ALJDEC decisions subject to certification as final

09F-2513-ROC · Registrar of Contractors · 2009-05-13

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

PROCEDURAL BACKGROUND 1. These consolidated matters were originally scheduled to convene for hearing April 7, 2009, pursuant to the Registrar of Contractors’ (ROC/Registrar) Notice of Hearing dated March 2, 2009. 2. On March 19, 2009, Respondent (“Respondent/Republic ITS”) filed a Motion for Summary Judgment Re: Citation and Complaint (“motion”) wherein it requested oral argument and asserted, inter alia, that the instant Complaint should be dismissed for three (3) reasons. First, Complainant’s Complaint is, in essence, a challenge of the ROC’s “interpretation of A.R.S. § 32-1123 for which Complainant has failed to allege any clear error of law.” Second, Complainant’s claims are barred by the doctrines of res judicata and collateral estoppel “because they have already been considered, and rejected, not just once, but twice, including once by [the ROC].” Third, the Complaint “should be dismissed without a hearing because the underlying issue is moot.” 3. By Minute Entry dated March 24, 2009, Complainant was provided until March 30, 2009 to file a written response. 4. On March 30, 2009, Complainant filed its Response to Respondent’s [sic] Motion for Summary Judgment (“response”). Therein, it objected to the motion and asserted, inter alia, that “Arizona’s contractor licensing statutes can only be interpreted to prohibit the grant of a license to [Respondent],” Complainant’s claims “are not precluded under any theory,” and Complainant’s claims are “ripe.” 5. On April 2, 2009, this tribunal issued an Order Denying Motion for Summary Judgment/Order Setting Oral Argument on Motion to Dismiss.[1] 6. On April 3, 2009, Respondent submitted a Reply in Support of Respondent’s Motion for Summary Judgment wherein it assert, inter alia, that Complainant’s “response…makes clear that, in reality, there is no valid basis for this Complaint against [Respondent] because [Complainant’s] real complaint is with the Registrar itself.” 7. Counsel for the parties appeared for oral argument on April 7, 2009. As a result thereof, this tribunal took the matter under advisement and instructed the parties to submit supplemental briefs by April 20, 2009. 8. The parties both timely filed their supplemental briefs/memoranda.

FINDINGS OF FACT[2] 1. On April 18, 2008, Republic Intelligent Transportation Services, Inc. (“Republic CA”), a foreign corporation licensed to do business in Arizona, submitted a bid for a contract with the City of Phoenix to perform streetlight maintenance. Though awarded the contract, Republic CA did not have the requisite ROC licenses to perform the work required by the contract. Because of this, Complainant filed suit in Maricopa County Superior Court, obtained a temporary restraining order preventing Republic CA from acting on the contract, and the ROC issued a cease and desist order whereby Republic CA was precluded from obtaining an Arizona contractor’s license for one year pursuant to A.R.S. Sec 32-1123. 2. As a result of the foregoing, the City of Phoenix cancelled the bid solicitation and re-solicited bids for the same construction services with responses due in August 2008. 3. On July 10, 2008, Republic CA formed Republic ITS, an Arizona limited liability company and wholly owned subsidiary. On July 15, 2008, Republic ITS filed an application for an L-11 (Commercial Electrical) Contractor’s License with the Registrar and, thereafter, an application for an A (General Engineering) Contractor’s license. 4. On August 14, 2008, Complainant filed with the ROC a “Protest of Issuance of a License to Republic ITS, Inc.” whereby it protested the issuance of a Class A license to Republic ITS. Therein, Complainant asserted, inter alia, that Republic ITS was but an “alter ego” and/or “shell subsidiary” of Republic CA; Republic misrepresented its corporate status as a subsidiary of Republic CA to the Registrar; and, A.R.S. § 32- 1123 barred the issuance of a license to Republic ITS because of its affiliation with Republic CA. 5. On August 19, 2008, fully cognizant of the corporate relationship between Republic CA and Republic ITS and Complainant’s protest, the ROC issued Republic ITS Class A and L-11 licenses. Complainant did not appeal the Registrar’s action. 6. On September 26, 2008, the City of Phoenix awarded Republic ITS a contract to perform streetlight maintenance. On November 3, 2008, Complainant filed a protest with the City of Phoenix of its award of a contract to Republic ITS contending, inter alia, that the award was based on an evaluation of Republic CA, not Republic ITS, and, because Republic ITS was but an empty shell of Republic CA, the proposal actually came from Republic CA which was precluded from holding an Arizona contractor’s license. Complainant further contended that Republic ITS is “nothing more that [Republic CA’s] alter ego because it was incorporated…in an effort to circumvent issues involved with [Republic CA’s] making a proposal to the City without possessing valid contractors’ licenses;…there is no apparent difference in officers, etc. among the two entities;... [and] Republic really intends to perform [the contract] work via its alter ego, Republic ITS.” 7. On November 5, 2008, Complainant filed the instant Complaint with the ROC. Therein, Complainant alleged, inter alia, that Republic ITS’s licenses should be “rejected” because obtained through misrepresentation or fraud; Republic ITS was a “sham corporation” formed to avoid the dictates of A.R.S. § 32-1123 imposed on Republic CA; Republic ITS’s ownership, management, assets, etc, failed to substantially or materially differ from those of its parent, Republic CA; Republic ITS had no assets; and, Jeffrey Asch, an officer of both entities, failed to disclose the Registrar’s previous rejection of Republic CA’s licenses. 8. An evidentiary hearing on Complainant’s protest was held November 11, 2008, by Hearing Officer Robert J. Corcoran at which both Complainant and Republic ITS were present and represented by counsel. ROC Assistant Director Alan Felber (“Felber”) was also present and testified. 9. Hearing Officer Corcoran issued a decision on November 17, 2008, which, among other things, rejected Complainant’s objection to the award of the bid to Republic ITS and determined, inter alia, that the ROC issued Republic ITS’ licenses with knowledge of its relationship with Republic CA. 10. On November 12, 2008, the Registrar issued the instant Citation and Complaint charging Respondent Republic ITS with possible violations of A.R.S. § 32-1154(A) (6), (7) and (20). 11. Respondent filed an Answer on December 5, 2008, wherein it asserted a general denial of all allegations and affirmatively asserted, inter alia, that the Complaint is intended to “harass… Republic ITS without a valid basis for doing so…[and that] Republic ITS remains an appropriately formed and maintained Arizona corporation separate and distinct from Republic [CA] and the Registrar’s previous interpretation of A.R.S. § 32- 1123(A) remains correct.”

