Circuit Center, No. MSB-453 (February 16, 1994)
Docket No. MSBE-93-10-19-12


                     UNITED STATES OF AMERICA
                                
                  SMALL BUSINESS ADMINISTRATION
                                
                 OFFICE OF HEARINGS AND APPEALS
                                
                        WASHINGTON, D.C.


IN THE MATTER OF:             )
                              ) Docket No. MSBE-93-10-19-12
Circuit Center                )

                           APPEARANCES

For the Petitioner:                For the Agency:

Craig D. Peckarsky, Owner          John T. Spotila, Esq.
Circuit Center                     General Counsel
3514 West Villard Avenue           Donald A. Morrison, Esq.
P.O. Box 09485                     Agency Representative
Milwaukee, WI 53209                Small Business Administration
                                   409 3rd Street, SW,
                                   Washington, DC 20416


                             DIGEST


The regulations published at 54 Federal Register 34692, et seq.,
on August 21, 1989 and codified at 13 CFR Part 124 must be fol
lowed in evaluating all applications for participation in the
Agency's 8(a) Program that were pending as of August 21, 1989 or
were filed thereafter. 13 CFR 124.1(a)(2)(i).

An applicant for participation in the Agency's 8(a) Program has
the burden of proving all elements of its eligibility. 13 CFR
124.210(h)(3)(ii); 13 CFR 134.31(a).

In order to be eligible to participate in the Agency's 8(a)
Program, an applicant concern must be one which is at least 51
percent unconditionally owned by an individual who is determined
by SBA to be socially and economically disadvantaged, and the
concern must be controlled by the socially and economically
disadvantaged individual. 13 CFR 124.103.

An applicant firm whose socially-disadvantaged status is based
upon the claim of social disadvantage on the part of an individ
ual, who is not a member of a group that has been designated by
SBA as "presumed to be socially disadvantaged," must prove that
individual's claim of social disadvantage by clear and convincing
evidence. 13 CFR 124.105(c).

Clear and convincing evidence is not unequivocal or of such
quality as to dispel all reasonable doubt; rather, it is evidence
that fairly compels the factfinder's belief, leaves little doubt
about the truth of the matter asserted, and produces an abiding
conviction that the truth of the matter is highly probable, not
merely more probable than not.

In a proceeding brought under Section 124.210 of the regulations,
an individual who claims to be socially disadvantaged because of
his or her gender, physical handicap, long-term residence in an
environment isolated from the American mainstream, or other
similar cause not common to small business persons who are not
socially disadvantaged, need not prove that his or her disadvan
tage results from a cause or Causes common to all members of that
gender or to all those with the same or similar handicap or
residential background. 13 CFR 124.105(c).

A determination by the Associate Administrator denying the
socially-disadvantaged claim of the individual upon whom a firm's
8(a) eligibility is based is not arbitrary, capricious, or con
trary to law if there is a reasonable basis for that conclusional
finding in the record that was before the Associate Administrator
at the time she made the determination.

                          FINAL DECISION

                        February 16, 1994

USHER, Administrative Law Judge:

Jurisdiction

Authority for these proceedings is found in Section 409 of the
Business Opportunity Development Reform Act of 1988, Public Law
100-656 (Section 8(a)(9) of the Small Business Act of 1958, as
amended; 15 U.S.C. 637(a)(9)), hereinafter referred to as "the
Act," and in the regulations codified at 13 CFR Parts 124 and
134, which are referred to hereinafter by section numbers only.

Issues

Is there an evidential rationale for the conclusion of the
Associate Administrator 1/ in the record that was before her at
the time she made her determination, and is it clear from the
record and from the determination itself that the AA/MSB&COD
considered all of the relevant facts in making her determination?

Facts

Craig D. Peckarsky filed an application with the Agency's Mil-
waukee District Office for the admission of his firm, Circuit
Center, a sole proprietorship, to the Agency's Section 8(a)
Program in early February of 1992. Peckarsky claimed social
disadvantage because of "cultural bias" on the basis that he had
been adopted and was the "second generation of single parenthood'
in his family. He did not claim to be a member of any of the
groups that have been designated by the Agency as being "presumed
to be socially disadvantaged." See Section 124.105(b) of the
regulations. The application was returned as incomplete on two
occasions, and further information was submitted as requested. On
April 30, 1992, the Chicago Regional Division of Program
Certification and Eligibility completed its processing of the
application, and it was forwarded to the Central Office in
Washington.

