ALJDEC decisions subject to certification as final

06F-M2512-ROC · Registrar of Contractors · 2007-08-27

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 9, 2007, July 19, 2007 and August 7, 2007. APPEARANCES: Harry Tahiliani was represented by his attorney, Charles Price, Esq. DV8 Design, Inc. was represented by its attorney, Robert S. Porter, Esq. ADMINISTRATIVE LAW JUDGE: Brian Brendan Tully _____________________________________________________________________ Based upon the evidence of record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law and Recommended Order:

FINDINGS OF FACT

1. DV8 Design, Inc. (“Respondent”) is the holder of License No. 205555, a Class C-05 contracting license issued by the Registrar of Contractors (“Registrar”). 2. On or about November 4, 2005, Respondent entered into a written contract with Harry Tahiliani (“Complainant”) 3. The scope of work under the parties’ contract was the following:

[Respondent] is hereby engaged to perform design consulting services for [Complainant’s] residence at 1101 E. Warner Rd. Est. 112, Tempe, AZ 85284 to include the selection/design of the following:

• Furniture • Window Treatments • Artwork • Surface Finishes • Bedding • Accessories

4. Paragraph 2. of the parties’ contract set forth the contract price to be paid as follows:

2. Design Consulting Fees: [Respondent] agrees to pay [Complainant] as follows:

Fixed Fee of Ten Thousand and 00/100 Dollars ($10,000.00) payable at the signing of this agreement.

Cost Plus Fee of Twenty Percent (20%) added to the cost of items purchased for [Respondent] in the performance of this agreement and payable at the time of periodic project advances. The advances will be requested with the production of current project financials to include a statement, invoices and the costs of spreadsheet.

5. Complainant had recently purchased a 10,000 square foot residence in Tempe, Arizona. He desired to have the interior redesigned and to have new furnishings. 6. Complainant had been impressed with an article about Respondent completing the interior design and furnishing for a 6,800 square foot residence in 60 days. 7. In mid-October, 2005, Complainant approached and requested that Respondent accomplish the same for his residence, with an estimated budget of $400,000.00 to $600,000.00 for furnishings and interior design, and a move in date by Christmas 2005. 8. Respondent agreed to Complainant’s project, only after Complainant understood and agreed to the fact that Respondent would then have to shut down all of its other projects, not take any other work during Complainant’s project and concentrate all of its employees, on an expanded basis, to meet Complainant’s deadline. 9. Respondent’s principals are John Murphy and Carolyn Von Lintel, the latter being the interior designer. 10. Ms. Von Lintel described the original theme for Complainant’s residence as “Versace Bachelor Pad.” 11. Complainant kept expanding the scope of the project to include extensive remodeling. As a result of the expanding scope of the project, the Christmas Day completion date for the project became unrealistic. 12. Because of the expansions and changes, Complainant hired Alden Custom Homes, a licensed general contractor. In January 2006, Complainant fired Alden Custom Homes and hired Artisan Enterprises as his successor general contractor. 13. As a result of a romantic relationship, Complainant wanted the theme for the residence to be more children friendly. Ms. Von Lintel described the new theme as “Romper Room.” 14. There was extensive communications between Complainant and Ms. Von Lintel concerning design and furnishings. 15. Complainant paid Respondent’s invoices for November 2005, December 2005 and through March 2006. Those invoices included Complainant’s overhead costs, such as its leased cars and travel expenses for Ms. Von Lintel, which even included charge for a massage with $100.00 tip. 16. In January 2006, Complainant’s certified public accounted requested backup documentation for Respondent’s invoices. Mr. Murphy’s response was that the contract did not provide for that documentation. 17. Respondent left the project in April 2006 because Complainant refused to make further payments until the accounting issues were addressed. 18. Respondent filed a civil lawsuit for damages in Maricopa County Superior Court. That case is CV2006-051337. 19. Complainant then filed a written complaint with the Registrar alleging statutory and regulatory violations against Respondent. 20. The Registrar issued a Citation and Complaint in Case No. M06-2512 alleging that Respondent violated the provisions of A.R.S. § 32- 1154(A)(1), (6), (7), (9), (13), specifically A.R.S. § 32-1124(B), (17) and (3), namely R4-9-108. 21. On June 25, 2007, Superior Court Judge Paul A. Katz issued the following ruling in the civil lawsuit:

UNDER ADVISEMENT RULING

The Court having taken Defendant/Counterclaimant Tahiliani’s Motion for Partial Summary Judgment under advisement; having reviewed the memoranda of the parties and legal authorities cited therein; and good cause appearing,

IT IS ORDERED granting Defendant/Counterclaimant Tahiliani’s Motion for Partial Summary Judgment.

