Case Title: Department of Employment, Labor Standards Div. v. Roberts Const. Co.

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1992-11-20T00:00:00Z

Document:
Department of Employment, Labor Standards Div. v. Roberts Const. Co.1992 WY 152841 P.2d 854Case Number: 92-26Decided: 11/20/1992Supreme Court of Wyoming
DEPARTMENT 
OF EMPLOYMENT, LABOR STANDARDS DIVISION, State of Wyoming, 
Appellant,

 
 
v.

 
 
ROBERTS 
CONSTRUCTION COMPANY, Appellee.

 
 
Appeal from 
District Court, LaramieCounty, Edward L. Grant, 
J.

 
 
Joseph B. 
Meyer, Atty. Gen., Michael L. Hubbard, Sr. Asst. Atty. Gen., and Robert L. 
Lanter, Asst. Atty. Gen., for 
appellant.

 
 
George E. 
Powers, Jr. of Godfrey & Sundahl, Cheyenne, for appellee.

 
 
Before THOMAS, CARDINE, URBIGKIT* and GOLDEN, JJ., and BROWN, J. 
(Retired).

 
 

* Chief 
Justice at time of oral argument.

 
 

BROWN, Justice 
(Retired).

 
 

[¶1.]     The trial court set 
aside and reversed a decision by appellant, the Department of Employment, Labor 
Standards Division, State of Wyoming (Department), which had revoked the 
certificate of residency possessed by appellee Roberts Construction Company, 
Inc. (Roberts).

 
 

[¶2.]     Appellant argues a 
single issue:

 
 
     Was there sufficient 
evidence to support the Division of Labor Standards' decision that a certified 
resident contractor was using its certificate of residency primarily as a device 
to obtain benefits of residency for a nonresident contractor, in violation of 
W.S. § 16-6-102(d).

 
 

[¶3.]     We 
affirm.

 
 

[¶4.]     In 1984, all of the 
stock in Roberts Construction Company was purchased by McCormick, Inc. In 1987, 
Roberts received from the Department a certificate of residency status. The 
certificate of residency allowed Roberts to bid public contract projects as a 
resident contractor and thus enjoy a five percent preference on its bids over 
those of nonresident contractors.

 
 

[¶5.]     This dispute arose when 
the owner of Nucor Drilling, Inc., filed an oral complaint with the Department 
complaining about the residency status of Roberts. The complaint was formally 
made in writing and received by the Department on March 14, 
1991.

 
 

[¶6.]     At the time of the 
complaint by Nucor Drilling, Inc., Roberts was the low bidder on two 
construction projects planned by the Department of Environmental Quality. Nucor 
Drilling, Inc., was the second lowest bidder on these projects, its bid being 
$115,460 higher than Roberts' bid.

 
 

[¶7.]     As a result of the 
complaint by Nucor Drilling, Inc., David Crowlie, a compliance officer with the 
Department, did an on-site investigation of Roberts' business office in 
Sundance, Wyoming. The on-site inspection disclosed 
material which caused Crowlie to believe that Roberts was using the certificate 
of residency primarily as a device to obtain benefits of residency for its 
nonresident corporate parent, McCormick, Inc. (McCormick), a North Dakota 
corporation. David Simonton, Compliance Supervisor for the Department of Labor 
Standards, wrote a letter to Roberts on March 25, 1991, informing Roberts of the 
residency certification audit and his preliminary findings. In his letter, David 
Simonton requested that Roberts respond to the preliminary findings and produce 
documentation to demonstrate that it was not in fact using its residency 
certificate primarily as a device to obtain the residency five percent bid 
preference for McCormick, a non-resident.

 
 

[¶8.]     Roberts responded to 
David Simonton's March 25, 1991 letter with a letter from its attorney dated 
April 9, 1991. After reviewing Roberts' response, Mr. Simonton concluded that 
Roberts was in violation of Wyo. Stat. § 16-6-102(d) (1990) and was using its 
certificate of residency primarily as a device to obtain benefits of residency 
for McCormick, a nonresident. Mr. Simonton revoked Roberts' resident contractor 
certificate in his April 16, 1991 letter.

