ALJDEC decisions subject to certification as final

2011A-4206-ROC · Registrar of Contractors · 2012-01-23

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 4, 2012, at 8:00 a.m. APPEARANCES: Complainant Max A. Butler appeared on his own behalf; Respondent J.R. Perkins Company, Inc. appeared through Richard William Larsen, its qualifying party and general manager. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure In August 1985, the Arizona Registrar of Contractors (“the Registrar”) issued License No. C39R.063344-R for residential air conditioning and refrigeration to J.R. Perkins Company, Inc. (“Respondent”). On July 22, 2011, the Registrar received a complaint from Max A. Butler (“Complainant”) regarding Respondent’s failure on January 4, 2011, to repair an air conditioning unit on a house that Complainant owns at 5301 North 83rd Place, Scottsdale, Arizona 85250. Complainant requested that the Registrar require Respondent to “[h]onor the January 4th contract as well as the extended warranty which they sold with the unit.” The Registrar assigned Complainant’s complaint to its inspector, Jeff Fleetham, for investigation. On August 9, 2011, after Inspector Fleetham performed a jobsite inspection, he sent a letter to the parties, informing them that he had determined to close the complaint unless Complainant requested further review, in relevant part as follows: Complainant states he has evidence that he does not want to present at time of inspection, but will provide at an Administrative Hearing.

Complainant’s allegations and concerns are taken from the original complaint filing and are listed below with Inspector’s comments in italics

On 1/4/11 a service technician from J.R. Perkins Heating & Cooling came to my home and removed the system’s outdoor fan motor. As he struggled to remove this motor, he snapped off a weld on the motor mounting bracket. He explained that the broken motor mount would be easily fixed and that he could simply solder it back together. After further discussion, we agreed that an attempt to solder aluminum was not the ideal approach and he agreed to replace the broken motor mount on a follow-up visit. • Unable to determine cause or assign fault for broken motor mounting bracket at time of inspection

The tech then bolted in a new motor onto the now broken bracket. After he finished installing the new motor, he stated that my machine would require a different motor altogether and proceeded to call his operations manager. • No deficiency demonstrated or observed at time of inspection.

I then received a call from Scott with J.R. Perkins who stated that I would need to pay J.R. Perkins $1,200 for a new motor plus an additional $200 to $300 for additional work, including a new motor mounting bracket. Scott then stated that if I did not agree to these terms and pay this sum, that that [sic] he would nullify my unit’s Trane extended warranty. I told Scott that this did not sound reasonable and that I would prefer to speak directly with Trane before proceeding with repairs beyond the scope of my Trane extended warranty. • ROC does not regulate charges.

As I was contacting Trane by phone the technician uninstalled the new motor and re-installed the old motor onto the now broken motor mounting bracket. • Inspector has no first hand knowledge.

In the meantime I called Trane and explained the situation. Trane stated that there was no issue with covering the repairs under my Trane extended warranty. The Trane representative agreed to call JR. Perkins on my behalf. • Inspector has no first hand knowledge.

Several minutes later I received a call from Jenifer [sic] with J.R. Perkins who apologized for the, “misunderstanding” and stated that the repairs would be covered under my Trane extended warranty. • Inspector has no first hand knowledge.

The technician then stated he would order the necessary parts and return later that week. He then wrote and signed an itemized contract (please see page 5) stating the needed repairs and that these repairs would be covered under my Trane extended warranty. • No contract provided by complainant at time of inspection. • Document provided with original complaint filing is a technical diagnoses form. No cost listed.

On 1/5/11 I received a call from J.R. Perkins H. & C. who stated that they had just gotten off the phone with Trane and had some bad news. Jenifer [sic] with JR. Perkins then stated that Trane had inexplicably decided to void my extended warranty policy and that I would need to pay for the repairs [o]ut of pocket. • Inspector has no first hand knowledge.

On 1/6/11 I called Trane with regards to J.R. Perkins statements and was told by Trane that they had neither been contacted by J.R. Perkins regarding the repair nor were they aware of any warranty issues. • Inspector has no first hand knowledge.

On 1/6/11 I called J.R. Perkins and spoke with Jenifer [sic] who made a series of statements contradictory to Trane. • Inspector has no first hand knowledge.

