ALJDEC decisions subject to certification as final

09F-5025-ROC · Registrar of Contractors · 2010-04-12

STATE OF ARIZONA OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 11 & 23, 2010

APPEARANCES: Complainant appeared on his own behalf; Respondent was represented by attorney Robert Roos, accompanied by the company’s Senior Vice President of Estimating and Operations Tom Sjoholm.

WITNESSES: For Complainant: Adie Arom

For Respondent: Jeff Stana, IT Manager Tom Sjoholm

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

Complainant Adie Arom brings this action claiming that he is owed over $100,000 from Respondent Chanen Construction Company for scheduling services Complainant performed as an independent contractor for Respondent during construction of Casino Arizona and for breach of contract. Respondent denies that further payment is owed to Complainant and asserts that Complainant breached the employment agreement. This tribunal entered the complaint file received from the Registrar of Contractors into the record, with the addition of Complainant’s Exhibit packet (including marked Exhibits AR01 through AR09) and Respondent’s Exhibits R1 through R4. The parties presented evidence and testimony at the hearing. Based upon the entire record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and Decision finding no violation of contractor licensing provisions. FINDINGS OF FACT 1. Respondent is the holder of a class B-1 general commercial contractor license (No. 083480) issued by the Registrar of Contractors (“ROC”). That license authorizes Respondent to perform general commercial construction of a structure or appurtenance, except for certain specialty contracting such as electrical, plumbing, swimming pools, etc. 2. Complainant has experience with scheduling large commercial projects. After negotiating with each other, Complainant and Respondent entered into a written employment contract (hereinafter “Agreement”) in October 2008 for “consulting” services that consisted of scheduling services for the Casino Arizona project on the Salt River Pima-Maricopa Indian Community.[1] The Agreement notes that Complainant was hired as an independent contractor for a term of employment of one year. Total compensation was $150,000 to be paid in equal monthly amounts. 3. One term of the Agreement stated: “Company [Respondent] agrees that apart from giving a work assignment to Consultant [Complainant] and except as otherwise provided herein, Company shall not in any way control how or where Consultant structures his work in developing solutions to Company’s problems presented by Company to Consultant.”[2] 4. Another provision stated that Complainant understood and agreed that he was acting as a fiduciary to Respondent and that he had a duty to maintain and protect confidential information that came into his possession as part of his duties. 5. Furthermore, the Agreement stated that all information developed during the term of Complainant’s employment and related to the project belonged to Respondent. 6. Complainant performed his work for several months and was paid $12,500 per month through the end of January 2009. After that point, a dispute arose between the parties and Complainant has not worked under the agreement since. 7. During the last months of 2008, the evidence shows that Complainant performed the work he was hired to do.[3] The people he worked with at the project site were happy with his work. However, beginning in December 2008, Respondent’s upper management, including Vice President of Estimating and Operations Tom Sjoholm, expressed concern about Complainant’s work product. Disagreement between Complainant and Respondent’s upper management developed. Complainant expressed frustration with the attitude and lack of support from management while Respondent expressed concern about Complainant’s work product and work pace. Complainant was also offended by comments made by upper management about his work. 8. This atmosphere continued through January 2009. In mid-January, Complainant sent a letter to Respondent’s President stating the “ground rules” under which he would continue to work. In late January, both parties continued to try to work together to move the scheduling for the project forward. 9. In early February 2009, Complainant was told, without much notice, that his company computer that he had been using would be taken in to the corporate office. Complainant had been provided that computer, including software, by Respondent so that Complainant could work at the jobsite. After October 2008, a month during which Complainant worked at home while the jobsite computer and software were ordered and a trailer at the jobsite was prepared, Complainant worked mostly at the jobsite. He also took work home and worked there as well. 10. Complainant’s computer was taken from the jobsite to Respondent’s corporate office for about one week in early February 2009. Respondent could not access any data on the computer because of password protections that Complainant had placed on the computer. Complainant either did not respond to requests for those passwords or refused (the evidence is not clear) and Respondent tried to “hack” into the data. The result was that Respondent found no data on the computer