ALJDEC decisions subject to certification as final

2014A-2211-ROC · Registrar of Contractors · 2015-02-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 21, 2015, at 8:00 a.m. APPEARANCES: Respondent Michael Levy appeared on his own behalf; the Arizona Registrar of Contractors (“the Registrar”) was represented by Seth T. Hargraves, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure On or about June 2, 2014, Stephen J. Gonzalez filed a complaint with the Registrar that alleged that “the Blind Guys – Michael & Virginia Levy” were performing unlicensed contracting work.[1] Mr. Gonzalez attached to his complaint copies of pages from Angie’s List, a web-based business referral service, that contained reviews from property owners who had hired the Blind Guys to provide install and install blinds. Many of the described jobs cost $1,000.00 or more. The Angie’s List printout included the following Trade License Information for the Blind Guys: “Not applicable, my trade does not required licensing.” The Angie’s List printout did not include the disclaimer, “Not a licensed contractor.” The Registrar assigned the hotline tip to its investigator, James Vildusea, to investigate. Investigator Vildusea consulted the Registrar’s records and found that the Registrar had never issued a license to Mr. Levy, Mrs. Levy, or their company, the Blind Guys. Investigator Vildusea testified that the Registrar’s Legal Department had advised him that providing and installing blinds requires a C-65 license for glazing. That license classification includes sub-classifications for installation of skylights, storm windows and doors, mirrors, and window treatment.[2] On or about September 30, 2014, Investigator Vildusea called Mr. Levy at the telephone number for the Blind Guys on Angie’s List. Investigator Vildusea identified himself and stated the reason for his call. In Investigator Vildusea’s interview, Mr. Levy said that he was not aware that providing and installing blinds required a license, but that he was in the process of obtaining a license. Mr. Levy stated further that in 21 years of being in business, he had never heard that he needed a contractor’s license and that he was working under the so-called “handyman’s exemption.”[3] Mr. Levy also stated that he was not aware that the Blind Guys’ information on Angie’s List violated the Registrar’s advertising statute, but that he would correct the information to comply with the statute. On October 1, 2014, Investigator Vildusea located the Blind Guys’ advertisement on Angie’s List. The advertisement did not include the disclaimer, “Not a Licensed Contractor” and stated that “I am appropriately licensed for my trade.”[4] On or about September 30, 2014, Investigator Vildusea on behalf of the Registrar issued a Cease & Desist Order, a Civil Citation, and imposed civil penalties in the amounts of $1,500.00 against Mr. Levy for contracting without a license in violation of A.R.S. § 32-1151 and $1,000.00 for advertising without a license in violation of A.R.S. § 32- 1165.[5] Mr. Levy requested a hearing. The Registrar referred the matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing. A hearing was held on January 21, 2015. The Registrar presented Investigator Vildusea’s testimony and submitted three exhibits. Mr. Levy testified on his own behalf and submitted four exhibits. Additional Hearing Testimony and Evidence Mr. Levy testified that Mr. Gonzalez was an attorney who had represented his next-door neighbor in her dispute with Mr. Levy. Mr. Levy testified that Mr. Gonzalez was not the Blind Guys’ client and that Mr. Levy had just obtained an injunction against harassment against the neighbor. Mr. Levy testified consistently with the statements that Investigator Vildusea reported. Mr. Levy testified that he did not believe that installation of blinds constituted contracting because the blinds were not fixtures and if the size of the window openings were the same, could be removed without significant damage to the window opening and reinstalled in another structure. Mr. Levy testified that he had provided and installed blinds for 21 years in Denver, Colorado, where he did not need a contractor’s license. Mr. Levy testified that after he moved to Arizona in 2004, his bookkeeper and the attorney who filed the paperwork for his limited liability company put him in the handyman category. Mr. Levy testified that no one told him that he needed to be licensed. Mr. Levy testified that most of his competitors in the blind installation business in the Tucson area were unlicensed. The two blind installation companies who were licensed possessed CR-5 licenses for window treatment, not a CR-65 license for glazing.[6] Mr. Levy submitted an excerpt from the preparation materials for the C-65 licensing examination that showed that the scope of work for a CR-65 license included general glazing, glass systems, metal framing, plastics/acrylics, and sealant installations.[7] Mr. Levy testified that that he is not familiar with the work required for most of these sub- classifications because all he does is provide and install blinds. Mr. Levy testified that three days after he received the citation, Cease & Desist Order, and Notice of Civil Penalties, he enrolled in a class to prepare for the Registrar’s examination for a CR-65 license. Although he easily passed the business practices portion of the examination, he has twice failed the portion of the examination on the work allowed by the CR- license, even though he has spent more than 50 hours studying for the exam. The second time Mr. Levy took the work portion of the CR-65 license examination was on January 15, 2015.[8] Mr. Levy testified that he has paid the $1,400.00 bond for the CR-65 license and complied with all other licensing requirements. Mr. Levy testified that if the Registrar had told him that he needed a CR-5 license solely to install window treatment, he would already have a license. Mr. Levy testified that after he received the citation, Cease & Desist Order, and notice of civil penalties, he corrected the Blind Guys’ information on Angie’s list to comply with A.R.S. § 32-1165 and the requirements of the handyman’s exemption. During the hearing, Mr. Levy showed the statement, “We are not a licensed contractor in the State of Arizona,” in Blind Guys’ Angie’s List information on his computer tablet. Mr. Levy acknowledged that he did not include the disclaimer, “Not a licensed contractor,” on the Blind Guys’ website or on the truck that he drove to the hearing, which advertised the Blind Guys’ business. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[9] The Registrar bears the burden of proof to establish Mr. Levy’s statutory violation by a preponderance of the evidence.[10] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[11] A.R.S. § 32-1151 provides as follows: It is unlawful for any person, firm, partnership, corporation, association or other organization, or a combination of any of them, to engage in the business of, submit a bid or respond to a request for qualification or a request for proposals for construction services as, act or offer to act in the capacity of or purport to have the capacity of a contractor without having a contractor's license in good standing in the name of the person, firm, partnership, corporation, association or other organization as provided in this chapter, unless the person, firm, partnership, corporation, association or other organization is exempt as provided in this chapter. . . .

