ALJDEC decisions subject to certification as final

2007A-11037997-ROC · Registrar of Contractors · 2013-06-03

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: April 9, 2013 and May 13, 2013 (closing arguments only)

APPEARANCES: Complainants appeared and were represented by their attorney C. Adam Buck, Esq.; Respondent was represented by attorney James B. Rolle, III, Esq., accompanied by Qualifying Party John LaPota.

WITNESSES: John LaPota Ella Springfield, Copper Sun Construction, LLC Richard Meyer

ADMINISTRATIVE LAW JUDGE: Eric A. Bryant _____________________________________________________________________

This matter is a compliance hearing to determine whether Respondent has complied with a final Order issued by the Registrar of Contractors (“Registrar” or “ROC”). The Order required Respondent to perform corrective work described as removal and replacement of tile flooring in Complainants’ house. Respondent alleges that it was not allowed reasonable access to perform the required corrective work. Complainants deny the allegation that there was a lack of reasonable access and also affirmatively assert that Respondent failed to comply with the Order. This tribunal entered the full complaint file received from the Registrar into the record, which includes documentation relating to the underlying complaint and relating to the question of compliance with the Order. In addition, Complainants’ Exhibits C1, C2, C3A through C3F, C4A through C4D, C5, C6, C7A through C7D, and C8 through C11 were admitted, along with Respondent’s Exhibits R1 through R24 (excluding R2 and R11, and including R5a).[1] Before the hearing began, Complainants moved for summary judgment on the basis of collateral estoppel, claiming that the parties had litigated the issue in Superior Court. Respondent opposed the motion and, eventually, the issue was fully briefed and argued by the parties. The motion was taken under advisement by the Administrative Law Judge and a hearing on the merits was held as well. This Administrative Law Judge Decision makes recommended rulings for both the summary judgment motion and on the merits of the case, so that a complete record is sent to the Registrar. Ruling on Motion for Summary Judgment: Is Respondent Estopped from Claiming That Complainants Did Not Provide Reasonable Access? [2] ANSWER: YES

The parties stipulated at hearing that no work was performed by Respondent. Thus, the only issue in dispute is whether Complainants allowed reasonable access to perform the work. Complainants contend that the issue has already been decided against Respondent in Superior Court and cannot be re-litigated here. Respondent disagrees. The ROC complaint in this matter was filed in 2007. A final Order was issued in February 2009, ordering Respondent to remove and replace the tile flooring before April 2009. Sometime in 2007, Respondent had filed an action against Complainants in Pinal County Superior Court based on the same contract that is the basis for the ROC complaint and seeking payment on that contract. Complainants had filed a counterclaim. The Court matter was delayed, first by waiting for the ROC hearing and Registrar’s decision and then by Respondent’s filing of bankruptcy in May 2009. In early 2009, the Court had not yet held a trial. In December 2009, after a lifting of the bankruptcy stay was obtained, Pinal County Superior Court Judge William O’Neil granted summary judgment in favor of Complainants as to liability on the contract, relying on the ROC Order from February 2009, to find a breach by Respondent.[3] In that decision, Judge O’Neil made several striking findings and conclusions, emphasizing Respondent’s stubborn belief that its work met standards and finding that Respondent delayed resolution of the action: [Respondent] continues to argue that it has done nothing wrong; that the tile was apparently installed perfectly or that its actions in ignoring its contractual obligations were merited. Its reasoning is as flawed as its supplemental response. Instead, in what appears to be nothing short of a delaying action, [Respondent makes irrelevant arguments]. . . .

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[Respondent]’s actions make clear the justification for [Complainants’] concerns with having [Respondent] re-enter their home, considering [Respondent’s] contentious and unmitigated avoidance and delaying tactics. For [Respondent] to base an argument upon the premise that having filed for protection of bankruptcy that a homeowner who has already been wronged by a corporation should open its doors and allow them back in the home to potentially wreak further damages and hide under the protection of bankruptcy is without merit. . . . [N]othing within this nearly three year litigation demonstrates anything but litigious avoidance by [Respondent].