Normally I would have solved the problem with J.R. Perkins by calling another company to have my unit repaired[.] However, It [sic] is my understanding that J.R Perkins is the sole company authorized by Trane to perform repairs on my Trane unit. • Inspector has no first hand knowledge.

Based on the above experiences I must conclude that J.R. Perkins Company Incorporated committed the following: 1. Inadequate heat was aggravated by the contractor’s actions, inaction and fraudulent behavior. • Inspector has no first hand knowledge. • Complainant states he has evidence that he does not want to present at time of inspection, but will provide at an Administrative Hearing 2. The contractor abandoned/refused to perform a contract after submitting a bid on work and without legal excuse for the abandonment/refusal. • No contract provided at time of inspection.

3. The contractor did fraudulent acts resulting in another person being substantially injured. • Inspector has no first hand knowledge.

4. The contractor failed in a material respect to complete a construction project for the price stated in the contract. • No contract provided at time of inspection.

5. The contractor failed or neglected to apply funds, which were received for the purpose of obtaining or paying for services, labor, and materials. • Inspector has no first hand knowledge.

6. The contractor used false and misleading advertisements for the purpose of inducing a person to enter into a contract and to pay money for work to be performed. • Inspector has no first hand knowledge.

7. The contractor made false and misleading statement for the purpose of inducing a person to enter into a contract and pay money for work to be performed. • Inspector has no first hand knowledge.

8. The contractor[‘]s work was not performed in a good and workmanlike manner. • Unable to determine cause or assign fault to broken motor mount at time of inspection

9. The contractor performed work that was deliberately and negligently in violation of building codes and/or safety laws. • No deficiency demonstrated or observed at time of inspection.

10. The contractor performed work that failed to meet minimum acceptable trade or industry standards or practices and that was not performed in a good and workmanlike manner. • See # 9

11. The contractor performed work that has caused loss or damage to the structure, its appurtenances or property being worked upon and has caused loss and injury to the property owner/occupant including but not limited to inadequate heat. • Inspector has no first hand knowledge.

(Emphasis in original.) On August 24, 2009, Complainant filed a request for hearing and to amend his complaint to allege a claim that Respondent engaged in false and deceptive advertising. On September 27, 2011, the Registrar issued a Citation and Complaint against Respondent, charging violations of A.R.S. § 32-1154(A)(2), (3), namely A.A.C. R4-9-108, (9), (13), namely A.R.S. § 32-1158, and (16). Respondent filed a timely written answer to the Citation and Complaint, denying any violation of A.R.S. § 32-1154(A)(2), (3), (9), or (13). With respect to the charged false advertising in violation of A.R.S. § 32- 1154(A)(16), Respondent acknowledged that its website erroneously stated that all of its service technicians were certified by North American Training Excellence (“NATE”), when only two of its four technicians were so certified. Respondent stated that the error was due to an oversight and had been corrected. The Registrar referred the matter to the Office of Administrative Hearings, an independent agency, for an evidentiary hearing. A hearing was held on January 4, 2012. Inspector Fleetham testified. Complainant submitted 19 exhibits and testified on his own behalf. Respondent submitted seven exhibits and presented the testimony of Rich Larsen, its qualifying party and general manager. According to the Registrar’s records, Respondent’s license is current and in good standing. Complainant’s complaint appears to be the only complaint pending against the license. Additional Evidence On or about July 10, 2001, a former owner of the house at 5301 North 83rd Place (“the house”) installed a new air conditioning unit manufactured by Trane. The former owner also purchased a 10-year extended warranty on the unit from Trane. Trane’s extended warranty excludes “Repairs to correct failures or malfunctions that are [due to] the improper selection, installation, or application of the equipment” and “Any work performed by any servicer not approved by Trane’s Extended Warranty Department.” On or about June 25, 2010, Complainant purchased the house from the federal Department of Housing and Urban Development (“HUD”). HUD acquired the house from mortgage lender MetLife Home Loans (“Metlife”) on or about March 9, 2010. Metlife acquired the house through foreclosure on or about February 8, 2010, from a successor to the owner who purchased the extended warranty from Trane in 2001. The Trane extended warranty contract was transferred to Complainant when he purchased the house. Trane has approved Respondent to perform repairs covered by Trane’s extended warranty contracts with property owners in the Phoenix metropolitan area. Because Respondent had performed repair work to the unit at Complainant’s house under Trane’s extended warranty before Complainant purchased the house, its name and contact information was on a sticker on the air conditioning unit. Trane has authorized other HVAC contractors in the Phoenix metropolitan area to perform repair work under Trane’s extended warranty contracts with homeowners. In January 2011, Complainant contacted Respondent because the heater on the air conditioning unit on his house was only working intermittently. On January 4, 2011, Respondent’s service technician, Ivan Flores, inspected the air conditioner. Mr. Flores prepared a service invoice that included the following diagnosis: Unit needs new variable speed outdoor fan motor, rewireing [sic], contactor and motor support mounts. We need to order motor and support. Unit has 10 years [Parts] & [Labor].

