STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LASER RITE, )

)

Petitioner, )

)

vs. ) CASE NO. 94-5997

) COMMISSION ON MINORITY ECONOMIC ) AND BUSINESS DEVELOPMENT, )

)

Respondent. )

)

RECOMMENDED ORDER

Upon due notice, William R. Cave, Hearing Officer, Division of Administrative Hearings, held a formal hearing in this matter on February 27, 1995, in Sarasota, Florida.

APPEARANCES

For Petitioner: Helen Pell, Pro se

Laser Rite

1165-A Gillespie Avenue Sarasota, Florida 34236

For Respondent: William H. Roberts, Esquire

Department of Legal Affairs The Capitol, PL-01

Tallahassee, Florida 32399-1050 STATEMENT OF THE ISSUE

1. Is Helen Pell's ownership of Laser Rite real, substantial and continuing as provided in Rule 60A-2.005, Florida Administrative Code?

   
   

2. Does Helen Pell share in the business risks commensurate with her percentage of ownership in Laser Rite as provided in Rule 60A-2.005, Florida Administrative Code?

   
   

3. Does Helen Pell exercise day-to-day control of Laser Rite as provided in Rule 60A-2.003, Florida Administrative Code?

PRELIMINARY STATEMENT

By Application For Certification dated May 25, 1994, Petitioner applied to the Commission On Minority Economic And Business Development (Commission) for certification as a Minority Business Enterprise (MBE). On September 28, 1994, the Commission informed Petitioner in writing that it intended to deny Petitioner's application for MBE certification. On October 11, 1994, Petitioner requested an administrative hearing pursuant to Section 120.57(1), Florida Statutes. On October 21, 1994, the Commission referred the matter to the

Division of Administrative Hearings (Division) for the assignment of a Hearing Officer and conduct of a hearing. A formal hearing was scheduled for February 27, 1995.

At the hearing, Petitioner presented the testimony of Helen Pell but offered no other witness or documentary evidence. The Commission presented the testimony of Hector A. DeLaO. The Commission's exhibits 1 through 12 were received as evidence.

A transcript of the proceeding was filed with the Division on March 15, 1995. The Commission timely filed its proposed findings of fact and conclusions of Law. Petitioner elected not to file any proposed findings of fact and conclusions of law. A ruling on each proposed finding of fact submitted by the Commission has been made as reflected in an Appendix to the Recommended Order.

FINDINGS OF FACT

Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made:

1. Laser Rite is a partnership owned by Helen Pell and her husband, Richard Pell. Helen Pell owns fifty-five percent and Richard Pell owns forty- five percent.

   
   

2. Laser Rite sought MBE certification in two areas: (1) laser cartridge remanufacture; and (2) laser printer repair.

   
   

3. Laser cartridge remanufacture is the major portion (85 percent) of Laser Rite's business. Helen Pell controls the laser cartridge remanufacture for Laser Rite.

   
   

4. Laser printer repair makes up approximately 15 percent of Laser Rite's business. Richard Pell performs the repair of laser printers with the help of Jose Disilva, a part-time employee. Disilva was trained in laser printer repair by Richard Pell and works under Richard Pell's supervision. Most of the laser printer repair takes place in the field. Disilva is also learning laser cartridge remanufacuture from Helen Pell.

   
   

5. Helen Pell does not have the knowledge or expertise to repair laser printers.

   
   

6. Laser Rite has only one business bank account. Helen Pell, Richard Pell and Knyvett Lee (Helen Pell's daughter) each have individual signature authority for the business bank account. The bank has authority to honor a check drawn on the Laser Rite business bank account that is signed by any one of those having individual signature authority. Richard Pell has on occasions signed checks drawn on the Laser Rite account.

   
   

7. Richard Pell and Helen Pell at one time owned another business called Metro Audio Visual, which they bought in 1977 for $150,000. A $40,000 down payment on Metro Audio Visual came from the sale of Helen Pell's home which was in her name solely. The remainder of the purchase price for Metro Audio Visuals was financed by notes signed by both Helen Pell and Richard Pell.

8. Metro Audio Visual was sold for $425,000. The profits from the sale of Metro Audio Visuals were invested in Vanguard Securities. The record is not clear whether these securities were held jointly or individually by Helen Pell and Richard Pell.

   
   

9. Vanguard Securities were sold for $50,631.18. A wire transfer of those funds was made in the name of Helen Pell and deposited in the joint account of Helen Pell and Richard B. Pell at the American Bank of Bradenton.

   
   

10. On October 30, 1993, in contemplation of purchasing Laser Rite, Helen Pell and Richard B. Pell executed a Partnership Agreement wherein Helen Pell would own 55 percent of Laser Rite and Richard B. Peel would own 45 percent of Laser Rite. Additionally, Helen Pell would control the general management and day to day operations of Laser Rite whereas Richard B. Pell would be responsible for the technical direction of the Laser Rite.

    
    

11. In January 1994, Helen Pell and Richard B. Pell purchased Laser Rite for a purchase price of $134,375 which included, among other things, the purchase of assets and consulting services.

    
    

12. Fifty thousand dollars of the funds received from the sale of the Vanguard Securities was used as a down payment. The balance of the purchase price ($84,375) was financed by a note signed jointly by Helen Pell and Richard

    B. Pell. The first payment on the note was due and payable on February 15, 1994, in the amount of $23,500 which was paid by check drawn on the Pell's joint money market account. The balance of the note was to be paid in equal monthly installments of $1,476.29 beginning March 15, 1994.

