South Carolina              
Administrative Law Court
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SC Administrative Law Court Decisions

CAPTION:
Buck’s Trucking, L.L.C vs. DOT

AGENCY:
South Carolina Department of Transportation

PARTIES:
Petitioner:
Buck’s Trucking, L.L.C

Respondent:
South Carolina Department of Transportation
 
DOCKET NUMBER:
03-ALJ-19-0405-CC

APPEARANCES:
Petitioner & Representative:
Bucks Trucking, L.L.C., W. Greg Seigler, Esquire

Respondent & Representative:
South Carolina Department of Transportation, Linda C. McDonald, Esquire
 

ORDERS:

FINAL ORDER AND DECISION

I. Introduction


Susan W. Buck (Susan) seeks to have Buck’s Trucking, L.L.C. certified as a Disadvantaged Business Enterprise (DBE) under S.C. Code Ann. § 12-28-2930 (2002) and 25A S.C. Code Ann. Regs. 63-700 (Supp. 2003), et seq. After a review, the South Carolina Department of Transportation (DOT) denied the requested certification. Susan has challenged DOT’s decision in this contested case before the Administrative Law Judge Division (ALJD) with jurisdiction in the ALJD provided in S.C. Code Ann. § 1-23- 600(B) (Supp. 2003) and 23A S.C. Code Ann. Regs. 63-704(K) (Supp. 2003).


II. Issue


The issue here is whether Susan has the requisite degree of ownership in and control of Buck’s Trucking, L.L.C. to qualify that entity as a Disadvantaged Business Enterprise.


III. Analysis


A. Findings of Fact


I find by a preponderance of the evidence the following facts:


The business here under review is a trucking company formed on April 18, 2003 as a limited liability company. The formation documents for the L.L.C. place management of the company in Susan Buck and Robert Buck.


The business being conducted by the L.L.C is not new. Rather, after driving for other employers for several years, Robert began his own business in 1990 hauling rock, sand, and gravel as Buck’s Trucking. In fact, the L.L.C. is the successor to the former business which Robert owned. In the former business, Robert was (and now continues in the new business) to be a truck driver. Moreover, the current business continues to haul rock, sand, and gravel and is Robert’s full-time employment.


On the other hand, Susan has been employed by McCormick County since 1977 in a full-time position in the Assessor’s Office. However, in a part-time position of approximately 10 to 15 hours a week, she has assisted in the old business and continues to do so in the new business.


For example, under both the old and the new business, she handled then and continues now to handle office administrative matters for the trucking business including filing fuel tax reports and arranging pickup and destination contacts with customers. In both old and new, Susan wrote and still writes the vast majority of the checks for the business. However, Robert continues to have check writing authority and has written checks for business expenditures.


Both Robert and Susan have management functions in the new business. Both she and Robert are participants in providing estimates and bids to customers, participants in the hiring and firing of employees, and participants in the purchasing of goods, services, and equipment for the business.


Further, in terms of finances, both she and Robert have purchased equipment for the past and current businesses. Of the equipment currently owned by all businesses in which Robert and Susan are involved (and based on the prices paid at the time of purchase), Robert purchased equipment totaling $83,820 while Susan purchased equipment totaling $55,560. However, as to the L.L.C. assets, Susan purchased a 1988 Peterbuilt from Robert for $8000 on February 25, 2002. Further, from a third party, she purchased a 1994 Lufkin trailer for $10,500.00.


B. Conclusions of Law


Based on the foregoing Findings of Fact, I conclude the following as a matter of law:


1. Background

Both the General Assembly and Congress have determined that the effect of past discrimination in the contracting business produced a need to provide opportunities for businesses that historically were unable to obtain contracts because of discrimination against their owners. See 23 USC § 101, specifically Public Law 105-108; 49 C.F.R. Part 26; S.C. Code Ann. Section 12-28-2930 (2000); 25A S.C. Code Ann. Regs. 63-700, et seq. (Supp. 2003). To meet the need to provide opportunities for these disadvantaged businesses, Congress and the General Assembly require DOT to spend a portion of its funds with firms qualifying as disadvantaged businesses or DBE's.

However, before a firm may participate in the DBE program, DOT must certify that the firm qualifies for DBE treatment. S.C. Code Ann. § 12-28-2930(B)(2002). To accomplish the certification task, DOT was given the duty of establishing a certification program that complied with the applicable federal regulations promulgated by the U. S. Department of Transportation. See 49 C.F.R. Part 26. DOT met that duty by promulgating regulations. See 25A S.C. Code Ann. Regs. 63-700 et seq. (Supp. 2003). Under these regulations, applicants for South Carolina DBE certification must comply with the standards set in the federal regulations. See 25A S.C. Code Ann. Regs. §§ 63-702(A) and 63-703(A) (Supp. 2001). Thus, the federal regulations are controlling here.

