PDF copy: ALJDEC decisions subject to certification as final

2015A-3739-ROC · Registrar of Contractors · 2016-06-27

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

IN THE MATTER OF THE CIVIL PENALTY No. 2015A-3739-ROC CITATION ISSUED TO:

Ronald Cohen Dew and Acme Home Services, LLC ADMINISTRATIVE LAW JUDGE DECISION RESPONDENT

HEARING: February 22, 2016 APPEARANCES: John Tellier, Attorney for Registrar of Contractors; Ronald Dew , Respondent; Darrah Dombrowski, Bob Settembre, Stephen Lawton and Roger Davis, Registrar of Contractors witnesses; Denise McGrath, Voneice Andrews, observers ADMINISTRATIVE LAW JUDGE: Dorinda M. Lang _____________________________________________________________________ As shown by the following Findings of Fact and Conclusions of Law, the undersigned Administrative Law Judge finds that the Arizona Registrar of Contractors

(“Registrar of Contractors”) has established by a preponderance of the evidence that

Respondent violated Arizona contracting law and is subject to a civil penalty in the

amount of $1,277,500.00.

FINDINGS OF FACT

1. This matter was initiated by the Registrar of Contractors on or about

September 18, 2015, when it issued a Cease and Desist Order together with a Civil

Citation2 to Respondent alleging that Respondent had violated Arizona Revised

Statutes (“A.R.S.”) § 32-1154(A)(9)3 and imposing a Civil Penalty of $1,277,500.00.

1 Mr. Dew was referred to as Ronald Colen Dew and Ronald Cohen Dew variously throughout the exhibits. Ronald Cohen Dew will be used herein. 2 Exhibit 1. A.R.S. § 32-1154(A)(9) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license, [a]iding or abetting a licensed or unlicensed person to evade this chapter, knowingly or recklessly combining or conspiring with a licensed or unlicensed person, allowing one's license to be used by a licensed or unlicensed person or acting as agent, partner, Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826 2. Respondent appealed that decision, and a hearing was set with the Arizona Office of Administrative Hearings, an independent agency authorized to conduct hearings in contested matters arising out of State regulation.

3. At the hearing, the Registrar of Contractors offered evidence in support of

the 491 factual allegations set forth in the Cease and Desist Order and Civil Citation.

4. The Registrar of Contractors alleged that Ronald Cohen Dew was named

on License No. C39R.212859-R as the Qualifying Party and member of Abode Air, LLC

(“Abode Air”). According to the uncontested testimony of Darrah Dombrowski at

hearing, beginning on September 7, 2011, the Registrar of Contractors revoked Abode

Air’s license over 46 times and the Residential Contractor’s Recovery Fund (“Recovery

Fund”) had paid $14,558.40 to persons injured by the actions of Abode Air, which

Abode Air has not repaid to the Recovery Fund.

5. ACME Home Services, LLC (“ACME”), an Arizona Limited Liability

Company, submitted an application for a contractor’s license on or about October 26,

2011. The application listed Ronald Cohen Dew’s father, William Edward Dew, as its

manager and sole member. However, Ronald Cohen Dew (then listed on a license that

had been revoked) was acting as ACME’s manager using a Limited Power of Attorney executed by his father. Based on that fact, the Registrar of Contractors denied ACME’s application for a contractor’s license on December 5, 2011. 6. On or about June 20, 2012, ACME purchased M Drive Enterprises, Inc., (“M Drive”), which held Registrar of Contractors License Nos. C39R.261176-R and L- 39.261175-C. ACME installed William Edward Dew as the director and president of M Drive on or about August 17, 2012. Ronald Cohen Dew ran the daily operations of M Drive and was the functional equivalent of an officer and a director of M Drive. The Registrar of Contractors was not notified of these changes as required by A.R.S. § 32- 1151.0of the changes in M Drive’s officers, directors or owners.4

associate or otherwise of a licensed or unlicensed person with intent to evade this chapter. 4 This is required by A.R.S. § 32-1151.01. 7. The Registrar of Contractors summarily suspended M Drive’s licenses on March 18, 2014 and revoked them on June 11, 2014. The revocations were for violations of A.R.S. § 32-1154(A)(10), (13), and (21).