 
 

[¶9.]     Roberts requested a 
hearing to review the decertification decision as provided by Chapter XI, 
Section 10(a) of the Departments' Rules of Practice and Procedure. The hearing 
was held on May 17, 1991, with the Commissioner of Labor, Michael J. Sullivan, 
sitting as hearing officer. On May 30, 1991, the Commissioner issued his 
determination and order upholding the Department's decision to revoke Roberts' 
residency certification.

 
 

[¶10.]  Roberts filed a petition for review on 
June 3, 1991. Roberts' motion for stay of enforcement of the administrative 
decision was denied on June 26, 1991, by the district court. The contracts were 
then awarded to Nucor Drilling, Inc., at a cost of an additional $115,460 to the 
state. On December 13, 1991, the district court reversed the Commissioner of 
Labor's order revoking Roberts' residency certification. The district court held 
that the Department's decision to revoke Roberts' certificate of residency was 
unsupported by substantial evidence, and, therefore, must be set aside in 
accordance with Wyo. Stat. § 16-3-114(c)(ii)(E) (1990) of the Administrative 
Procedures Act. The Department filed its notice of appeal to the supreme court 
on December 24, 1989.

 
 

[¶11.]  The Wyoming Administrative Procedures Act 
sets the legislative standard for reviewing an administrative decision. Wyo. 
Stat. § 16-3-114(c) (1990) provides in pertinent part:

 
 
     To the extent 
necessary to make a decision and when presented, the reviewing court shall 
decide all relevant questions of law, interpret constitutional and statutory 
provisions, and determine the meaning or applicability of the terms of an agency 
action. In making the following determination, the court shall review the whole 
record or those parts of it cited by a party and due account shall be taken of 
the rule of prejudicial error. The reviewing court shall:

 
 
(i) Compel 
agency action unlawfully withheld or unreasonably delayed; and 

 
 
(ii) Hold 
unlawful and set aside agency action, findings and conclusions found to 
be:

 
 
(A) 
Arbitrary, capricious, an abuse of discretion or otherwise not in accordance 
with law;

 
 
(B) 
Contrary to constitutional right, power, privilege or 
immunity;

 
 
(C) In 
excess of statutory jurisdiction, authority or limitations or lacking statutory 
right;

 
 
(D) Without 
observance of procedure required by law; or

 
 
(E) 
Unsupported by substantial evidence in a case reviewed on the record of an 
agency hearing provided by statute.

 
 

[¶12.]  This court has developed further 
standards of review with respect to agency decisions that tilt in favor of the 
agency determination. When reviewing an agency decision, we must examine the 
entire record as if it came directly to the court from the agency. The district 
court's determination should not be afforded any deference. Mekss v. Wyoming Girls' School, State of Wyoming, 813 P.2d 185, 200-01 (Wyo. 1991). After a 
careful review of the record, the court must determine whether the agency's 
findings were supported by substantial evidence. Id. at 200.

 
 

[¶13.]  Substantial evidence is defined by this 
court as "relevant evidence which a reasonable mind might accept in support of 
the conclusions of the agency." Dougherty v. J.W. Williams, Inc., 820 P.2d 553, 
555 (Wyo. 1991) (quoting Trout v. Wyoming Oil 
and Gas Conservation Commission, 721 P.2d 1047, 1050 (Wyo. 1986)). The 
substantial evidence standard also requires that there be more than a scintilla 
of evidence. Knight v. Environmental Quality Council of State of Wyoming, 805 P.2d 268, 274 (Wyo. 1991). It is not 
required that the proof attain such a degree of certainty as to support only one 
conclusion to the exclusion of all others. Marathon Battery Company v. 
Kilpatrick, 418 P.2d 900, 917 (Okla. 1965). Once the measure of evidence has 
surpassed the scintilla threshold, the possibility of drawing two inconsistent 
conclusions from the entire record does not mean that the conclusion drawn by 
the administrative agency is not supported by substantial evidence. Knight, 805 P.2d  at 274. Even where this court, after reviewing the record, arrives at a 
different conclusion, the court cannot substitute its judgment for that of the 
agency's as long as the agency's conclusion is supported by substantial 
evidence. Kloefkorn-Ballard Construction and Development, Inc. v. North Big Horn 
Hospital District, 683 P.2d 656, 660 (Wyo. 1984).

