STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BARANOWSKI & ASSOCIATES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 94-0403

) STATE OF FLORIDA, DEPARTMENT OF ) MANAGEMENT SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

A formal hearing was conducted in this proceeding before Daniel Manry, a duly designated Hearing Officer of the Division of Administrative Hearings, on May 5, 1994, in Sanford, Florida.

APPEARANCES

For Petitioner: Dorothy Baranowski, pro se

Baranowski & Associates 7050 Tallow Tree Road Sanford, Florida 32771

For Respondent: Cindy Horne, Esquire

Office of General Counsel Department of Management Services Knight Building, Suite 309

2737 Centerview Drive

Tallahassee, Florida 32399-0950 STATEMENT OF THE ISSUE

The issue is whether Petitioner qualifies for certification as a minority business enterprise.

PRELIMINARY STATEMENT

By letter dated October 21, 1993, Respondent advised Petitioner that Petitioner's application for certification as a minority business enterprise was denied. Petitioner timely requested a formal hearing. The proceeding was referred to the Division of Administrative Hearings, and assigned to the undersigned. A formal hearing was scheduled for May 5, 1994.

At the formal hearing, Petitioner presented the testimony of two witnesses and submitted two exhibits for admission in evidence. Respondent presented the testimony of one witness and submitted three exhibits for admission in evidence. The identity of the witnesses and exhibits and any rulings pertaining to each are set forth in the transcript of the formal hearing filed with the undersigned on June 1, 1994.

Petitioner timely filed its proposed recommended order on June 10, 1994. Respondent timely filed its proposed recommended order on June 7, 1994. The parties' proposed findings of fact are addressed in the appendix to this Recommended Order.

FINDINGS OF FACT

1. Petitioner is a closely held Florida corporation engaged in the business of inspecting elevators, providing expert testimony in cases involving malfunctioning elevators, and writing elevator specifications. Petitioner also functions as a consultant to operators of elevator equipment.

   
   

2. All of the outstanding stock of Petitioner is owned by Mr. Theodore Baranowski and Mrs. Dorothy Baranowski, his wife. Mrs. Baranowski owns 65 percent of Petitioner's outstanding stock, and Mr. Baranowski owns the remainder.

   
   

   Technical Control

   
   

3. The essential services provided by Petitioner are rendered by Mr. Baranowski. Mrs. Baranowski is a full-time school teacher. She is only available to work in Petitioner's business when school is not in session. She assists Mr. Baranowski in rendering the services provided by Petitioner.

   
   

4. Of the 15 jobs Petitioner completed in the year preceding the formal hearing, Mrs. Baranowski assisted in seven. Mr. Baranowski completed the other eight jobs without assistance. Mrs. Baranowski did not provide the essential services for any job.

   
   

5. Mr. Baranowski has 30 years of experience in the elevator field and a certificate of competency. His extensive experience and expertise is the primary reason Petitioner is able to render the services it provides.

   
   

6. Mrs. Baranowski has only two years of experience as an elevator consultant. She lacks the training and experience needed to obtain a certificate of competency. Without a certificate of competency, Mrs. Baranowski must rely on Mr. Baranowski to conduct the major aspects of Petitioner's business, including consulting, expert testimony, and elevator inspections.

   
   

7. During elevator inspections, Mr. Baranowski conducts the inspection of the machine room and the elevator car. He instructs Mrs. Baranowski while she takes pictures and notes of Mr. Baranowski's findings.

   
   

8. A person conducting elevator inspections must have extensive knowledge of the Florida Elevator Code. Mrs. Baranowski lacks the requisite knowledge of the Florida Elevator Code.

   
   

9. Mrs. Baranowski's main duties for Petitioner involve invoicing, purchasing supplies, and scheduling. Mrs. Baranowski also writes reports after going over notes of inspections with Mr. Baranowski. Reports provided to customers at the end of elevator inspections are signed by Mr. Baranowski.

