Corporate Owner of 'Women's Business' Leads to Court's Rejection of Business Certification

In an unpublished opinion Monday, the New Jersey Appellate Division affirmed the denial of an application for the certification of a “women’s business” by a division of the state’s treasury department because that business is owned by another corporation.

The appellant, Stone Industries, appealed a determination made by the Division of Revenue and Enterprise Services, which is responsible for certifying to public agencies business eligibility to bid on contracts as a women’s business, according to the opinion. The division maintains a database listing all such businesses. Inclusion in that list means that the business would be eligible for state programs and initiatives that are designed to ensure equal opportunity for women’s businesses.

According to the opinion, the definition of a women’s business is spelled out in a state statute. Such a business is a sole proprietorship owned and controlled by a woman, a partnership or joint venture controlled by women with 51% ownership where the management and daily business operations are controlled by women owners, or a corporation or other entity whose management and daily business operations are controlled by one or more women who own at least 51% of the business. If stock is issued, at least 51% must be owned by one or more women.

Stone applied to the division for certification as a women’s business, according to the opinion. In that application, Stone stated that 56% of Stone was owned by Janet R. Braen and Samantha L. Braen. However, Stone submitted tax returns for another company called Braen Commercial Holdings as part of its application, along with letters from accountants for Stone and BCHC. Those letters stated that Stone is a wholly owned qualified subchapter S subsidiary of BCHC and included a reorganization statement filed as part of BCHC’s 2002 tax return, according to the opinion.

“Because Stone was ’100% owned, controlled, and operated by another entity BCHC,’ the division concluded that Stone’s ‘majority owner is not a woman’ or women as required by N.J.S.A. 52:27H-21.18(i)(3),” the per curiam opinion said. “Therefore, the division denied Stone’s application for certification as a women’s business.”

On appeal, Stone argued that the decision by the division was arbitrary, capricious and unreasonable and should be reversed. Stone further contended that the decision “runs contrary to” the legislative intent governing the certification of women’s businesses, according to the opinion.

Judges Michael J. Haas and Stephanie Ann Mitterhoff stated that under the relevant statute, the division found that a women’s business must be both controlled by and owned by women.

“Stone, however, is owned and controlled by a corporation,” the judges said.

Stone argued that since the division certified the business as a women’s business in 2003, and again in 2008, those decisions should bind future determinations. However, the judges disagreed, explaining that “the fact that Stone received prior certifications following its reorganization into a wholly owned subsidiary of BCHC does not bind the state to grant certification again, especially when doing so would be contrary to the requirements of the applicable law.”

The judges stated that, after 2008, Stone did not reapply for certification until 2021. In that intervening period, the division approved BCHC for certification as a women’s business four times, most recently in 2018.

“Stone is owned by a corporation, BCHC,” the judges said. “While BCHC might qualify for certification on its own based on its ownership structure, Stone plainly does not.”

Neither counsel for Stone, Jason J. Waldstein of Schenck, Price, Smith & King, nor the Attorney General’s Office on behalf of the Department of the Treasury responded to a request for comment.