The area on the service invoice for customer was left blank and the word “warranty” was circled. The service invoice did not include any description of work or dollar amounts. Complainant testified that when Mr. Flores removed the condenser motor to take to his truck, Complainant heard a “loud snap.” Complainant testified that Mr. Flores told him that he would repair the support mount when he replaced the motor. Mr. Larsen testified that Trane is the only manufacturer whose air conditioning condensers have variable motors, which are expensive. Mr. Larsen testified that the Trane variable-speed condenser motor at Complainant’s house had been replaced with a single-speed motor and that the wiring harness had been cut to disable the variable speed connections. Mr. Larsen testified that Mr. Flores would have reported his diagnosis to Respondent’s office staff, who would have contacted Trane’s warranty department to determine whether it would approve repairs under its extended warranty. According to Respondent’s records, on January 4, 2011, Trane personnel informed Respondent that the extended warranty would not cover repairs or replacement of the single-speed motor because non-authorized personnel had replaced the Trane variable-speed motor with a non-authorized part. After Respondent’s office staff informed Mr. Flores that Trane would not cover repairs to or replacement of the motor under its extended warranty contract with Complainant, Mr. Flores returned to the condenser the single- speed motor that he had removed. Mr. Larsen testified that Mr. Flores said that he did not break the support mount. Nonetheless, Respondent offered to repair the motor mount but Complainant did not respond. Mr. Larsen testified that unless Trane authorizes repairs, it will not pay Respondent under the extended warranty. Inspector Fleetham testified consistently with his August 9, 2011 letter to the parties. Complainant submitted a printout from Respondent’s website that stated that all of Respondent’s service technicians are NATE-certified. Complainant also submitted printouts from service websites Kudzu, City Search, Judy’s Book, and Simply the Best that showed very similar positive reviews about Respondent. Complainant argued that Respondent must have fraudulently submitted the positive reviews. Both parties submitted a letter from Nicole Field, Customer Relations Team Lead at Trane, dated December 12, 2011, in relevant part as follows: In January 2011 both you and your air conditioning heating contractor, [Respondent], contacted the extended warranty department in regards to the above mentioned contract. It has come to my attention that conflicting information was provided and the purpose of this letter is to clarify Trane’s position and to offer resolution.

There was a need to have your heat pump outdoor unit repaired as a result of your complaint of lack of heat. Standard Trane Warranty Company (“STWC”) confirmed to you that the repair would be covered under the terms and conditions of your extended warranty. However, when [Respondent’s] service technician arrived at your home he found some non-original equipment manufacturer (OEM) modifications had been made to your heat pump outdoor unit that were possibly the root cause of the lack of heating performance. The service technician contacted STWC with the information about the heat pump outdoor unit modification and he was told this modification voided your extended warranty.

The information provided to [Respondent’s] service technician was incorrect. Based upon the terms and conditions of your extended warranty contract STWC should have allowed [Respondent] to repair your heat pump outdoor unit and compensated them per the current task times and program details sheet. STWC would not be responsible to pay for modifications to your heat pump outdoor unit that are non OEM approved.

If the outdoor heat pump is still in need of repair STWC would be glad to have a one [sic] of our service providers come to you [sic] home and correct the problem at no cost to you. If the outdoor heat pump unit has already been repaired we will be glad to review the service invoice and reimburse you for reasonable expenses incurred for repair that are covered by the terms and conditions of the extended warranty. . . .

