ALJDEC - Licensing

2023A-12349-CHC-ROC · Registrar of Contractors · 2024-03-07

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

John Wesley Upperman,

COMPLAINANT,

v.

Alliance LLC

ROC License No. 243303,

RESPONDENT.

No. 2023A-12349-CHC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: March 05, 2024 at 1:00 PM.

APPEARANCES: John Wesley Upperman (“Complainant”) appeared on his own behalf. John Kulina appeared on behalf of Alliance LLC (“Respondent”). Robert Di Alto appeared on behalf of the Arizona Registrar of Contractors (“Registrar”). Casey Upperman and Devon Kulina observed.

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

EXHIBITS ADMITTED INTO EVIDENCE: The Notice of Hearing, including the Registrar’s attached agency file, was admitted into the record. Respondent Exhibits 1-9 were also admitted.

_____________________________________________________________________

After review of the hearing record in this matter, the undersigned Administrative Law Judge makes the following Findings of Fact and Conclusions of Law, and issues this Recommended Order to the Director of the Registrar.

FINDINGS OF FACT

Background and Procedure

Pursuant to Arizona Administrative Code (“Ariz. Admin. Code”) R4-9-117, Administrative Notice is taken of Respondent’s prior license record as reflected on the Registrar’s public website. On April 08, 2008, the Registrar issued License No. 243303 Specialty Dual CR-8 Floor Covering contracting license to Respondent. The license is renewed through April 30, 2024. John Anthony Kulina is listed as the Qualifying Party and Member on the license. Respondent’s address of record for the license is 20165 N. 67th Ave. Unit 122A-191 Glendale, Arizona 85308-7002. Respondent has an active $6,750.00 surety bond on the license issued by Western National Mutual Insurance Company, effective May 14, 2015. The license no prior disciplinary record, save one open complaint which is presumed to be related to this matter.

On or about October 25, 2023, the Registrar received a narrative complaint from Complainant against Respondent’s License No. 243303 alleging poor work of their commercial flooring project. The Registrar designated it Complaint No. 2023-12349 and assigned to Robert Di Alto (“Investigator Di Alto”) for investigation.

On November 07, 2023, Investigator Di Alto issued a Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on December 01, 2023, at 9:30 a.m. Correspondence was not returned as undeliverable to Respondent.

Respondent did not submit a response to Complaint No. 2023-12349 to the Registrar.

On December 01, 2023, Investigator Di Alto inspected the work that had been performed on the project to date. Respondent was present. Investigator Di Alto also reviewed the contract-related correspondence between the parties, and took 27 photographs of the project site. When he was finished, Investigator Di Alto drafted his Inspection Notes. Ultimately, Investigator Di Alto derived a total of 2 separate and distinct complaint items, 1 of which he was able to substantiate based on his firsthand observations. Investigator Di Alto determined Respondent’s workmanship on complaint item 1 failed to meet the Registrar’s minimum standards and required Respondent to perform corrective and/or completion work to remediate the identified deficiencies. Specifically, Investigator Di Alto noted the following:

Verified. I observed areas in the turf where cross cuts were made in an attempt to repair areas where adhesive has failed. I also observed areas where rippling/bubbling is visible, including along the back wall of the business. The Respondent inspected and accepted the substrate and performed preparation prior to turf installation. The Respondent shall correct by the appropriate means.

On December 07, 2023, Investigator Di Alto issued a Written Directive from the Registrar (“Directive”) to Respondent because he substantiated half of Complainant’s complaint allegation(s) against Respondent. Respondent was put on notice that it had until 5:00 p.m. on December 29, 2023, to notify the Registrar of its compliance with the Directive or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A) and 32-1154(E). Correspondence was not returned as undeliverable to Respondent.

On December 15, 2023, Respondent emailed Investigator Di Alto that it had completed all corrective work required by the Directive. As a result, by that same date, Investigator Di Alto issued a Compliance Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on December 22, 2023, at 10:45 a.m. Correspondence was not returned as undeliverable to Respondent.

On December 22, 2023, Investigator Di Alto issued a Notice of Rescheduled Compliance Jobsite Inspection Notification Letter to the parties, advising that he would conduct an inspection of the project on December 29, 2023, at 12:00 p.m. Correspondence was not returned as undeliverable to Respondent.

On December 29, 2023, Investigator Di Alto inspected the corrective work that had been performed on the project and took 3 photographs. Respondent was present. When he was finished, Investigator Di Alto drafted his Compliance Jobsite Inspection Notes. Ultimately, Investigator Di Alto determined that Respondent had not satisfactorily performed corrective work necessary to remediate complaint item 1. Specifically, Investigator Di Alto noted the following:

Rippling and bubbling was still visible along the back wall. The Complainant was able to easily sepperate [sic] a small cross seam using his fingers with minimal effort.