 
 

[¶14.]  Wyoming Rules of Evidence 401 defines 
relevant evidence as "evidence having any tendency to make the existence of any 
fact that is of consequence to the determination of the action more probable or 
less probable than it would be without the evidence." Relevant evidence can be 
either direct or circumstantial in nature. Circumstantial evidence, like direct 
evidence, is relevant if it tends to prove or disprove some matter in issue or 
to make a fact in issue more or less probable. Jozen v. State, 746 P.2d 1279, 
1283 (Wyo. 1987); Petricevich v. Salmon River 
Canal Company, 92 Idaho 865, 452 P.2d 362 
(1969).

 
 

[¶15.]  In developing our standards of review we 
have used some imprecise terms such as "scintilla of evidence," "weight of the 
evidence," "great weight of evidence," "over-whelming weight of evidence," and 
"substantial evidence." How these terms are applied often depends on the context 
in which they are used, but more likely, as a practical matter, it depends on 
"the eye of the beholder."1 To paraphrase the late United 
States Supreme Court Justice Potter Stewart [pornography case], substantial 
evidence is difficult to define, but one knows it is not present when one does 
not see it.

 
 

[¶16.]  The administrative hearing officer, 
Michael J. Sullivan, wrote voluminously in support of his "Determination and 
Order." He purported to make seventy-one findings of fact; however, sixty-three 
of these entries are really a summary of the evidence. The so-called conclusions 
of law mostly state the parties' contentions and set out some findings of fact. 
Although the hearing officer did not actually make conclusions of law as 
required by the statute, we can glean from his "Determination and Order" that he 
concluded that Roberts was using the certificate of residency primarily as a 
device to obtain benefits of residency for a nonresident. Most likely, the 
hearing examiner's findings of fact and conclusions of law do not satisfy the 
requirements of Wyo. Stat. § 16-3-110 (Wyo. 1990).2 However, we will decide this case 
on the merits.

 
 

[¶17.]  In the first paragraph of his 
"Determination and Order," the hearing officer, Michael J. Sullivan, said, "The 
decertification was based on a violation of Wyoming Statute 16-6-102(d)." This 
statute provides in pertinent part:

 
 
     (d) The department of 
employment shall deny or revoke a certificate of residency even if the applicant 
or certificate holder is in compliance with W.S. 16-6-101(a)(i), if the 
department finds the applicant or certificate holder will use or is using the 
certificate of residency primarily as a device to obtain benefits of residency 
for a nonresident. Evidence that a certificate might be or is being utilized as 
such a device includes, but is not limited to, the following none of which 
create a presumption that the certificate is being so 
utilized:

 
 
(i) The 
applicant or certificate holder:

 
 
(A) 
Contracts with a nonresident parent corporation, partnership, individual or any 
subsidiary thereof for any goods or services;

 
 
(B) 
Utilizes equipment, supplies and materials from any nonresident source unless 
they are not economically available from resident sources.

 
 
Section 
16-6-102(d) was added by 1989 Wyo. Sess. Laws, ch. 156 after the decision of 
this court in Kloefkorn-Ballard Construction, 683 P.2d 656.

 
 

[¶18.]  In that portion of the hearing officer's 
"Determination and Order" at paragraph 19, he states: "The Objector [Roberts] 
has a special relationship with its parent corporation [McCormick]. We do know 
from the record that the objector has the following business activities with the 
parent corporation[.]" He then lists eight of these activities.3 Paragraph 19 of the "Determination 
and Order" is in some respects a summary of the factors that the agency 
considered in decertifying Roberts. In Finding No. 35, the hearing examiner 
stated:

 
 
Witness 
[Labor Standards Supervisor David Simonton] testified that any one fact does not 
constitute a violation of Wyoming law but the combination of these factors does 
give the appearance of gaining benefits for a nonresident (see case file letter 
of April 16, 1991).

 
 
Simonton 
also testified:

 
 
There are 
some of those factors that I think if that one factor alone, say, the 
commingling of funds issue, in my opinion, if that's all we had, that might be 
enough to decertify a corporation.

