STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

VEDDER AND ASSOCIATES INCORPORATED, )

)

Petitioner, )

)

vs. ) CASE NO. 92-3763

) DEPARTMENT OF MANAGEMENT SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

Upon due notice, this cause came on for formal hearing on February 3, 1993, in Gainesville, Florida, before Ella Jane P. Davis, a duly assigned hearing officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Peter C. K. Enwall, Esquire

Post Office Box 23879 Gainesville, Florida 32602

For Respondent: Terry A. Stepp, Esquire

Department of Management Services Office of General Counsel

Koger Executive Center, Suite 309 2737 Centerview Drive

Tallahassee, Florida 32399-0950 STATEMENT OF THE ISSUE

Whether or not Petitioner may be certified as a minority (female) business enterprise, pursuant to Rule 13A-2.005(2) and (3) F.A.C. [now Rules 60A-2.005(2) and (3)].

PRELIMINARY STATEMENT

Petitioner's application for minority business certification was submitted to the Department of Management Services (formerly Department of General Services) on January 22, 1992. The application was denied by letter dated May 22, 1992. The basis for denial was the failure of the Petitioner to meet the requirements of Section 288.703(2) F.S. and the agency's Rules 13A-2.001(7) and (14); 13A-2.005(2)(e); 13A-2.005(3), (3)(a), (3)(b), (3)(c), and (3)(d); 13A-

2.005(3)(d)1,(3)(d) 2, (3)(d)3, (3)(d)4, and (3)(d)5, F.A.C.

The letter of denial cited supporting documents and a telephone interview which established, to the agency's satisfaction, that the minority ownership of Vedder and Associates Incorporated was not real, substantial or continuing, because the minority owner did not share risk commensurate with her percentage

of ownership, the minority owner did not control the management and daily operations of the business, and the overall corporate structure of the business as provided in its bylaws did not give the minority owner the authority to control the corporate affairs of the company.

At formal hearing, Petitioner presented the oral testimony of Kathleen Vedder, John Vedder, Samuel Wester and Robert Henderson and had 24 exhibits admitted in evidence. Respondent presented the oral testimony of Lloyd Ringgold and Marcia Nims and had two exhibits admitted in evidence.

Chapter 472 F.S., Minority Business Rules Chapter 13A-2 (subsequently renumbered because of agency merger under 60A-2), and two cases, Barton S. Amey Company, Inc. v. Department of General Services, DOAH Case No. 86-3954, (RO 3/5/87; FO 4/21/87), aff'd Fla. DCA February 11, 1988, No. 87-235 and David Nixon Inc. v. Department of General Services, DOAH Case No. 87-0248C (RO 6/24/87; FO 8/25/87), were officially recognized.

The parties filed a joint stipulation of fact which has been incorporated herein to the extent appropriate.

A transcript was provided in due course, and all timely-filed proposed findings of fact have been ruled upon in the appendix to this recommended order pursuant to Section 120.59(2) F.S.

FINDINGS OF FACT

1. Vedder and Associates Incorporated's (VAI's) application for minority certification dated January 22, 1992 was received by the Department of Management Services on January 27, 1992. Petitioner's application for minority certification was denied by the Department of Management Services in a letter dated May 22, 1992.

   
   

2. VAI was established in October of 1991 and offers as its principal service "land surveying."

   
   

3. VAI is licensed to do business in Florida and is fifty-one percent (51 percent) owned by Kathleen Vedder, a Caucasian female, and forty-nine percent (49 percent) owned by John Vedder her husband, a Caucasian male. Kathleen A. Vedder and John F. Vedder were the sole directors of the corporation at the time of certification denial, with Kathleen A. Vedder serving as president/secretary and John F. Vedder serving as vice-president/treasurer.

   
   

4. On September 16, 1992, after the denial of certification, John Vedder resigned as a director of VAI. No business reason was offered for this decision. Kathleen Vedder, the minority owner, is presently the sole director of the corporation. As sole director, she represents a majority of the board of directors. She continues to serve as president and secretary. John Vedder continues to serve as treasurer. It is not clear if he still serves as vice- president. (See Findings of Fact 5-11 and 28-29).

   
   

5. At all times material, Kathleen Vedder has owned 51 percent of the stock through a greater monetary investment than John Vedder, who owns 49 percent of the stock.

   
   

6. At all times material, Kathleen Vedder has served as the principal officers, president and secretary.

7. At all times material, Kathleen Vedder has made up at least 50 percent of the board of directors. Since September 16, 1992, she has made up 100 percent of the board of directors.

   
   

8. At all times material, John Vedder has served as a principal officer, treasurer.

   
   

9. Up until September 16, 1992, John Vedder made up 50 percent of the board of directors. Thereafter, he did not serve on the board.

   
   

10. At all times material, Article VII of VAI's Articles of Incorporation have permitted an increase or decrease in the board of directors as permitted by the bylaws, but never less than one director.

    
    

11. At all times material, Item III of VAI's bylaws have provided that corporate officers hold office at the "satisfaction" of the board of directors; that the president shall be the chief executive officer; and that subject to any specific assignment of duties by the board of directors, the vice-president, the secretary, and the treasurer act under the direction of the president.

