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Meadowbrook, LLC v. Rhode Island Department of Administration

Superior Court of Rhode Island, Providence

July 9, 2019

MEADOWBROOK, LLC, Plaintiff,
v.
RHODE ISLAND DEPARTMENT OF ADMINISTRATION; MICHAEL DiBIASE, in his capacity as the Director of RHODE ISLAND DEPARTMENT OF ADMINISTRATION; and, MINORITY BUSINESS ENTERPRISE COMPLIANCE OFFICE, Defendants.

          For Plaintiff: Nicholas J. Goodier, Esq.

          For Defendant: Jennifer S. Sternick, Esq.; Andrew S. Marcaccio, Esq.

          DECISION

          McGUIRL, MAGISTRATE JUSTICE

         Before this Court is the appeal of Meadowbrook, LLC, (Meadowbrook or Appellant) from a final decision of the Rhode Island Department of Administration (DOA) Office of Diversity, Equity and Opportunity Minority Business Enterprise Compliance Office's (MBECO) Certification Review Committee (CRC), denying the Appellant's certification as a Minority Business Enterprise (MBE).[1] In its May 5, 2015 Decision (the Decision), the CRC denied the application, finding that the Appellant failed to adequately demonstrate that it met the certification criteria to qualify as a MBE as set forth in the Minority Business Enterprise Rules and Regulations with respect to capital contributions, control, dependency, and affiliation. Jurisdiction is pursuant to G.L. 1956 §§ 42-35-15 et seq. For the reasons set forth in this Decision, this Court remands the Decision to the DOA for further findings of fact and conclusions of law.

         I

         Facts and Travel

         MBECO was created within the DOA after the Rhode Island General Assembly tasked the director of the DOA with maximizing opportunities for the MBE to participate in state funded construction projects and state purchases of goods and services. The MBECO provides administrative services relating to minority business enterprises including certification, enforcement, business assistance and advocacy. Pursuant to its governing rules, the MBECO established the CRC, which is responsible for determining whether an applicant is eligible for MBE certification.

         Meadowbrook is a Rhode Island based limited liability company owned by Mackenzie St. Godard (Ms. St. Godard). Prior to the creation of Meadowbrook, Ms. St. Godard owned and operated Meadowbrook Farm with her husband, Thomas St. Godard (Mr. St. Godard). Meadowbrook Farm boarded horses, raised cows and brokered the sale of hay.

         In 2011, Ms. St. Godard formed Meadowbrook to supplement her income when boarding horses was no longer feasible due to a changing economic climate. The firm was formed in order to utilize the experience she had gained operating construction and other heavy equipment while working on her farm with the goal of leasing or subcontracting her services on a contractual basis for general contractors working on large scale projects. Since creation of the company, Ms. St. Godard has acquired a valid Commercial Driver's License (CDL) and Rhode Island hoisting license required to operate certain types of construction equipment in order to facilitate the company's main purpose of loading and hauling material for large general contractors. The company operates out of the jointly owned home and property Ms. St. Godard shares with Mr. St. Godard at 232 Sneech Pond Road, Cumberland, Rhode Island. Mr. St. Godard also operates T.S. Enterprise, a hay brokering business, out of the same location.

         Meadowbrook previously applied for MBE certification in 2011 but was denied. At that time, the CRC indicated that Ms. St. Godard did not have the requisite construction experience necessary to operate a company within that field. Moreover, the CRC found that Ms. St. Godard did not possess certain licenses-including a CDL and hoisting license-necessary for her to operate the machinery associated with the business. Furthermore, the CRC expressed concern with inconsistencies in Ms. St. Godard's tax returns, the presence of dual signatories by Ms. St. Godard and Mr. St. Godard on the company business account, and the fact Mr. St. Godard operated a separate company out of the same location on Sneech Pond Road. Accordingly, the CRC denied the application and found that Meadowbrook "is closely affiliated with the non-minority owned firm, T.S. Enterprise, and subcontracts out all trucking to this non-minority firm." (MBECO Decision at 7, July 14, 2011.)

         On March 27, 2014, Ms. St. Godard submitted an application (the Application) on behalf of Meadowbrook to the MBECO seeking certification as a MBE. Ms. St. Godard is the sole member of Meadowbrook and submitted her application on the basis that the company was created, owned and controlled by a female.

         On May 27, 2014, the MBECO informed Ms. St. Godard by correspondence that her application was incomplete. The MBECO included a list of additional information required, including proof of the initial cash contribution of $5000, updated truck registrations, active insurance information and Federal Tax Returns for Meadowbrook Farm for 2011-2013. On June 16, 2014, Ms. St. Godard responded to this inquiry indicating that the capital contributions were funded by the $5000 she received via tax return payments from Meadowbrook Farm and provided Schedule F forms from 2009 and 2010 as proof. In addition, 2013 tax returns for Ms. St. Godard, Meadowbrook and Meadowbrook Farm were provided. Additionally, the correspondence indicates that the 2011 and 2013 tax returns for Meadowbrook Farm were previously submitted on the couple's joint tax filing because it operated as a sole proprietorship.

