STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

TRANSPORTATION SOLUTIONS, ) INC., )

)

)

Petitioner, )

)

vs. ) CASE NO. 91-2273

) DEPARTMENT OF TRANSPORTATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice the Division of Administrative Hearings by its duly designated Hearing Officer, K. N. Ayers, held a formal hearing in the above styled case on July 23, 1991, at Tampa, Florida.

APPEARANCES

For Petitioner: Mark M. Schabacker, Esquire

P.O. Box 3391

Tampa, Florida 33601-3391

For Respondent: Harry R. Bishop, Esquire

605 Suwanee St

Tallahassee, Florida 32399-0458 STATEMENT OF THE ISSUES

Whether Petitioner should be certified as a Disadvantaged Business Enterprise.

PRELIMINARY STATEMENT

By letter dated February 19, 1991 Transportation Solutions, Inc. (TSI), Petitioner, requested a formal hearing to contest the denial of its application for certification as a Disadvantaged Business Enterprise (DBE), and these proceedings followed. Grounds for denial of the application of TSI for certification contained in the Department of Transportation (DOT), Respondent, letter dated February 5, 1991, or that the minority owner of the business does not exercise the control of the firm required by Rule 14-78.005, Florida Administrative Code and the risks and profits of the company are not commensurate with the ownership interest of the minority and non-minority owners.

At the hearing Petitioner called five witnesses, Respondent called one witness and 14 exhibits were admitted into evidence. Treatment accorded proposed findings submitted by the parties is contained in the Appendix attached hereto and made a part hereof.

Based upon all of the evidence presented I submit the following.

FINDINGS OF FACT

1. Jennifer Morales-Allison is Hispanic-American and qualifies as a minority as defined in Section 278.012(9), Florida Statutes (1989) (Ex. 6).

   
   

2. TSI was incorporated with the intent to obtain certification as a Disadvantaged Business Enterprise (DBE). In carrying out this intent Ms. Allison owns 510 shares of the 1000 shares issued in TSI which constitutes 51% of the stock of TSI.

   
   

3. Richard Alberts, the non-minority shareholder of TSI, owns 490 shares or 49% of the stock of TSI. Alberts is president of TSI.

   
   

4. TSI is primarily an environmental planning consultant and contracts generally with governments to provide environmental consulting involving road and airport construction. Accordingly, the work performed is technical in nature.

   
   

5. Richard Alberts has some 22 years experience in environmental consulting primarily under contracts with the Federal Aviation Administration involving environmental effects of airport construction and state road departments involving environmental effects of highway construction. Prior to the incorporation of TSI Alberts worked at Greiner, an engineering firm doing extensive environmental consulting work, for some eight years.

   
   

6. Ms. Allison also worked at Greiner during the time Alberts was employed there. She started out as a word processor-typist, moved up through secretary to office manager. During her eight years at Greiner she worked as secretary for Alberts and later as his administrative assistant. Her working experience was predominantly administrative such as in the preparation of contracts as opposed to technical. She has never served as a project manager or been involved with carrying out environmental contracts other than seeing that the proper personnel were assigned to the project and the agency was properly billed for the services.

   
   

7. Although the evidence indicates Ms. Allison contributed $19,876 (51%) and Alberts contributed $19,092.32 (49%) as start up capital for TSI, Ms. Allison's contribution was obtained as a loan from Alberts for which promissory notes were signed. These notes were intended to be repaid from profits of the corporation, although the promissory notes are not so conditioned.

   
   

8. Alberts' salary is set at $60,000 per year and Ms. Allison's salary at

   $40,000. Prior to leaving Greiner Alberts' salary was $80,000 and Ms. Allison's salary was $28,000.

   
   

9. The bylaws of TSI (Ex. 5) provide that the president of the corporation shall be the principal executive officer of the corporation and, subject to the control of the board of directors, shall in general supervise and control as manager of technology all of the business and affairs of the corporation. Both Alberts and Allison testified that it was their intent that Alberts supervise the technical aspects of the corporation and Allison would supervise the business aspects of the corporation, and, if necessary, the bylaws of the corporation would be redrawn to express that intent.

10. Both incorporators, Allison and Alberts, testified that Allison made final decisions for the corporation and as 51% owner controlled the vote of the board of directors comprised of Allison and Alberts. As such she had the authority to hire and fire employees, including Alberts.

    
    

11. Without Alberts' expertise the corporation could not have successfully commenced operations. He is the incorporator with the knowledge and experience to bid on projects and carry out environmental consulting contracts once obtained. He is also the person who provided all necessary working capital for TSI to commence operations. Finally, he holds the necessary licenses and is qualifying officer for the company's projects.

    
    

12. Evidence was submitted that Allison signs checks and contracts on behalf of TSI, that she hires and fires employees, and that she has the final say in all corporate decisions. This evidence is not credible with respect to her having final say in all corporate decisions.

    
    

13. If Allison attempted to fire Alberts he could move out with the remaining capital he provided and forthwith start another company similar to TSI; and, if he did so, TSI would undoubtedly fail.

    
    

    CONCLUSIONS OF LAW

    
    

14. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.

    
    

15. The Florida Department of Transportation (FDOT) is the recipient of highway construction funds received from the Federal Highway Administration (FHWA) as defined in 49 CFR 23.5 and is, therefore, required to comply with the provisions of 43 CFR 23 in certifying DBEs.

    
    

16. 49 CFR 23.53 establishes eligibility standards for certification as a DBE. To be eligible for such certification the ownership by the minority member of the applicant shall be real, substantial, and continuous and shall go beyond the pro forma ownership of the firm as reflected in its ownership documents.

