VSBC APPEAL OF: ONE VETERAN LLC, APPELLANT

*1 On March 29, 2023, One Veteran LLC (Appellant) appealed a decision of the U.S. Small Business Administration (SBA), denying Appellant's application for certification as a Service-Disabled Veteran-Owned Small Business (SDVOSB). SBA found that Appellant did not demonstrate that it is fully controlled by one or more service-disabled veterans. On appeal, Appellant maintains that the denial decision was erroneous, and requests that SBA's Office of Hearings and Appeals (OHA) reverse. For the reasons discussed infra, the appeal is denied.

*1 OHA adjudicates SDVOSB status appeals pursuant to the Small Business Act of 1958, 15 U.S.C. §§ 631 et seq., and 13 C.F.R. parts 128 and 134 subpart K. Appellant timely filed the appeal within 10 business days after receiving the denial notice on March 16, 2023. 13 C.F.R. § 134.1104(a). Accordingly, this matter is properly before OHA for decision.

*1 Appellant is a limited liability company (LLC) formed on January 5, 2023. (Case File (CF), Exh. 28.) In February 2023, Appellant applied for certification as an SDVOSB, and submitted various supporting documents to SBA. Appellant is 51% owned by Mr. Toua Vang, a service-disabled veteran. (CF, Exhs. 29 and 30.) Mr. Neelesh Jain owns the remaining 49% of Appellant. (Id.) Mr. Jain is neither a veteran nor a service-disabled veteran. (Id.)

*1 Appellant provided a copy of its Operating Agreement, dated January 3, 2023. (CF, Exh. 27.) The Operating Agreement reflects that Messrs. Vang and Jain are Appellant's two Members. (Id. at 1-2.) Management of the company “is vested in the Members.” (Id. at 4.) Furthermore, “[a]ny Member has the authority to bind [[Appellant] in contract.” (Id.) Section 24 of the Operating Agreement states that “Toua Vang has unilateral control of all decision-making, including the ability to overcome any supermajority voting requirements.” (Id. at 5.) However, according to section 64 of the Operating Agreement, “[t]he following actions will require the unanimous consent of all Members: (a) Endangering the ownership or possession of company property including selling, transferring or loaning any Company property or using any Company property as collateral for the loan [and] (b) Releasing any company claim except for payment in full.” (Id. at 11.) Section 65 of the Operating Agreement states that “[n]o amendment or modification of this Agreement will be valid or effective unless in writing and signed by all Members.” (Id.)

*2 In response to an inquiry from SBA, Mr. Vang submitted a letter stating:

*2 (CF, Exh. 26.)

*2 On March 16, 2023, SBA, acting through the Director of the Office of Government Contracting (D/GC), denied Appellant's application for certification as an SDVOSB. (CF, Exh. 22.) The D/GC found that the documentation Appellant provided did not demonstrate that Appellant is fully controlled by one or more service-disabled veterans. (Id. at 1.)

*2 The D/GC determined that Appellant did not demonstrate that Mr. Vang, a service-disabled veteran, has final, ultimate authority to establish and lead both long-term decision-making and the day-to-day operations of the business, as is required under 13 C.F.R. § 128.203(a). (Id.) According to Appellant's Operating Agreement, both Mr. Vang and Mr. Jain are Members of Appellant with authority to manage and bind Appellant. (Id.) Furthermore, in response to a request for clarification, Mr. Vang acknowledged that he had “completely delegated daily management to [Mr.] Jain”. (Id.)

*2 The D/GC also expressed concern over conflicting provisions in Appellant's Operating Agreement. (Id. at 1-2, citing 13 C.F.R. § 128.203(d).) Although section 24 of the Operating Agreement indicates that Mr. Vang “has unilateral control of all decision-making, including the ability to overcome any supermajority voting requirements”, section 64 of the agreement states that ““unanimous consent of all Members” is required for common transactions. (Id. at 2.) Mr. Vang could not unilaterally amend the Operating Agreement to remove or revise these contradictory provisions. (Id.) “As such, [Appellant's] [O] perating [A]greement does not prevent [Mr. Jain] from having negative control” over Appellant. (Id.)

