SKJ & Associates, Inc., No. SDBA-134 (March 22, 2000) Docket No. SDBA-99-12-06-32 UNITED STATES OF AMERICA SMALL BUSINESS ADMINISTRATION OFFICE OF HEARINGS AND APPEALS WASHINGTON, D.C. ) IN THE MATTER OF : ) ) Docket No. SDBA-99-12-06-32 SKJ & Associates, Inc. ) ) Decided: March 22, 2000 Petitioner ) ) APPEARANCES Joseph M. Jankite For SJK & Associates, Inc. David L. King, Esq. For the Small Business Administration DIGEST In determining SDB eligibility, SBA is not required to treat Vietnam veterans who claim social disadvantage as if they also are socially disadvantaged because of their age. An individual has failed to establish, by a preponderance of the evidence, individual social disadvantage on the basis of his alleged disabled Vietnam veteran status, where the Administrative Record contains credible evidence that the particular incidents complained of are attributable to causes other than that status. An individual has failed to establish, by a preponderance of the evidence, individual social disadvantage on the basis of gender, where the Administrative Record contains no evidence that the individual's choice to give priority to home and child care, rather than business or professional development, was involuntary. DECISION BLAZSIK, Administrative Judge: Jurisdiction This appeal petition is decided under the Small Business Act of 1958, 15 U.S.C. Sections 631 et seq., and 13 C.F.R. Parts 124 and 134 (1999). Issues Whether SBA must treat Vietnam veterans claiming social disadvantage as if they are also socially disadvantaged because of their age. Whether an individual has failed to establish, by a preponderance of the evidence, individual social disadvantage on the basis of his alleged disabled Vietnam veteran status, where the Administrative Record contains credible evidence that the particular incidents complained of are attributable to causes other than that status. Whether an individual has failed to establish, by a preponderance of the evidence, individual social disadvantage on the basis of gender, where the Administrative Record contains no evidence that the individual's choice to give priority to home and child care, rather than business or professional development, was involuntary. Background On May 17, 1999, SKJ & Associates, Inc. (Petitioner), applied for certification as a Small Disadvantaged Business (SDB) to the Small Business Administration's (SBA) Acting Associate Administrator for Small Disadvantaged Business Certification and Eligibility (AA/SDBCE). 13 C.F.R. Section 124.1008(a). On October 13, 1999, the AA/SDBCE denied certification. Petitioner filed an Appeal Petition with this Office on December 6, 1999. On December 7, 1999, the Administrative Judge issued a Notice and Deficiency Order. On December 15, 1999, Petitioner filed an amended Appeal Petition. On January 31, 2000, the SBA filed its Answer and the Administrative Record (AR). SBA requested permission to withhold two exhibits, claiming the deliberative process and attorney- client privileges. Petitioner did not object. The Administrative Judge granted the request on February 9, 2000. Facts The facts are uncontroverted. Petitioner, a management- consulting firm was incorporated on October 9, 1997, in Lakewood, Ohio. AR at Exhibit N. Petitioner was established by Joseph and Susan Jankite, each of whom owns 50% of Petitioner's stock. Petitioner's primary Standard Industrial Classification code is 8742 (Management Consulting Services), with a corresponding $5 million average annual receipts size standard. Petitioner based its claims of social disadvantage on Mr. Jankite, Petitioner's President, because he alleged is a disabled Vietnam veteran; and Ms. Jankite, its Vice President, because she is a woman. AR at Exhibit E. SBA Determination On October 13, 1999, the AA/SDBCE issued her determination, denying Petitioner certification because the Jankites had not established that either of them was socially disadvantaged. 13 C.F.R. Section 124.103(c). AR at Exhibit A. The AA/SDBCE found Mr. Jankite's application contradicted his claim of social disadvantage. Specifically, the AA/SDBCE found Petitioner lacked access to capital because its business was selling intellectual capital, not because of Mr. Jankite's status as a disabled veteran. Similarly, Mr. Jankite was fired from Primary Health Systems (PHS) because of his intervention in a sexual harassment case, not because he was allegedly disabled. The AA/SDBCE also rejected Mr. Jankite's reliance on statistics showing higher unemployment among disabled Vietnam veterans, because these do not demonstrate how he personally suffered such bias. The AA/SDBCE also rejected Ms. Jankite's assertions of social disadvantage, that lenders do not take her seriously because she is a female, and she has had