ALJDEC

01F-2410-ROC · Registrar of Contractors · 2001-11-26

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 26, 2001 APPEARANCES: Julianne C. Wheeler, Esq. represented Complainant Code Electric Corp. Respondent Archon, Inc. failed to appear. ADMINISTRATIVE LAW JUDGE: Daniel G. Martin _____________________________________________________________________

The question presented by this matter is whether Respondent Archon, Inc. (“Archon”) is subject to discipline for acts or omissions in violation of A.R.S. § 32-1154. Based on the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law and Recommended Order. To ensure the completeness of the record, the Administrative Law Judge also addresses, as a preliminary matter, Archon’s request for continuance made just prior to the commencement of the hearing. ARCHON’S REQUEST FOR CONTINUANCE At 8:49 a.m., just eleven minutes prior to the commencement of the 9:00 a.m. hearing in this matter, Archon’s general counsel, Roza Ferdowsmakan, faxed a request for continuance of hearing to the Office of Administrative Hearings. Ms. Ferdowsmakan wrote, in pertinent part: On behalf of my client, Archon, Inc., I respectfully request a continuance of the hearing date in the resolution of the above case. I apologize for such short notice and hope that you will understand that I was not informed by the appropriate representatives of Archon, Inc. of their decisions to extend their Thanksgiving holiday into the latter part of this week, forgetting that there was an administrative hearing scheduled. (Emphasis added.)

There is no indication in Ms. Ferdowsmakan’s correspondence that she provided a copy to counsel for Complainant Code Electric Corp. (“Code Electric”). However, at the commencement of the hearing, the Administrative Law Judge shared Ms. Ferdowsmakan’s letter with Code Electric’s counsel, who objected to the request on the grounds, inter alia, that no good cause had been shown. Arizona Administrative Code Rule R2-19-106(C) provides: “Absent good cause, or unless otherwise provided by law or these rules, written motions shall be filed with the Office [of Administrative Hearings] at least fifteen days before the hearing. A party demonstrates good cause by showing that the grounds for the motion could not have been known in time, using reasonable diligence and: 1. A ruling on the motion will further administrative convenience, expedition or economy; or 2. A ruling on the motion will avoid undue prejudice to any party” (emphasis added).

