must be by the minority/disadvantaged members who must share in the risks as well as the profits of the operation, (Rule 14- 78.005(7)(c). This is not to say that the day to day management of the business cannot be contracted out to a non- minority/disadvantaged party, but the ultimate control must be, and must be seen to be, in the hands of the minority/disadvantaged members, (Rule 14- 78.005(7)(e). This is not the case here.

    
    

27. Until just two years ago, a substantial percentage of ownership rested with Mr. Fletcher as a joint tenant with his wife. That ownership interest was transferred by Mr. Fletcher to his wife, but no evidence was produced to indicate if it was a bona fide transfer for consideration or a mere paper transfer to set up the basis for minority certification.

    
    

28. The evidence presented at the hearing indicates more form that substance. Though Jaretha Fletcher is in training to be of benefit to the business, her tasks are now and are likely to be, when she is trained, ministerial rather than managerial. She has no experience in the construction business and her qualifications to exercise managerial functions pale in comparison to those of her husband who apparently built, ran, and still runs the business. Kathleen Fletcher is physically disqualified from engaging in substantial management activity and has not been shown to have the business skills and experience to do so even if physically capable. Only Ms. Prado appears to have any of the qualifications needed to take an effective part in the running of the business, and because of her employment with the county, would appear to be barred from doing so because of a possible conflict of interest.

    
    

29. This leaves only Eddie Fletcher, Randall Fletcher, and Mr. Cox, none of whom qualify for the minority, to run the business. Though it is claimed that the Board proposes and Mr. Fletcher disposes, the only evidence on that point indicates that in that regard, "whatever Eddie wants, Eddie gets." It is deemed highly unlikely, considering the state of the evidence here, that if Mr.

    Fletcher felt a particular course of action were appropriate from a business standpoint, the Board would overrule him.

    
    

30. The Department claims that the fact that Jaretha Fletcher, owning 43.3% of the stock, receives the smallest salary is indicative of her failure to exercise adequate control. She undoubtedly draws dividends on her stock, but the salary she receives for her daily performance clearly indicates that the tasks she performs in management are of a low level category.

    
    

31. In its written argument submitted subsequent to the hearing, counsel for Petitioner refers to that portion of Rule 14-78.005(7)(e) which provides:

    
    

    . . . where the actual management of the enterprise is contracted out to individuals other than owners, those persons who have the ultimate power to hire and fire the managers can be considered as controlling the enterprise for the purpose of this rule chapter.

    
    

32. The Department does not quarrel with the accuracy of that statement. However, in applying it, one must look to the surrounding facts and circumstances to see if, in fact, the employment agreement is an "at arm's length" agreement or a mere subterfuge. The facts of this case show that the manager under contract to the Petitioner corporation was, at one time, one of its major stockholders whose ownership was voluntarily divested by a stock transfer, the consideration for and bona fide nature of which is questioned. Further, the manager is the husband to, son of and brother of the three major stockholders, none of whom have been shown to have the qualifications to operate the business.

33. Rule 14-78.005(7)(c) requires that minority operation and control be: demonstrated by an examination of the

    substance rather than form of financial

    and managerial arrangements.

    
    

34. Here, while no doubt the financial and managerial arrangements between the owners and Mr. Fletcher are legal, ethical, and probably sound for the operation of the business, there has been insufficient evidence presented by the Petitioner that the arrangement is such as would qualify it for certification as requested.

    
    

35. Any failures by the Department to process Petitioner's application in a timely fashion had no effect on the determination of non-qualification and are de minimis.

RECOMMENDATION

Based on the foregoing findings of Fact and Conclusions of Law, it is, therefore:

RECOMMENDED that Petitioner, F & M Concrete Company, Inc.'s application for recertification as a disadvantaged business enterprise be denied.

RECOMMENDED this 7th day of December, 1989, in Tallahassee, Florida.

ARNOLD H. POLLOCK, Hearing Officer Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 7th day of December, 1989.

APPENDIX TO RECOMMENDED ORDER

The following constitutes my specific rulings pursuant to s. 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case.

FOR THE PETITIONER:

None submitted.

FOR THE RESPONDENT:

1. - 6. Accepted and incorporated herein.

1. & 8. Accepted and incorporated herein. 11.-13. Accepted and incorporated herein.