In his application, Peckarsky argued the following, in pertinent
part:

     My education in higher studies was terminated due to
     economic realities. My previous employer had terminated the
     position I held for three [sic] years and the needs of my
     son clearly have priority over a "traditional 9-5" position.
     Thus requiring me to be self-employed [sic] and placing my
     personal desires for advancement beyond reach [sic].

In answer to the question, "Have you experienced low income
status because of apparent discriminatory practice?" Peckarsky
replied:


     Yes. Circuit Center has progressed slower [sic] than its
     potential. Many major government contracts have been elusive
     for Circuit Center awards. The competitors in these
     contracts have consistently better success due to their
     obvious advantages in technical research and development,
     financial strength, management contacts within the industry
     and even alliances with manufacturers.

Peckarsky answered "Yes" to a question on the SBA Form 1010A
concerning whether, because of racial and/or ethnic prejudice
and/or cultural bias, his ability to compete in the free enter
prise system has been impaired due to diminished capital and
credit opportunities as compared to others in the same business
area who are not socially disadvantaged, and he further
explained: "Without proper capital available, my resources to
capitalize the power of literature, inventory, advertising, etc.,
to capture potential sales is severely limited [sic]." The record
indicates that Peckarsky submitted no evidence to support his
assertions.

The Associate Administrator initially denied the application on
March 2, 1993 because she determined that Peckarsky had not
proven his claim that he was socially disadvantaged as the result
of his "adoption or single parenthood." On March 15, 1993,
Peckarsky requested that his application be reconsidered. He
submitted no evidence with his reconsideration request, but
argued further, in pertinent part, as follows:

     Economic inequities manifest themselves almost daily. Since
     the inception of Circuit Center we have been under
     capitalized [sic] and acceptable credit lines unobtainable,
     even with a good "credit rating." [sic] From a competitor's
     perspective our competition... have major league capital
     assets at their disposal.

     As stated previously, a lack of higher and continued
     education by reason of parenthood (i.e., time/money)
     restraints reveals consistent inequitable disappointment
     over lost sales. This is due to a deficiency in business
     management knowledge and manufacturers' advanced
     authorizations. Prior inadequacies in employment
     opportunities (discrimination) would have prevented child
     nurturing. Being what has prompted myself into Circuit
     Center and our current predicament(s) [sic]. And
     furthermore, our business history dictates growth although
     reality dictates an impending plateau of stagnancy.

                          * * * * * * *

     Does it really matter what you call it? Discrimination, for
     any reason, mandates negative impact upon our business'
     advancing growth and hiring. Lack of credit and/or capital,
     inabilities to secure more than token government or industry
     contracts and unsuited to "network" with members in
     attendance at professional organization gatherings [sic]. It
     all means the same....

     Everyone likes to see the small businessperson [sic] make
     good in their [sic] endeavors, however, no one [sic] is
     wiling to assume any portion of the risk. From banks who
     [sic] only finance companies already having assets to
     customers who purchase only from financially secure
     traditional business [sic].

     Social and economic disadvantage have clearly made Circuit
     Center their home at Circuit Center [sic] and are ever
     present. If questions persist please do not hesitate to
     contact myself personally [sic]....

In a letter dated September 8, 1993, 2/ the Associate Adminis
trator denied Peckarsky's application after reconsideration,
giving, in pertinent part, the following explanation:

     You did not provide sufficient information to allow us to
     conclude that you are socially disadvantaged. This
     determination is based on our finding that you have not
     presented clear and convincing evidence that would allow us
     to conclude that you have been subjected to racial or ethnic
     prejudice or cultural bias.