(Emphasis added.) Complainant submitted into evidence CDs and transcripts of conversations that he had with Rachel Thompson at Trane, Jennifer in Respondent’s office, and Scott Bossen in Respondent’s office. Ms. Thompson told Complainant that Trane had authorized repairs, and Jennifer told Complainant that it had not. Mr. Larsen testified that Trane is a large company, that warranty service and customer service are different departments, and that Trane employees may not know about their colleagues’ conversations regarding warranty repairs or customer service. Complainant testified that he did not want Respondent to perform repairs at his house pursuant to his extended warranty from Trane. Complainant testified that he did not trust Respondent because he believed that it had deliberately sabotaged the unit to “double-bill” for repairs. Complainant requested that the Registrar require Respondent, as a condition of keeping its license in good standing, to pay for the repairs to Complainant’s air conditioning unit if Trane refused to do so. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[1] Complainant bears the burden of proof to establish Respondent’s statutory violations by a preponderance of the evidence.[2] Respondent bears the burden to establish affirmative defenses by the same evidentiary standard.[3] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[4] Complainant did not establish that Respondent sabotaged the unit or broke the support mount for the motor. Complainant’s extended warranty contract was with Trane, not Respondent. Respondent’s January 4, 2011 service invoice was an offer to Trane to perform work under Trane’s extended warranty contract with Complainant if Trane authorized such work. Mr. Larson’s testimony, Respondent’s warranty records, and Ms. Fields’ December 12, 2011 letter established that Trane did not authorize Respondent to perform the repairs. Because Trane did not accept Respondent’s offer, it did not perform any repairs on Complainant’s air conditioning unit. Because Trane did not accept Respondent’s offer, no contract was formed. Even if Trane had accepted Respondent’s offer, because Trane is not a property owner, A.R.S. § 32-1158 does not apply.[5] Therefore, Complainant did not establish that Respondent violated A.R.S. § 32-1154(A)(13).[6] Complainant also did not establish that Respondent departed from plans or code, in violation of A.R.S. § 32-1154(A)(2),[7] failed to construct the project in a professional and workmanlike manner, in violation of A.R.S. § 32-1154(A)(3), namely A.A.C. R4-9-108,[8] or failed to complete a construction project or operation for the price stated in the contract, in violation of A.R.S. § 32-1154(A)(9).[9] Respondent admitted in its written answer that its website erroneously stated that all of its service technicians were NATE-certified and that it thereby inadvertently engaged in false, misleading, or deceptive advertising that could mislead or injure a member of the public, in violation of A.R.S. § 32-1154(A)(16).[10] In mitigation of the penalty, Mr. Larsen credibly testified at the hearing that Respondent has modified its website to accurately reflect its service technicians’ qualifications. Complainant did not establish that Respondent was responsible for the reviews on Kudzu, City Search, Judy’s Book, or Simply the Best, or that Respondent violated A.R.S. § 32-1154(A)(16) or any other charged statute in any respect. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Registrar’s order in this matter, the Registrar suspend Respondent J.R. Perkins Company, Inc.’s License No. C39R.063344-R until Respondent provides proof that it has remedied its admitted violation of A.R.S. § 32- 1154(A)(16). It is further recommended that the Registrar not suspend Respondent’s license but, instead, close Case No. 2011-4206 if on or before the effective date of the Registrar’s order, Respondent provides written proof that is satisfactory to the Registrar that Respondent has modified its website to remove the misstatement that all of Respondent’s service technicians are NATE-certified. 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, January 23, 2012.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] See A.R.S. § 32-1101 et seq. [2] 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). [3] See A.A.C. R2-19-119(B)(2). [4] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [5] A.R.S. § 32-1158(B) provides that any contract in an amount of more than one thousand dollars entered into between a contractor and the owner of a property to be improved after December 31, 2007 must be in writing and include certain minimum terms. [6] A.R.S. § 32-1154(A)(13) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure in any material respect to comply with this chapter.” [7] A.R.S. § 32-1154(A)(2) 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.” [8] A.R.S. § 32-1154(A)(3) 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.” A.A.C. R4-9-108 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.” [9] A.R.S. § 32-1154(A)(9) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, “[f]ailure in a material respect by the licensee to complete a construction project or operation for the price stated in the contract, or in any modification of the contract.” [10] A.R.S. § 32-1154(A)(16) includes among the grounds for suspension, revocation, and other disciplinary action against a contractor’s license, “[f]alse, misleading or deceptive advertising whereby any member of the public may be misled and injured.”

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