SC Administrative Law Court Decisions

STATEMENT OF THE CASE

This matter comes before the Administrative Law Judge Division (Division) upon the request of Petitioner JBK Trucking, Inc. for a contested case hearing pursuant to S.C. Code Ann. § 1-23-600(B) (Supp. 2001) and 25A S.C. Code Ann. Regs. 63-700 et seq. (Supp. 2001), challenging Respondent South Carolina Department of Transportation's (Department) denial of Petitioner's application for certification as a Disadvantaged Business Enterprise (DBE).

After notice to the parties, a final hearing before the Division was conducted on February 6, 2002. Upon review of the relevant and probative evidence and the applicable law, I find that the DBE Certification of JBK Trucking, Inc. should be granted

FINDINGS OF FACT After observing the witnesses and considering the testimony and evidence presented at the hearing, I make the following Findings of Fact:

• Notice of the date, time, place, and nature of the hearing was timely given to all

parties.

• JBK Trucking, Inc. is a trucking firm which owns trucks used to haul raw materials

for construction jobs. Petitioner's trucks pick up materials at a certain point and transport those materials to the user of the materials. Customers call the Petitioner and request the pick up and delivery.

• Kathryn and John King established JBK Trucking in 2000. Although Kathryn King

stated on her application with the Department that she owns 51% of the business, she testified at the hearing that she owns 75% of the stock in the business. She stated she put 51% on the application because that is what the Department told her she had to own in order to obtain the DBE certification.

• Kathryn King received a diploma from Horry-Georgetown Technical College in

Stenography/General Office. Since 1986 she has worked at Coastal Rapid Public Transit Authority (CRPTA) in Conway, South Carolina. Over the course of the years she has held three positions there, all of which involve administrative duties. The company is responsible for transporting people to and from medical appointments. She is responsible for scheduling seventeen drivers to transport Medicaid and elderly patients to medical appointments. Her position with CRPTA is full-time.

5. JBK Trucking employs drivers to drive the trucks. The drivers are responsible for

picking up the materials and delivering them as instructed. Kathryn King does all of the scheduling of JBK's trucks. She negotiates the price with customers and instructs drivers on where and when to pick up and deliver materials. At the time of the hearing the three trucks were going to North Carolina twice a day to pick up rock.

6. John King has worked in the asphalt business for many years. For 22 years he worked

for Palmetto Paving Corporation as the Asphalt Plant Manager. He left his employment at Palmetto about the time JBK Trucking was being established. Temporarily it looked as though he would resume work by driving a truck for JBK ; however, he accepted a job with Southern Asphalt and has worked with them since 2000. He testified he stays extremely busy at Southern Asphalt and has very little time to assist with JBK Trucking. He does coordinate with Kathryn King on a frequent basis because JBK transports materials for Southern Asphalt. It does not appear that Mr. King sets up all of JBK's business through his employment as the Respondent alleges. The Petitioners submitted evidence of work they have done for other companies. There is no doubt it is fortuitous for Mrs. King that her husband is now employed with a company that uses JBK's services, but I do not find that in any way puts Mr. King in control of JBK. The Kings contend that the Department is wrong when it asserts John King is the one with trucking/hauling experience and they claim he has no such experience. His experience is in asphalt, but not in hauling materials for projects.

7. Kathryn and John King have the authority to sign checks and to do payroll for JBK;

however, Mrs. King is the one who does both. Both signed on the loans for the JBK trucks. Generally they interview new employees together, but the final decision is hers. They did the policy and procedure manual together. John King stated he occasionally does oil and tire changes on the trucks. He also states he will tell his wife if he believes a JBK employee is "messing up" or if a truck seems to need maintenance, but that she handles all it all. On at least one occasion, Mrs. King left her full-time job to go to the scene of a disabled truck.

8. Sammie Tucker of Tucker and Son Trucking, a South Carolina company with a DBE

certification, testified as to his experience in the hauling industry. He started his business with his father when he was still employed full-time as an officer with the South Carolina Highway Patrol. He stated that he could not have run the company, which then had five trucks, while he was working full-time. However, his father was running the hauling business and Sammie Tucker never had control of the business at that time. Also, Mr. Tucker's full-time employment was significantly different than Mrs. King's full-time employment. Since 1997 Sammie Tucker has run Tucker and Son Trucking on a full-time basis. He now has 22 trucks hauling from a four-state area. I find Mr. Tucker's present business is very different than JBK Trucking and cannot be compared for purposes of daily responsibilities of a hauling company.

CONCLUSIONS OF LAWBased upon the foregoing Findings of Fact, I conclude, as a matter of law, the following:

• The Division has subject matter jurisdiction in this case pursuant to S.C. Code Ann.

§ 1-23-600(B) (Supp. 2001) and 23A S.C. Code Ann. Regs. 63-704(K) (Supp. 2001).