    
    

12. VAI was formed by the purchase of assets from the Perry C. McGriff Company, which had employed Kathleen and John Vedder.

    
    

13. Kathleen Vedder began her career with the surveying firm of Keith & Schnars, P.A., in Fort Lauderdale in 1976. She was the administrative assistant to the President. In 1981 she and John Vedder moved to Gainesville to manage the Perry C. McGriff Company, a wholly owned subsidiary of Keith & Schnars.

    John Vedder handled the surveying aspects of the business, and Kathleen Vedder handled most of the management of the company other than the surveying portion, including purchasing, handling business accounts and financial affairs, client relations, insurance, and correspondence. This continued until 1991 when the assets of the Perry C. McGriff Company were sold to VAI. Kathleen Vedder now performs for VAI basically the same functions as she did for the predecessor company with certain additions.

    
    

14. John Vedder served as the director of survey for the Perry C. McGriff Company which employed both Mr. and Mrs. Vedder prior to the formation of VAI. In his position as director of survey at Perry C. McGriff Company, he was responsible for all contracts and negotiations and coordination of personnel to ensure timely completion of contracts. His background by education, training, and experience is extensive in the technical applications to perform land surveying.

    
    

15. The business of VAI essentially began on December 6, 1991. Prior to that date, husband and wife had discussed the purchase of the McGriff assets. Kathleen Vedder discussed the purchase of the business with her husband and informed him that she wanted to run the business. He accepted this relationship and her role as "boss" because he hated working in the office and wanted nothing to do with running the business.

    
    

16. Kathleen Vedder contacted the old Perry C. McGriff clients and facilitated the transition from the old company to the new company.

    
    

17. The Perry C. McGriff Company was purchased for $100,000 with a $15,000 down payment and the remainder to be paid over 7 years. Funds for the original purchase price of the assets were obtained by cashing Kathleen Vedder's 401K plan, two IRA's, and by loans against her life insurance policies for an

    investment of $57,185.62 by Kathleen Vedder and $25,682.25 of marital assets held with her husband, John Vedder.

    
    

18. John Vedder participated in the negotiations to buy Perry C. McGriff Company. John Vedder provided input and expertise regarding the assets of Perry

    C. McGriff Company which were to be purchased, whether survey equipment was acceptable, and the vehicles to be purchased.

    
    

19. John Vedder discussed and consulted with Kathleen Vedder regarding the financial aspects of the purchase of Perry C. McGriff Company. He discussed with her the starting salaries of employees to be hired/transferred to VAI, and the leasing and location of business premises for VAI and purchase of furniture.

    
    

20. Kathleen Vedder established the corporate policies, the accounting procedures, the job costing, and the standard management practices of the new company.

    
    

21. Kathleen Vedder, as VAI president, made all of the final decisions regarding implementation of the new business such as renting the office, moving the assets purchased from the old Perry C. McGriff Company, establishing lines of insurance, determining the manner and location of the survey records purchased, and hiring the staff.

    
    

22. Kathleen Vedder and John Vedder made it clear to all of the employees from the beginning of the company that she was the "boss".

    
    

23. The takeover of Perry C. McGriff Company by VAI was explained to former employees during a field visit by John Vedder. His explanation was made at Kathleen Vedder's direction and took place while these employees were already in the field, during a time of transition, in a spirit of damage control when Kathleen and John Vedder were concerned that rumors might affect the new company's ability to retain good personnel from the old company and over concern that some might have trouble working for a woman.

    
    

24. Kathleen Vedder hired six employees initially from the old Perry C. McGriff Company.

    
    

25. Kathleen Vedder set the initial pay scale for the employees of the company and maintained the documentation relevant to this function.

    
    

26. The additional four persons hired by the company since it began were Robert Henderson, Tom Crossman, George Gruner, and Doug Zimmerman, each of whom were hired by Kathleen Vedder who interviewed them, who set their wages and benefits, and who described their job functions to them as new employees.

    
    

27. VAI has a business license posted on its premises issued by the City of Gainesville, Florida, in the name of John Vedder, authorizing the performance of land survey services.

    
    

28. VAI currently employs eight permanent employees and the qualifying agent is John F. Vedder, who serves as a principal officer, treasurer. He holds a land survey license issued by the State of Florida, Department of Professional Regulation, Land Surveying Board. In order to be qualified as a licensed land surveying corporation, a principal officer must be a licensed land surveyor.

    
    

29. The participation of John Vedder or another duly-licensed land surveyor is required to satisfy the requirements of Chapter 472 F.S., for a

    qualifying agent. Under that statute, the qualifying agent must have a license as a land surveyor and hold a position as a principal officer in VAI. If John Vedder were to lose his professional land surveyor license, there would be three licensed land surveyors remaining with the company, and it would be possible for VAI to continue if one of these were designated as a principal officer.

    
    

30. Kathleen Vedder holds no license or certification other than a notary public.

    
    

31. In terms of any special needs or requests, such as medical needs, all employees are required to report to Kathleen Vedder.