A non-jury trial on the issue of damages was set. On January 26, 2010, the Court held a bench trial on the issue of damages at which both Richard Meyer and John LaPota testified. During cross-examination of Mr. Meyer, Respondent offered evidence to “show[] an effort to cure or an attempt to show a willingness to cure” by Respondent that “goes to mitigation. . . .”[4] In addition, there was evidence during redirect examination regarding an April 2009 proposal for correction by Respondent that Complainants “had problems” with.[5] In its closing argument to the court, Respondent argued that the evidence showed “a continuing willingness by [Respondent] to correct the claimed deficiencies as early as January 2007.”[6] Respondent also argued that Complainants did not allow Respondent access to do the work,[7] even after the final Order had been issued.[8] The Court bought none of it. On April 28, 2010, Judge O’Neil issued a decision on damages that included Findings of Fact and Conclusions of Law.[9] After describing the history of the case and the parties’ actions from the time of the contract in 2006, the Court made findings about the ROC Order of February 2009, noting the ordered corrective work, at which point the Court stated: “This Court further finds [Respondent] failed and refused to follow the Registrar’s orders resulting in damages to [Complainants].”[10] The Court awarded Complainants $62,000.00 in damages.[11] The Court’s ruling, by necessary implication, includes a rejection of Respondent’s argument that Complainants denied access. The judicial doctrine of res judicata is part of administrative law.[12] Collateral estoppel (issue preclusion) “bars relitigation between parties of issues necessary to a determination in a different proceeding.”[13] Preclusion of re-litigating an issue requires five elements: “(1) issue is actually litigated in previous proceeding; (2) full and fair opportunity to litigate the issue; (3) resolution of such issue is essential to decision; (4) valid and final decision on the merits; (5) common identity of parties.”[14]

All five elements must be present. The Administrative Law Judge finds that all five elements exist here. First, the issues of whether Complainants allowed Respondent access and whether Respondent attempted to comply with the February 2009 ROC Order were raised by Respondent at trial and argued by Respondent in its closing argument. Thus, those issues were actually litigated and Respondent had a full and fair opportunity to litigate them. Next, because Respondent raised those issues as issues of mitigation of damages, and because the issue before the Court was the assessment of damages, resolution of those issues was essential to the Court’s decision. And finally, there is no question that Judge O’Neil’s decision is a valid and final decision on the merits and that the parties in that action are the same here. Therefore, the Administrative Law Judge concludes that the parties have already litigated the issue in this compliance hearing and should be bound by that decision, which was against Respondent. This tribunal recommends that the Registrar find that he is bound by the Pinal County Superior Court ruling of April 28, 2010, and find that reasonable access was given and that Respondent is not in compliance. Ruling on the Merits: Was There Unreasonable Interference? Was There Compliance?[15] ANSWERS: NO

The parties presented evidence and testimony at the compliance hearing. Based upon the entire record, the Administrative Law Judge makes the following Findings of Fact, Conclusions of Law, and alternate Recommended Order finding that Respondent is not in compliance. Procedural Background Following an administrative hearing, the Registrar issued a February 25, 2009 Order that adopted a January 30, 2009 Administrative Law Judge Decision and ordered Respondent to perform corrective work or have its license suspended.[16] The Registrar’s Order adopted the Administrative Law Judge’s Recommended Order that stated: Within 60 days of the effective date of the Order entered in this matter, Power’s Class C-08 license (No. 201817) . . . shall be suspended unless the ROC receives written proof that Power . . . ha[s] removed and replaced, at their sole expense and with comparable quality tile, all of the tile in the Meyers’ home in a professional, workmanlike, and effective manner, and in accordance with industry standards.[17]

The Order gave Respondent until April 6, 2009, to perform the work and file written proof of compliance. After much correspondence between the parties and the ROC, including requests for clarification and other motions to the ROC, the Registrar re- opened the case and issued an order setting the matter for compliance hearing. The Registrar’s February 1, 2013 Order Reopening Complaint and Setting Compliance Hearing provides a detailed listing of the correspondence to the ROC that occurred between 2009 and 2013 and states that the compliance hearing is to determine “whether or not Complainants have denied Respondent access to comply with the Registrar’s directives or whether or not Respondent has failed to comply with the Registrar’s directives, absent unreasonable interference by Complainants.”[18] FINDINGS OF FACT 1. Respondent is the holder of License No. C-8.201817-R. John LaPota is Respondent’s Qualifying Party. All actions of behalf of Respondent in this matter were performed by John LaPota. Respondent’s license expired in December 2010. 2. As noted above, Respondent was required to perform corrective work under the terms of the Registrar’s February 25, 2009 Order. Moreover, Respondent was to perform that work and provide written proof of compliance to the Registrar on or before April 6, 2009,in order to avoid suspension. 3. The evidence shows that on March 2, 2009, Respondent sent a note to Complainants asking them to pick out replacement tile.[19] 4. On March 31, 2009, Complainants’ counsel sent a letter to Respondent’s counsel regarding compliance with the Order.[20] The letter asks if Respondent is going to comply with the Order or let its license be suspended. It also notes that if Respondent is going to comply then “a lot of coordination” will need to take place to deal with the moving the furniture in and out and other items, and to deal with dust control issues due to serious health conditions that Complainants’ experience. Counsel noted that Complainants would not be able to live at the house while the work was being performed, so “alternative housing arrangements” needed to be made. The letter is a short and reasonable request for information. 5. On April 1, 2009, Respondent sent a letter to Complainants in order to “clear up” what Respondent was going to do at the house.[21] It included the following list: 1) Remove and replace your tile with like quality tile. 2) Remove and replace any backer boards that are damaged by the removal of the tile. 3) Install the nails required by ANSI and [W]onder [B]oards [sic] standards in the spacing required. 4) Fill in any spacing around the backer boards as required by [W]onder [B]oard. 5) Move any furniture within the interior or your home.