The parties to this action had an agreement that Tahiliani would pay dV8 “costs plus 20%” for its services. The parties dispute the meaning of the term “costs.” Defendant/Counterclaimant Tahiliani asserts that the term “costs” refers to the direct costs of furnishing his home, i.e., furniture and subcontractors. Plaintiff maintains that “costs” means “costs to the client.” Plaintiff’s definition of costs if unreasonable, such an interpretation would allow Plaintiff to bill Defendant for any and all expenses, whether or not they were related to the work being done to his home and obligate him to pay them. It is unlikely that a $100 gratuity to a masseur was related in any way to the completion of the project undertaken by dV8 on Tahiliani’s behalf. dV8 breached its contract with Tahiliani when it passed on to him its general operating expenses for the time period during which it worked on Tahiliani’s home and again when it refused to provide Mr. Tahiliani with an accounting.

22. Judge Katz’s ruling that Respondent breached its contract with Complainant is found to be persuasive. 23. As a result of Respondent’s breach of contract, it abandoned the project without legal justification. 24. Respondent did not exceed the scope of its Class C-05 contracting license. Any interaction with subcontractors was within the scope of its license. 25. Respondent failed to list its contracting license number on the parties’ contract and on invoices. 26. Respondent’s breach of contract and abandonment of the project are wrongful acts that substantially injured Complainant. 27. A review of the Registrar’s official records reflects that Complainant’s complaint is the only complaint listed on Respondent’s contracting license.

CONCLUSIONS OF LAW

1. The Registrar has jurisdiction over Respondent and the subject matter in this case. 2. Pursuant to A.A.C. R2-19-119(B), Complainant has the burden of proof in this matter. The standard of proof is preponderance of the evidence. A.A.C. R2-19-119(A). 3. Respondent violated the provisions of A.R.S. § 32-1154(A)(1), as cited in the Citation and Complaint issued by the Registrar. 4. Respondent did not violate the provisions of A.R.S. § 32-1154(A)(6), as cited in the Citation and Complaint issued by the Registrar. There is no credible evidence of record to support a violation of that statute. 5. Respondent violated the provisions of A.R.S. § 32-1154(A)(7), as cited in the Citation and Complaint issued by the Registrar. 6. Respondent did not violate the provisions of A.R.S. § 32-1154(A)(9), as cited in the Citation and Complaint issued by the Registrar. 7. Respondent violated the provisions of A.R.S. § 32-1154(A)(13), specifically A.R.S. § 32-1124(B), as cited in the Citation and Complaint issued by the Registrar. 8. Respondent violated the provisions of A.R.S. § 32-1154(A)(17), as cited in the Citation and Complaint issued by the Registrar. 9. Respondent did not violate the provisions of A.R.S. § 32-1154(A)(3), as cited in the Citation and Complaint issued by the Registrar.

RECOMMENDED ORDER

Respondent’s Class C-05 contracting license shall be suspended on the effective date of the Order entered in Case No. M06-2512 until Respondent submits proof to the Registrar, and the Registrar approves such proof, that it is in compliance with the provisions of A.R.S. § 32-1124(B). If Respondent presents proof of its compliance with A.R.S. § 32- 1124(B) to the Registrar and the Registrar finds compliance with the statute on or before the effective date of the Order entered in Case No. M06-1124(B), then the above-provided license suspension shall not take place. In addition to the foregoing indefinite license suspension, if any, Respondent’s Class C-05 contracting license shall be placed on probation for a period of 120 days commencing on the effective date of the Order entered in Case No. M06-1124(B) or the date on which the Registrar approves Respondent’s proper compliance with the provisions of A.R.S. § 32-1124(B), whichever is later. In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be 40 days from the date of that certification. Done this day, August 27, 2007

______________________________________ Brian Brendan Tully Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2007, to:

Fidelis V. Garcia, Director Registrar of Contractors Legal Department 800 West Washington, 6th Floor Phoenix, AZ 85007

By ___________________________ -----------------------

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