    
    

32. Kathleen Vedder earns $14.50 per hour. The survey party chiefs, including John Vedder, now earn $13.00 per hour. These amounts are commensurate with Kathleen Vedder's percentage of VAI ownership of fifty-one percent (51 percent). The evidence is conflicting as to whether another crew chief earned more than John Vedder in one year due to a higher rate of pay or more hours worked in that period.

    
    

33. No one in the company draws any bonus, commission or has any particular insurance coverage as a benefit of employment.

    
    

34. The company has not posted any dividends or distributed any proceeds from business investments or engaged in any profit sharing.

    
    

35. The corporation has, as a risk of doing business, the liability connected with its $85,000.00 promissory note to Keith & Schnars, P.A. It also has the risk associated with premises liability, with motor vehicle liability, with general errors and omissions liability, and with professional liability. Kathleen Vedder has procured insurance to cover all these risks. These premiums are paid by the corporation.

    
    

36. There has been no additional ownership interest acquired by anyone since the inception of the corporation.

    
    

37. There are no third party agreements.

    
    

38. There are no bonding applications.

    
    

39. The company has not at any time entered into an agreement, option, scheme, or created any rights of conversion which, when exercised, would result in less than fifty-one percent (51 percent) minority ownership and minority control of the business by Kathleen Vedder.

    
    

40. Kathleen Vedder controls the purchase of the goods, equipment, business inventory and services needed in the day-to-day-operation of the business.

    
    

41. Kathleen Vedder expressly controls the investments, loans to and from stockholders, bonding, payment of general business loans, and payments and establishment of lines of credit.

    
    

42. The corporate business account of VAI contains the signatures of John Vedder and Kathleen Vedder on the bank signature card. Only one signature is required to transact business. Of the 823 checks issued by VAI since it began, John Vedder signed one at Kathleen Vedder's direction when it was not possible for her to be in two places at once, and Kathleen Vedder signed 822 checks.

43. Although he is treasurer, John Vedder professed to know nothing of VAI's finances and deferred to Kathleen Vedder in all matters of financing from the very beginning. Nonetheless, the corporate documents list the treasurer as the chief financial officer in ultimate charge of all funds.

    
    

44. Kathleen Vedder has knowledge of only the minimum technical standards required for a survey. In her certification interviews, Mrs. Vedder did not know how to establish true north or how a line survey would establish true north. She lacks basic survey knowledge and could not identify Polaris as the north star or state the standard measurement (length of a chain) for a surveyor. Identifying Polaris is not particularly important in modern surveying.

    
    

45. Kathleen Vedder is capable of doing the necessary paper search and telephone call regarding underground utilities for surveyors in the field.

    
    

46. Kathleen Vedder has extensive experience in the production of a surveying product and is able to manage the surveyors who perform the technical aspects of the business.

    
    

47. Upon acquisition of the assets and formation of the new company, Kathleen Vedder began directing the two field crews newly employed by VAI to the various projects and work which she had scheduled. This direction has primarily been in the timing and coordination of projects and is commensurate with some of the work previously done by John Vedder when he was director of survey for the predecessor company, Perry C. McGriff Company. (See Finding of Fact 14).

    
    

48. Technical problems involving a particular site do not arise very often so as to require a discussion among the land surveyors of the company but if they do, the professional land surveyors jointly or singly make all technical surveying decisions. Surveys must be signed by a registered land surveyor pursuant to Chapter 472 F.S.

    
    

49. John Vedder provides Kathleen Vedder technical advice, coordinates field crews' work, makes decisions pertaining to technical work which is not within Kathleen Vedder's abilities, consults with Kathleen Vedder once a week concerning the general financial picture of VAI, and does some job estimating and quality control.

    
    

50. Kathleen Vedder rarely visits work sites in the field. Employees in the field report to John Vedder whenever they have a problem and report to Kathleen Vedder if the problem is in the nature of project coordination.

    
    

51. John Vedder is responsible for training and working with employees and providing technical training required for the performance of land surveys. He does computer aided drafting (CAD) and provides technical assistance to the CAD operator, which Kathleen Vedder cannot do, however she works it afterward on her computer.

    
    

52. Kathleen Vedder does not work in the field, and of the two, John Vedder performs the majority of work in the field. Kathleen Vedder defers to John Vedder to handle technical matters because he has more experience.

    
    

53. Party Chief John Vedder supervises his crew. Party Chief Louis Crosier supervises his crew. Kathleen Vedder supervises Louis Crosier and John Vedder and a third crew chief when one is used, usually Robert Henderson.

54. Kathleen Vedder established a fee schedule for the company and a method of formulating the estimates and bids which the company would propose to prospective clients. John Vedder is not knowledgeable in this area.

    
    

55. When a job comes in, the prospective client initially contacts Kathleen Vedder.

    
    

56. If a client calls requesting a survey, Kathleen Vedder does the research and provides the estimate or bid without further input from any surveyor if the survey requested is a standard routine survey.

    
    

57. If the job is complex, Kathleen Vedder requires man hour estimates from two land surveyors, one of whom is often John Vedder. She takes these estimates and applies previous histories, experience, and adjustments in order to prepare the final bid or survey estimate.