Respondent asked Complainants to move “any small breakable items” and noted that upon completion Respondent would “thoroughly vacuum the entire house.” Respondent then stated it would only do the five listed items and would take other suggestions, but only if they were written in the “orders from ROC.” 6. On April 8, 2009, Respondent’s counsel sent a letter to Complainant’s counsel in response to the March 31, 2009 letter.[22] Much of the letter addresses topics not relevant to compliance. However, the conclusion of the letter is that Respondent was “ready, willing, and able to remove and replace the tile.”[23] Then, the letter states: However, there is nothing in the ALJ/ROC Order which requires my client to replace underlayment, to remove their furniture to a satellite location, to put your clients up in a five-star hotel during construction, or any of the other outlandish demands that your clients are making.[24]

The Administrative Law Judge finds that statement to be without support, as the Order required Respondent to perform the work in a professional manner and at Respondent’s sole expense. This would include proper underlayment and reasonable accommodations for both Complainants’ property and person. Complainants were being reasonable. 7. On April 21, 2009, Complainants’ counsel responded by letter.[25] That letter points out that a CWO had been issued that required Respondent to install cementitious backer units and that the ALJ had relied on Complainants’ expert witness who stated that cementitious backer board installation was necessary. The letter also emphasized the Order’s language “at their sole expense.”[26] Complainants’ counsel then addressed the April 1, 2009 list of five items from Respondent, providing helpful guidance from the manufacturer of Wonder Board as to its proper use and installation. He concluded that “the proposed repairs of [Respondent] will not bring the floor into compliance. . . .” The letter concluded by stating that, even though both Complainants had been having some medical issues, they would soon visit tile distributors to pick out tile. Complainants asked Respondent for “a clear written plan as to how [Respondent] intends to address all the items defined in [the] letter [dated] March 31, 2009.” They also offered to agree to an extension of time within which to comply. 8. Again, the Administrative Law Judge finds the April 29, 2009 letter from Complainants’ counsel to be reasonable and supported by the evidence. 9. On May 1, 2009, Respondent sent a letter to the ROC asking for closure of the case due to Complainants alleged non-cooperativeness.[27] 10. On May 7, 2009, Complainants filed with the ROC a request for extension of the time within which Respondent could comply with the Order.[28] This led to the bizarre result of Respondent first objecting to an extension,[29] and then joining in the request.[30] This was explained at hearing by the parties to be that, at first, Respondent wanted closure for lack of access and then the parties came close to “settling” and needed more time. 11. On May 18, 2009, an event occurred that the parties do not agree about. According to Richard Meyer, Respondent was scheduled to come to the house and meet Complainants. He believed that they had some sort of settlement agreement to discuss. John LaPota testified that the parties were going to meet on May 18 to discuss how Respondent would perform the corrections, but that Complainants cancelled the meeting the day before it was to happen. Mr. Meyer testified that Complainants did not cancel the meeting and actually waited for Respondent to show up to it. There is no documentation in the evidence to corroborate either version and the testimony is based on events that were nearly four years old at the time. Thus, it is difficult to determined what actually happened. 12. Because the evidence is not sufficient as the “cancelling” of the events of May 18, 2009, the Administrative Law Judge does not find that Complainants unreasonably denied access on that occasion. 13. On May 22, 2009, Respondent filed a voluntary bankruptcy petition[31] and stopped doing business.[32] At that point, Complainants reasonably lost all faith in Respondent’s willingness to perform the work. 14. At hearing, Respondent called Ella Springfield to testify on its behalf. She is a principal of Copper Sun Construction LLC, holder of ROC License No. KB-2.211192-D. She testified that she was ready to perform the removal of the tile at Complainants’ house and described what measures she would have taken to control the dust. While her testimony is descriptive, there is no evidence that any of that information was ever relayed to Complainants in response to their stated concerns about dust during tile removal. In fact, Mr. Meyer credibly testified that he had never that information until the hearing. Therefore, Ms. Springfield’s evidence is given no weight in determining compliance. 15. The evidence fails to show that Complainants unreasonably denied access to Respondent. Instead, it shows that Complainants has reasonable questions about coordination of the work, and that Respondent was uncooperative. Respondent was given reasonable access to perform the corrective work, but failed to do so. CONCLUSIONS OF LAW 1. The burden of proof at an administrative hearing is generally upon the party asserting a claim, right, or entitlement.[33] Further, the standard of proof at hearing is by preponderance of the evidence.[34] Since the January 12, 2012 Order required Respondent to show compliance, Respondent bears the burden of showing, by a preponderance of evidence, that it has complied with that Order, absent a lack of reasonable access.[35] Respondent has not met that burden. 2. The evidence shows that Respondent was given reasonable access and failed to comply with the February 25, 2009 Order. Although Respondent is correct to point out that the ROC generally does not allow a homeowner to dictate to the contractor how to make corrections, the applicable standard in a compliance case is “reasonable access.” Here, given the history and circumstances of the case, it was reasonable for Complainants to seek information about how Respondent intended to treat their property and make the corrections, and it was reasonable for them to expect Respondent to coordinate with them. Contrary to what Respondent seems to believe, the onus for compliance is placed on Respondent, and Respondent must do everything in its power to effect compliance, absent unreasonable interference by Complainants. In this case, the alleged “interference” by Complainants was simply reasonable questions and expectations. 3. As noted in the Order Reopening Complaint and Setting Compliance Hearing: “If it is determined that Respondent failed to comply with the terms of the February 25, 2009 Order, absent unreasonable interference by Complainants, Respondent’s C-8.201817-R License shall be subject to the immediate imposition of discipline.” 4. Immediate revocation of the license is warranted. The expired status of Respondent’s license leaves no other viable alternative. Complainants may seek relief from the Residential Contractors’ Recovery Fund. RECOMMENDED ORDER IT IS RECOMMENDED that, License No. C-8.201817-R, held by Power Carpet & Tile LLC, be immediately revoked.