 
 

[¶19.]  We think it fair to say that the agency 
considered multiple factors in decertifying Roberts as a resident. We do not 
believe, however, that the agency's Findings of Fact and Conclusions of Law are 
supported by substantial evidence.

 
 

[¶20.]  We will not discuss all of the numerous 
findings of fact and conclusions set out in the hearing officer's "Determination 
and Order," but only those that seemed most significant to the 
agency.

 
 

[¶21.]  The hearing examiner assumed that Roberts 
improperly maintained a joint bank account with its parent corporation at the 
American National Bank of St. 
Paul, Minnesota. The 
evidence is to the contrary. Alan Roberts testified that Roberts had never 
maintained a checking account at American National Bank of St. Paul, Minnesota. Further, the minutes of the Annual 
Meeting of the Board of Directors of Roberts Construction held on April 1, 1991, 
reflected that any prior Board of Directors' minutes suggesting a bank account 
in St. Paul, Minnesota, was in error. Margaret Mary Yanez, 
Vice President of American National Bank, in an affidavit, stated: "Roberts 
Construction Company maintains no checking accounts, savings account, or other 
deposits with American National Bank and Trust Company, nor has it ever 
maintained such deposits." All of this uncontradicted evidence clearly 
established that Roberts did not, and never had, maintained an account at the 
American National Bank in St. 
Paul, Minnesota. Mr. 
Sullivan impermissibly speculates, in the face of evidence to the contrary, that 
Roberts' past activities may have included maintaining a joint out-of-state bank 
account with its parent corporation.

 
 

[¶22.]  The hearing officer was concerned about 
Roberts leasing equipment from the parent company. In Paragraph 8 of the 
Department's conclusions, the hearing officer noted that Roberts submitted 
documents pertaining to the purchase, as opposed to leasing equipment from the 
parent company, together with checks showing four separate equipment 
transactions. The hearing officer found this evidence insufficient, noting that 
"it failed to show the reverse side of each check reflecting deposit or cash." 
The hearing officer apparently ignored the uncontroverted testimony of Alan 
Roberts that the checks were used to purchase equipment. Roberts presented 
evidence that the equipment it did lease from its parent corporation was at 
favorable rates. Mr. Sims and Mr. Olsen, both presidents of resident 
construction companies, testified that the rates Roberts received on leased 
equipment from McCormick were very favorable. Furthermore, these two individuals 
testified regarding the difficulty in leasing equipment from Wyoming suppliers. Mr. 
Roberts substantiated the testimony of both Mr. Sims and Mr. Olsen by stating, 
in his experience, the rates Roberts received from McCormick, were very 
favorable. Mr. Simonton, of the Department, agreed that the rates Roberts 
received from McCormick, were more favorable than those available within the 
state of Wyoming. In his findings, Mr. Sullivan 
complained that no other supplier rates were submitted for comparison. However, 
the testimony regarding the favorable rates came from individuals knowledgeable 
about construction lease equipment and rates. The Department did not produce 
evidence to contradict the testimony elicited at the hearing. Furthermore, Mr. 
Sullivan complains that no documentation or testimony was presented regarding 
McCormick renting or leasing equipment to other contractors. No evidence or 
testimony was presented to establish that these lease agreements were improper 
or contrary to law. This court found that it was not unusual for a contractor to 
lease equipment from a parent corporation. Kloefkorn-Ballard Construction, 683 P.2d  at 661. Roberts' equipment leases from its nonresident source were at rates 
more economically advantageous than were available in Wyoming. It does not seem 
reasonable to conclude that Roberts was not in compliance with Wyo. Stat. § 
16-6-102(d)(i)(B).

 
 

[¶23.]  Mr. Sullivan found that Roberts maintains 
contracts with its parent corporation for goods and services including 
"equipment, yard facilities, preparation of bids, personnel, Wyoming project 
information, and some administrative tasks." The evidence presented at the 
hearing regarding any transactions for goods and services between Roberts and 
its parent corporation supports a conclusion that such transactions were 
conducted at an arm's length. While Roberts does lease equipment from its parent 
corporation, it does so because it receives favorable rates which it would not 
receive in Wyoming. Roberts does lease yard facilities to 
store the leased equipment; however, the yard facilities leased by Roberts are 
leased from entities not associated with Roberts' parent corporation. All of the 
yard facilities are leased strictly for purposes of Roberts' business in 
Wyoming. No 
evidence was presented that Roberts' parent corporation shared its Wyoming yard 
facilities.