    
    

58. Once she has received the man-hour estimate, Kathleen Vedder reviews it, compares it with previous surveys, applies a job costs analysis to it, applies any other known costs to it, and presents the final estimate or bid.

    
    

59. There is a difference between compiling the work hours necessary for the estimate and compiling the estimate itself.

    
    

60. Kathleen Vedder has the ultimate responsibility for finalizing complex estimates and bids.

    
    

61. Kathleen Vedder makes presentations as a part of her function which involve technical presentations of the survey services rendered by VAI.

    
    

62. In the fourteen month period since the business began, Kathleen Vedder has given approximately eight presentations of a technical nature to prospective clients, including the Florida Department of Transportation (DOT). Kathleen Vedder is capable of complying with DOT bid specifications to submit material on a DOS disc.

    
    

63. DOT has qualified VAI under its Disadvantaged Business Enterprise program.

    
    

64. Petitioner's witnesses skilled in land surveying consistently testified that without Kathleen Vedder's skilled contributions to the firm, technical land surveying could be accomplished but the firm would not show a profit.

    
    

65. Rule 13A-2.005(3)(d)(4), requires minority owners to have managerial, technical capability, knowledge, training, education and experience to make decisions regarding the business. In interpreting this rule, the Respondent agency relies on Barton S. Amey v. Department of General Services, DOAH Case No. 86-3954, (RO 3/5/87; FO 4/21/87), aff'd Fla. DCA February 11, 1988, No. 87-235. The agency has no further refinement by way of rule or policy which applies specifically to the land surveying industry. It does not require the minority owner to have a land surveying license per se. It does not require the minority business owner to have an extensive knowledge of surveying.

    
    

    CONCLUSIONS OF LAW

    
    

66. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this cause pursuant to Section 120.57(1), F.S.

67. The agency's basis for denial of Petitioner's application for certification was alleged failure to meet the requirements of Section 288.703(2)

    F.S. and the Department of Management Services' Rules 13A-2.001(7) and (14); 13A-2.005(2)(e); 13A-2.005(3), (3)(a), (3)(b), (3)(c), and 13A-2.005(3)(d)1, 2, 3, 4, and 5 F.A.C. For purposes of continuity, all rule references will be to the 13A-2 classification system which has subsequently been renumbered after agency merger under a 60A-2 classification.

    
    

68. This is a de novo proceeding. The burden of proving entitlement to certification in this de novo proceeding is upon Petitioner. See, Florida Department of Transportation v. J.W.C. Company, Inc., 396 So.2d 778 (Fla. 1st DCA 1981) and McDonald v. Department of Banking & Finance, 346 So.2d 569 (Fla. 1st DCA 1977).

    
    

69. Respondent agency's assertion that changes in corporate organization that occurred between the application for certification and the Section 120.57(1) F.S. formal hearing should not be considered and weighed is rejected. See, Board of Medicine v. Mata, 561 So.2d 364 (Fla. 1st DCA 1990) and McDonald

    v. Department of Banking & Finance, supra.

    
    

70. The organic law tested herein is Section 288.703(2) F.S. defining, "minority business enterprise," as follows:

    
    

    . . . Any small business concern as defined

    in subsection (1) which is organized to engage in commercial transactions, which is domiciled in Florida, and which is at least fifty-one percent owned by minority persons and whose management and daily operations are controlled by such persons. . . . (Emphasis supplied)

    
    

71. Petitioner must satisfy Rules 13A-2.005(2)(a), (b), or (c) and (d), (e), and (f) as well as all of 13A-2.005(3) F.A.C. in order to be certified. For present purposes, 13A-2.001(7) and (14) add nothing to the foregoing rules.

    
    

72. Rule 13A-2.005(2) provides, in pertinent part, 13A-2.005 Certification Eligibility.

    1. An applicant must satisfy (a), (b) or (c), and (d), (e), and (f) 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 transferal of ownership percentages with no exchange of capital at fair market value.

       1. In a corporate form of organization, the minority shareholders of the corporation must own at least 51 percent of each and every class of stock, including 51 percent of all voting stock in the corporation.

          ***

          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, and

          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, acquisition of additional ownership interest, 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 the 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, and

          3. The business firm cannot at any time enter into any agreement, option, scheme, or create any rights of conversion, which when exercised would result in less than 51 percent minority ownership and minority control of the business firm.

73. Rule 13A-2.005(3) F.A.C. provides, in pertinent part, 13A-2.005 Certification Eligibility.

    . . . (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 discretion of the minority owners shall not be subject to any formal or informal restrictions (including, but not limited to, bylaw provisions, purchase agreements, employment agreements, partnership agreements, trust agreements or charter requirements for cumulative voting rights or otherwise) which would vary or usurp managerial discretion customary in the industry.

    2. If the applicant is a corporation and the business and affairs of the corporation are managed under the direction of a board of directors as provided by the articles of incorporation or bylaws of the corporation or Section 607.11, Florida Statutes, a majority of the directors must be minority owners, notwithstanding whether the directors are required to be elected by a majority vote of the outstanding shares of the corporation.

    3. 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.