On December 29, 2023, Investigator Di Alto forwarded the matter to the Registrar’s legal department with the issuance of a Citation Recommendation.

On January 03, 2024, the Registrar issued a Citation to Respondent for alleged violations of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), and 32-1154(A)(22). Respondent was given until January 18, 2024, to respond with its Answer or face discipline pursuant to Ariz. Rev. Stat. §§ 32-1154(A)(22) and 32-1155. Correspondence was not returned as undeliverable to Respondent.

On January 05, 2024, the Registrar received Respondent’s timely Answer whereby Mr. Kulina argued that it was hired for a labor-only contract and that Complainant had supplied the materials. Specifically, Respondent argued that the turf Complainant supplied was for external use, but could be used for interior purposes with the proper adhesive – which Complainant also supplied. Per Respondent, Complainant refused to pay the final invoice due to “latent bubbles that are somewhat expected with this type of Artificial Turf.” Mr. Kulina opined that Complainant had been unduly enriched, and further argued that because Respondent had attempted to satisfy its client on numerous occasions that disciplinary action was not warranted. Mr. Kulina concluded by acknowledging that a seam in the turf near a pipe required additional adhesive, which could easily be addressed.

On January 05, 2024, the Registrar referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on March 05, 2024. Per the January 19, 2024, Notice of Hearing the issues to be determined are whether the Registrar has cause to discipline Respondent’s license based on the following alleged statutory violations:

Charge 1: A.R.S. § 32-1154(A)(3) – A.A.C. R4-9-108(a)

Charge 2: A.R.S. § 32-1154(A)(22)

Hearing Evidence

Complainant testified on his own behalf and called Investigator Di Alto as a witness. Mr. Kulina testified on behalf of Respondent. The substantive evidence of record is as follows:

Complainant rents commercial space located at 10953 N. Frank Lloyd Wright Blvd., Unit 112 Scottsdale, Arizona 85259, which is used for his business, a baseball training facility.

On or about September 19, 2023, the parties, through their sons and employees Devon Kulina and Casey Upperman, entered into a $21,298.00 replacement flooring contract.

Work on the projects commenced on or about September 30, 2023, and stopped or was otherwise completed on October 23, 2023.

Complainant paid Respondent $10,649.00 towards the contract.

Respondent never advised Complainant that the flooring he provided was unsuitable for installation.

Between December 07, 2023, and December 29, 2023, during the Directive’s compliance period, Complainant’s business opened at 8:00 a.m. and closed at either 6:00 p.m. or 8:00 p.m., depending on the day. Respondent was able to perform corrective work during those times and would have been permitted to perform corrective work outside of those hours on request.

Respondent only performed corrective work on one date, December 14, 2023.

At no point in time did Respondent allege a denial of access to the project site during the Directive’s compliance period, or the extension thereof.

Additional Evidence

Investigator Di Alto testified that the outstanding balance on the underlying contract did not impact Respondent’s ability to perform satisfactory corrective work on complaint item 1.

Investigator Di Alto testified that while he did not observe any “obvious tripping hazards,” he observed several “undulations and bubbles in the substrate” that needed to be addressed prior to installation of the flooring at issue. Investigator Di Alto testified that substrate preparation was the most important part of flooring installation, and that Respondent’s had not been acceptable. Per Investigator Di Alto, Respondent likely should have informed Complainant that his substrate was unsuitable for installation, but instead Respondent accepted the surface area and failed to properly prepare it for installation.

Per Investigator Di Alto, Mr. Kulina’s son made a deceptive attempt to establish that the seam issue had been remediated, when in fact Complainant’s son demonstrated how easily the sections could be separated using just his fingers.

Closing Arguments

In closing, Respondent argued that it had a long history of satisfied customers without any complaints against License No. 243303, and that it was clear Complainant was simply trying to avoid tendering final payment to Respondent on the underlying contract.

In closing, Complainant argued that discipline was warranted against License No. 243303 because Respondent had accepted the surface area of the project, and failed to warn Complainant in advance that the end result might fail to meet minimum workmanship standards.

CONCLUSIONS OF LAW

The Registrar has jurisdiction over this matter pursuant to Ariz. Rev. Stat. §§ 32-1101 et seq. and 32-1154(A). The matter was properly brought before OAH pursuant to Ariz. Rev. Stat. §§ 41-1092 et seq.

The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors.

The Registrar may resolve contractual disputes if such resolution in ancillary to its regulatory mission and may penalize a contractor’s license by ordering payment of restitution if a proven statutory violation was not remedied by corrective action.

Complainant bears the burden of proof to establish cause for the Registrar to discipline Respondent’s license by a preponderance of the evidence. Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” 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.”