• The Department is required to certify eligible firms to participate in the South

Carolina DBE program pursuant to S.C. Code Ann. § 12-28-2930(B) (Rev. 2000). Businesses receiving the certification are then allocated a certain percentage of highway funds for construction and renovation projects.

• As a recipient of federal highway funds, the Department is also required to

implement a DBE program in compliance with 49 C.F.R. Part 26. The Department has promulgated regulations to implement both the state and federal DBE programs in South Carolina. See 25A S.C. Code Ann. Regs. 63-700 et seq. (Supp. 2001). Pursuant to the regulations, the Department has adopted the standards for certifying DBEs, which are set forth in 49 C.F.R. Part 26. See 25A S.C. Code Ann. Regs. 63-702(A) and 63-703(A) (Supp. 2001).

• A DBE stands for Disadvantaged Business Enterprise and is defined generally as a

small business concern owned and controlled by a socially and economically disadvantaged individual. See 49 CFR, Subpart A, Section 26.5. The regulations provide that woman owners are rebuttably presumed to be socially and economically disadvantaged for purposes of the DBE program. See 49 CFR Section 26.67(a). The regulations further set forth certain rules to be used for determining whether or not the socially and economically disadvantaged individual "owns" and "controls" the firm as required by the eligibility standards. See 49 CFR 26.69 and 26.71.

• A business seeking certification as a DBE has the burden of demonstrating, by the

preponderance of the evidence, that it meets the requirements of 49 C.F.R. Part 26 concerning group membership or individual disadvantage, business size, ownership, and control. 49 C.F.R. § 26.61. The Department does not contest that JBK Trucking meets the requirements of 49 CFR Part 26 as to group membership, business size or ownership by a disadvantaged individual. The Department contends only that the firm has failed to meet its burden of proving that it meets the requirements for "control" by the woman-owner.

• The DBE regulations require that:

The socially and economically disadvantaged owner must possess the power to direct and cause the direction of the management and policies of the firm and to make the day-to-day as well as long-term decisions on matters of management, policy and operations.

49 CFR Section 26.71(d).

• In addition, the regulations provide the following in regard to the degree of technical expertise required in order to control a firm within the meaning of the DBE regulations:

the socially and economically disadvantaged owners must have an overall understanding of, and managerial and technical competence and experience directly related to, the type of business in which the firm is engaged and the firm's operations. The socially and economically disadvantaged owners are not required to have experience or expertise in every critical area of the firm's operations, or to have greater experience or expertise in a given field than managers or key employees. The socially and economically disadvantaged owners must have the ability to intelligently and critically evaluate information presented by other participants in the firm's activities and to use this information to make independent decisions concerning the firm's daily operations, management, and

policymaking. Generally, expertise limited to office management, administration, or bookkeeping functions unrelated to the principal business activities of the firm is insufficient to demonstrate control.

49 C.F.R. § 26.71(g).

The regulations require the disadvantaged owner to have "technical competence" and

experience directly related to the type of business in which the firm is engaged and the firm's operations. Unfortunately, however, the regulations do not define "technical competence."

• At the very least, "technical competence" must consist of "a base level of technical

knowledge of the industry" and "a sufficient background and expertise...with respect to delegated aspects of the business to be able to intelligently use and critically evaluate information" presented by employees in making "decisions concerning the daily operational activities of the business." See Car-Mar Construction Corp. v. Skinner, 777 F. Supp. 50, 55-56 (D.D.C. 1991).

• In this case, JBK Trucking is a hauling business whose primary product is

the transport of construction materials. Although Kathryn King does not possess expertise gained from either education or experience in construction material or trucking maintenance, she does possess the expertise in the field of transportation. While it is true that "office management, administration, or bookkeeping functions unrelated to the principal business activities of the firm is insufficient to demonstrate control", here the coordination of the transportation is exactly the business in which JBK Trucking is engaged.

10. The federal regulations address the issue of owners working in other jobs:

In order to be viewed as controlling a firm, a socially and economically disadvantaged owner cannot engage in outside employment or other business interests that conflict with the management of the firm or prevent the individual from devoting sufficient time an attention to the affairs of the firm to control its activities. For example, absentee ownership of a business and part-time work in a full-time firm are not viewed as constituting control. However, an individual could be viewed as controlling a part-time business that operates only on evenings and/or weekends, if the individual controls it all the time it is operating.

49 C.F.R. §26.71 (j).

It is undisputed that Mrs. King works full-time for another employer. However, that business does not conflict with the management of JBK Trucking and does not seem to prevent her from devoting sufficient time to JBK Trucking to control its activities. This seems obvious by the fact that JBK Trucking is running its trucks on a daily basis and clearly there is no one else controlling the business.

ORDER

IT IS HEREBY ORDERED that the application for certification as a Disadvantaged Business Enterprise of JBK Trucking, Inc. is GRANTED.

AND IT IS SO ORDERED.

____________________________________

CAROLYN C. MATTHEWS

Administrative Law Judge

May 2, 2002

Columbia, South Carolina