*2 On March 29, 2023, Appellant appealed the D/GC's decision to OHA. Appellant concedes that “there are conflicting provisions in our [O]perating [A] greement”, and that Mr. Vang could not, by himself, amend the Operating Agreement. (Appeal at 1.) Furthermore, “it is true that [Mr.] Jain, a non-veteran, shares the daily operations of the business”. (Id.) Nevertheless, Appellant maintains, Mr. Vang fully controls Appellant because “Section [24 of the Operating Agreement] indicates that [Mr.] Vang has the unilateral ability to overcome supermajority voting requirements, which gives him ultimate control over all decisions of the [LLC].” (Id.)

*3 When a concern seeks certification as a VOSB or SDVOSB, SBA regulations provide that:

*3 13 C.F.R. § 128.302(d). Furthermore, “[i]f a concern submits inconsistent information that results in SBA's inability to determine the concern's compliance with any of the VOSB or SDVOSB eligibility requirements, SBA will decline the concern's application.” Id. § 128.302(d)(1).

*3 On appeal to OHA, Appellant has the burden of proving, by a preponderance of the evidence, that the denial decision is based upon clear error of fact or law. Id. § 134.1111.

*3 Appellant has not shown that the D/GC erred in reaching his decision. As a result, this appeal must be denied.

*3 The D/GC determined — and the record confirms — that Appellant provided inconsistent information as to whether Mr. Vang, a service-disabled veteran, fully controls Appellant's decision-making. Sections II.A and II.B, supra. According to section 24 of Appellant's Operating Agreement, “Toua Vang has unilateral control of all decision-making, including the ability to overcome any supermajority voting requirements.” Section II.A, supra. The Operating Agreement further provides, however, that Mr. Jain, who is not a service-disabled veteran, also is a Member of Appellant with authority to bind Appellant and manage the business. Id. The Operating Agreement states that the “unanimous consent of all Members” is required for common transactions, such as the sale of any company property. Id. Additionally, in a letter to SBA, Mr. Vang acknowledged that responsibility for Appellant's daily business operations had been “delegated” to Mr. Jain. Id. Given the record before him, then, the D/GC could reasonably conclude that Appellant did not establish that one or more service-disabled veterans fully controls Appellant's decision-making; as a result, denial of Appellant's application was proper. SBA regulations are clear that “[i]f a concern submits inconsistent information that results in SBA's inability to determine the concern's compliance with any of the VOSB or SDVOSB eligibility requirements, SBA will decline the concern's application.” 13 C.F.R. § 128.302(d)(1); see also VSBC Appeal of Wigs Plus, L.L.C., SBA No. VSBC-278-A (2023) (D/GC appropriately denied application for certification when applicant submitted contradictory information on material issues).

*4 On appeal to OHA, Appellant suggests that the D/GC should have given greater weight to section 24 of Appellant's Operating Agreement, and should have concluded that Mr. Vang fully controls Appellant based on this provision. Section II.C, supra. Again, though, the problem for Appellant is that Appellant ultimately was responsible for proving its eligibility as an SDVOSB. Section III.A, supra. The D/GC found, and Appellant does not dispute, that section 24 is inconsistent with other information submitted by Appellant, including other provisions of Appellant's Operating Agreement. Sections II.B and II.C, supra. Nor does Appellant offer any explanation, or reason to believe, why section 24 necessarily would supersede other provisions of Appellant's Operating Agreement.

*4 Appellant has not established that the D/GC committed any error of fact or law in denying Appellant's application for certification. The appeal therefore is DENIED. This is the final agency action of the U.S. Small Business Administration. 15 U.S.C. § 657f(f)(6)(A); 13 C.F.R. § 134.1112(d).