    4. The control exercised by the minority owners shall be real, substantial and continuing, and shall go beyond mere pro forma control. In instances where the applicant business is found to be a family-operated business with duties, responsibilities and decision-making occurring jointly and mutually among owners and principals, or severally along managerial and operational lines between minority and non-minority owners, 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 the lack of knowledge or capability to independently make decisions regarding the business' management and

    day-to-day operations, the minority owners' 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.

    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 to/from stockholders, bonding, payment of general business loans, payroll, and establishment of lines of credit.

    4. The minority owners shall have managerial and technical capability, knowledge, training, education and experience required to make decisions regarding that particular type of work. In determining the applicant's 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 familially 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 of the business through their demonstrable knowledge and capability.

    5. The minority owners shall display independence and initiative in seeking, and negotiating contracts, accepting and rejecting bids and in conducting all major aspects of the business. In instances where the minority owners do not directly seek or negotiate contracts, prepare estimates, or coordinate with contracting officials, but claim to approve or reject bids and contractual agreements, the minority owners shall demonstrate that they have knowledge and expertise to independently make contractual decisions. . . .

    
    

74. In this case, there is no question that a "minority person" as defined in Section 288.703(3) F.S. owns at least 51 percent of Petitioner's corporate stock. See, Rule 13A-2.005(2)(a). Petitioner has also demonstrated that the minority owner's shares, income, earnings, and benefits are commensurate with the percentage of her ownership in the business. See, Rule 13A-2.005(2)(d). Petitioner has not entered into any agreement, option, or scheme or created any

    rights of conversion to result in less than 51 percent minority ownership and is not barred from certification on those grounds. See, Rule 13A-2.005(2)(f).

    
    

75. With regard to the requirements of Rule 13A-2.005(2)(e) F.A.C., sharing all risks assumed by the business firm, Respondent asserts that non- minority owner John Vedder, a registered land surveyor, has more to lose than just his 49 percent ownership (stock) interest in the corporation because he is also the qualifying agent for the corporation. As such, he is at risk for personal liability for errors and omissions, discipline of his professional license, and loss of professional reputation. Respondent also asserts that John Vedder's 49 percent stock ownership plus his professional liability and disciplinary risk amount to a greater risk exposure than that of the minority owner, Kathleen Vedder, who is not a registered land surveyor. This argument is based upon the provisions of Section 472.021 F.S. whereby the Department of Professional Regulation licenses and disciplines corporations only through a registered land surveyor. See, specifically, Section 472.021(3) F.S. which provides,

    
    

    The fact that any registered land surveyor practices through a corporation or partnership shall not relieve the registrant from personal liability for negligence, misconduct, or wrongful acts committed by him. Corporations and stock holders who are land surveyors, or partnerships, and all partners, shall be jointly and severally liable for the negligence, misconduct or wrongful acts committed by their agents, employees, officers, or partners while acting in a professional capacity. (Emphasis supplied)

    
    

76. Pursuant to the first sentence of Section 472.021(3), John Vedder bears personal liability for his own negligence, misconduct, or wrongful acts as a registered land surveyor which would be so even without the statute and without any corporate association whatsoever. Pursuant to the second sentence, the corporation bears joint and several liability for professional acts of its corporate land surveyor agents, employees, and officers (including John Vedder). Likewise, John Vedder, as a "stockholder who is a registered land surveyor," also bears joint and several liability for professional acts of corporate land surveyor agents, employees, and officers whether he acts as professional qualifying agent or not.

    
    

77. Section 472.021(1) requires a land surveying corporation to be licensed through one registered land surveyor who is also a principal officer of the corporation. That section also specifically states that it does not relieve the corporation of responsibility for conduct or acts of any agent, employee, or officer and does not relieve any practicing land surveyor of personal responsibility. Under this section, John Vedder remains responsible for his own acts as a registered land surveyor no matter which "hat" he wears and the corporation is responsible for his acts as an agent, employee, or officer. The corporation is responsible for all acts of all its registered land surveyor employees and they, like John Vedder, are individually responsible for their own professional acts.

    
    

78. Under Chapter 472 F.S. all registered land surveyors must individually meet minimum technical standards on surveys they sign-off on, regardless of how or by whom they are employed and regardless of whether they are corporate

    officers or stockholders. Whenever any registered land surveyor signs/certifies a survey, it is the signing/certifying registered surveyor who assumes the bulk of both professional disciplinary consequences and personal professional liability for errors and omissions. VAI has insured its corporate professional liability and errors and omissions for all its employees' acts. Under these circumstances any disciplinary exposure or personal liability (i.e. risk) that John Vedder assumed on behalf of the corporation separate and apart from his individual capacity and solely as a result of being a stockholder in (and/or qualifying agent for) VAI is remote in probability, is speculative, and is unquantifiable. Also, the corporation is free to change qualifying agents at any time and is not bound to John Vedder for that function.

    
    

79. Although 13A-2.005(2)(e) specifies that the Petitioner corporation must demonstrate that the minority owner shares in "all" risks, it also states, "The minority owners' sharing in business risks shall be commensurate with their percentage of ownership," (emphasis supplied). The rule goes on to list tangible tests of a purely financial and monetary nature that may be easily assessed quantitatively. "Commensurate" does not equate with "precisely equal to another shareholder's disciplinary and liability exposure." The Doubleday Dictionary, Copyright 1975, defines "commensurate" as, "In proper proportion; proportionate."