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 the date of that certification.

Done this day, June 3, 2013.

/s/ Eric A. Bryant Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] Exhibits R2, R11, and C12 (audio recording that were marked but not transcribed) are telephone conversations between the parties. The offer of these exhibits was taken under advisement due to foundation issues. The Administrative Law Judge ordered during the hearing that only transcripts of the conversations would be admitted and only if the parties stipulated to them or if they were transcribed by a certified transcriber. By the end of the hearing, neither party had offered either stipulated or certified transcripts. Therefore, Exhibits R2, R11, and C12 have not been admitted. This tribunal notes that Exhibits C1 (Administrative Law Judge Decision issued January 30, 2009) and C2 (ROC Order issued February 25, 2009) are part of the underlying complaint file and are the basis for this compliance action. [2] Any relevant facts are stated in the light most favorable to the non- moving party, which is Respondent. [3] Exhibit C8. [4] Id. at 49. The issue is raised by Respondent again at page 51. [5] Id. at 68-70. [6] Motion for Summary Judgment (filed with OAH on March 29, 2013), Exhibit (Closing Argument of Power Tile & Carpet LLC) at 3. [7] Id., Exhibit 11 at 7. [8] Id., Exhibit 11 at 8. [9] Exhibit 10. [10] Id. at 2. [11] Id. at 3. [12] J.W. Hancock Enters. v. Ariz. State Registrar of Contractors, 142 Ariz. 400, 409, 690 P.2d 199, 128 (App. 1984) (quoting Campbell v. Super. Ct., 18 Ariz. App. 287, 501 P.2d 463 (1972)). [13] J.W. Hancock, 142 Ariz. at 410, 690 P.2d at 129. [14] Id. [15] As stated before, in the event that the Registrar determines not to accept the Administrative Law Judge’s recommendation to apply collateral estoppel and find non-compliance, the Administrative Law Judge hereby makes factual findings and an alternative recommendation based on the merits of the case. [16] Exhibit C2. [17] Exhibit C1. References to Respondent’s subcontractor, Courtesy Tile, have been removed. [18] The Order Reopening Complaint and Setting Compliance Hearing is incorporated herein by reference. [19] Exhibit C3A. [20] Exhibit C3B. [21] Exhibit C3C. [22] Exhibit C3D. [23] Id. at 2. [24] Id. [25] Exhibit C3E. [26] That provision is plural because a tile subcontractor of Respondent’s was also a party to that Order. That subcontractor is not a named party in this compliance action. [27] Exhibit C3F. [28] Exhibit C4A. [29] Exhibit C4B and C4C. [30] Exhibit C4D. [31] Exhibit C5 [32].Testimony of John LaPota. [33] Arizona Administrative Code (A.A.C.) R2-19-119(B). [34] Smith v. Arizona Dept. of Transportation, 146 Ariz. 430, 706 P.2d 756 (App. 1985). [35] Culpepper v. State, 187 Ariz. 431, 437, 930 P.2d 508, 514 (Ct. App. 1996).

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