ALJDEC decisions subject to certification as final

2014A-1720-RFA-ROC-ReHRG · Registrar of Contractors · 2018-10-16

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

REHEARING: October 1, 2018, at 1:00 p.m. APPEARANCES: Chris Martin (“Complainant”) appeared on his own behalf; R M Flooring Enterprises Inc. appeared through Dylan Traver, its employee; the Arizona Registrar of Contractors (“the Registrar”) was represented by Thomas Raine, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT 1. On February 23, 2018, the Registrar issued a Notice of Claim for Administrative Payout from the Residential Contractors’ Recovery Fund (“the Fund”), notifying the parties that “[a]fter a review of the claim and all supporting documentation, the Fund determined that Complainant is to be awarded $20,465.04 in the form of a payment issued by the Fund.”[1] 2. After Respondent requested a hearing on the amount of the payout, the Registrar referred Complainant’s claim to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing. The undersigned Administrative Law Judge issued a recommended decision, which the Registrar substantially accepted. Complainant requested a rehearing, which the Registrar granted. The Registrar referred the rehearing to OAH for a second evidentiary hearing. Background: The First Hearing on Amount of Fund Payout 3. A hearing on the merits of Complainant’s claim to the Fund was held on May 1, 2018, before the OAH. The Registrar presented the testimony of Marlee McCormick, a Legal Assistant in the Registrar’s Legal Department/Fund who had analyzed Complainant’s claim, and submitted fifteen exhibits. Complainant testified on his own behalf. Respondent presented the testimony of its employee, Dylan Traver, and submitted one exhibit. 4. Respondent installed a bamboo floor in Complainant’s house at 1507 W. El Alba Way, Chandler, Arizona 85281 (“the residence”). 5. In the underlying workmanship complaint, Respondent was found to have violated A.R.S. § 32-1154(A)(2), A.R.S. 32-1154(A)(3), namely A.A.C. R4- 9-108, and A.R.S. § 32-1154(A)(22).[2] 6. The flooring installation sheet that Respondent attached to its written answer to the citation in the underlying workmanship complaint stated that Respondent would install 1549 square feet of flooring at a cost of $1.50/square foot, or $2,323.00, plus $200.00 for floor preparation, for a total cost of $2,523.00.[3] 7. When Respondent installed the bamboo floor, Complainant provided the materials. Complainant submitted an invoice from Slayer Distributing dated May 2, 2012, to “Chris Martin c/o RM Flooring” for 70 boxes of Mfg Bel Air Bamboo Strand Woven Color Carbonized flooring, Bostik Best 5-gallon mastic, and a trowel, in the total amount of $6,390.95.[4] 8. Complainant submitted three itemized bids to replace the bamboo flooring in his house: (1) A bid from The Artist of Wood Floors in the total amount of $24,032.44; (2) A bid from ENMAR Hardwood Flooring in the total amount of $24,247.33, and (3) A bid from Diamondback Flooring in the total amount of $24,405.87.[5] 9. All three contractors who provided bids to Complainant were appropriately licensed. The Registrar disallowed the items that had not been included in Respondent’s scope of work, such as moving furniture and removing and replacing baseboards, and the cost of labor and materials to install a floor that exceeded the size of the floor that Respondent had installed. The Registrar submitted a spreadsheet that showed the total disallowed amounts.[6] Ms. McCormick testified that the Registrar used The Artist of Wood Floors’ low bid, less disallowances, to calculate the payout from the Fund that would make Complainant whole. 10. Respondent did not challenge the Registrar’s determination that Complainant was a person who had been injured as defined by A.R.S. § 32- 1131(3) who was potentially eligible to receive a payout from the Fund.