 
 

[¶24.]  In Paragraph Nos. 9 and 19(a) of the 
Department's Conclusions of Law, Mr. Sullivan found that Roberts used a 
McCormick estimator when preparing bids on public projects. Roberts hired and 
paid the estimator for part-time services. Alan Roberts specifically stated that 
he knew of no such part-time estimator service available in Wyoming. Mr. Sullivan 
complains that no evidence was produced to "collaborate" [sic] Mr. Roberts' 
testimony from the other contractor witnesses. Mr. Olsen and Mr. Sims, both 
owners of construction companies in Wyoming, do their own estimating work. 
Further, Mr. Sullivan companies that the estimator services employed by Roberts 
from its parent corporation were not available to other contractors. Mr. 
Sullivan states that no payroll documents to substantiate the payment of the 
estimator's salary or benefits by Roberts were admitted into evidence. However, 
Alan Roberts testified that the estimator he hired, Don Earl, was paid a salary 
and other benefits by Roberts. No testimony or evidence was presented by the 
Department rebutting Mr. Roberts' testimony. His testimony was unchallenged and 
must be accepted as true.

 
 

[¶25.]  In Paragraph Nos. 14 and 19(h) of the 
Department's Conclusions of Law, Mr. Sullivan finds that Roberts used 
supervisory personnel from its parent corporation to manage and control its 
field operations. No evidence in the record supports this conclusion. Alan 
Roberts testified that he controls all aspects of the business, including any 
supervisors he employs for such projects. While a number of the supervisors that 
are or were employed by Roberts were, at one time, employed by McCormick, the 
evidence indicates that Roberts subsequently employed and controlled the 
supervisors.

 
 

[¶26.]  Mr. Sullivan also raises concerns over a 
loan agreement between Roberts and McCormick Roberts had loaned its parent 
corporation money at an interest rate of at least eleven percent (11%) per 
annum. In Paragraph No. 15, Mr. Sullivan complains that no documentation or 
evidence was presented at the hearing regarding how the loan agreement actually 
worked between Roberts and McCormick and where McCormick, kept the funds loaned 
from Roberts. Mr. Sullivan concluded that the parent corporation would have to 
be gaining from such an agreement and that the transfer of funds from Roberts to 
its parent corporation demonstrated a failure to adequately capitalize. To the 
contrary, Roberts is a financially sound business. Furthermore, this loan 
agreement, which carried interest, between Roberts and McCormick represents an 
arm's-length transaction. We have previously said that loan agreements which 
carry interest between a construction company and its nonresident parent were 
arm's-length transactions. Kloefkorn-Ballard Construction, 683 P.2d  at 
661.

 
 

[¶27.]  The Department scatter-gunned numerous 
complaints against Roberts as reflected by the numerous findings of fact and 
conclusions of law. We have addressed the matters that seemed most important to 
the hearing examiner such as the factors set out in Wyo. Stat. § 
16-6-102(d)(i)(A) and (B) and commingling of assets. With respect to these 
factors and others not addressed, there was, in some instances, a disregard of 
uncontradicted evidence, drawing unwarranted conclusions from facts found and 
unsubstantial evidence to support the conclusions drawn.

 
 

[¶28.]  We affirm the determination by the 
district court.

 
 
FOOTNOTES

 
 

1 The court's use of a 
"substantial evidence" review of agency actions was developed by Justice Blume 
in Howard v. Lindmier, 67 Wyo. 78, 214 P.2d 737 (1950). The court first stated 
the limited review provided under "substantial evidence" and then defined the 
concept in this manner: "[T]he term `substantial evidence' does not include the 
idea of weight of evidence, although it is more than a mere scintilla and means 
such relevant evidence as a reasonable mind might accept as adequate to support 
a conclusion." Id. at 740. See also Clements v. Board of 
Trustees of Sheridan County School District No. 2, 585 P.2d 197, 202 (Wyo. 
1978).