     Your request for reconsideration did not address the issue
     of your personal chronic suffering of social disadvantage
     due to adoption and single parenthood. It also did not
     specifically address denials of opportunity for educational
     pursuits. It did not specifically

     This decision was not rendered within 90 days after the
     Petition was filed because it was necessary that I remand
     the matter to the AA/MSB&COD on January 18, 1994 for an
     affirmation that she had considered all of the factors rel
     ative to the Petitioner's eligibility. The determination
     after remand was submitted to me on February 4, 1994.
     address how you personally experienced discriminatory
     practices in employment or in the award of government
     contracts. Further, it did not clear [sic] and convincingly
     indicate that you personally experienced unequal access to
     credit or were excluded from business or professional
     organizations because of the adoption. In addition, it did
     not specifically address how you directly suffered
     discriminatory practices that influenced the firm's entry
     and advancement in the business world because of the
     adoption. Therefore, we cannot conclude that you are
     socially disadvantaged.

     As a result of our determination that you are not socially
     disadvantaged, we are unable to conclude that you are
     economically disadvantaged.

In accordance with the regulation codified at 13 CFR 124.210,
Peckarsky filed a timely Petition on October 19, 1993, and this
proceeding was commenced. He repeated the assertions set forth in
his letter of April 15, 1993, which accompanied his request of
the Associate Administrator to reconsider her initial denial of
his eligibility and added the following argument:

     Even professional peer networks have bylaws of authorization
     or membership requiring advanced training in order to
     patronize within these organizations [sic]. Clearly a denial
     of equal (or any) opportunity for educational pursuits and
     exclusion from professional organizations of choice (ie.
     Novell CNE, Landa Etc.) [sic].

     Government contract awards are few and far between. Those
     that have been awarded to Circuit Center have been nothing
     other than token purchase orders. Although these are much
     appreciated, they are fulfilled upon the intention of
     getting both feet within the office doors. Ideally leading
     to further contracts once a respectable track record has
     been established [sic]. Most awards of substance require
     advanced technical knowledge in order to service their users
     appropriately.

     Prior disappointments regarding inadequacies in employment
     opportunities (discrimination) would have prevented child
     nurturing. My previous employer...eliminated my position of
     Operations Manager and reduced my position to telephone
     sales. This being what has prompted myself [sic] into
     Circuit Center and our current predicament(s) [sic]. And
     furthermore, our business history dictates growth although
     reality dictates an impending plateau of stagnancy.

                          * * * * * * *

     Traditional substantial hard evidence or proof of unequal
     access to opportunity is difficult to secure. However, what
     is proven is that millions of dollars are loaned, granted
     and utilized to purchase goods, services and supplies to
     other business's [sic] on a daily basis. What is known is
     that Circuit Center is located in a labor surplus industrial
     corridor target trade area. What is known is that our bank
     (and AT&T, ITT, First Financial) of over 4 years has no line
     of credit available for Circuit Center.

On December 2, 1993, the Agency's Counsel submitted the admin
istrative record upon which the AA/MSB&COD's reconsidered deter
mination was based and filed the Agency's Answer to the Petition.
Counsel argues that the Petitioner's

     request for reconsideration merely made brief unsupported
     claims as to Mr. Peckarsky's claim of social disadvantage.
     It did not in any way come close to demonstrating Mr.
     Peckarsky's social disadvantage by clear and convincing
     evidence as required by the regulations.

Discussion

The regulation at 13 CFR 124.103 provides, in part:

     Except for concerns owned by Indian tribes, Alaska Native
     Corporations or Native Hawaiian Organizations, in order to
     be eligible to participate in the 8(a) program, an applicant
     concern must be one which is at least 51 percent
     unconditionally owned by an individual who is a citizen of
     the United States...and who is determined by SBA to be
     socially and economically disadvantaged.

At 13 CFR 124.105, the requirements for the establishment of
social disadvantage are discussed at length, as follows:


(a) General. Socially disadvantaged individuals are those who
have been subjected to racial or ethnic prejudice or cultural
bias because of their identities as members of groups without
regard to their individual qualities. The social disadvantage
must stem from circumstances beyond their control.

                          * * * * * * *

     (b) Members of designated groups.

       (1) In the absence of evidence to the contrary, the
     following individuals are presumed to be socially
     disadvantaged: Black Americans; Hispanic Americans; Native
     Americans (American Indians, Eskimos, Aleuts, or Native
     Hawaiians); Asian Pacific Americans...; Subcontinent Asian
     Americans...; and members of other groups designated from
     time to time by SBA according to procedures set forth at
     paragraph (d) of this section.

     (c) Individuals not members of designated groups.

