STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AQUA TERRA, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 96-0599

)

DEPARTMENT OF LABOR AND ) EMPLOYMENT SECURITY, MINORITY ) BUSINESS ADVOCACY AND ASSISTANCE )

OFFICE (formerly known as ) COMMISSION ON MINORITY ECONOMIC ) AND BUSINESS DEVELOPMENT), )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Claude B. Arrington, held a formal hearing in the above-styled case on May 23, 1996, in Miami, Florida.

APPEARANCES

For Petitioner: Isidro A. Duque, President

Richard K. Meyers, Vice-President Aqua Terra, Inc.

3520 Corporate Way

Miramar, Florida 33025

For Respondent: Joseph L. Shields, Esquire

Department of Labor and Employment Security Minority Business Advocacy and

Assistance Office

2012 Capital Circle, Southeast Hartman Building, Suite 307 Tallahassee, Florida 32399-2189

STATEMENT OF THE ISSUES

Whether the Petitioner is entitled to certification as a minority business enterprise by the Florida Department of Labor and Employment Security, Minority Business Advocacy and Assistance Office (formerly known as the Commission on Minority Economic and Business Development).

PRELIMINARY STATEMENT

Petitioner's application for certification as a minority business enterprise (MBE) was denied by Respondent by letter dated January 10, 1996. The grounds cited for the intended denial were stated as being the failure of the applicant to meet the criteria for certification established by statute and

rule. Petitioner thereafter timely challenged the Respondent's denial, the matter was referred to the Division of Administrative Hearings, and this proceeding followed. Effective July 1, 1996, the Commission on Minority and Economic and Business Development was abolished and its duties pertinent to this proceeding were transferred to the Department of Labor and Employment Security, Minority Business Advocacy and Assistance Office. See, Chapter 96-320, Laws of Florida.

At the formal hearing, Isidro A. Duque and Richard K. Meyers, the president and vice-president of the corporation, testified on behalf of the Petitioner, but offered no exhibits. Respondent presented the testimony of Polly Williams, who is a certification officer employed by Respondent, and offered seven exhibits, each of which was admitted into evidence.

No transcript of the proceedings has been filed. At the request of the parties, the time for filing post-hearing submissions was set for more than ten days following the close of the formal hearing. Consequently, the parties waived the requirement that a recommended order be rendered within thirty days after the close of the hearing. Rule 60Q-2.031, Florida Administrative Code.

Rulings on the parties' proposed findings of fact may be found in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. Aqua Terra, Inc., is a corporation that was organized under the laws of Florida. Aqua Terra is a small business as that term is defined by Section 288.703(1), Florida Statutes. 1/ The work of the corporation requires expertise in geology and in environmental science. The work of the corporation also requires the services of an engineer for certain projects.

   
   

2. Isidro Duque owns 51 percent of the stock of Aqua Terra. Mr. Duque is of Hispanic-American descent and is, consequently, a member of a recognized minority group.

   
   

3. Richard Meyers owns 49 percent of the stock of Aqua Terra. Mr. Meyers is not a member of a minority group.

   
   

4. Mr. Duque founded Aqua Terra on April 23, 1993. Mr. Duque and Mr. Meyers were coworkers at another company before Mr. Duque founded Aqua Terra.

   
   

5. Mr. Duque was the sole shareholder and only officer of the corporation until March, 1994, when Mr. Meyers formally joined the company.

   
   

6. When Mr. Meyers joined Aqua Terra in March, 1994, the parties negotiated the structure of the corporation. They agreed that Mr. Duque would retain 51 percent of the authorized stock of the corporation and that Mr. Meyers would be issued the remaining 49 percent. Mr. Duque was named the President, Treasurer, and a Director of the corporation. Mr. Meyers was named the Vice- President, Secretary, and a Director of the corporation.

   
   

7. The Board of Directors consists of only these two directors. According to the bylaws of the corporation, all corporate powers are to be exercised under the authority of, and the business and affairs of the corporation shall be managed under the direction of, its board of directors. A majority vote of the board of directors is required.

8. Mr. Duque is a professional geologist while Mr. Meyers is an environmental scientist. They both direct projects undertaken by the corporation and share the overall responsibility for such projects. Mr. Duque is primarily responsible for those aspects of a project that require expertise in geology. Mr. Meyers is primarily responsible for those aspects of a project that require expertise in environmental science. The corporation retains the services of a consulting engineer for projects that require certification by an engineer. The engineer the corporation uses for this purpose is not a member of a minority group.

   
   

9. Both Mr. Duque and Mr. Meyers have the authority to transact any and all business on behalf of the corporation, including the signing of checks and bank drafts.

   
   

10. Mr. Meyers and Mr. Duque actively participate in the daily operation of the corporation.

    
    

11. Mr. Duque manages the business development activities of the corporation.

    
    

12. Mr. Meyers manages the financial concerns of the corporation and is primarily responsible for purchasing.

    
    

13. Mr. Meyers and Mr. Duque assert that Mr. Duque, as the 51 percent shareholder, retains the right to overturn any decision made by Mr. Meyers and that he retains ultimate authority to control the corporation. That right was not established since the existing authority to manage the corporation is, pursuant to the bylaws, vested in the Board of Directors. The managerial functions actually performed by both stockholders are essential to the operation of the company, and one was not established to be more important than the other.