A.R.S. § 32-1121(A)(14) sets forth the so-called “handyman’s exception” to licensure requirements for contractors who perform work whose aggregate contract price, including labor and materials, is less than $1,000.00 if other requirements are met. A.R.S. § 32-1101(A)(3) defines “contractor” in relevant part as follows: "Contractor" is synonymous with the term "builder" and means any person . . . [who], for compensation, undertakes to or offers to undertake to, purports to have the capacity to undertake to, submits a bid or responds to a request for qualification or a request for proposals for construction services . . . to:

(a) Construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, railroad, excavation or other structure, project, development or improvement, or to do any part thereof, including the erection of scaffolding or any other structure or work in connection with the construction.

(Emphasis added.) A.R.S. § 32-1121(A)(9) includes among the persons who are not required to be licensed those who perform the following work: The sale or installation of finished products, materials or articles of merchandise that are not fabricated into and do not become a permanent fixed part of the structure. This exemption does not apply . . . if the total price of the finished product, material or article of merchandise, including labor . . . is more than one thousand dollars or if the removal of the finished product, material or article of merchandise causes damage to the structure or renders the structure unfit for its intended use.

Although blinds may be removed without rendering a structure unfit for its intended use, Mr. Levy and the Blind Guys performed many jobs installing blinds whose total cost for labor and materials was more than $1,000.00. Neither the exemption set forth in A.R.S. §§ 32-1121(A)(9) or 32- 1121(A)(14) applies. Therefore, the Registrar established that Mr. Levy violated A.R.S. § 32-1151 by installing blinds on the several jobs described on Angie’s List whose cost exceeded $1,000.00. A.R.S. § 32-1165 provides as follows: Except as authorized by section 32-1121, subsection A, paragraph 14, subdivision (c), it is a class 1 misdemeanor for any person to advertise that he is able to perform any service or contract for compensation subject to regulation by the registrar under the terms of this chapter unless a license under the terms of this chapter is first obtained regardless of whether his operations as a contractor are otherwise exempt.

A.R.S. § 32-1121(A)(14)(c) provides that “[t]his exemption does not apply . . . [t]o a person who utilizes any form of advertising to the public in which the person's unlicensed status is not disclosed by including the words ‘not a licensed contractor’ in the advertisement.” The Registrar established that the advertisements on Angie’s List that Mr. Levy placed on behalf of his company, the Blind Guys, violated A.R.S. § 32-1165. A.R.S. § 32-1166(A) provides in relevant part as follows: In addition to all other remedies, when it appears to the registrar, either upon complaint or otherwise, that any person . . . has engaged in or is engaging in any act of contracting, practice or transaction which constitutes a violation of this chapter, . . . the registrar may serve upon such person . . . not currently licensed under this chapter, by certified mail or by personal service, a cease and desist order requiring the person . . . to cease and desist immediately, upon receipt of the notice, from engaging in such act, practice or transaction. In conjunction with the cease and desist order, the registrar may issue a citation for a violation. . . . Each citation shall contain an order to cease and desist and an assessment of a civil penalty in an amount of at least two hundred dollars for each violation but not more than two thousand five hundred dollars for the multiple violations committed on the same day. If after the issuance of a citation by the registrar, the person or organization receiving the citation fails to cease and desist in the violation or violations described in the citation, the registrar may assess an additional civil penalty of up to two thousand five hundred dollars for each day the violation or violations continue. The registrar shall adopt rules covering the assessment of a civil penalty that give due consideration to the gravity of the violation and any history of previous violations. . . .