The Registrar of Contractors (“ROC”) issued the notice of hearing for this matter on September 5, 2001. In that notice, the ROC advised the parties that the hearing in this matter would be conducted on November 26, 2001, at 9:00 a.m. There is no evidence that Archon did not receive proper notice of the hearing. Instead, the evidence indicates that Archon’s “representatives” (there is no identification as to who these persons are) simply forgot that the hearing had been scheduled. Inexplicably, Archon’s counsel did not even attend the hearing to protect Archon’s interests in the event its motion was denied. After consideration of Archon’s motion at hearing, and Code Electric’s response in opposition, the Administrative Law Judge denied Archon’s motion on the ground that Archon had failed to demonstrate the good cause requisite to its requested continuance. The Administrative Law Judge thereafter deemed Archon to have failed to appear, and proceeded in Archon’s absence. The Administrative Law Judge now confirms his prior ruling, and expressly finds that to the extent Archon may have been prejudiced by its failure to appear, Archon alone is responsible for that occurrence. FINDINGS OF FACT Archon is the holder of a Class A license (No. 096436) and a Class B- license (No. 097360) issued by the ROC. Steve Arthur is Archon’s qualifying party for each of the foregoing licenses. Code Electric is the holder of several contracting licenses issued by the ROC, including a Class L-11 (commercial electrical) license. On August 25, 1999, Archon entered into a general contract with the City of Phoenix (the “City”) to construct a sewage lift station and associated force mains (the “Project”). The scheduled substantial completion date for the Project was late August 2000. On November 8, 1999, Archon and Code Electric entered into a subcontract (the “Subcontract”) under which Code Electric agreed to construct the electrical component of the Project. The Subcontract price was $285,000.00. The City contracted with Damon S. Williams Associates, L.L.C. (consulting civil and environmental engineers) (“Williams”) to oversee the Project. Carl W. Herup, an engineer with significant construction and other engineering experience, served as Williams’ project manager. In that capacity, Mr. Herup had daily contact with Archon and Archon’s subcontractors (including Code Electric). Mr. Herup’s primary responsibility was to coordinate work at the Project to ensure its timely completion. The Project’s scheduling followed what is known as the “critical path” method, a process under which the network of activities required to complete a project are logically arranged to describe how that completion will be effected. The “critical path” refers to the series of events that must be completed in a particular order because completion of each sequential event is contingent upon completion of the preceding events. Using the critical path, the project’s manager can plan for completion of the project along the shortest sequence of critical path events, and plan associated events accordingly. The weight of the credible evidence presented at hearing, particularly the testimony of Mr. Herup, demonstrated that Archon lacked the necessary experience to properly construct the lift station in a timely manner, and that Archon was either unwilling or incapable of adhering to the critical path method of scheduling. For reasons that the Administrative Law Judge finds attributable primarily to Archon’s failure to have properly managed the construction process, Archon failed to meet the Project’s August 2000 substantial completion date, and further failed to meet an extension of that date to September 29, 2000. In accordance with Archon’s general contract with the City, Archon’s failure to have met the substantial completion date for the project rendered Archon liable for liquidated damages. As of October 18, 2000, the Project was still not complete. As of that date, Archon had taken the position with the City that its delays were excusable. According to Mr. Herup, delays attributable to a subcontractor (such as Code Electric) would not have qualified as an excusable delay for Archon. Based on this testimony, the Administrative Law Judge finds that as of October 18, 2000, Archon did not deem Code Electric to have caused any non-excusable delays in the completion of the Project (or alternatively that Archon is estopped from making such a claim). According to Mr. Herup, whose testimony the Administrative Law Judge found to be very credible, conduct attributable to Code Electric caused several delays in completing tasks associated with the Project. However, none of those delays affected timely completion of the critical path elements; therefore, none of the delays caused by Code Electric delayed overall completion of the Project. Archon achieved substantial completion of the Project in November 2000. By correspondence dated January 19, 2001, Archon gave Code Electric “formal notification” of Archon’s intent to assess costs against Code Electric for Code Electric’s alleged “non-performance” under the Subcontract. Archon falsely claimed in this correspondence that it had been assessed liquidated damages by the City, and implied that such damages were attributable to conduct by Code Electric.