CONCLUSIONS OF LAW 1. In its motion for summary judgment, Republic ITS asserts, inter alia, that Complainant’s claims asserted in the instant Complaint have already been considered and rejected by the ROC and the City of Phoenix Hearing Officer and, therefore, are barred from being litigated a third time by the doctrines of res judicata and collateral estoppel. Conversely, Complainant contends that the issues raised by the instant Complaint have not been previously litigated and, as a result, are proper for consideration in this matter. In this case, the Registrar issued class L- and A licenses to Republic ITS on August 19, 2008. Although no hearing was held on Complainant’s objection thereto and, therefore, that issue was not technically “litigated,” the issuance of those licenses was an appealable administrative agency action which Complainant failed to appeal. In light of the absence of such appeal, Complainant waived any objection thereto and such issuances must be deemed valid. Lovitch v. Industrial Commission of Arizona, 202 Ariz. 102, 107, 41 P.3d 640, 645 (App.2002). 2. In addition, Republic ITS asserts that the issues raised by Complainant herein were and/or could have been litigated by the parties hereto in the City of Phoenix hearing and, therefore, are barred by res judicata and collateral estoppel. Conversely, Complainant contends, without limitation, that the issues raised by the instant Complaint have not been previously litigated as the sole issue addressed by the City of Phoenix was whether Republic ITS was the most qualified contractor to be awarded the streetlight maintenance contract and the ROC, while represented, was not a party to the City of Phoenix matter. As was established by the uncontroverted testimony of Mr. Felber at the November 11, 2008 City of Phoenix hearing, the ROC issued the referenced licenses to Republic ITS with full knowledge of its subsidiary-parent corporate and fiscal relationships with Republic CA which it determined did not violate A.R.S. § 32-1123. Thus, although it was not the main focus of that hearing, Hearing Officer Corcoran made a specific finding of fact regarding sub-issues included therein, i.e., the ROC’s knowledge of the relationship between Republic CA and Republic ITS and the propriety of the Registrar’s issuance of the referenced licenses. Moreover, by Complainant’s own admission, the Registrar was not a party to the City of Phoenix hearing as were Complainant and Republic ITS. Similarly, the Registrar is not a party to this dispute which is solely between Complainant and Republic ITS.[3] Thus, there is a continuity of parties and at least two sub-issues that were and/or could have been litigated at the City of Phoenix hearing, i.e., whether the ROC had full knowledge of the relationship between Republic CA and Republic ITS and the propriety of the ROC issuing Republic ITS the two licenses both of which are also before this tribunal when considering a violation of A.R.S. § 32-1154(A) (6), (20) and (7).

RECOMMENDED ORDER Based on the foregoing, IT IS RECOMMENDED that Respondent’s motion for summary judgment be granted and the Citation and Complaint pertaining to A.R.S. §§ 32-1154(A) (20) and (7) be dismissed as it is evident that the issue of the ROC’s knowledge of the corporate and fiscal relationships between Respondent and its parent company, Republic CA, was previously litigated between the parties hereto. As a result, it cannot now be claimed by Complainant that there was any “subsequent discovery of facts…which would have been grounds to deny the issuance or renewal of [Republic ITS’s] license” or “wrongful or fraudulent act” by Respondent as addressed in A.R.S. § 32-115(A) (20) and (7), respectfully. Therefore, the doctrines of res judicata and collateral estoppel bar the re-litigation of this issue. IT IS FURTHER RECOMMENDED that Respondent’s motion for summary judgment be granted and the Citation and Complaint pertaining to A.R.S. §32- 1154(A) (6) and (7) be dismissed as the actions of Respondent’s representative, Jeffrey Asch, in completing the ROC license application, were also previously litigated between the parties at the City of Phoenix hearing. While Mr. Asch’s representations regarding sections 12 (b) and 14 of the application were erroneous, the Registrar, according to Mr. Felber, knew of the inaccuracies and nevertheless issued the L-11 and A licenses to Respondent. As a result, the technical violations of A.R.S. § 32-1154(A) are deemed moot and the Complaint regarding same should be dismissed. Done this day, May 13, 2009.

________________________ Brian E. Smith Administrative Law Judge

Copy mailed this ____ day of ______________, 2009 to:

William A. Mundell, Director Registrar of Contractors c/o Legal Department 3838 N. Central Ave. Phoenix, AZ 85012

By _______________________ ----------------------- [1] In this Order, the parties were advised that Respondent’s motion for summary judgment based on res judicata and collateral estoppel arguments would be considered a motion to dismiss. [2] The facts set forth herein, albeit an incomplete account, are taken from the pleadings and attachments thereto submitted by the parties and are intended to set forth the salient events. [3] Based on the facts and applicable law, should Complainant have an issue with the Registrar’s issuance to the referenced licenses to Republic ITS, it should file a complaint against the ROC, not Republic ITS.

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