Pursuant to the requirement set forth in A.R.S. § 32-1166(A), the Registrar promulgated A.A.C. R4-9-131, providing as follows: In assessing a civil penalty as provided for under A.R.S. § 32- 1166(A), the Registrar shall give due consideration to whether the person cited or any individual acting on that person's behalf has committed one or more of the following acts in determining the gravity of the cited violation:

1. Falsely represented to be a licensed contractor.

2. Failed to perform any work for which money was received.

3. Executed or used any false or misleading documents for the purpose of inducing a person to enter into a contract or to pay money for work to be performed.

4. Made false or misleading statements for the purpose of inducing a person to enter into a contract or to pay money for work to be performed.

5. Failed or neglected to apply funds which were received for the purpose of obtaining or paying for services, labor, materials, or equipment.

6. Performed work that was or had the potential to become hazardous to the health, safety, or general welfare of the public.

7. Performed work that deliberately was in violation of building codes, safety laws, labor laws, workers' compensation laws, or unemployment insurance laws.

8. Performed work that failed to meet minimum acceptable trade or industry standards or practices or was not performed in a good and workmanlike manner.

9. Has committed any other act which would otherwise be cause for disciplinary action if the person cited had been properly licensed pursuant to A.R.S. Title 32, Chapter 10.

10. Has committed two or more prior violations.

11. Performed work that has caused loss or damage to the structure, its appurtenances, or property being worked upon or has caused loss or injury to any person.

None of the aggravating factors set forth in A.A.C. R4-9-131 apply in this case. Although the aggravating factors set forth in A.A.C. R4-9-131 are not exhaustive, Mr. Levy credibly testified that he reasonably believed that he was not required to be licensed to install window treatments, that after the Registrar issued the citation and notice of civil penalties, he has devoted substantial effort to obtaining a license, and but for the Registrar’s advice that he needed to obtain a CR-65 license, rather than the CR-5 license for window treatments that his two competitors possess, he would have been licensed by the time of the hearing. These are substantial factors in mitigation of the civil penalty for unlicensed contracting. With respect to the civil penalty for advertising without a license, the Registrar established aggravating factors that Mr. Levy did not fully correct all of the Blind Guys’ advertising to comply with A.R.S. §§ 32-1165 and 32-1121(A)(14)(c) and that, in fact, Mr. Levy added the claim to Angie’s List that the Blind Guys was properly licensed, when he knew that it was not. No reduction in the civil penalty is warranted. RECOMMENDED ORDER Based on the foregoing, it is recommended that the Registrar affirm the finding that Respondent Michael Levy violated A.R.S. § 32-1151, but reduce the assessed civil penalty under A.R.S. § 32-1166(A) and A.A.C. R4-9- 131 to $750.00, to be paid in certified funds to the Registrar on or before thirty days after the effective date of the final order in this matter. It is further recommended that the Registrar affirm the finding that Respondent Michael Levy violated A.R.S. §32-1165 by advertising without a license and affirm the civil penalty assessed under A.R.S. § 32-1166(A) in the amount of $1,000.00, to be paid in certified funds to the Registrar on or before thirty days after the effective date of the final order in this matter. 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, February 4, 2015.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

William A. Mundell, Director Registrar of Contractors ----------------------- [1] See the Registrar’s Exhibit 1. [2] See A.A.C. R4-9-103(“Residential Contracting License Classifications and Scopes of Work). [3] See the Registrar’s Exhibit 2 (Investigator Vildusea’s investigative report). [4] See id. 5. [5] See the Registrar’s Exhibit 3. [6] See Mr. Levy’s Exhibits A and B. Investigator Vildusea explained that last year, the Registrar re-designated former residential C-65 and C-5R license classifications as dual CR-65 and CR-5 license classifications covering the same scope of work. [7] See Mr. Levy’s Exhibit C. [8] See Mr. Levy’s Exhibit D. [9] See A.R.S. § 32-1101 et seq. [10] See A.R.S. § 41-1092.07(G)(3); A.A.C. R2-19-119(A) and A.A.C. R2-19- 119(B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [11] Morris K. Udall, Arizona Law of Evidence § 5 (1960).

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