[1] Archon requested, “in the spirit of cooperation,” that Code Electric provide Archon with a settlement offer not later than January 23, 2001, and warned that if Code Electric failed to do so, Archon would “take unilateral action and withhold an appropriate amount from the final payment [due].” [See Exhibit 68] On or about March 14, 2001, the City issued its final payment to Archon for the Project. As of that date, the balance due from Archon to Code Electric on the Subcontract was $30,871.24. There is no evidence of record that Archon lacked the capacity to pay Code Electric this amount. On March 26, 2001, Archon contacted Code Electric and offered $20,000.00 as full and final payment on the Subcontract. Code Electric declined this offer. On April 2, 2001, Code Electric filed a complaint against Archon with the ROC in which it alleged that Archon had failed to pay the $30,871.24 balance due on the Subcontract. On July 12, 2001, the ROC issued a Citation and Complaint charging Archon with violations of A.R.S. § 32-1154(A)(7) (wrongful or fraudulent act resulting in substantial injury) and (A)(11) (failure to pay monies in excess of seven hundred fifty dollars when due). Because Archon failed to appear at the hearing of this matter, Archon did not offer any evidence to controvert or mitigate the evidence offered by Code Electric. At hearing, Code Electric requested that it be awarded interest under A.R.S. § 1129.02. However, there is no evidence in the record that Code Electric complied with the jurisdictional prerequisites of this statute necessary to create a valid claim for interest (i.e., by filing a complaint with the ROC under the statute and posting the required surety bond or cash deposit). Therefore, Code Electric is not entitled to an award of interest. CONCLUSIONS OF LAW In this proceeding, Code Electric bears the burden to prove, by a preponderance of the evidence, that Archon is subject to discipline for violations of A.R.S. § 32-1154(A)(7) and/or (A)(11) as charged by the ROC. See Arizona Administrative Code (“A.A.C.”) R2-19-119. A preponderance of the evidence is “such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960). Under A.R.S. § 32-1154(A)(11), a contractor is subject to discipline for “failure . . . to pay monies in excess of seven hundred fifty dollars when due for materials or services rendered . . . .” The evidence demonstrated that Archon failed to pay to Code Electric, when due, the $30,871.24 balance due on the Subcontract. There is no evidence in the record that Archon lacked the capacity to pay this amount. Therefore, the Administrative Law Judge concludes that Archon stands in violation of A.R.S. § 32-1154(A)(11). Under A.R.S. § 32-1154(A)(7), a contractor is subject to discipline for “the doing of a wrongful or fraudulent act . . . as a contractor resulting in another person being substantially injured.” The evidence demonstrated that Archon committed a wrongful act when it failed to pay Code Electric the $30,871.24 balance due on the Subcontract. This wrongful act substantially injured Code Electric by depriving Code Electric of a significant amount of money to which Code Electric was lawfully entitled. Based on the foregoing violations, it is appropriate to impose discipline against Archon’s Class A and Class B-01 licenses. The ROC’s July 12, 2001 Citation and Complaint advised Archon that in the event of a finding of a violation against it, Archon’s prior disciplinary record of final ROC orders could be considered in mitigation or aggravation. Accordingly, subsequent to the conclusion of the instant hearing, the Administrative Law Judge took notice of prior final disciplinary orders against Archon’s Class A and Class B-01 licenses in the ROC’s official records. Those records revealed that neither Archon’s Class A nor Class B-01 license has been the subject of any final ROC disciplinary order within the past two years. The Administrative Law Judge considered this factor when determining appropriate recommended discipline for this matter. Upon consideration of all of the facts and circumstances presented by this case, the Administrative Law Judge concludes that Archon’s Class A and Class B-01 licenses should be suspended. The Administrative Law Judge further concludes, however, that such suspension should be conditional and that Archon should be given the opportunity to avoid suspension by making payment to Code Electric of the $30,871.24 outstanding balance due. Additional to the foregoing, the Administrative Law Judge concludes that in consequence of Archon’s conduct in this matter, both Archon’s Class A and Class B-01 licenses should be placed on disciplinary probation for a period of 180 days each. Additional to the foregoing, the Administrative Law Judge concludes that in consequence of Archon’s conduct in this matter, the bond for Archon’s Class B-01 license should be increased in the amount of $5,000.00 for a period of thirty-six (36) months. RECOMMENDED ORDER Based on the foregoing, the Administrative Law Judge makes the following Recommended Order: Commencing on the effective date of the Order entered in this matter, Archon’s Class A and Class B-01 licenses shall be suspended until the ROC receives credible written proof that Archon has paid or tendered to Code Electric the sum $30,871.24. If Archon pays or tenders to Code Electric the sum of $30,871.24 on or before the effective date of the Order entered in this matter, and provides credible written proof to the ROC of such payment, then the above provided suspension shall not take place and this matter shall be closed. It is further recommended, commencing on the effective date of the Order entered in this matter, that Archon’s Class A and Class B-01 licenses each be placed on disciplinary probation for a period of one hundred and eighty (180) days. It is further recommended, in addition to the above provided penalties, if any, that any continuation or restoration of Archon’s contracting rights, whether or not probationary, shall be subject to the condition that Archon first post with the ROC an additional surety bond, cash deposit or alternative deposit for its Class B-01 license for a period of thirty-six (36) months, including future renewal periods, in the amount of $5,000.00, to be in addition to the required surety bond or cash deposit set forth in A.R.S. § 32-1152(D). Cash or alternative additional deposits, if utilized, shall be returned only after the expiration of an additional two year period following the above-provided thirty-six (36) month period and only if no claims are then pending.

Done this day, December 17, 2001.

______________________________________ Daniel G. Martin Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2001, to:

Michael P. Goldwater, Director Registrar of Contractors ATTN: Joyce Armijo 800 West Washington, 6th Floor Phoenix, AZ 85007

By ___________________________ ----------------------- [1] The evidence demonstrated that at no time has the City assessed liquidated damages against Archon in connection with the Project.

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826