ALJDEC decisions subject to certification as final

08F-2702-ROC · Registrar of Contractors · 2008-12-17

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: December 16, 2008 APPEARANCES: Complainant appeared on his own behalf; Qualifying Party Joshua Nepa appeared for Respondent. ADMINISTRATIVE LAW JUDGE: Michael G. Wales _____________________________________________________________________ Evidence and testimony were presented and, based on the entire record in this matter, the following Findings of Fact, Conclusions of Law and Recommended Order are made:

FINDINGS OF FACT 1. This matter convened for hearing at the time, date and place set forth in the Registrar of Contractors’ Notice of Hearing dated November 10, 2008. 2. Complainant Gary Johanson (“Complainant”) is the owner and occupant of a residence located at 10231 W. Ironwood in Sun City, Arizona. 3. Respondent Autumn Air Heating and Cooling, LLC (“Respondent”) is an Arizona limited liability company which holds Arizona Contractor’s License No. 187538, Class 39-R (Residential Air Conditioning and Refrigeration) issued by the Registrar of Contractors on August 11, 2003. Joshua David Nepa is the qualifying party for the license.

4. Complainant filed a complaint with the Registrar of Contractors on February 18, 2007, wherein he alleged: a. Respondent’s “preseason plan was overpriced”; b. The capacitor Respondent “replaced for $107.50 carries a wholesale price of less than $2.00”; and c. After offering to “balance the air [flow in the house]”…Respondent “should have balanced the air or hired a firm that was able to do the work.” 5. On March 19, 2008, Complainant contacted the Registrar of Contractors and requested an administrative hearing on his complaint. 6. On August 26, 2008, the Registrar issued a CITATION AND COMPLAINT in Case No. 08-2702 charging Respondent with possible violations of A.R.S. § 32-1154A (1) and (7). 7. Respondent filed an answer on September 3, 2008 denying the allegations. The matter was set for the instant hearing before the Office of Administrative Hearings, an independent state agency. 8. At the hearing, Complainant and Mr. Nepa testified and submitted exhibits which were marked, admitted and considered. 9. From the evidence elicited at the hearing, the following salient facts are important to note: a. On May 4, 2007, Complainant hired Respondent to perform an inspection of his existing air conditioning system at his home in Sun City. Respondent was not the original installer of the air conditioning system.

b. On May 4, 2007, Respondent’s technician inspected the system. The technician informed Complainant that certain work needed to be performed, including cleaning the air conditioning unit’s coil and that a capacitor was failing and needed to be replaced. Complainant testified he does not recall if the technician asked for authorization to perform the work, but “if he did ask, I did authorize the work.” c. The technician replaced the capacitor. The technician billed Complainant $39.95 for the tune-up, $77.99 for cleaning the coil and $107.50 to remove and replace the capacitor. Complainant also purchased a two-year service agreement from Respondent for $100.00. d. Complainant paid for the services performed and also informed the technician that he was dissatisfied with the manner in which air flow was balanced in the home, specifically that he was displeased with the inadequate cooling in the front of the home The technician wrote a proposal to supply additional ductwork in the home for the price of $425.00, plus tax. The technician informed Complainant that someone would be out to perform the additional duct work installation on Tuesday, May 8, 2007. e. At some uncertain date, but on or near Tuesday, May 8, 2007, Complainant received a telephone call from Respondent informing him that Respondent would be unable to perform the installation of additional ductwork. f. At some other uncertain date, an installer employed by Respondent inspected the attic space of Complainant’s home and determined that there was insufficient attic space to install additional ductwork of the appropriate size to address Complainant’s concerns with unbalanced airflow. The installer opined that installation of the smaller ductwork that would fit in Complainant’s attic would not satisfy Complainant’s concerns of inadequate cooling in the front of the home. Respondent determined that the proper work would be impossible to perform and declined to take Complainant’s money. g. On or about February 2008, nine months after Respondent had inspected Complainant’s system and replaced the capacitor, Complainant, in discussions with his neighbor, learned that the wholesale cost for a capacitor is less than $2.00. On February 18, 2008, Complainant, failing to understand that a contractor is entitled to its labor costs and may build labor costs and costs associated with the warranty on labor and parts into pricing, filed a complaint with the Registrar of Contractors alleging that he should not have been charged $107.50 for a part that cost less than $2.00. h. The evidence of record established that the $107.50 that Complainant paid for Respondent’s technician to replace the capacitor did include labor costs and costs associated with the warranty on labor and parts. Respondent also presented evidence of competitor pricing for the same service and established that Respondent’s pricing was within the industry norm. i. When Complainant filed his complaint with the Registrar of Contractors, he also alleged that Respondent failed to perform the work it offered to do in its proposal to add additional ductwork. However, as described above, Respondent properly declined to do the work after learning that the attic space was too small to add the proper size ductwork. Respondent properly declined to do the work and properly declined to take Complainant’s money. j. Complainant’s third and final allegation, presented in his February 18, 2008 Complaint, was that the $100.00 he agreed to pay Respondent in May 2007 for a two-year service agreement “was overpriced”. At hearing, however, Complainant offered no evidence as to why he believed the $100.00 was too much to pay for a two-year service agreement, or why, if he believed that $100.00 was “over-priced”, he simply did not decline to purchase the two-year service agreement. k. As with the allegation regarding the overcharging for the capacitor, Respondent presented evidence of competitor pricing for the same service and established that Respondent’s pricing was within the industry norm.