11. Respondent also did not dispute that the floor needed to be completely replaced. Respondent also did not dispute the cost of materials or the cost of installing a new bamboo floor. 12. At the initial hearing on Complainant’s claim to the Fund, Respondent submitted a budget pricing estimate from Spectra Contract Flooring in the total amount of $9,750 for labor to remove and reinstall bamboo flooring in a 1500 sq. ft. residence, including $4,425.00 for the removal and $5,325.00 for the installation. Mr. Travers noted that the demolition costs on Complainant’s bids were higher than the industry standard. 13. Complainant testified during demolition, silica from the concrete slab and additional particulates from the glue would be released into the air. Complainant testified that he wanted to make sure that his family was not endangered by the demolition process. 14. Mr. Travers testified that OSHA prevents contractors from performing work that results in an environmental hazard. 15. Because the cost of removing the bamboo floor on the three bids that Complainant submitted to the Fund far exceeded that price in Spectra Contract Flooring’s budget pricing estimate, the Administrative Law Judge recommended that the Registrar reduce the cost of removing the bamboo floor to the amount of Spectra Contract Flooring’s budget pricing estimate, for a total payout in the amount of $16,981.04. 16. Complainant requested a rehearing. The Registrar referred Complainant’s request to Ombudsman Jim Krupp for an inquiry. On July 31, 2018, the Registrar granted the request for rehearing based on the following: The administrative law judge relied on Respondent’s bid from Spectra Contract Flooring in reducing the registrar’s proposed payout to Complainant. . . . The Ombudsman inquiry revealed that the submitted bid was a “budget bid” subject to fluctuation and that the bid did not account for major floor preparation. . . . The Ombudsman inquiry also revealed that “to demo bamboo and re-install the same spec of bamboo, [Spectra Contract Floorings’ representative] wouldn’t think any major floor prep would need to be completed…Once again – this was a budget based on industry standard rates. The budget could possibly have fluctuated after seeing the existing project, but it wouldn’t vary much from the rates provided.” See Exhibit 5, July 20, 2018 email from Taylor Newman to Jim Knupp. Because the administrative law judge may have considered this information material in considering whether Complainant’s contractors’ bid to demo the floor exceed what most other qualified contractors would charge for the job, and in considering the proper measure of the payout that Complainant should recover from the Fund, the Registrar orders that this matter be reheard before [OAH].[7]

17. Before the rehearing, the Administrative Law Judge denied Respondent’s request that it be allowed to have a contractor of its choice inspect and measure the floor at Complainant’s residence to prepare a bid to replace the bamboo floor because “no statute, regulation, or policy adopted by the Registrar [requires] that homeowners provide access to their properties to a contractor to obtain a competing bid to contest the bid that the homeowner has submitted to support his claim to the Fund.” Evidence Presented at Rehearing 18. The Registrar submitted the same fifteen exhibits that it had submitted at the initial hearing and made Ms. McCormick available for examination by the other parties at the rehearing. 19. Mr. Traver testified on Respondent’s behalf and submitted two exhibits.