    
    

13. The Asset Purchase Agreement for Laser Rite was signed by Helen K. Pell and Richard B. Pell collectively as buyers.

    
    

    CONCLUSIONS OF LAW

    
    

14. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, this proceeding pursuant to Section 120.57(1), Florida Statutes.

    
    

15. The burden of proof is on the party asserting the affirmative of an issue before an administrative tribunal. Florida Department of Transportation

    v. J.W.C. Company, Inc., 396 So.2d 778 (Fla. 2d DCA 1981). To meet this burden Petitioner must establish facts upon which its allegations are based by a preponderance of the evidence. Petitioner has failed to meet its burden in this regard.

16. Section 288.703(2), Florida Statutes, provides in pertinent part: "Minority business enterprise" means 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 51 percent owned by minority persons . . . and whose management and daily operations are controlled by such persons. . . .

17. Section 288.703(3)(e), Florida Statutes, provides:

    
    

    (3) "Minority person" means a lawful, permanent resident of Florida who is:

    * * *

    (e) An American woman.

    
    

18. Pertinent to this case, Rule 60A-2.005(2)(c), Florida Administrative Code, provides:

    
    

    (2) An applicant business must satisfy paragraphs (a), (b), (c), and (d) 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 transferral of ownership percentages with no exchange of capital at fair market value.

    * * *

    1. 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 interests, 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. (Emphasis supplied)

    
    

19. It is clear and undisputed that Helen Pell, the minority person, owns

    55 percent of Laser Rite. However, it is equally clear from the evidence, including Helen Pell's testimony, that Helen Pell's business risks in Laser Rite is not commensurate with her percentage of ownership in Laser Rite in that it has been shown that she contributed only 50 percent of the funds for the down payment and signed, jointly with Richard Pell, a note to finance the balance of the purchase price.

20. Rule 60A-2.001(14), Florida Administrative Code, provides:

    
    

    1. "Control" means to direct with primacy or cause the direction of all phases of the

       management and daily operations of the business, including, but not limited to, standard manage- ment practices and principles such as policy development, establishment of personnel reporting

       lines and operation procedures, problem solving, etc.

       
       

21. Also pertinent to this case, Rule 60A-2.005(3)(a)(c) and (d) 3., 4, and 6., Florida Administrative Code, provide:

    
    

    1. 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,

    by-law provisions, purchase agreements, employment agreements, partnership agreements, trust agreements or voting rights, whether cumulative or otherwise) which would vary or usurp managerial discretion customary in the industry.

    1. 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 the minority owners.

    2. 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 either jointly and mutually among owners and principals, or severally along managerial and operational lines between minority owners and non-minority owners or principals, 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 their 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 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 investments, loans to/from stockholders, bonding, payment of general business loans, payroll, and establishment of lines of credit.

    2. The minority owners shall have managerial and technical capability, knowledge, training, education and experience required to make decision regarding that particular type of work. In determining the applicant business' eligibility, the Office will review the prior employment and educational back- grounds 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 (sic) 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 and each phase of the technical operations of the business

    through their demonstrable knowledge of and capability in the delegated area.

    * * *

    (6) The minority owner shall substantiate personal direction and actual involvement with all major aspects of the applicant business. The major aspects shall be defined as those tasks essential to accomplish all objectives and operations related those services or commodities for which the applicant business requests certification.

    
    

22. Helen Pell has established that she possesses the skills to make the managerial decisions necessary to operate the business and the necessary technical capability and knowledge to handle the day-to-day operation of the laser cartridge remanufacture. However, by her own admission, Helen Pell does not possess the necessary technical capability and knowledge to handle the day- to-day operation of the laser printer repair portion of the business. Furthermore, the Partnership Agreement grants the authority to control the technical direction of the business to Richard B. Pell, a non-minority owner. Additionally, the record reflects that although Helen Pell has the knowledge of all financial affairs of the business she shares control of all financial affairs of the business with Richard B. Pell, a non-minority owner.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Commission enter a Final Order denying Petitioner's application for certification as a Minority Business Enterprise.

RECOMMENDED this day 21st of April, 1995, at Tallahassee, Florida.

WILLIAM R. CAVE, 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 21st day of April, 1995.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-5997

The following constitutes my specific rulings, pursuant to Section 120.59(2), Florida Statutes, on all of the proposed findings of fact submitted by the Commission in this case.

Petitioner's Proposed Findings of Fact.

1. Petitioner elected not to file any proposed findings of fact.

Commission's Proposed Findings of Fact.

1. Proposed findings of fact 1 through 9 are adopted in substance as modified in Findings of Fact 1 through 13.

COPIES FURNISHED:

William H. Roberts, Esquire Department of Legal Affairs The Capitol, PL-01

Tallahassee, Florida 32399-1050

Helen Pell, President Laser Rite

1165-A Gillespie Ave. Sarasota, Florida 34236

Mr. Crandall Jones Executive Administrator Knight Building

2727 Centerview Drive

Tallahassee, Florida 32399-0950

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to the 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 consult with the agency that will issue the final order in this case concerning their 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: 94-005997

Orders for Case No: 94-005997