APPLICABLE LAW The CITATION AND COMPLAINT issued by the Registrar of Contractors in Case No. 08-2702 charged Respondent with possible violations of A.R.S. § 32- 1154A (1) and (7). Those statutory sections require that the holder of a license or person listed on the license shall not commit the following:

1. Abandonment of a contract or refusal to perform after submitting a bid on work without legal excuse for the abandonment or refusal.

…

7. The doing of a wrongful or fraudulent act by the licensee as a contractor resulting in another person being substantially injured.

CONCLUSIONS OF LAW 1. The Registrar of Contractors has jurisdiction over this matter pursuant to A.R.S. § 32-1101, et.seq., which authorizes the Registrar to impose disciplinary sanctions against licenses for violations of A.R.S. § 32-1154. 2. To warrant such sanctions by the Registrar, Complainants must demonstrate by a preponderance of the evidence that Respondent violated any one, or more, of the statutory sections cited. Proof by a “preponderance” means that “the evidence is sufficient to persuade the finder of fact that the proposition is more likely true than not.” In re Arnold and Baker Farms, 177 B.R. 648 (9th Cir. BAP (Ariz.) 1994). See also, Culpepper v. State of Arizona, 187 Ariz. 43, 930 P.2d 508 (App. 1996). It is “evidence which is of greater weight or more convincing than the evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.” Black’s Law Dictionary 1182 (Rev. 6th ed. 1990). 3. The purpose of licensing Arizona contractors is to regulate the conduct of contracting and protect the public from unscrupulous acts. Beazer Homes Ariz., Inc. v. Goldwater, 196 Ariz. 98, 101, 993 P.2d 1062, 1065 (App. 1999); Better Homes Constr. v. Goldwater, 203 Ariz. 295, 300, 53 P.3d 1139 (App. 2002). The statutory purpose is to prevent unscrupulous or financially irresponsible contractors from deceiving and taking advantage of those who engage them to build. Sobel v. Jones, 96 Ariz. 297, 394 P.2d 415 (1964). 4. This tribunal determines and concludes that Complainant has not established by a preponderance of credible, probative and relevant evidence that Respondent violated A.R.S. § 32-1154A(1). Without accepting any money, Respondent submitted a proposal to install additional ductwork for the sum of $425.00. However, additional investigation by Respondent showed that the attic space at Complainant’s residence did not provide sufficient space for the appropriate-sized ductwork to be installed and the installation of smaller ductwork would not accomplish the goals the Complainant desired. Thus, Respondent properly declined to charge Complainant and properly declined to perform the work. 5. This tribunal further determines and concludes that Complainant failed to establish by a preponderance of credible, probative and relevant evidence that Respondent violated A.R.S. § 32-1154A(7) as it pertains to the $100.0 Respondent charged Complainant for a two-year service agreement or the $107.50 Respondent charged Complainant for the part, labor and warranty to replace a failing capacitor. While it is typically not within the bailiwick of the Registrar of Contractors to oversee industry pricing for parts, labor and other services, discipline is appropriate if a Complainant establishes fraud, misrepresentation, predatory pricing[1] or other wrongful acts relating to a Respondent’s pricing. In the case at hand, Complainant presented absolutely no evidence of any wrongful act relating to Respondent’s pricing or any other wrongful or fraudulent actions on the part of Respondent.

RECOMMENDED ORDER On the basis of the foregoing, IT IS RECOMMENDED that the entire Citation and Complaint in Case No. 08-2702 be dismissed.[2] Done this day, December 16, 2008.

Office of Administrative Hearings

__________________________ Michael G. Wales Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2008, to:

Registrar of Contractors Armando Contreras 3838 N. Central Ave. Phoenix, AZ 85012

By ___________________________ ----------------------- [1] Predatory pricing is typically defined as the practice of driving out competition by lowering prices and then reinstating high prices once the competitor is vanquished. [2] 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 in this matter will be forty (40) days from the date of that certification.

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