and believed that Complainant had taken the data home, which Respondent expressed as “stolen data.” 11. Respondent then demanded that Complainant give Respondent copies of whatever work he had done up to that point. Respondent noted that Complainant would not be paid until the data was provided. Complainant then began to state that the work was his private work product and that he had a right to password-protect it and not tell the password to anyone else. Respondent then took the position that Complainant did not have the right to work at home and that Respondent had the right to access Complainant’s work product at anytime, since under the Agreement it was Respondent’s property. Respondent continued to refuse to pay Complainant after January 31, 2009, until Complainant produced a copy of what he had. Complainant responded that what he had was not in a useable format and could not be provided without more work by him, which he threatened to stop doing for lack of payment. Complainant stated that what he had was his own work product using his own software and not the software provided by Respondent. 12. The impasse described above remained through March 2009, when Complainant filed his complaint with the ROC. 13. Complainant takes the position that Respondent breached the Agreement by refusing to pay him after January 31, 2009. He denies that he breached the Agreement. 14. Respondent maintains that Complainant breached the Agreement by refusing to provide the data that he had in February 2009 and that Respondent was justified in withholding payment from Complainant on that basis. 15. The evidence shows a good faith contractual dispute between the parties. Respondent’s position that it is not in breach of contract is reasonable and is held in good faith.[4] CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing is generally upon a complainant.[5] Further, the standard of proof at hearing is by preponderance of the evidence.[6] Therefore, Complainant bears the burden of showing, by a preponderance of the evidence, that Respondent has violated the statutes cited in the Citation and Complaint.[7] Complainant has not met that burden. 2. Per the Citation and Complaint, this case focuses on the “no pay’ provision found in Arizona Revised Statutes (A.R.S.) § 32-1154(A)(11) that prohibits the failure of a licensee to pay monies in excess of $750 “when due for materials or services” rendered in connection with a licensee’s operations when the licensee has the capacity to pay or when the licensee has been paid for the project. 3. The evidence is not sufficient to show that Respondent has violated the no pay provision. Complainant makes a strong case that under the Agreement Respondent is not entitled to direct the location from where Complainant works. On the other hand, Respondent has a strong argument that Complainant was required to give up the data and work product that Complainant possessed in February 2009. Therefore, this tribunal cannot find, in this forum, that the amount claimed by Complainant is due and owing from Respondent. Parties to a contract may have a good faith dispute about their obligations under a contract that would be appropriate for a civil court action but would not rise to the level of a disciplinary violation on a determination that the amount was due and owing as alleged in the Citation and Complaint. A good faith dispute about payment issues should not result in disciplinary action against a license. Those disputes can be taken to court.[8] 4. Complainant has failed to show a violation of statute by Respondent. 5. This matter should be dismissed. RECOMMENDED ORDER Based on the foregoing, it is hereby recommended that the Citation and Complaint against Respondent Chanen Construction Company, Inc. in case 09-5025 be dismissed.

Done this 12th day of April 2010.

Office of Administrative Hearings

/s/ Eric A. Bryant Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] Exhibit 1. [2] Emphasis added. [3] The findings in paragraphs 7 through 11 are based on the testimony presented and e-mail and other correspondence found in Exhibits AR04, AR05, AR06, AR07, and R3. [4] This is not a finding that Respondent has not breached the Agreement, a question that this tribunal does not reach. This tribunal makes no finding that either Complainant or Respondent breached the Agreement. Instead, this tribunal defers that finding to the civil courts of this State and merely finds that Respondent has a good faith defense for breach of contract. [5] Utah Construction Company v. Berg et al, 68 Ariz. 285, 205 P.2d 367 (1949). [6] Smith v. Arizona Dept. of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985). [7] See Culpepper v. State, 187 Ariz. 431, 437, 930 P.2d 508, 514 (Ct. App. 1996) (moving party bears burden of proof by preponderance of evidence in an administrative hearing). [8] This tribunal also considered Respondent’s argument that this case did not fit within the intent of 32-1154(A)(11), but has rejected that argument in this case because the facts fit within the language of the statute—the best indicator of its intent. Complainant provided services to Respondent in connection with Respondent’s operations as a contractor.

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