   
   

10. A marketing brochure sent by Petitioner to potential customers extols the qualifications of Mr. Baranowski. The brochure does not mention Mrs. Baranowski's role in the services provided by Petitioner. Letters to potential customers are typically signed by Mr. Baranowski. Mr. and Mrs. Baranowski

    tacitly admit in Petitioner's advertising brochures and letters that potential customers will hire Petitioner based on Mr. Baranowski's technical experience and expertise.

    
    

11. Mrs. Baranowski is a minority owner (not a minority shareholder) in the learning process and does not have technical control of Petitioner. Mrs. Baranowski does not have the technical proficiency required under applicable rules to manage and operate Petitioner's business and make independent decisions.

    
    

    Operating And Financial Control

    
    

12. Petitioner is required by its bylaws to have a minimum of two members on its board of directors. The two current directors are also Petitioner's sole shareholders.

    
    

13. Mr. Baranowski is a white male and does not qualify as a member of any statutorily designated minority. Section 288.703, Florida Statutes. Mrs. Baranowski qualifies as a member of a minority but comprises only 50 percent of the current directors. Therefore, a majority of the directors are not minority owners.

    
    

14. The corporate bylaws provide that Petitioner is to be managed and operated by the board of directors. The board can not make corporate decisions without a quorum present. A quorum consists of a majority of the board members. As currently constituted, both board members must be present to satisfy the requirement for a quorum.

    
    

15. Corporate decisions are made by majority vote of the board of directors. The requirement for a majority vote of the board of directors, in effect, is a requirement for unanimity of the current members of the board.

    
    

16. Mrs. Baranowski does not have a majority vote on the board of directors. Either member has an effective veto of any proposed corporate action.

    
    

17. Mrs. Baranowski owns a majority of the voting stock. As the majority shareholder, Mrs. Baranowski has the legal authority and ability to remove or add directors, with or without cause. She can conduct business without a meeting of the directors by signing a consent form approving any corporate action.

    
    

18. In economic substance, Mrs. Baranowski cannot exercise her legal authority as the majority shareholder without risking loss of the technical expertise provided by Mr. Baranowski. Mrs. Baranowski's legal control of the board of directors is inextricably intertwined with Mr. Baranowski's technical control of Petitioner's business. Minorities do not, in substance, control Petitioner's board of directors.

    
    

19. Both current directors are authorized signatories on Petitioner's bank account. There are no limitations on Mr. Baranowski's legal right to draw on the account, and he regularly writes checks for Petitioner. For the reasons stated in the preceding paragraph, Mrs. Baranowski could not use her position as a majority shareholder to control Mr. Baranowski's legal right to draw on Petitioner's bank account without risking loss of Mr. Baranowski's technical expertise. Therefore, minorities do not, in substance, have financial control of Petitioner.

    CONCLUSIONS OF LAW

    
    

20. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding. Section 120.57(1), Florida Statutes. The parties were duly noticed for the formal hearing.

    
    

21. The burden of proving entitlement to certification as a minority business enterprise is on Petitioner. Florida Administrative Code Rule 28-

    6.008. Petitioner must demonstrate by a preponderance of evidence that its application should be granted. Florida Department of Transportation v. J.W.C. Company, Inc., 396 So.2d 778 (Fla. 1st DCA 1981). Petitioner failed to satisfy its burden of proof.

    
    

    Technical Control

    
    

22. Florida Administrative Code Rule 60A-2.005(3)(c) provides in relevant part:

    
    

    The minority owners must exercise sufficient

    . . . 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 the minority owners.

    
    

23. Florida Administrative Code Rule 60A-2.005(3)(d) states in relevant part:

    
    

    The control exercised by the minority owners shall be real, substantial and con-tinuing. .

    . . In . . . a family-operated business, with duties and responsibilities and decision-making occurring . . . between minority owners and

    non-minority owners . . ., the minority owners shall not be considered as controlling the business. Where the minority owners substantiate that assumption of duties is not based on their lack of knowledge or capability to independently make decisions regarding the business' management and day-to-day operation, the minority owners' control may not be affected. . . .