    
    

80. Given the fact that the minority business enterprise rule uses the word "commensurate" and makes all of the tests for "commensurate risk" both tangible and quantitative, and the fact that any increased exposure of the non- minority shareholder is purely speculative and unable to be quantified in such a way as to assess this risk exposure in monetary terms, it is concluded that VAI is not barred from minority business enterprise certification simply because it uses a non-minority stockholder as a professional qualifying agent. To hold otherwise would be tantamount to creating a new and uncodified rule requiring all minority shareholders to hold professional licenses. Further, such a holding would render virtually impossible any future analysis of minority risk factors. For instance, how would one quantify or qualify risk for a corporation that offered "engineering, land surveying, and planning" where one of its corporate officers was a registered land surveyor and another was a registered professional engineer? In a corporation owned 99 percent by a minority owner and 1 percent by a non-minority owner and only the non-minority owner was licensed in some capacity, would the agency or the trier of fact be compelled to assess the quality of the 1 percent non-minority owner's personal liability and disciplinary exposure as raising his 1 percent ownership risk above the 99 percent minority owner's monetary risk?

    
    

81. In reaching the foregoing conclusion, the undersigned has considered that Respondent agency has not promulgated a rule or non-rule policy requiring that minority-owners always be holders of professional licenses and/or the qualifying agents for state-regulated professional corporations. The undersigned has also considered the evidence that such a result was never the agency's intent in promulgating rules or in interpreting its rules. It is further noted that if such a non-rule criterion were applied under the facts of this case, it would have the effect of requiring the minority owner to fulfill requirements in forming a business that a non-minority person would not have to fulfill to run a similar business in competition with her. That result surely cannot be the goal of a statute designed to encourage minority participation in the mainstream of commerce.

    
    

82. Petitioner has satisfied Rule 13A-2.005(2)(e).

83. In approaching Rule 13A-2.005(3), both parties appear to rely exclusively, for case law purposes, upon Barton S. Amey Company, Inc. v. Department of General Services, DOAH Case No. 86-3954, (RO 3/5/87; FO 4/21/87), aff'd Fla. DCA February 11, 1988, No. 87-235. Both parties further assert that pursuant to that case, if Kathleen Vedder (1) has control over the purchase of goods, equipment, business inventory, and services, and (2) has control over all financial affairs and business accounts, and (3) has authority to hire and fire, Petitioner corporation can be certified.

    
    

84. Respondent's characterization of Kathleen Vedder's activities and involvement in the corporation as merely clerical, secretarial, or office managerial is rejected. Her activities and involvement are clearly commensurate with those of any chief executive officer and her business acumen is essential to organize and orchestrate the technical skills of the corporation's land surveyor employees so that the business of land surveying can make a profit.

    
    

85. With regard to whether the minority owner currently possesses the authority to control and exercise dominant control over the management and daily operations of the business, the proof establishes that she has. It also establishes that since September 16, 1992, the minority owner constitutes a majority of the board of directors. There has been no suggestion that Kathleen

    A. Vedder has been or is acting as a "beard" for a corporation controlled by John A. Vedder. At worst, it can only be said that prior to John Vedder's resignation from the board of directors there was shared control because on a board of directors made up of only two persons, each director requires the other's vote to transact corporate business. See, David Nixon, Inc. v. Department of General Services, DOAH Case No. 87-0248C (RO 6/24/87; FO 8/25/87). Also, since there was 50-50 control of the board of directors during the start- up period, some of Kathleen Vedder's authority, decision-making, and control as president also were diminished during that period of time. The cumulative weight of evidence of her control is accordingly less than it would be otherwise. Nonetheless, as a practical matter, during that period, the minority owner as the majority stockholder could have removed and replaced the directors, who in turn could remove and replace officers, and the minority owner was simultaneously majority stockholder, two directors, and the president to whom, pursuant to the bylaws, all officers (including John Vedder) were subordinate. Currently, Kathleen A. Vedder simultaneously constitutes 51 percent of the shareholders, is the sole director, and is the president of the corporation. Pursuant to the bylaws, all other principal officers, including John Vedder, must take "direction" from the president. Rule 13A-2.005(3) (a-b) is currently satisfied.

    
    

86. With regard to the issue of whether the minority owner exercises sufficient management and technical responsibilities and capabilities to maintain control of the business, the greater weight of the evidence supports certification. Upon the foregoing findings of fact, it is determined that the non-minority owner, John Vedder, currently is not disproportionately responsible for the operations of the business. His input to the minority owner's running of the firm is primarily confined to areas of technical land surveying advice. She also receives similar, although not identical, input from the other registered land surveyors. See, Rule 13A-2.005(3)(c).

    
    

87. With regard to the issue of whether the control exercised by the minority owner is real, substantial and continuing and goes beyond mere pro forma control, the proof is a "mixed bag" and requires substantial discussion. See Rules 13A-2.005(3)(a-d).