2. DBE General Requirements

To qualify as a DBE the entity under review must be "a small business concern owned and controlled by a socially and economically disadvantaged individual." See 49 C.F.R., Subpart A,
§ 26.5. Here, Susan, a female, is rebuttably presumed to be a socially and economically disadvantaged individual for purposes of the DBE program. See 49 C.F.R. § 26.67(a). Since Susan’s status is not challenged, the issue becomes one of deciding whether the preponderance of the evidence shows that the tests of ownership and control rest in Susan. See 49 C.F.R. §§ 26.69, 26.71, and 26.61. In this case, ownership is satisfied, but control is not.

3. DBE Ownership Requirements

The ownership requirements are identified in 49 C.F.R.
§ 26.69. Being mindful of the duty to consider all of the facts as a whole rather than piecemeal (see § 26.69(a)), Susan must show that she owns at least 51 percent of each class of member interest in the L.L.C. § 26.69(b)(3). In deciding whether the 51% is met, a presumption arises that Susan is not the owner of any assets that she acquired from Robert if she acquired the assets without adequate consideration since Robert is a “non-disadvantaged individual . . . who is . . . [i]nvolved in the same firm for which [Susan] is seeking certification.” § 26.69(h)(1)(i).


Under the facts of this case, Susan is the owner of the L.L.C.’s equipment. The L.L.C owns only two significant assets, a 1988 Peterbuilt and a 1994 Lufkin trailer. Footnote Susan purchased and contributed both items to the L.L.C. The 1988 Peterbuilt was purchased from Robert for $8000 on February 25, 2002. However, nothing in the evidence persuasively establishes that the purchase price was for less than a full and fair consideration. Thus, no presumption of “non-ownership” arises as to that asset. Further, no such presumption arises as to the 1994 Lufkin since it was not purchased from Robert but instead was purchased by Susan from Bare's Sand & Stone, Inc. for $10,500.00. Accordingly, Susan satisfies the ownership requirement.


4. DBE Control Requirements


DOT also denied the request for DBE status since Susan does not control Buck Trucking L.L.C.. Under the evidence produced in this case, I agree with DOT.


The regulations impose the following:

(l) Where a firm was formerly owned and/or controlled by a non-disadvantaged individual (whether or not an immediate family member), ownership and/or control were transferred to a socially and economically disadvantaged individual, and the non-disadvantaged individual remains involved with the firm in any capacity, the disadvantaged individual now owning the firm must demonstrate to you, by clear and convincing evidence, that:
(1) The transfer of ownership and/or control to the disadvantaged individual was made for reasons other than obtaining certification as a DBE; and
(2) The disadvantaged individual actually controls the management, policy, and operations of the firm, notwithstanding the continuing participation of a non- disadvantaged individual who formerly owned and/or controlled the firm.


49 C.F.R. § 26.71(l).


Here, the business has been previously owned and controlled by Robert, a non-disadvantaged individual. Indeed, the application seeking DBE status candidly and freely admits the prior ownership in Robert by acknowledging that “[Robert] has been full owner of the business until 2002.” Further, the evidence shows that Robert “remains involved with the firm.”


Given the above, Susan must show “by clear and convincing evidence, that [she] controls the management, policy, and operations of the firm, notwithstanding the continuing participation of a non- disadvantaged individual who formerly owned and/or controlled the firm.Such has not been shown in this case.


For example, the application (again candidly so) explains Robert’s continued role in the control of the business. Robert is listed as an “owner” of the business. And, quite significantly, that ownership is not merely passive. Rather, the application explains that Robert is a participant in providing estimates and bids to customers, a participant in the hiring and firing of employees, and a participant in the purchasing of goods, services, and equipment for the business. Indeed, the testimony establishes that Robert has essentially unlimited authority to write checks from the business bank account.


Finally, the entity within which the business operates is an L.L.C. The Articles of Organization establishing the L.L.C. explicitly state “that management of the limited liability company is vested in” both Susan and Robert.


Therefore, the control held by Susan as compared to the actual, exercised authority held by Robert plus the formal statement of control granted to him by the Articles of Organization fail to show clear and convincing evidence that Susan controls the management, policy, and operations of the firm. Thus, Susan lacks the requisite degree of control.


IV. Order


Susan W. Buck lacks the requisite degree of control of Buck’s Trucking, L.L.C. to qualify that entity as a Disadvantaged Business Enterprise. Accordingly, the application seeking to have Buck’s Trucking, L.L.C. certified as a Disadvantaged Business Enterprise (DBE) must be denied.


AND IT IS SO ORDERED


______________________

RAY N. STEVENS

Administrative Law Judge


Dated: February 17, 2004

Columbia, South Carolina


Brown Bldg.

 

 

 

 

 

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