   1. Accepted and incorporated herein.

   2. Accepted and incorporated herein.

   3. Accepted and incorporated herein. 17.&18. Accepted and incorporated herein. 19.-21. Accepted and incorporated herein.

COPIES FURNISHED:

W. Eddie Fletcher President

F & M Concrete Company, Inc. Post Office Box 938

Plant City, Florida 34289-0938

Thomas H. Bateman, III, Esquire General Counsel

DOT 562 Haydon Burns Bldg. Tallahassee, Florida 32399-0450

K.N. Henderson, P.E.

Secretary

Haydon Burns Building 605 Suwanee Street

Tallahassee, Florida 32399-0450 Attn: Eleanor F. Turner, M.S. 58

Ruth B. Dillard, Esquire Department of Transportation 605 Suwanee Street, M.S. 58

Tallahassee, Florida 32399-0458

=================================================================

AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA DEPARTMENT OF TRANSPORTATION

F & M CONCRETE COMPANY,

Petitioner,

vs. CASE NO. 89-1861

DEPARTMENT OF TRANSPORTATION,

Respondent.

/

FINAL ORDER

The FLORIDA DEPARTMENT OF TRANSPORTATION denied Petitioner's Application for Certification as a Disadvantaged Business Enterprise (DBE). Petitioner requested an administrative hearing, so the matter was referred to the Division of Administrative Hearings.

A hearing was held in this matter on October 11, 1989. The Hearing Officer entered his Recommended Order December 7, 1989. No exceptions were received to the Recommended Order. The Hearing Officer's Recommended Order, copy attached, is considered to be correct in both fact and law except as noted, and is incorporated as part of this order with the following exceptions.

In Finding of Fact No. 12, the Hearing Officer finds that December 2, 1988, is 31 days after November 2, 1988. This is incorrect. Rule 14-78.0011 says that in computing any time period, the day of the act from which the designated period of time begins to run shall not be included. November 2 is the 307th day of 1988. Thirty days after November 2 would be day 337, or December 2, 1988.

The conclusion of law that the application was not processed timely is also rejected. As noted herein, the Department requested additional information within 30 days of receipt of the application as required by Section 120.60(2), Fla. Stat.

The Hearing Officer did not find the application to be complete with all requested additional information until December 21, 1988. The Department denied the application on March 14, 1989. There are 84 days from December 21, 1988 to

March 14, 1989.

Section 120.60(2), Fla. Stat. says:

Every application for license shall be approved within 90 days after receipt of the original application or receipt of timely requested additional information or correction of errors or omissions unless a shorter period of time for agency action is provided by law.

Since there is no statutory time frame to act on the application, the evidence shows that the Department acted on the application within 90 days of receipt of the requested additional information, as required by law. So, it is

ORDERED that the application of F & M CONCRETE COMPANY for certification as a Disadvantaged Business Enterprise is DENIED.

DONE AND ORDERED this 30th day of January, 1990.

BEN G. WATTS, P. E.

Secretary

Department of Transportation 605 Suwannee Street

Tallahassee, Florida 32399

COPIES FURNISHED:

Arnold H. Pollock, Hearing Officer Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

W. Eddie Fletcher, President F & M Concrete Company, Inc. Post Office Box 938

Plant City, Florida 34289-0938

Charles G. Gardner, Attorney Ruth B. Dillard, Attorney Department of Transportation 605 Suwannee Street

Tallahassee, Florida 32399

Ms. Juanita Moore, Manager Minority Programs Office Department of Transportation 605 Suwannee Street

Tallahassee, Florida 32399

The following information is required by law to be included in all Final Orders:

Judicial review of agency final orders may be pursued in accordance with Section 120.68, Florida Statutes, and Florida Rules of Appellate Procedure 9.030(b)(1)(c) and 9.110. To initiate an appeal, a Notice of Appeal must be filed with the Department's Clerk of Agency Proceedings, Haydon Burns Building, MS 58, 605 Suwannee Street, Tallahassee, Florida 32399-0458, and with the appropriate District Court of Appeal within thirty (30) days of the filing of this Final Order with the Department's Clerk of Agency Proceedings. The Notice of Appeal filed with the District Court of Appeal should be accompanied by the filing fee specified in Section 35.22(3), Florida Statutes.

Docket for Case No: 89-001861

Orders for Case No: 89-001861