8. Prior to the revocations, on or about May 16, 2014, ACME, acting through

Ronald Cohen Dew, entered into an agreement with Acclaim Air, LLC (“Acclaim Air”),

which then obtained a contractor’s license on August 8, 2014, naming as its sole

member and Qualifying Party, Roger Owen Davis.5 However, the agreement that

ACME entered into with Acclaim Air made ACME, and thus Ronald Cohen Dew,

tantamount to Acclaim Air’s manager.6

9. The Registrar of Contractors argued that this arrangement violated A.R.S.

§ 32-1154(A)(9) because, as the de facto manager of a licensed contracting company,

ACME was contracting without a license,7 and as such, Respondent is subject to a civil

penalty at a maximum of $2,500.00 per violation, which, the Registrar of Contractors

argued, should be imposed for each day the arrangement was active and in force.

10. Roger Owen Davis, the owner and Qualifying Party of Acclaim Air,

testified that he entered the management agreement with ACME because he was able

to start his business much more quickly with fewer start-up costs this way. However, he also testified that he did not perform any of the day-to-day operations or daily supervisory activities and he was not aware who did. He received a base pay and a percentage of the income but he only went to the office every couple of weeks and attended Registrar of Contractors’ job site inspections when there was a complaint. In the meantime, he worked full time for a remodeling company. He acknowledged that he had full access to Acclaim Air’s bank account, provided the password to it to Mr. Dew, and received weekly reports on the income and payments made by the business. He attended monthly meetings. He said his lawyer assured him that the agreement was clear that ACME would not be doing any contracting. He said ACME got jobs, This is License No. R29R.294097-R. See Exhibit 7. In other words, ACME was utilizing violations of A.R.S. § 32-1151.01 in order to work under a license without the Registrar of Contractors’ knowledge, knowing that Ronald Cohen Dew could not obtain a license due to A.R.S. § 32-1154(A)(20). Thus, it was using fraud to circumvent the requirements of the Registrar of Contractors statutes and contract without a license while appearing that it was licensed. priced them, sent workers out to do the work, and supervised the work. He said he did not know what jobs the employees worked on, though some jobs were discussed at the monthly meetings. He said ACME supplied the trucks, equipment, and supplies that

were used on the jobs, but Acclaim Air did not acquire any assets from ACME. He

acknowledged that some jobs were done before he obtained the license, but he thought

they had come under the handyman exception.

11. It is noted that the exhibits submitted by the Registrar of Contractors show

that there have been over 12 complaints against Acclaim Air,8 that the same employees

were on the payroll of ACME and M Drive,9 that the address used by Acclaim was not

the same as the address reported to the Registrar of Contractors,10 that M Drive’s

license was revoked for failing to report its change of ownership to the Registrar of

Contractors,11 and that Acclaim Air agreed in a separate agreement with ACME that all

of Acclaim Air’s assets (which would include the license) were collateral that would go

to ACME if ACME chose to terminate the agreement.12

12. Ronald Cohen Dew testified that ACME only did things that did not

require a license. He said it sold air conditioner service contracts. He said he wanted

to do marketing because there is a need for that. He stated he hired an attorney to be sure that everything was done properly, and if he crossed the line, it was not intentional. He acknowledged that he ran ACME through his father’s Power of Attorney and that ACME managed Acclaim Air. He acknowledged that he used ACME’s trucks and equipment when doing Acclaim Air’s work without putting Acclaim Air’s name on them.13 He made no argument that the proposed civil penalty was excessive for any specific reason other than his professed innocence and he did not argue that he or ACME were unable to pay it. CONCLUSIONS OF LAW

See Exhibit 4. See Exhibits 17 and 19. See Exhibit 9. See Exhibit 11. See Exhibit 8. 13 This would be a potential violation of A.R.S. § 32-1154(A)(14). 1. This matter is within the jurisdiction of the Registrar of Contractors pursuant to A.R.S. §§ 32-1104(A)(4), 32-1154(B) and 32-1156. 2. The Registrar bears the burden of proof to establish Respondent’s

statutory violations by a preponderance of the evidence. See A.R.S. § 41-

1092.07(G)(2); 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). “A preponderance of the

evidence is such proof as convinces the trier of fact that the contention is more

probably true than not.” MORRIS K. UDALL, ARIZONA LAW OF EVIDENCE § 5 (1960).