little for-profit business experience, noting her statements that she voluntarily chose to concentrate on her home and children. The Appeal Petition On appeal, Petitioner submits two exhibits it did not previously submit to SBA: (1) a series of rejection letters Mr. Jankite received in seeking employment after PHS terminated him; and (2) Ms. Jankite's statement concerning her employment history, in which she alleges she was subjected to sexual harassment and discrimination. Petitioner asserts manifest injustice would occur if the Administrative Judge does not consider this evidence. As to the merits, Petitioner asserts, first, that SBA erroneously failed to find age discrimination based on Mr. Jankite's alleged disabled Vietnam veteran's status. Petitioner asserts that, because Mr. Jankite's age could be inferred from the fact that he was a Vietnam era age veteran (at least 45), and because age is a protected category under the Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C. Sections 621-34, the AA/SDBCE erred in not considering this issue. Second, Petitioner asserts the AA/SDBCE erred in failing to find social disadvantage based on Mr. Jankite's termination from a previous employer for engaging in protected activity. Finally, Petitioner asserts the AA/SDBCE erred in finding Ms. Jankite was not the victim of gender bias. The SBA Answer SBA opposes Petitioner's introduction of new evidence on appeal, because Petitioner failed to make the necessary showing that manifest injustice would occur if the Administrative Judge limits the appeal to the record. As to the merits, SBA asserts the AA/SDBCE's determination was not arbitrary, capricious, or contrary to law. First, Mr. Jankite's reliance upon the ADEA is misplaced, because the ADEA does not mandate any SBA action as to SDB eligibility. Second, SBA asserts the AA/SDBCE properly found Mr. Jankite failed to show discrimination based on his alleged disabled Vietnam veteran status, because his intervention in a sexual harassment case is unrelated to that status. Finally, the SBA asserts Ms. Jankite failed to establish she suffered discriminatory treatment based on her gender. Discussion Threshold Matters Petitioner filed its Appeal Petition within 45 days after service of the SBA determination, and, thus, it is timely. 13 C.F.R. Sections 134.202(a), 134.204(e)(3). As a threshold matter, the Administrative Judge EXCLUDES Petitioner's proffered new evidence. The Administrative Judge notes the regulation explicitly limits her review of an SDB determination to the facts before SBA at the time of the determination and to the arguments on appeal. 13 C.F.R. Section 124.1008(f)(3)(ii). The Administrative Judge will admit new evidence only if she determines manifest injustice would occur if she did not do so (id.); that is, if her failure to admit the evidence would be plainly wrong, and would result in substantial prejudice to Petitioner. In the Matter of Aero CNC, Inc., No. SDBA-106 at 6 (1999). Here, Petitioner's proffer of new evidence merely constitutes a bare assertion that manifest injustice would occur. Merits of the Appeal A firm applying for SDB certification has the burden of demonstrating to the AA/SDBCE that it is owned and controlled by socially and economically disadvantaged individuals. 13 C.F.R. Sections 124.1001(b), 124.1008(c)(2). To determine whether a firm meets this requirement, the SDB program generally applies the same criteria used for the 8(a) program. 13 C.F.R. Section 124.1002(a); In the Matter of Hernandez, Inc., No. SDBA-132 (2000); and In the Matter of T&K Painting Contractors, Inc., No. SDBA-122 at 4 (2000). The specific issue on appeal here is whether the Jankites, the individuals on whom Petitioner bases its eligibility, are socially disadvantaged. The AA/SDBCE must examine the relevant data and articulate a satisfactory explanation for the determination, including a "rational connection between the facts found and the choice made." In the Matter of IRECOR, Inc., No. SDBA-104 at 5 (1999). On appeal, the Administrative Judge applies the following standard of review to the AA/SDBCE's determination: whether the record demonstrates SBA's determination was "arbitrary, capricious, or contrary to law." 13 C.F.R. Section 124.1008(f)(3)(ii). Based on the record in this case, the Administrative Judge concludes the AA/SDBCE's determination was correct. An individual who is not a member of one of the groups presumed to be socially disadvantaged (13 C.F.R. Section 124.103(b)(1)), as here, must establish individual social disadvantage by a preponderance of the evidence. 13 C.F.R. Section 124.103(c)(1). The SDB applicant bears the burden of persuading the AA/SDBCE that the individual upon whom it bases its claim of eligibility is socially disadvantaged. 