20. Complainant testified on his own behalf and presented telephonically the testimony of Dominic “Nick” Giammarino, the office manager of Arizona Home Floors LLC, License No. CR-8.291708-D, and Keith Jacobson, the qualifying party/member of Diamondback Flooring LLC, License No. CR- 8.311107-D, whose bid was among the three that Complainant had submitted with his bid to the Fund. Complainant also submitted three exhibits. 21. Respondent again submitted Spectra Contract Flooring’s budget pricing for removal of a glued down bamboo floor from 1,500 square feet for a price of $4,425.00 and to install 1,500 square feet of bamboo flooring for a price of $5,325.00.[8] 22. Mr. Traver testified that a budget price for a project differed from a bid in that the budget price is subject to increase or decrease because the entire scope of the job is not spelled out in a budget price. A budget price is to allow customers to see whether they can afford an improvement. 23. Complainant submitted a video that Arizona Home Floors LLC had produced that showed the steps for the proper removal of a hardwood floor that has been glued down to the slab, which showed the floor being pried off and special tools being used to avoid dust at the jobsite. Mr. Giammarino testified that Arizona Home Floors charges $6.70/square foot to remove glued down bamboo flooring. 24. Complainant submitted a bid from Arizona Home Floors LLC in the amount of $9,674.80 to remove 1,444 square feet of bamboo flooring.[9] Mr. Giammarino acknowledged that the bid was not complete because he had not been out to Complainant’s residence to measure or inspect the floor. 25. Mr. Giammarino testified that the dust from the glue and slab contains silica, which is a known carcinogen. Arizona Home Floors LLC uses a machine to remove the glue from the concrete slab that captures virtually all of the dust. 26. Mr. Giammarino testified that, in contrast, some other contractors just hang up plastic sheets to contain dust when they remove glued down hardwood flooring. When contractors remove hardwood floors the “old- fashioned way,” substantial dust is generated. The dust can be dangerous to people with asthma and other respiratory conditions. 27. Mr. Giammarino testified that Arizona Home Floors LLC markets and sells equipment for dustless removal of glued down wood floors. In response to the Registrar’s attorney’s questions, Mr. Giammarino acknowledged that other contractors may use a floor grinder to remove glue from the concrete. 28. Mr. Giammarino testified that in contrast, Arizona Home Floors uses a proprietary system on which it holds a patent to perform dustless removal of hardwood floors. The system self-cleans the filters every few seconds, which prevents the filters from getting clogged. This proprietary dustless removal system allows even people whose respiratory conditions make them vulnerable to remain in the home during removal. 29. The Fund did not rely on Diamondback Flooring LLC’s bid to calculate the amount of Complainant’s payout.[10] Diamondback Flooring LLC’s bid was $8,100.00 to “[t]ear out/haul away existing Bamboo flooring using dustless removal system” and $7,452.00 to install 1,792.51 square feet of flooring.[11] 30. The bid that the Fund did rely upon to establish the amount of the payout came from The Artist of Wood Floors LLC, License No. CR-8.282725- D, in the amount of $24,032.44, of which Ms. McCormick disallowed $3,567.40, for a total payout of $20,465.04.[12] The Artist of Wood Floors LLC’s bid included $7,909.00 for “Dustless glued down Bamboo Flooring removal and haul away.”[13] 31. Mr. Jacobson testified that he did not recall the bid that Complainant had submitted with his claim to the Fund. Mr. Jacobson testified that prices had gone up over the past year. 32. Complainant asked Mr. Jacobson about the environmental problems in removing glue-down flooring from an occupied house. Mr. Jacobson responded that all engineered or other wood flooring has formaldehyde in it. California but no other state, including Arizona, prohibits the use of formaldehyde in flooring. 33. Mr. Jacobson testified that Diamondback Flooring LLC does not perform dustless removal of glued-down flooring, but instead removes glued down flooring the “old-fashioned way.” Mr. Jacobson testified that if customers request dustless removal, Diamondback Flooring LLC refers them to another contractor or subcontracts that portion of the job. 34. Complainant submitted an exhibit that consisted of scientific studies and trade journals showing the toxicity of urethane, formaldehyde, silica, and other substances found in flooring and concrete. The articles included a discussion of silicosis,[14] which Complainant testified results from scar tissue forming in the lungs around a particle of silica dust. Acute silicosis can result from a few weeks’ exposure to high concentrations of silica dust. There is no treatment for silicosis and it may lead to lung cancer. 35. Complainant testified that OSHA only regulates conditions for workers. In contrast, the EPA regulates the levels of contaminants in the air. The 36. Complainant testified that he is asthmatic and that his 5-year-old son and 11-year-old daughter are also asthmatic. Complainant testified that since his family is living in the house, their asthma places them at increased risk for illness and injury if a dustless floor removal process is not used. 37. Ms. McCormick testified that the Fund generally does not consider the lowest line items in various bids to arrive at a payout amount. Rather, it considers the overall lowest bid, after deductions. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[15] As in the original hearing, Respondent bears the burden of proof to establish that the Registrar’s calculations were erroneous or not supported by a preponderance of the evidence.[16] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[17] 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.”