    
    

17. The minority owner must possess the power to direct or cause the direction of the management and policies of the firm and make day-to-day as well as major decisions on matters of management, policy, and operations. If the owners of the firm who are not minorities or women are disproportionately responsible for the operation of the firm, than the firm is not controlled by minorities or women and shall not be considered an MBE within the meaning of this part. 49 CFR 23.53(4).

    
    

18. The contributions of capital or expertise by the minority or women owners to acquire their interests in the firm shall be real and substantial. Examples of insufficient contributions include a promise to contribute capital, a note payable to the firm or its owners who are not socially or economically disadvantaged, or the mere participation as an employee, rather than as a manager. 49 CFR 23.53(6).

19. Respondent's rules establishing standards for certification are contained in Rule 14-78.004, Florida Administrative Code. This section provides in part:

    
    

    (c) The ownership and control exercised by the socially and economically disadvantaged individuals shall be real, substantial, and continuing, and shall go beyond mere pro forma

    ownership of the firm, as reflected in ownership documents. The socially and economically disadvantaged owners shall enjoy the customary incidents of ownership and shall share in the risks and profits commensurate with their ownership interests, as demonstrated by an examination of the substance rather than form

    of financial and managerial arrangements.

    1. In determining whether the socially and economically disadvantaged owners also possess the power to direct or cause the direction of the management, policies and operations of the firm and have the requisite decision-making authority, the Department may look to the control lodged in the owners who are not socially and economically disadvantaged individuals. If the owners who are not socially and economically disadvantaged individuals are disproportionately or primarily responsible for the operation of the enterprise

       or if there exists any requirement which prevents the socially and disadvantaged owners from making business decisions without concurrence of any owner or employee who is not a socially or disadvantaged individual, then the enterprise, for purposes of this rule chapter, is not controlled by socially and economically disadvantaged individuals and shall not be considered a DBE within the meaning of this

       rule chapter.

    2. To be certified under this rule chapter, the DBE shall be one in which the contributions

    of capital or experience invested by the socially and economically disadvantaged individual owner shall be real and substantial. Examples of insufficient contributions include, but are

    not limited to, a promise to contribute capital, a note payable to the DBE enterprise or its owners who are neither socially and economically

    disadvantaged individuals, or the mere participation as an employee, rather than as a decision-maker.

    
    

20. Applying these rules to the facts involving the ownership and operation of TSI, it is clear that the minority owner contributed neither capital nor expertise essential to the operation of TSI as an enterprise capable of performing the type work for which it was incorporated. Ms. Allison's majority ownership is more pro forma than real and, despite their self-serving testimony to the contrary notwithstanding, it is Alberts rather than Allison who controls the operation of TSI.

21. In these proceedings the Petitioner has the burden to prove, by a preponderance of the evidence, that Ms. Allison as minority owner of the business exercises that degree of control necessary to qualify for certification as a Disadvantaged Business Enterprise. Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1 DCA 1977); Florida Department of Transportation v. JWC Company, Inc., 396 So.2d 778 (Fla. 1 DCA 1981). This burden Petitioner has failed to meet.

    
    

22. From the foregoing it is concluded that Petitioner has failed to show that the minority owner of TSI, Jennifer Morales-Allison exercises the control necessary to qualify TSI as a Disadvantaged Business Enterprise.

RECOMMENDATION

It is, RECOMMENDED:

That the application of Transportation Solutions, Inc. for certification as a Disadvantaged Business Enterprise be disapproved.

DONE and ENTERED this 9th day of September, 1991, in Tallahassee, Florida.

K. N. AYERS Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 9th day of September, 1991.

APPENDIX

Proposed findings submitted by Petitioner are generally accepted as testimony of the witnesses but, insofar as this testimony is that Ms. Allison controls the operation of TSI, those findings are rejected. Petitioner filed no findings of fact separate from conclusions of law; accordingly, without assigning a number to each paragraph, a ruling on Petitioner's proposed findings cannot be made. Nevertheless, the ultimate paragraph, starting at the bottom of page 6 of the proposed Order, is rejected insofar as it concludes that Ms.

Allison has the requisite control to qualify TSI as a minority business enterprise.

Proposed findings submitted by Respondent are accepted and are generally included in the Hearing Officer's findings of fact.

COPIES FURNISHED:

Mark M. Schabacker, Esquire

P.O. Box 3391

Tampa, FL 33601-3391

Harry R. Bishop, Esquire 605 Suwanee Street

Tallahassee, FL 32399-0458

Ben G. Watts, Secretary Department of Transportation Haydon Burns Building

605 Suwanee Street

Tallahassee, FL 32399-0458

Thornton J. Williams, General Counsel Department of Transportation

562 Haydon Burns Building Tallahassee, FL 32399-0458

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS:

ALL PARTIES HAVE THE RIGHT TO SUBMIT WRITTEN EXCEPTIONS TO THIS RECOMMENDED ORDER. ALL AGENCIES ALLOW EACH PARTY AT LEAST 10 DAYS IN WHICH TO SUBMIT WRITTEN EXCEPTIONS. SOME AGENCIES ALLOW A LARGER PERIOD WITHIN WHICH TO SUBMIT WRITTEN EXCEPTIONS. YOU SHOULD CONTACT THE AGENCY THAT WILL ISSUE THE FINAL ORDER IN THIS CASE CONCERNING AGENCY RULES ON THE DEADLINE FOR FILING EXCEPTIONS TO 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: 91-002273

Orders for Case No: 91-002273