3. Arizona contracting law prohibits a person from acting as a contractor

without a license.14 The Registrar can order a person who performs contracting without

a license and who is not exempt from licensure to cease and desist such activity and

may impose a civil penalty of between $200.00 and $2,500.00 for each violation, but

not more than $2,500.00 per day.15

4. The Cease and Desist Order and Civil Citation issued by the Registrar of

Contractors in this matter alleged potential violations of A.R.S. § 32-1154(A)(9).

5. A.R.S. § 32-1154(A)(9) provides for the suspension or revocation of a

contractor’s license for aiding or abetting an unlicensed person to contract without a license. It is not disputed that ACME does not have a Registrar of Contractors license or that Ronald Cohen Dew does not have a Registrar of Contractors license. Therefore, it is not possible to suspend or revoke a license in this matter. 6. A.R.S. § 32-1151 also prohibits engaging in the business of contracting without having an appropriate license. 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. Evidence of A.R.S. § 32-1164(A)(2). 15 A.R.S. § 32-1166(A). securing a permit from a governmental agency or the employment of a person on a construction project shall be accepted in any court as prima facie evidence of existence of a contract. 7. A.R.S. § 32-1166(A) authorizes the Registrar to assess “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.” With respect to the appropriate amount of civil penalties for violations of A.R.S. § 32- 1151, A.R.S. § 32-1166(A) required the Registrar to “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 this directive, the Registrar adopted A.A.C. R4-9-131.16 8. In this case, the Registrar of Contractors has established that, by doing the day-to-day management of a licensed contractor, ACME was engaging in the business of contracting, yet it did not have a proper contracting license. This is considered an aggravating factor according to A.A.C. R4-9-131(1). Further, by failing

A.A.C. R4-9-131 sets forth permissible aggravating factors to be considered, in relevant part 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. to notify the Registrar of Contractors of its involvement with Acclaim Air and by using an address that was not reported to the Registrar of Contractors, as well as other actions, ACME was clearly attempting to avoid being discovered by the Registrar of

Contractors. This is an aggravating factor under A.A.C. R4-9-131(9). Finally, Mr.

Dew’s actions Adobe Air that resulted in over 46 revocations, support a finding of

further aggravating factors reflected in A.A.C. R4-9-131(8), (10), and (11).

9. Considering the evidence in this matter and the aggravating factors, the

Administrative Law Judge finds that the imposition of the maximum civil penalty of

$2,500.00 per day is reasonable. The date the ACME entered into its management

agreement with Roger Davis was May 16, 2014.17 This was the first day of violation.

September 18, 2015 was the date of the Cease and Desist Order and Civil Citation.18

According to it, the proposed civil penalty spans those dates and includes them. This

is a total of 491 days. When $2,500.00 is multiplied by 491, the total is $1,227,500.00.

The Administrative Law Judge finds that the Registrar of Contractors’ decision to

impose a civil penalty of $1,227,500.00 is justified by the evidence in this matter and

that is it authorized by the applicable law.

RECOMMENDED DECISION Based upon the foregoing considerations, the undersigned Administrative Law Judge hereby recommends that the Cease and Desist Order and Civil Citation be affirmed in their entirety.

If the Director of the Office of Administrative Hearings certifies this Administrative Law Judge Decision, the effective date of the order will be forty (40) days from the date of certification. Done this day, March 9, 2016.

/s/ Dorinda M. Lang Administrative Law Judge

See Exhibit 7. 18 Exhibit 1. Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors