ALJDEC decisions subject to certification as final

2010A-308473626-ROC · Registrar of Contractors · 2011-02-02

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 20, 2011, at 8:00 a.m. APPEARANCES: Complainant Belisle Construction, Inc. appeared through Rex A. Christensen, Esq.; Respondent AL Tech Energy Management, Inc. appeared through Lesette Reardon, its general manager. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure In October 2001, the Arizona Registrar of Contractors (“the Registrar”) issued License No. ROC169406, Class L-39 for commercial air conditioning and refrigeration to AL Tech Energy Management, Inc. (“Respondent”). In April 2006, the Registrar issued License No. ROC217586, Class B-1 for commercial general contracting to Belisle Construction, Inc. (“Complainant”). On June 7, 2010, the Registrar received a complaint from Complainant’s attorney against Respondent, requesting that the Registrar require Respondent to correct its work to conform to plans and specifications in the following respects: #1 Air conditioning split systems refrigeration piping and accessories need to be modified to meet manufacturer’s specifications, as follows: A. Vapor line needs to be replaced with larger line on all units except AC-6 & AC-7 B. Vapor line trap at the indoor fan coil unit must be provided for all systems except AC-6 & AC-7 C. Cranckcase [sic] heater must be provided for all systems except AC-6 & AC-7 D. The refrigerant charge of each system needs to be checked and adjusted to meet manufacturer’s guidelines, including sub-cooling settings for all systems.

#2. Installation of outside air ducting that is designated to serve AC-1, AC-2 and AC-10 needs to be completed.

Complainant stated on its complaint that “if [Respondent does not correct this work] immediately, then Complainant will have to hire a substitute contractor to fix the work, in which case Complainant will seek reimbursement of the amounts paid to the new contractor.” Complainant attached to its complaint a copy of a proposal from Fidelity Mechanical Contracting, Inc. (“Fidelity Mechanical”), License No. 099891, Class L-39, dated April 27, 2010 to perform the work described on Complainant’s complaint for $32,935.00. The Registrar assigned Complainant’s complaint to Inspector Rick Oelke for investigation. On June 9, 2010, Inspector Oelke sent a letter to the parties, informing them that he had scheduled a jobsite inspection on July 2, 2010, at 2:00 p.m. On June 9, 2010, Inspector Oelke also sent a letter to the parties, informing them that contracting statutes required that Respondent be allowed to inspect its allegedly deficient work within fifteen days. On June 28, 2010, Inspector Oelke informed the parties that he would not conduct a jobsite inspection because Complainant informed him that the complaint items had been corrected. On July 21, 2010, the Registrar received Complainant’s letter stating that it had paid another contractor to correct the complaint items after Respondent had refused to do so, and requesting that the Registrar issue a citation against Respondent. On September 28, 2010, the Registrar issued a Citation and Complaint against Respondent, charging violations of A.R.S. § 32-1154(A)(2) and (3), (namely, A.A.C. R4-9-108). Respondent filed a timely written answer to the Citation and Complaint, denying any statutory violations. Respondent affirmatively alleged that “portions of the HVAC were performed by an independent contract [sic] not affiliated with AL Tech at the Complainant’s insistence” and that Complainant’s cancellation of the jobsite inspection did not afford Respondent “the appropriate means to inspect and facilitate an unbiased determination.” The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. A hearing was held on January 20, 2011, at 8:00 a.m. Complainant presented the testimony of two witnesses: (1) Jerry D. “Colby” Belisle, Complainant’s president and qualifying party; and (2) James L. “Jim” Pechin, Complainant’s project manager and job superintendent for its subcontractor’s repairs to Respondent’s allegedly deficient work at the Primrose School. Complainant submitted seven exhibits. Respondent presented the testimony of Lessette “Lee” Reardon, its general manager, and submitted three exhibits. Hearing Evidence Complainant’s Settlement with BigSister and the Architect Complainant is a large, commercial contractor with operations in many states. The Primrose School is a franchise for daycare or preschool. Complainant contracted with the franchisor for the Goodyear franchise, BigSister, L.L.C. (“BigSister”), to be the general contractor on the Primrose School project. Mr. Belisle testified that after work was substantially completed on the Primrose School project, Complainant and BigSister discovered that although the building was wired for a 3-phase HVAC system, an incompatible single- phase HVAC system had been installed. Mr. Belisle testified that he initially believed that Complainant had failed to catch errors in the plans, not that Respondent had done anything to cause problems in the HVAC system at the Primrose School. Because Complainant did not have a contract with the architect, and the architect would not voluntarily work with Complainant to resolve the problem, Complainant filed suit against BigSister and the architect (“the lawsuit”). Complainant, BigSister, and the architect agreed to mediate the lawsuit. As part of the mediation, LSWE Engineers Arizona, Incorporated (“LSWE”) submitted a report dated April 2010, entitled, “Primrose School HVAC System Review” for Weil & Drage, a law firm.[1] The LSWE report made the following recommendation: All refrigerant piping installations shall be reviewed by an independent factory certified Carrier refrigeration technician. All accessories required for conformance to the Carrier Long Line Guideline published data shall be installed including, but not limited to, vapor line traps, crankcase heaters, etc. . . .

LSWE’s report also recommended that the work described on Complainant’s complaint to the Registrar be performed. At the end of April 2010, Complainant obtained proposals from Fidelity Mechanical and KBK Mechanical, Inc., License No. ROC071436, Class L-39, to perform the work that LSWE’s report recommended. Complainant did not obtain a proposal from Respondent. On or about May 25, 2010, Complainant, BigSister, and the architect entered into an agreement to settle the lawsuit. As consideration for the settlement, the architect agreed to pay BigSister $35,000.00 and Complainant agreed to perform the work that it later set forth on its complaint to the Registrar against Respondent. The settlement required Complainant to submit an action plan to BigSister and to begin the agreed- upon repairs no later than June 15, 2010. On June 14, 2010, Complainant submitted an action plan to BigSister for its subcontractor, Mesquite Mechanical Services, Inc., License No. 243056, Class K-39 (“Mesquite Mechanical”), to perform the repairs that Complainant’s settlement agreement with BigSister and the architect required. Complainant subsequently paid Mesquite Mechanical $9,325.00 for the repairs. Evidence of Respondent’s Responsibility for Complainant’s Settlement No independent factory-certified Carrier refrigeration technician ever reviewed the refrigerant piping installations that Respondent installed at the Primrose School project. Neither the plans for the Primrose School project nor Carrier’s Long Line Guidelines were submitted at the hearing. Mr. Belisle testified that he did not get too involved in Complainant’s individual projects; supervision of subcontractors is the project manager’s role. The project manager who supervised Respondent on the Primrose School project no longer worked for Complainant. Mr. Pechin was Complainant’s project manager when Mesquite Mechanical performed the repairs required by Complainant’s settlement agreement with BigSister and the architect. Mr. Pechin criticized ductwork fittings on the system and Respondent’s alleged failure to draw outside air into the HVAC system. Mr. Pechin testified that the bulk of Mesquite Mechanical’s work was eliminating angles in the refrigerant lines to make the HVAC system more efficient. Mr. Pechin pointed out on photographs where some of the refrigerant lines that Respondent allegedly installed at the Primrose School project included elbows that were 90˚ or greater. Mr. Pechin acknowledged that 90˚ angles in refrigerant lines do not violate applicable codes. He also acknowledged that the manufacturer’s Long Line Guidelines provided its specifications for the number of angles and length of the line, but also acknowledged that Long Line Guidelines were not his area of expertise. Mr. Pechin acknowledged that no one had measured the refrigerant lines that Respondent had installed to see whether they conformed to plan or complied with Carrier’s Long Line Guidelines. Mr. Belisle acknowledged that Complainant had not involved Respondent in the lawsuit or in the process that led to the settlement agreement with BigSister and the architect. Ms. Reardon testified that Carrier’s Long Line Guidelines applied to refrigerant lines that exceeded 80’ in length. Although angles in the line effectively cause the lines to be longer under the guidelines, Ms. Reardon testified that she measured the refrigerant lines on the plans for the Primrose School project and that only three of the nine lines exceeded 80’. Nonetheless, Respondent applied the guidelines to four of the lines. Ms. Reardon testified that Respondent’s work passed all city inspections and that Complainant paid Respondent for its work on the refrigerant lines. Ms. Reardon pointed out that Respondent was not the only HVAC subcontractor who worked at the Primrose School project before the problem arose that led to the lawsuit. On July 24, 2008, Complainant back-charged Respondent $1,312.50 for work performed by Alliance Comfort Systems, License No. 243344, Class K-39, to level some of the units and re-pipe drain lines and p-traps. CONCLUSIONS OF LAW 1. This matter lies within the Registrar’s jurisdiction.[2] 2. Complainant bears the burden of proof and must establish Respondent’s statutory violations by a preponderance of the evidence.[3] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[4] 3. “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[5] A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”[6] 4. Under the contracting statutes, in most cases involving contested workmanship complaints, the Registrar’s inspector performs a jobsite inspection. If the inspector opines that the workmanship is deficient, he directs the contractor to correct the workmanship before the Registrar suspends, revokes, or otherwise disciplines its license.[7] In all cases, a contractor must be afforded an opportunity to inspect its allegedly deficient workmanship.[8] In this case, no jobsite inspection was performed by the Registrar’s inspector, an independent factory-certified Carrier refrigeration technician, or any other independent third party, and Respondent was not afforded any meaningful opportunity to inspect or correct its work. 5. Complainant, BigSister, and the architect unilaterally agreed on apportionment of fault in their settlement agreement, without affording Respondent any opportunity to defend itself. Neither Complainant’s settlement of its lawsuit against BigSister and the architect nor Complainant’s evidence at hearing established that Respondent violated A.R.S. § 32-1154(A)(2)[9] or (3) (namely, A.A.C. R4-9-108).[10] 6. With respect to the monetary compensation that Complainant asked the Registrar to order Respondent to pay as a condition of keeping its license in good standing, the legislature has not empowered the Registrar to adjudicate or award monetary or consequential damages.[11] Complainant’s claimed monetary loss resulted from its unilateral decisions to settle its lawsuit and to hire another contractor to comply with the settlement,[12] not directly from Respondent’s violation of any contracting statute. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Registrar’s final order in this matter, the Registrar dismiss Belisle Construction, Inc.’s complaint in Case No. 2010-[number redacted] against Respondent AL Tech Energy Management, Inc.’s License No. ROC169406, Class L- 39. 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, February 2, 2011.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] The record does not disclose whether Weil & Drage represented one of the parties or provided mediation services in the lawsuit. [2] See 32-1101 et seq. [3] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and (B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [4] See A.A.C. R2-19-119(B)(2). [5] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [6] Black’s Law Dictionary at page 1220 (8th ed. 1999). [7] See A.R.S. § 32-1154(A)(23) (including among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure to take appropriate corrective action to comply with this chapter or with rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving a written directive from the registrar.” [8] See A.R.S. § 32-1155(C)(1). [9] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[d]eparture from or disregard of plans or specifications or any building codes of any state or any political subdivision of the state in any material respect which is prejudicial to another without consent of the owner or the owner’s duly authorized representative and without the consent of the person entitled to have the particular construction project or operation completed in accordance with such plans and specifications and code.” [10] This statutory subsection includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[v]iolation of any rule adopted by the registrar.” The rule cited was A.A.C. R4-9-108, which requires that “[a]ll work shall be performed in a professional and workmanlike manner” and that “[a]ll work shall be performed in accordance with any applicable building codes and professional industry standards.” [11] See J.W. Hancock Enterprises, Inc. v. Arizona State Registrar of Contractors, 142 Ariz. 400, 406, 690 P.2d 119, 125 (Ct. App. 1984). [12] “Consequential damages are such as are not produced without the concurrence of some other event attributable to the same origin or cause; such damage, loss, or injury as does not flow directly and immediately from the action of the party, but only from the consequences or results of such act.” 25 C.J.S., Damages, § 2 at 617 (quoted in State v. Morris, 173 Ariz. 14, 17, 839 P.2d 434, 437 (App. 1992)).

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