       (1) An individual who is not a member of one of the above-
     named groups must establish his/her individual social
     disadvantage on the basis of clear and convincing evidence.
     A clear and convincing case of social disadvantage must
     include the following elements:

          (i) The individual's social disadvantage must stem from
          his or her color, ethnic origin, gender, physical
          handicap, long-term residence in an environment
          isolated from the mainstream of American society, or
          other similar cause not common to small business
          persons who are not socially disadvantaged.

          (ii) The individual must demonstrate that he or she has
          personally suffered social disadvantage, not merely
          claim membership in a non-designated group which could
          be considered socially disadvantaged.

          (iii) The individual's social disadvantage must be
          rooted in treatment which he or she has experienced in
          American society, not in other countries.

          (iv) The individual's social disadvantage must be
          chronic and substantial, not fleeting or insignificant.

          (v) The individual's social disadvantage must have
          negatively impacted on his or her entry into and/or
          advancement in the business world. SBA will entertain
          any relevant evidence in assessing this element of an
          applicant's case. SBA will particularly consider and
          place emphasis on the following experiences of the
          individual, where relevant:

            (A) Education. SBA shall consider, as evidence of an
          individual's social disadvantage, denial of equal
          access to institutions of higher education; exclusion
          from social and professional association with students
          and teachers; denial of educational honors; social
          patterns or pressures which have discouraged the
          individual from pursuing a professional or business
          education; and other similar factors.

            (B) Employment. SBA shall consider, as evidence of an
          individual's social disadvantage, discrimination in
          hiring; discrimination in promotions and other aspects
          of professional advancement; discrimination in pay and
          fringe benefits; discrimination in other terms and
          conditions of employment; retaliatory behavior by an
          employer; social patterns or pressures which have
          channelled the individual into non-professional or non
          business fields; and other similar factors.

            (C) Business history. SBA shall consider, as evidence
          of an individual's social disadvantage, unequal access
          to credit or capital; acquisition of credit or capital
          under unfavorable circumstances; discrimination in
          receipt (award and/or bid) of government contracts;
          discrimination by potential clients; exclusion from
          business or professional organizations; and other
          similar factors which have impeded the individual's
          business development.

The regulations set forth at 124.106(a)(1)(i) and (ii) provide
that, for purposes of the 8(a) Program, economically disadvan
taged individuals are socially disadvantaged individuals whose
ability to compete in the free enterprise system has been im
paired due to diminished capital and credit opportunities as
compared to others in the same or a similar line of business who
are not socially disadvantaged, and such diminished opportunities
have precluded or are likely to preclude such individuals from
successfully competing in the open market. Thus, in order to be
found to be economically disadvantaged, it is necessary to first
be determined by the Agency to be socially disadvantaged.

In order for the Petitioner to prevail in this review proceeding,
it is necessary that Peckarsky's social and economic disadvan
tage, as defined in the regulations quoted above, be proven in
the record that was before the AA/MSB&COD by clear and convincing
evidence. See Section 124.105(c)(1); see also Fagan v. Small
Business Administration, 783 F.Supp. 1455 (D.D.C. 1992); Central
States Construction. Inc. v. Small Business Administration, 770
F.Supp. 1447 (D.Kan. 1991).

The clear and convincing standard of evidence is discussed in
United States v. Mastrangelo, 561 F.Supp. 1114, 1120 (E.D.N.Y.
1983) as follows:

To meet the clear and convincing standard it is not required that
the evidence be unequivocal or of such a quality so as to dispel
all reasonable doubt. Addington v. Texas, 441 U.S. at 423, 99
S.Ct. at 1807. The clear and convincing standard, however, does
require from the fact-finder a distinctly higher degree of
certainty than does the preponderance standard. Id. at 432-33, 99
S.Ct. at 1812. It has been said that:

          [T]he term "clear and convincing" evidence means that
          the witness to a fact must be found to be credible, and
          that the facts to which they have testified are
          distinctly remembered and the details thereof narrated
          exactly and in due order, so as to enable the trier of
          the facts to come to a clear conviction, without
          hesitancy, of the truth of the precise facts in issue.
          Whether evidence is clear and convincing requires
          weighing, comparing, testing, and judging its worth
          when considered in connection with all the facts and
          circumstances in evidence.