    1. It has been clearly established that the minority owner currently controls the purchase of goods, equipment, business inventory and services needed in the day to day operation of the business. See, 13A-2.005(3)(d)1.

       
       

    2. The minority owner controls the hiring, firing, and supervision of all employees and the setting of employment policies, wages, benefits and other employment conditions. Kathleen Vedder has sufficient knowledge and capability to evaluate all VAI's employees' performances, including registered land surveyors. See, 13A-2.005(3)(d)2.

       
       

    3. The minority owner has knowledge and control of all financial affairs of the business and expressly controls investments, loans, bonding, payroll and lines of credit. See, 13A-2.005(3)(d)3. John Vedder's name is on the corporate checking account, and he holds the office of treasurer, designated VAI's "chief financial officer." However, as such, he serves at the "satisfaction" of the board of directors, and Kathleen Vedder is now the sole director. Kathleen Vedder's alleged lack of corporate financial control is not supported by the totality of the facts proven. The evidence submitted is that the minority owner has signed all but one of the checks written on the corporate account since the corporation came into being. The non-minority owner signed one check out of 823 checks when the minority owner was unable to do so. Prudent business practices dictate that, in an ongoing business, it is necessary to have more than one person with authority to write checks on the company's account, and accordingly, this factor does not disqualify Petitioner from certification. See, Mid State Industries, Inc. v. Department of General Services, DOAH Case No. 92-2110 (RO 9/14/92).

       
       

    4. It is concluded that a reasonable application of Rule 13A-2.005(3) requires that (3)(d) and (3)(d)4 be read in para materia, since they each address technical versus managerial competence, how these elements of "control" are to be interpreted and weighed, and how exceptions to the rule are to be applied. The minority owner must first affirmatively establish eligibility under all the elements of subsection (d)(d)4, just as she has under (3)(d) 1-3 and 5.

       
       

       In regard to the elements of subsection (3)(d)4, the non-minority owner's employment background of fifteen years is grounded in the business of managing a land surveying firm. Her professional skills and training apply directly to managing a land surveying firm and handling land surveying project coordination, bids, and contracts. Her knowledge of survey records, underground utilities, working CAD information on a computer and DOT bid submittals by DOS is impressive and industry-specific. That type of work does not require a professional license. Holding herself out as a registered land surveyor or performing land surveying would require a professional license under Chapter 472

       F.S. Kathleen Vedder does not hold such a professional license and does not hold herself out to personally perform land surveying.

       
       

       Kathleen Vedder, as minority owner, sole director, and president of VAI performs all of the bid proposal, contract negotiating, and project coordinating previously done by John Vedder for the old Perry C. McGriff Company. She accepts technical advice and input from John Vedder more than from the other land surveyors employed by VAI, but it should be noted John Vedder is also an owner whereas the other land surveyors are not. His input does not appear to usurp her final authority.

       
       

       VAI's only significant management change of record is John Vedder's resignation as a director of VAI on September 16, 1992, leaving the minority

       owner as the sole director. Since his resignation occurred after the denial of certification, it is suspiciously manipulative. However, here, Mr. Vedder's resignation from the board of directors appears to have only had the effect of legitimizing the non-minority owner's de facto authority, control, and practice. No law has been cited to show that Petitioner corporation does not have the right to reorganize itself at any time. Indeed, its Articles of Incorporation and bylaws permit it to do so. Reorganization to create mere pro forma minority authority and control is precluded throughout the rules, but no law has been cited to show that corporate reorganization for purposes of minority business certification is not a valid business reason, provided genuine authority and control resides in the minority owner.

       
       

       If, as here, the minority owner has delegated technical responsibility to others, the minority owner must also substantiate that she has caused the direction of the management of the business through her demonstrable knowledge and capability. The evidence shows she has.

       
       

       The evidence shows Petitioner has demonstrated all of the elements of 13A- 2.005(3)(d)4.

       
       

       However, Rule 13A-2.005(3)(d) provides that in instances where the applicant is a family-operated business, as VAI is, and responsibilities and decision-making occur jointly or severally along managerial and operational lines between minority and non-minority owners, the minority owners shall not be considered as controlling the business unless the minority owners substantiate that the assumption of duties is not based on the lack of knowledge or capability to independently make decisions regarding the business management and day-to-day operations. Herein, Kathleen A. Vedder cannot technically perform a survey, correct a survey, or sign off on a survey because she is not a professionally licensed registered land surveyor, but she is fully capable of judging land surveyors' quality of work and of hiring and firing them. The agency has interpreted its own rule to the effect that mere absence of the professional license is insufficient reason per se to deny certification.

       
       

       The Petitioner has demonstrated eligibility for certification under 13A2.005(3)(d).

       
       

    5. The minority owner has displayed independence and initiative in seeking and negotiating contracts, making bids, and conducting all major aspects of the business. Kathleen A. Vedder relies on some man hours and job costing input from at least two land surveyor employees on complex bids, but only one of whom is ever the non-minority owner. The non-minority owner is not always one of the two employees selected. Employee input does not alter the fact that the minority owner calculates the bid once all components are assembled, has all final authority in this regard, and exercises that authority. See, Rule 13A- 2.005(3)(d)5.