Ariz. Rev. Stat. § 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.”

Ariz. Admin. Code R4-9-108(a) requires that “[a] contractor shall perform all work in a professional and workmanlike manner.”

Ariz. Rev. Stat. § 32-1154(A)(22) provides, in pertinent part, that “[a] holder of a license may not fail to take appropriate corrective action to comply with this chapter or rules adopted pursuant to this chapter without valid justification within a reasonable period of time after receiving a written directive from the registrar. The written directive shall set forth the time within which the contractor is to complete the remedial action. The time permitted for compliance shall not be less than fifteen days from the date of issuance of the directive. A license shall not be revoked or suspended nor shall any other penalty be imposed for a violation of this paragraph until after a hearing has been held. The Registrar has the authority to issue license discipline under this provision, including summary suspension, revocation, or imposing a civil penalty or recovery fund award.

Ariz. Rev. Stat. § 32-1154(E) provides, in pertinent parts, that the Registrar may “[i]mpose a civil penalty not to exceed five hundred dollars on a contractor for each violation. The failure by the licensee to pay any civil penalty imposed results in the automatic revocation of the license thirty days after the effective date of the order providing for the civil penalty.” It also provides that “[n]o future license may be issued to an entity consisting of a person who is associated with the contractor, unless payment of any outstanding civil penalty is tendered.”

Statutes shall be liberally construed to affect their objects and to promote justice. In interpreting a statute, “[w]e first consider the language of the statute and, if it is unclear, turn to other factors, including ‘the statute’s context, subject matter, historical background, effects, consequences, spirit, and purpose.”

Statutes should be interpreted to provide a fair and sensible result. “In applying a statute its words are to be given their ordinary meaning unless the legislature has offered its own definition of the words or it appears from the context that a special meaning was intended.”

The Tribunal is required to apply equitable principles when rendering decisions. The application of equity entails offering a remedy to avoid an unconscionable or unjust result.

The material facts in the case at bar are not in dispute.

It is undisputed that the Complainant paid Respondent for half of the underlying flooring contract. It is also undisputed that some of the work Respondent performed on the project did not satisfy the minimum standards set for workmanship by the Registrar. It is further undisputed that Respondent failed to comply with the Registrar’s Directive.

Therefore, the only issue in dispute is whether Respondent raised a sufficient justification or excuse for failing to adhere to the Registrar’s Directive and remediate Complainant’s project. This is an affirmative defense that Respondent bears the burden to establish. Here, Respondent did not sustain its burden. There is no evidence in the record that excuses or otherwise justifies Respondent’s lack of performance and/or competence on this project. While the record establishes that Respondent made an attempt to perform corrective work, there is no mitigating evidence to establish that the work Respondent performed actually did satisfy the Registrar’s minimum workmanship requirements.

Because Complainant has established Respondent’s violations of Ariz. Rev. Stat. §§ 32-1154(A)(3); Ariz. Admin. Code R4-9-108(a), and 32-1154(A)(22), Complainant has also established cause for the Registrar to discipline Respondent’s contractor’s license.

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that five days after the effective date of the Final Order in this matter, Respondent Alliance LLC, ROC License No. 243303, be suspended one (1) day.

IT IS FURTHER RECOMMENDED that the Registrar require Respondent to pay the sum total of $100.00 (one hundred dollars) in certified funds as a civil penalty.

IT IS FURTHER RECOMMENDED that if Respondent fails to pay the entire amount of the civil penalty on or before thirty (30) days following the effective date of the Registrar’s Order, the Registrar shall revoke Respondent’s license, effective on such deadline date. No future license shall be issued to any entity consisting of persons associated with Respondent, as defined in Ariz. Rev. Stat. § 32-1101(A)(5), unless Respondent tenders payment of any outstanding prior civil penalty.

NOTICE

Pursuant to Ariz. Rev. Stat. § 41-1092.08(I), the licensee may accept the Administrative Law Judge Decision by advising the Office of Administrative Hearings in writing not more than ten (10) days after receiving the decision. If the licensee accepts the Administrative Law Judge Decision, the decision shall be certified as the Final Decision by the Office of Administrative Hearings.

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 forty (40) days from the date of that certification.

Done this day, March 07, 2024.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile to:

Tom Cole, Director

c/o Legal Department

Registrar of Contractors

1700 W. Washington St., Ste. 105

Phoenix, AZ 85007

[email redacted]

Alliance LLC, Respondent

20165 N. 67th Ave. # 122A-191

Glendale, AZ 85308-7002

[email redacted]

John Wesley Upperman, Complainant

1114 E. Palo Verde Dr.

Phoenix, AZ 85013

[email redacted]

By: OAH Staff