         In connection with the Application, CRC caseworker Patsy Peterson (Ms. Peterson) conducted a site visit on July 22, 2014 at Ms. St. Godard's home, which also acts as the location of the subject business. Ms. Peterson completed a certification evaluation form in which she indicated Ms. St. Godard provided an initial cash contribution of $5000; both Ms. St. Godard and Mr. St. Godard are authorized to sign checks from the business account; and logos of Meadowbrook Farm were visible on a number of vehicles purportedly owned by Meadowbrook. Moreover, the certification evaluation form indicates that Ms. St. Godard is also the co-owner of Meadowbrook Farm and works approximately five hours per week for that entity. However, the certification evaluation form also indicates Ms. St. Godard operates the equipment, manages the schedule and handles the finances for Meadowbrook as its sole employee.

         On July 31, 2014, Ms. Peterson recommended to the CRC that Ms. St. Godard's Application be set down for a hearing to discuss issues of ownership, control, and dependency on a non-minority individual. Specifically, Ms. Peterson raised concerns that there were discrepancies in supporting documentation as to ownership of the firm. In addition, Ms. Peterson was concerned with an undue reliance and dependent relationship on a non-minority individual, Mr. St. Godard. The CRC agreed with Ms. Peterson's recommendation to hold a hearing regarding the Application. In its August 22, 2014 letter (Notice Letter), notifying Ms. St. Godard of the hearing on October 21, 2014, the CRC included a breakdown of the MBE regulations and its analysis based on the record at that time. This provided Ms. St. Godard with time to prepare for the hearing and supplement the record as needed. Among the issues raised were the listing of both Ms. St. Godard and Mr. St. Godard as signatories on the company accounts, supporting documentation indicating the legal name of the firm as Meadowbrook, LLC, d/b/a Meadowbrook Farm, and the lack of evidence regarding the source of the $5000 capital used to fund the startup of the firm.

         The CRC conducted a hearing on October 21, 2014, with Ms. St. Godard and her attorney, Nicholas Goodier (Attorney Goodier), present. At the start of the hearing, Attorney Goodier presented the CRC with supplemental correspondence responding to the concerns raised in the Notice Letter. First, Attorney Goodier indicated that Ms. St. Godard is the full and only owner of Meadowbrook and Ms. St. Godard no longer owns, operates, or manages any part of Meadowbrook Farm. Moreover, he explained Meadowbrook and Meadowbrook Farm have always been separate entities with no overlapping business. Next, the provided supplemental information evidences that Mr. St. Godard owns his own business on the property but conducts no business with or is in any way associated with Meadowbrook. However, it was further revealed that he was previously listed as a signatory on Meadowbrook's business account and was authorized to sign checks in case of emergency, but said ability has since been updated and removed. Appellant also provided documentation from the U.S. Department of Transportation Federal Motor Carrier Safety Administration (FMCSA) that Meadowbrook is registered as "Meadowbrook LLC" and not any other variation or d/b/a. Appellant also provided Ms. St. Godard's "Schedule F" tax forms from 2009 and 2010, as well as the Operating Agreement of Meadowbrook, as proof that she provided the $5000 capital contribution to launch Meadowbrook.

         At the conclusion of the hearing, the CRC voted to table the vote and reconvene at a later date for additional discussion on the Application. Specifically, CRC members sought additional information and copies of (1) checks issued by Meadowbrook to Mr. St. Godard when Meadowbrook allegedly purchased Mr. St. Godard's share of the 2007 Kenworth Tri-Axle dump truck previously owned by Meadowbrook Farm; (2) copies of a check issued to Minuteman Truck for the purchase of the 1989 Mack pumper truck; (3) proof of the initial $5000 investment which was initially required for the hearing; and (4) photographs of the updated decals on equipment owned by Meadowbrook.

         A second formal hearing was conducted on February 17, 2015, before the CRC with Ms. St. Godard and Attorney Goodier testifying. During this testimony, Ms. St. Godard and Attorney Goodier supplied the requested supplemental information in the form of purchase documents for a 2007 Kenworth Tri-Axle dump truck and pictures evidencing updated decals on Meadowbrook's trucks. The CRC then inquired as to the status of requested proof of the initial cash contribution, and testimony was heard regarding Ms. St. Godard's initial contribution by her tax return and subsequent application for a small business loan. Further inquiries were made regarding tax exemption forms, possible affiliation with another entity operating out of the Sneech Pond address, and issues involving ownership of equipment. At the conclusion of the hearing, a motion was made and properly seconded to deny the Application. The CRC unanimously approved the motion.

         The CRC issued its Decision on May 5, 2015, indicating the Application did not comply with the MBE regulations which govern certification. Specifically, the Decision indicates that the Application failed to meet criteria set forth in Sections 3.00, 3.02, 3.04, and 3.05.[2] Meadowbrook filed a timely appeal, and the matter was assigned for decision.

         II

         Standard of Review

         Pursuant to the Administrative Procedures Act, the Superior Court has appellate jurisdiction to review final orders of state administrative agencies. Secs. 42-35-1 et seq; McAninch v. State, Dep't of Labor & Training, 64 A.3d 84, 87 (R.I. 2013). Section 42-35-15(g) of the Administrative Procedures Act governs this Court's review of the CRC Decision, and it provides:

"The court shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact. The court may affirm the decision of the agency or remand the case for further proceedings, or it may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the ...

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