     30 Am.Jur.2d Evidence  1167 (1964); Hobson v. Eaton, 399
     F.2d 781, 784 n.2 (6th Cir. 1968), cert. denied, 394 U.S.
     928, 89 S.Ct. 1189, 22 L.Ed.2d 459 (1969).

In Kaszuk v. Bakery and Confectionery Union. etc. et al., 638
F.Supp. 365, 374 (N.D. Illinois, E.D. 1984) the Court declared
that:

     "[c]lear and convincing" does not mean evidence which
     unequivocally proves a point, or dispels all reasonable
     doubt. [Citing Mastrangelo.] To the extent that the phrase
     is susceptible of precise definition, we believe it is best
     described as evidence which produces in the mind of the
     trier of fact "an abiding conviction that the truth of [the]
     factual contentions are [sic] 'highly probable."'

Thus, if I find that the AA/MSB&COD had reason to conclude that
Peckarsky's argument concerning his claimed social and economic
disadvantage did not produce an abiding conviction that the truth
of the assertions was highly probable, I must affirm the determi
nation and deny the relief sought by the Petitioner. Inasmuch as
the record before me clearly indicates that Peckarsky did not
adduce any evidence to support his claim, I cannot but find that
the final determination of the Associate Administrator that the
Petitioner "did not [adduce] sufficient...evidence...that [Craig
D. Peckarsky], the individual upon whom eligibility is based,
[is] socially and economically disadvantaged" is not arbitrary or
capricious action or an action that is contrary to the law or
regulations.

The argument put forth by the Petitioner addresses, to some
extent, the fact that social disadvantage, generally, is endured
by those who maintain single-parent households, but it does not
address with any particularity the question of Peckarsky's own
personal disadvantage. The requirement of the regulation at
Section 124.105(c)(ii) is unmistakable:

     The individual must demonstrate that he or she has
     personally suffered social disadvantage, not merely claim
     membership in a non-designated group which could be
     considered socially disadvantaged.

Furthermore, while the many unhappy circumstances described by
Peckarsky in his application and in the request for reconsider
ation relate to him as an individual, and specifically to him as
the individual whose eligibility is in question, they either do
not prove that he is disadvantaged because of his status as an
adopted individual or as a single parent or do not amount to
evidence of "prejudice or bias" as is required by definition of
social disadvantage set out in the regulation at Section
124.105(a). Clearly, the Petitioner has not proved that either
his having been adopted, or his being a single parent, is the
cause of the firm's having to operate at a competitive disadvan
tage or of the other "economic inequities" which it suffers
"almost daily."

On this record, the AA/MSB&COD concluded that the Petitioner
failed to carry its burden of proving, by clear and convincing
evidence, that Peckarsky, the individual upon whom eligibility
rests, is socially and economically disadvantaged. I cannot dis
agree. Her determination was clearly based on a consideration of
all of the relevant factors regarding the Petitioner's eligibil
ity, and there appears to be no error of judgment. Motor Vehicle
Manufacturers Association v. State Farm Insurance Company, 463
U.S. 29, 77 L.Ed.2d 443, 103 S.Ct. 2856 (1983). It is apparent
that the Associate Administrator has adequately considered the
record compiled as the result of the Petitioner's submissions and
has demonstrated a rational connection between the facts found
and the choice made. The procedures she employed in reaching her
determination comply with the applicable statutory requirements
and with the regulations. United States Lines Inc. v. Federal
Maritime Commission, 584 F.2d 519 (D.C. Cir 1978).

Conclusion

The September 8, 1993 determination of the AA/MSB&COD, finding
the Petitioner, Craig Peckarsky, doing business as Circuit
Center, to be ineligible for participation in the Agency's 8(a)
Program, is NOT ARBITRARY, CAPRICIOUS OR CONTRARY TO LAW.

This is the final decision of the Small Business Administration,
and it is binding upon all parties, including those within the
employ of the Agency. See Section 124.210(i) of the regulations.


                              __________________________
                              Benjamin G. Usher
                              Administrative Law Judge


1/ The Associate Administrator for the Agency's Office of
Minority Small Business and Capital Ownership Development may be
referred to herein as the "Associate Administrator" or the
"AA/MSB&COD."

2/ See the regulation codified at 13 CFR 124.210(j).