 
 
     Variations of the same 
language have appeared in other cases. In Laramie River Conservation Council v. 
Industrial Siting Council, 588 P.2d 1241, 1249 (Wyo. 1978), the court modified the 
language:

 
 
In applying [the 
substantial evidence] standard for purposes of review we recognize that it may 
be less than the weight of the evidence, but it cannot clearly be contrary to 
the overwhelming weight of the evidence. More is required than a mere scintilla 
of evidence or suspicion of existence of a fact to be 
established.

 
 
See also Mountain Fuel 
Supply Co. v. Wyoming Public Service Commission of Wyoming, 662 P.2d 878, 882 
(Wyo. 
1983).

 
 
     In Burlington Northern 
Railroad Co. v. Public Service Commission of Wyoming, 698 P.2d 1135, 1138-39, 
(Wyo. 1985) (citations omitted), the court phrased the standard in this 
way:

 
 
Substantial evidence 
has been defined "as such relevant evidence as a reasonable mind might accept as 
adequate to support a conclusion." Substantial evidence may indeed be less than 
the great weight of evidence, but is more than a mere scintilla of evidence. The 
author of the opinion in Burlington Northern Railroad Co. did not contribute 
anything to a better understanding of the illusive term "substantial evidence." 
In fact, his contribution was counterproductive and only added another slippery 
term. A Philadelphia lawyer would be hard-pressed to sort out what this court 
has said about "substantial evidence."

 
 

2 An agency's duty to 
support its action with sufficient factual findings is set out in Wyo. Stat. § 
16-3-110, which reads in pertinent part:

 
 
     A final decision or 
order adverse to a party in a contested case shall be in writing or dictated 
into the record. The final decision shall include findings of fact and 
conclusions of law separately stated. Findings of fact if set forth in statutory 
language, shall be accompanied by a concise and explicit statement of the 
underlying facts supporting the findings.

 
 

3 Paragraph 19 of the 
Determination and Order reads in pertinent part:

 
 
     (a) parent corporation 
estimator does all bid estimates on public works projects for the Objector. Even 
though he is paid by the Objector, his services as an estimator are provided to 
no other contractor except the Objector and the parent corporation. There were 
no payroll documents to substantiate the payment of his salary or benefits by 
the Objector.

 
 
     (b) The assertion by 
the Public Body that the Objector and the parent corporation were jointly using 
an out-of-state bank was based on the April 2, 1991 minutes of the Board of 
Directors. The evidence refuting this issue was not submitted during the 
investigation because the error in the 1990 Board minutes was not noted until 
April 1, 1991 which is after the fact. Also, the Affidavit of Margaret Mary 
Yanez does state that the Objector currently has no checking account which 
leaves the past activities unclear to the hearing officer.

 
 
     (c) Objector has 
contracts with the parent corporation for goods and services to be shared and 
used such as equipment, yard facilities, preparation of bids, personnel 
Wyoming 
project information, and some administrative tasks.

 
 
     (d) The agreement to 
transfer excess funds to the parent corporation each month demonstrates a 
failure to adequately capitalize the resident corporation regardless of the 
terms of the agreement.

 
 
     (e) The Objector 
failed to provide payroll documents, banking statements, purchase of goods or 
services required in each project, accounts receivable documents, bonding 
documents, prequalification package for projects, and documents to show that the 
Objector does in fact stand separate from the parent corporation. This lack of 
documentation of the above activities demonstrates a failure to maintain 
adequate corporation records. Even the April 1, 1991 corporation minutes were 
prepared in the North Dakota office since they were faxed to Wyoming.

 
 
     (f) The Objector has 
failed to demonstrate and maintain an arm's length distance from its parent 
corporation. In each business activity discussed, the Objector continues to use 
its parent corporation for each and every endeavor discussed in the Findings of 
Fact and the Conclusion of Law. The very nature of the excess funds agreement 
allows a commingling of excess money made on each and every Wyoming project with the 
parent corporation.

 
 
     (g) The Objector has 
had no general construction equipment evidenced by equipment lease agreements 
with the parent corporation or real property located in Wyoming evidenced by the 
yard lease agreement and the office rental exhibit since its acquisition by the 
parent corporation in 1984.

 
 
     (h) Since the Objector 
testified that it does not work in the field operation for each project, the 
parent corporation's supervisors must control the public works 
projects.