    
    

88. Upon the greater weight of the credible competent evidence, Petitioner VAI is entitled to be certified as a minority business enterprise.

RECOMMENDATION

Upon the foregoing findings of fact and conclusions of law, it is recommended that a final order be entered certifying Vedder Associates, Incorporated as a Minority Business Enterprise.

RECOMMENDED this 7th day of June, 1993, at Tallahassee, Florida.

ELLA JANE P. DAVIS

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 June, 1993.

APPENDIX TO RECOMMENDED ORDER 92-3763

The following constitute specific rulings, pursuant to S120.59(2), F.S., upon the parties' respective proposed findings of fact (PFOF).

Petitioner's PFOF:

The so-called "stipulated facts" is accepted, as stipulated, but not as to the inserted conclusion of law/argument.

1-19 Accepted except to the degree it is unnecessary, subordinate, or cumulative.

20-21 Accepted, but not dispositive, subordinate.

1. Rejected as a conclusion of law or argument.

2. Accepted, but not dispositive, subordinate.

3. Rejected as a conclusion of law or argument.

25-33 Accepted as modified to more closely conform to the record, and to eliminate mere leal argument, conclusions of law, and unnecessary, subordinate, or cumulative material. Also testimony was to 823 checks.

1. Rejected as stated as not supported by the greater weight of the credible evidence.

2. Accepted, except to the degree it is unnecessary, subordinate or cumulative.

3. Rejected as out of context, a conclusion of law, or argument.

37-46 Accepted, as modified, except to the degree it is unnecessary, subordinate, or cumulative.

47-48 Rejected as out of context, a conclusion of law, or argument.

49-53 Covered to the degree necessary in Finding of Fact 65, otherwise irrelevant and immaterial to a de novo proceeding under Section 120.57(1) F.S.

54-56 Accepted except to the degree unnecessary, subordinate, or cumulative.

57 Rejected as out of context, a conclusion of law, or argument.

58-60 Accepted except to the degree unnecessary, subordinate, or cumulative.

Petitioner's "factual conclusions" are rejected as proposed conclusions of law not proposed findings of fact.

Respondent's PFOF:

1-10 Accepted except to the degree unnecessary or cumulative.

11 Rejected as subordinate.

12-14 Rejected as stated as argument. Covered in Findings of Fact 27-30, absent argument, conclusions of law, and erroneous statements not supported by the greater weight of the credible competent evidence.

1. Rejected as argument.

2. Mostly accepted except to the degree it is unnecessary, subordinate or cumulative. However, the job estimating as stated is not supported by the record nor the argument of "day-to-day business."

17-19 Accepted as modified to conform to the record evidence, and except to the degree it is unnecessary, subordinate, or cumulative.

20 Rejected as argument.

21-22 Accepted but incomplete, irrelevant and immaterial in a de novo Section 120.57(1) F.S. proceeding. Also, the footnote is rejected as mere argument.

23-24 Rejected as argument.

1. Accepted, but not complete or dispositive; unnecessary and cumulative.

2. Accepted to the degree stated except to the degree unnecessary, subordinate, or cumulative. She also did more.

3. Rejected as partially not supported by the record; other parts are rejected as unnecessary, subordinate, or cumulative.

4. Accepted except to the degree unnecessary, subordinate, or cumulative or not supported by the record.

5. Accepted in part and rejected in part upon the greater weight of the credible, competent record evidence.

6. Rejected as argument.

7. Rejected as stated as not supported by the greater weight of the credible, competent record evidence, also unnecessary, subordinate, or cumulative.

8. Accepted except to the degree it is unnecessary, subordinate, or cumulative.

9. Rejected as argument

34-35 Accepted in part. Remainder rejected as stated as not supported by the greater weight of the credible, competent record evidence, and as a conclusion of law contrary to Mid State Industries, Inc. v. Department of General Services, DOAH Case No. 92-2110 (RO 9/14/92).

36 Rejected as argument.

37-38 Accepted in part, and rejected in part because not proven as stated.

1. Rejected as argument.

2. Rejected as stated because out of context or not supported as stated by the greater weight of the credible, competent record evidence.

3. Rejected as argument.

4. Accepted, except to the degree unnecessary, subordinate or cumulative.

5. Rejected as argument.

44-46 Rejected as subordinate.

47,(No #48),49 Accepted except to the degree unnecessary, subordinate, or cumulative.

50-55 Rejected as subordinate or unnecessary or as conclusions of law or argument.

COPIES FURNISHED:

Peter C. K. Enwall, Esquire Post Office Box 23879 Gainesville, FL 32602

Terry A. Stepp, Esquire Department of Management Services Koger Executive Center

Suite 309, Knight Building 2737 Centerview Drive

Tallahassee, FL 32399-0950

William H. Lindner, Secretary Knight Building, Suite 307 Koger Executive Center

2737 Centerview Drive

Tallahassee, FL 32399-0950

Susan B. Kirkland, Esquire Department of Management Services Koger Executive Center

Suite 309, Knight Building 2737 Centerview Drive

Tallahassee, FL 32399-0950

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: 92-003763

Orders for Case No: 92-003763