    
    

14. Petitioner failed to establish that Mr. Duque exercises dominate control of the affairs of the business.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

16. Chapter 60A-2, Florida Administrative Code, establishes a "Minority Business Utilization Plan" and a minority business certification program for purposes of complying with Section 287.0947, Florida Statutes, and Section 287.0943, Florida Statutes. As an applicant seeking certification, Petitioner has the burden of proving by a preponderance of the evidence that it is entitled to that certification. Rule 28-6.08(3), Florida Administrative Code. See also, Florida Department of Transportation v. J.W.C., Co., 396 So.2d 778 (Fla. 1st DCA 1981). For the reasons discussed below, it is concluded that Petitioner has failed to meet that burden.

17. Section 288.703(2), Florida Statutes, provides in pertinent part: 'Minority business enterprise' means any small

    business concern . . . which is at least 51

    [percent] owned by minority persons and whose management and daily operations are controlled by such persons.

18. It was established that Aqua Terra, Inc. is a small business concern and that Mr. Duque is the record owner of 51 percent of the issued shares. It was further established that Mr. Duque is of Hispanic-American descent, which meets the definition of a "minority person". See, Section 288.703(3)(b), Florida Statutes.

    
    

19. Petitioner failed to establish that Mr. Duque exercises dominate control over the corporation. Subsections (2) and (3) of Rule 60A-2.005, Florida Administrative Code, set forth the following criteria for certification as a minority business enterprise and provide, in pertinent part, as follows:

    
    

    1. . . . 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.

       * * *

    2. 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. If the applicant business is a corporation and the business and affairs of the corporation are managed under the direc- tions of a board of directors as provided by the articles of incorporation or bylaws of the corporation ... a majority of the directors must be minority owners, notwith- standing whether the directors are required to be elected by a majority vote of the outstanding shares of the corporation.

       2. The minority owners must exercise sufficient management and technical respon- sibilities 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.

       3. The control exercised by the minority owners shall be real, substantial and continuing, and shall go beyond mere

          pro forma control. ... 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 owner shall control the hiring, firing and supervision of all employees ...

          3. 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 and enter into financial transactions on behalf of the business shall be considered in determining financial control....

          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 (sic) related, and the time 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 regard to any and all bidding and contracting. . . .

          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 to those services or commodities for which the applicant business requests certification.

             
             

20. While it was established that Mr. Duque owns 51 percent of the shares of stock in the corporation and that he participates in the affairs of the corporation in a real and meaningful way, the record is clear that Aqua Terra, Inc., is jointly managed and controlled by Mr. Duque and Mr. Meyers. As presently structured, Mr. Duque does not exercise dominant control over the management of the corporation. Mr. Meyers has an equal voice on the Board of Directors, manages the finances of the corporation, has the authority to sign on the corporate bank account, makes purchases on behalf of the corporation, and manages the projects that require his expertise. A majority of the Board of Directors is not composed of minority members as required by Rule 60A- 2.005(3)(b), Florida Administrative Code.

    
    

21. Based on the foregoing, it is concluded that Petitioner did not establish that Mr. Duque has dominant control over the business. Consequently, Petitioner is not entitled to certification as a minority business enterprise.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a final order that denies Petitioner's

application for certification as a minority business enterprise.

DONE AND ENTERED this 27th day of August, 1996, in Tallahassee, Leon County, Florida.

CLAUDE B. ARRINGTON, 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 27th day of August, 1996.

ENDNOTE

1/ Section 288.703(1), Florida Statutes, provides, in pertinent part, as follows:

(1) "Small business" means an independently owned and operated business concern that employs 100 or fewer permanent employees and that, together with its affiliates, has a net worth of not more than $3 million and an average net income after federal income taxes, excluding any carryover losses, for the preceding 2 years of not more than $2 million. . . .

APPENDIX TO RECOMMENDED ORDER, CASE NO. 96-0599

The following rulings are made as to the proposed findings of fact submitted by the Petitioner.

1. The proposed findings of fact in paragraphs 1-5 are adopted in material part by the Recommended Order or a subordinate to the findings made.

2. The proposed findings of fact in paragraph 6 and are adopted in part, but are rejected to the extent they are contrary to the findings made or are unnecessary to the conclusions reached.

The proposed findings of fact submitted by the Respondent are adopted in material part by the Recommended Order or are subordinate to the findings made.

COPIES FURNISHED:

Isidro A. Duque, President Richard K. Meyers, Vice-President Aqua Terra, Inc.

3520 Corporate Way

Miramar, Florida 33025

Joseph L. Shields, Esquire

Department of Labor and Employment Security Minority Business Advocacy and

Assistance Office

2012 Capital Circle, Southeast Hartman Building, Suite 307 Tallahassee, Florida 32399-2189

Douglas L. Jamerson, Secretary

Department of Labor and Employment Security

303 Hartman Building

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152

Edward A. Dion, General Counsel

Department of Labor and Employment Security

307 Hartman Building

2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152

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 ten 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: 96-000599

Orders for Case No: 96-000599