13 C.F.R. Section 124.1008(f)(1). The relevant regulation sets forth three criteria for establishing social disadvantage: (i) At least one objective distinguishing feature that has contributed to social disadvantage, such as gender: (ii) Personal experience of substantial and chronic social disadvantage in American society; and (iii) Negative impact on entry into or advancement in the business world because of the disadvantage. 13 C.F.R. Section 124.103(c)(2); In the Matter of Henze Industries, SDBA-111 (1999). SBA will consider any relevant evidence in assessing these criteria. Id. Here, as in every case, SBA will consider education, employment and business history, where applicable, to determine if the totality of circumstances shows disadvantage in the applicant's entry into or advancement in the business world. 13 C.F.R. Section 124.103(c)(2)(iii). Neither Mr. Jankite, a white male, nor Ms. Jankite, a white female, is a member of a designated group. Thus, each must meet all three explicit regulatory requirements. Mr. Jankite's Claim of Social Disadvantage The Administrative Judge concludes Mr. Jankite failed to submit sufficient evidence to meet the three-part regulatory test for non-designated members. 13 C.F.R. Section 124.103(c)(1). At the outset, the Administrative Judge rejects Petitioner's ADEA claim, that Mr. Jankite's status as a Vietnam veteran, without more, also establishes age discrimination. The Administrative Judge notes Petitioner has cites no authority requiring SBA, in determining SDB eligibility, to conclude social disadvantage claims by Vietnam veterans also establish social disadvantage because of age. In any event, Petitioner fails to show on this record that he meets the first element of the three-part test. Petitioner fails to make even the most minimal showing that Mr. Jankite is disabled; that he holds himself out as such; or how his disability has manifested itself. In fact, the AR contains no evidence that Mr. Jankite was discriminated against because he was a disabled Vietnam veteran. To the contrary, the Administrative Judge notes Mr. Jankite's resume demonstrates he progressed in his profession; from 1982 to 1997, he held high positions in several non-profit and for-profit hospitals. AR at Exhibit I. Similarly, Mr. Jankite's narrative states he received a "tremendous response" when he applied for jobs. AR at Exhibit E. Therefore, the AA/SDBCE's finding was not arbitrary, capricious, or contrary to law. Because Mr. Jankite failed to meet the first element of the test, it is unnecessary for the Administrative Judge to consider the other two elements. Nonetheless, the Administrative Judge notes Mr. Jankite failed to establish by any credible evidence the remaining elements of the test; nothing in the record links any reversals he may have suffered to his alleged disabled status. Indeed, because the Administrative Record contains credible and convincing evidence that the particular incidents complained of are attributable to causes other than Mr. Jankite's alleged disabled Vietnam veteran status, the Administrative Judge concludes Mr. Jankite has failed to satisfy, by a preponderance of the evidence, the three-part test, for individual social disadvantage. Ms. Jankite's Claim of Social Disadvantage Similarly, based on her review of the record, the Administrative Judge affirms the AA/SDBCE's conclusion that Ms. Jankite presented insufficient evidence of discrimination, and thus has failed to meet the regulatory requirement for social disadvantage for non-designated individuals. Ms. Jankite states in her narrative that she lacks private- sector business experience because she chose to take public and nonprofit work, which better supported her decision to give priority to home and child care. AR at Exhibit E. She also states she deferred college until her youngest child was in school. Id. However, nothing in her narrative even suggests that these choices were involuntary. Therefore, they were not caused by gender-based discrimination. Because Petitioner failed to establish that Ms. Jankite suffered discriminatory treatment because she is a woman, the AA/SDBCE could not find that such treatment was chronic and substantial, or that it prevented her advancement or entry into the business world. Conclusion Based on the Administrative Judge's conclusion that the AA/SDBCE's determination was not arbitrary, capricious, or contrary to law, she AFFIRMS the determination and DENIES the appeal petition. This is the initial decision of the SBA. Absent a request for review, this decision will become the SBA's final decision 30 days after the date of this decision. 13 C.F.R. Sections 134.227(b), 134.228(a) (1999). _____________________________ GLORIA E. BLAZSIK Administrative Judge Posted: March, 2000