[18] Mr. Giammarino acknowledged that dustless removal of a glued down wood floor using Arizona Home Floors LLC’s proprietary system provides advantages that it uses to market the higher price for this services. Mr. Jacobson acknowledged that Diamondback Flooring LLC does not offer dustless removal of glued down wood floors, but instead will provide this service upon a homeowner’s request by subcontracting the dustless removal. Mr. Giammarino, Mr. Jacobson, and Mr. Traver all testified that the usual practice in the industry is to remove glued down wood flooring the “old fashioned way,” with resulting dust and possible inconvenience and discomfort to the homeowner and his family. All of the bids that Complainant submitted to the Fund, as well as Arizona Home Floors LLC’s bid, were for dustless removal, apparently at Complainant’s request. Spectra Contract Flooring’s budget price $4,425.00 to remove the glued down hardwood floor the “old fashioned way” is the only cost that reflects the industry standard. Although Respondent attempted to obtain an actual bid from a contractor that was based on jobsite conditions, Complainant did not allow access to the contractor. A.R.S. § 32-1132(A) limits payouts from the Fund to “the actual damages suffered by the claimant as a direct result of the contractor's violation but shall not exceed an amount necessary to complete or repair a residential structure . . . .” For the purposes of A.R.S. § 32-1132(A), “actual damages” are the reasonable cost of repairing the contractor’s defective work and completing the project, minus any portion of the contract price still unpaid to the original contractor.[19] Upgrades in materials or the scope of the job are generally not available, as Ms. McCormick’s deductions from The Artist of Wood Floors LLC’s bid demonstrated. A Fund claimant is not entitled to recover money for upgrades or to avoid inconvenience during construction. Because Respondent again established that Complainant’s contractors’ bids to demo the bamboo floor exceeded industry standards, Respondent established that the proper measure of the payout that Respondent for which Respondent should be $16,981.04.[20] Complainant established that he does not seek an upgrade or special accommodation for his family’s convenience, but instead believes that a dustless removal process is necessary safeguard his own and his children’s fragile health. Although under the so called “eggshell plaintiff rule,” a person whose personal attributes make him more susceptible to injury than a normally healthy person is entitled to recover all damages resulting from a tortfeasor’s negligent act in a tort claim for a personal injury,[21] this is not necessarily the measure of damages under A.R.S. § 32-1132(A). The Registrar owes a fiduciary duty to Fund to preserve its assets for the benefit of all potential claimants.[22] Many tort damages that would be available on a civil malpractice or personal injury action, such as pain and suffering, lost wages, and other consequential damages, are not compensable in a payout from the Fund. The Administrative Law Judge believes that the measure of damages under A.R.S. § 32-1132(A) is only the cost to repair the job under industry standards, not the cost of special measures that may be necessary to protect a particular claimant’s health during repairs. RECOMMENDED ORDER In view of the foregoing, it is recommended that on the effective date of the final order in this matter, the Residential Contractors’ Recovery Fund shall pay $16,981.04 to Complainant Chris Martin. It is further recommended that under A.R.S. § 32-1139(B), the Registrar shall charge $16,981.04, plus interest at a rate of ten percent a year, to Respondent R M Flooring Enterprises Inc.’s License Nos. CR- 8.205455-D and CR-8.292341-D. 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 five days from the date of that certification. Done this day, October 12, 2018.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors ----------------------- [1] See the Registrar’s Exhibit 14. [2] See the Registrar’s Exhibit 7. [3] See Respondent’s Exhibit B. Complainant submitted an affidavit with his claim to the Fund stating that he had paid Respondent $5,000.00 in cash for installation of the floor. According to the Registrar’s Order for Rehearing, Complainant later amended his affidavit in a filing with the Registrar to state that he had paid Respondent $2,532.00 and had signed the affidavit in error. The Administrative Law Judge does not draw any inferences from the disparity in this recommended decision. [4] See the Registrar’s Exhibit 10 at ROC 0055. [5] The Registrar’s Exhibit 12 at 60, 63, and 64. [6] See the Registrar’s Exhibit 13 at 68. [7] The Registrar’s Order for Rehearing at 3. [8] See Respondent’s Exhibit A. [9] See Complainant’s Exhibit 1. [10] See the Registrar’s Exhibit 13 at 68. [11] The Registrar’s Exhibit 12 at 64. [12] See the Registrar’s Exhibit 13 at 68-69. The disallowed amounts are explained on page 69. Complainant did not challenge any of the disallowed amounts. [13] The Registrar’s Exhibit 12 at 60. [14] See Complainant’s Exhibit 3. [15] See 32-1101 et seq. [16] 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). [17] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [18] Black’s Law Dictionary at page 1220 (8th ed. 1999). [19] See Ramsey v. Arizona Registrar of Contractors, 241 Ariz. 102, 106, 384 P.3d 316, 320 (App. 2016). [20] $20,465.04 (The Artist of Wood Floors’ low bid less disallowances) - $7,909.00 (The Artist of Wood Floors’ excessive demo bid) + $4,425.00 (Spectra Contract Flooring’s low bid for demo) = $16,981.04. [21] See, e.g., Gasiorowski v. Hose, 182 Ariz. 376, 382, 897 P.2d 678, 684 (App. 1995). [22] See A.R.S. § 32-1134; cf. Laws 1985, Ch. 334, § 1 (“The goals and objectives of the registrar of contractors are to protect the public health, safety and welfare by licensing, bonding and regulating contractors engaged in residential construction . . . .”); Burrows v. Taylor, 129 Ariz. 212, 214, 630 P.2d 35, 37 (App. 1981) (“[T]he Registrar is charged with the overall responsibility of protecting the welfare of the public dealing with persons engaged in the building contracting vocations and afford the public protection against incompetent, inexperienced, unlawful and fraudulent acts of building contractors.”).

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Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826