By: Eric Whytsell
In the recent size appeal decision, Marple Fleet Leasing, LLC, SBA No. SIZ-5479 (June 24, 2013), the SBA’s Office of Hearings and Appeals (“OHA”) reiterated the well-established rule that affiliation may be based solely on ownership, even in the absence of any other independent grounds. If there were any doubt on this point previously (and there shouldn’t have been), there is certainly none now: two companies owned by the same person or entity are affiliated for size purposes.
The case involved Marple Fleet Leasing‘s appeal of the SBA Area Office’s determination that it is other than small based on its affiliation with another company, Pacifico Marple Ford Lincoln (“PMFL”). The Area Office had determined that appellant was not small because the same person owned 55% of Marple Fleet and 60% of PMFL. Despite not disputing that the two companies have common ownership and control, Marple Fleet sought to overturn the finding, arguing that there are no other ties and the firms conduct no business with one another.
Judge Hyde had no trouble swiftly rejecting that argument and denying the appeal, noting that “OHA has repeatedly explained that a person ‘owning 50% or more of a concern is deemed to control it,’ even in the absence of other indicia of control.” Since Marple Fleet did not contest the key finding that the two firms shared a majority owner, it could not argue that they did not also share common ownership – and are affiliated for that reason alone. Given these circumstances, OHA held, “It is not necessary to consider whether Appellant and PMFL are also affiliated on any other independent grounds.”
What does this mean for small contractors who want to avoid affiliation? Remember that common ownership is sufficient and other ties are not required. And make sure your majority owner does not own a controlling stake in any other companies big enough to push you over relevant size standards if you were affiliated.
Eric Whytsell is the attorney responsible for the content of this article.
© Jackson Kelly 2013