    
    

24. Florida Administrative Code Rule 60A-2.003(d)4 states in relevant part:

    
    

    . . . minority owners shall have the . . .

    technical capability, knowledge, training, education and experience required to make decisions regarding that particular type of work. . . . [Respondent] 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. . . . If the minority owners have delegated . . . technical responsibility to others, the minority owners must substantiate that they have caused the direction of . . . each phase of the technical operations of the business through their demonstrable knowledge of and capability in the delegated areas.

    
    

25. Mr. Baranowski has technical responsibility for conducting Petitioner's business. Mrs. Baranowski, as the minority owner, lacks the technical expertise necessary to conduct Petitioner's business or to direct Mr. Baranowski in his performance of services essential to the conduct Petitioner's business. The minority owner does not have technical control of Petitioner's business within the meaning of Florida Administrative Code Rules 60A-2.005(3)(b) and (d).

    
    

    Operating And Financial Control

    
    

26. Florida Administrative Code Rule 60A-2.005(3)(a) states in pertinent part:

The discretion of minority owners shall not be subject to any formal or informal restrictions

. . . which would vary or usurp managerial discretion customary in the industry.

The board consists of only Mr. and Mrs. Baranowski. The minority owner can not make any corporate decisions without Mr. Baranowski's assent. There is no formal restriction that prevents the minority owner, in her capacity as majority shareholder, from removing Mr. Baranowski as a board member or conducting Petitioner's business without Mr. Baranowski's participation. However, there are substantial informal, or economic, restrictions against such action by the minority owner. See para. 18, supra.

1. Florida Administrative Code Rule 2.005(3)(d)3 states in relevant part:

   
   

   The minority owners shall have knowledge and control of all financial affairs of the business. The ability of any nonminority owner or employee to sign checks . . on behalf of the business . . . shall be considered in determining finanancial control. . . .

   
   

2. Mr. Baranowski is an authorized signatory on Petitioner's corporate bank account and in fact signs checks regularly. Mrs. Baranowski, as the minority owner, does not have financial control of Petitioner within the meaning of Rule 2.005(3)(d)3. See also, para. 19, supra.

   
   

3. Florida Administrative Code Rule 60A-2.005(3)(b) states in relevant part:

If the applicant business is a corporation

. . . , 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.

Petitioner is a corporation managed by a board of directors. A majority of the board of directors is not comprised of minority owners.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Respondent enter a Final Order and therein DENY

Petitioner's request for certification as a minority business enterprise.

DONE AND ENTERED this 1st day of September, 1994, in Tallahassee, Florida.

DANIEL MANRY

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 1st day of September, 1994.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-0403

Petitioner's Proposed Findings Of Fact 1.-3. Accepted in substance

4. Not at issue and, therefore, immaterial 5.-7. Accepted in substance

1. Not at issue and, therefore, immaterial

2. Accepted in substance

3. Rejected as inconsistent with a preponderance of competent and substantial evidence

Respondent's Proposed Findings Of Fact

1. Accepted in substance

2.-3. Not at issue and, therefore, immaterial 4.-6. Accepted in substance

7. Accepted in substance but not characterization 8.-9. Accepted in substance

10. Rejected as recited testimony 11.-12. Accepted in substance

COPIES FURNISHED:

Dorothy Baranowski, Esquire Baranowski & Associates 7050 Tallow Tree Road Sanford, Florida 32771

Cindy Horne, Esquire Office of General Counsel

Department of Management Services 2737 Centerview Drive

Tallahassee, Florida 32399-0950

William H. Lindner, Secretary Department of Management Services Knight Building, Suite 307

2737 Centerview Drive

Tallahassee, Florida 32399-0950

Paul A. Rowell, General Counsel Department of Management Services Knight Building, Suite 307

2737 Centerview Drive

Tallahassee, Florida 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: 94-000403

Orders for Case No: 94-000403