ALJDEC - Licensing

2024A-03814-NPC-ROC · Registrar of Contractors · 2025-04-11

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Shull Contracting, LLC,

COMPLAINANT,

Interstate Restoration LLC

dba First Onsite Property Restoration,

License Nos. ROC 263331, 263330

RESPONDENT.

No. 2024A-03814-NPC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING SESSIONS: November 26, 2024 and December 6, 2024.

APPEARANCES: Attorney Dwayne E. Ross for Shull Contracting, LLC (Complainant). Attorney/Employee Joel M. Crank for Interstate Restoration LLC dba First Onsite Property Restoration (Respondent).

ADMINISTRATIVE LAW JUDGE: Kay A. Abramsohn

EXHIBITS ADMITTED INTO EVIDENCE: Registrar Notice of Hearing Packet (Packet); Complainant Exhibits 1 through 16; Respondent’s Exhibits 1 through 8. _____________________________________________________________________

FINDINGS OF FACT

Interstate Restoration LLC dba First Onsite Property Restoration (Respondent) is the holder of License No. 263330, B-1 General Commercial Contractor, issued by the Registrar of Contractors (Registrar or ROC) on March 1, 2010.

Interstate Restoration LLC dba First Onsite Property Restoration (Respondent) is the holder of License No. 263331, B General Residential Contractor, issued by the ROC on March 10, 2010.

On April 1, 2024, Shull Contracting, LLC (Complainant) filed a Non-Payment Complaint Form (Complaint) with the ROC against Respondent alleging that Respondent had failed to pay Complainant for work performed on one project. The one project was an REI store in Paradise Valley, Arizona.

In the Complaint, Complainant alleged that its invoice dated July 27, 2023 in the amount of $91,690.87 remained unpaid.

On April 16, 2024, ROC issued a Citation in this matter, citing Respondent for alleged violation of Arizona Revised Statute (Ariz. Rev. Stat.) § 32-1154(A)(10), failure to pay monies in excess of $750.00 when due for services rendered.

On April 19, 2024, Respondent filed its Answer to the Citation, generally indicating that Complainant had “walked off the job despite [Respondent’s] request that [Complainant] cure [Complainant’s] defective work, and, shortly thereafter [Complainant] “incurably breached” the parties’ Subcontractor Master Services Agreement (MSA). Respondent stated that Complainant had completed some of the work and then abandoned the job. Respondent stated that Complainant’s Change Orders were never accepted, in part, because they were duplicative of work that was to have been included in the original scope. Further, Respondent alleged that it had suffered damages in having to bring in another contractor to perform work Complainant had not performed and to repair a significant portion of Complainant’s “shoddy workmanship.”

Within Respondent’s Answer, Respondent indicated it had made an offer to settle the matter, to which Complainant had not responded, and Respondent requested that ROC host an informal settlement conference.

The matter was not resolved between the parties and the ROC subsequently set the matter for administrative hearing.

On May 14, 2024 ROC issued a Notice of Hearing in this matter setting the hearing for June 19, 2024.

Respondent requested a continuance, indicating that it had filed a complaint against Complainant alleging abandonment but stating that it was “pending review” by the ROC. Complainant subsequently requested a continuance due to obtaining legal representation. After these continuances, the hearing was conducted in two separate hearing sessions.

BACKGROUND

Respondent’s construction contract with REI is not included in the hearing record. The REI plans appear to have been permit approved on April 21, 2023.

At some point in 2022, Crestwood General Contracting LLC (Crestwood) gave a bid or estimate to Respondent on the REI project. The REI project was one of the first projects Crestwood had “looked at” for Respondent. Crestwood also worked for Respondent on a fire restoration project, a lobby, and some little jobs here and there. Crestwood began work at the REI project, doing “some demolition,” but then left the project “making it clear that we didn’t want to do the project.”

Complainant came to know of the REI project through one of Complainant’s employees who had met with Chis Rochin, Respondent’s site project manager.

On May 24, 2023, Joshua Shull, the Qualifying Party of Complainant, met with Respondent’s administrative team, and signed the MSA with Respondent. The Agreement was subsequently executed by Respondent’s Chief Legal Officer on June 20, 2023.

Mr. Shull met with Mr. Rochin at the location; Mr. Rochin indicated that Respondent wanted the work done “as soon as possible” and “as cheaply as possible,” i.e., within Respondent’s budget.

Complainant did not have a specific construction contract from Respondent, and was working based on verbal instructions from Mr. Rochin regarding what [portion of] work needed to be accomplished. Complainant had been provided with a scope of work document. The scheduled dates thereon began on June 5, 2023 and ended on July 21, 2023; portions of the scheduled work refer to the plans. The scope document specifies the following:

Note: This schedule is tentative and is established as a guideline for estimated completion of work, it is subject to change due to the demands and variables of the Project including unexpected changes to the scope and unforeseen delays. Any items added by client will be scheduled and completed at the discretion of the company and will not disturb current scope of work completion. Further, any items contingent on selection and supplier will be dictated by choice and availability of items.

Complainant and its employees began work at REI in the first week of June 2023; there were blueprints on the job site. While Complainant was not sure if there had been a prior contractor on the project, Complainant found that plastic had already been hung in certain areas, presumably to cordon off other areas from construction.

On June 19, 2023, Complainant provided an estimate to Respondent, specifying the various portions of the REI job. Complainant’s estimate was in the amount of $39,065.00.

Much, if not all of Complainant’s work took place at night when the REI store was closed so as not to impede store operations. As Complainant’s work at the REI progressed, some additional work was found to be needed and, when Mr. Shull approached Mr. Rochin about it, Mr. Rochin would tell him to do a change order and that they would address it “on the back end.”

Construction issues came up during Complainant’s work: there needed to be revisions, or variations, from the blueprints on some items; some materials to be provided by REI were not yet on site; some items needed for the installation process and painting were not the correct items; and Complainant needed to purchase some materials as those materials were needed. Other items that arose included: additional framers’ costs (on removal and repair of drywall) due to an inoperable skyjack; relocating the cash registers and then reinstalling them; and bringing in new circuits and new conduit from the electrical panel in the back of the store through the floors to serve the electrical and data needs at the cash registers.

On or about July 14, 2023, Complainant supplied an invoice and change orders to Mr. Rochin. In response, Mr. Rochin emailed Mr. Shull regarding the costs thereon and indicating what he had “expected” to be presented. Mr. Rochin wrote:

Seems high as we originally set around $35k for everything then added change orders etc. Seems like it is ballooning. I understand some stuff in the change orders, but not original ballooning [to] [$91k]?

What I was expecting:

Invoice 1: $35,500

To include:

-Front of house demo

-Framing, Drywall and texture, electrical including lighting install, door install, back fill, warehouse rack install, wainscoting and panel install and polish concrete backfill. Bathroom updates

-Back of house

-demo ceiling grid, install lighting, install paneling

Change orders:

CO1: $10,180

-Sprinkler change, install cabinetry, install client provided grid system, paint under mezzanine, drywall soffit to grid system, hvac move

CO2: $5,511.44

-Inoperable skyjack, remove and repair drywall, extra materials

CO3: $7000

Run circuits back to circuit breaker and connect to lighting and outlets

All these amount to $58,191.44

-Please remove racking @$1350 as that should be included in change order.

-Not sure about change order supervising man hours. $2500 seems added in just because.

Please call me to discuss if needed.

On July 14, 2023, Mr. Shull responded, in pertinent part:

There has been a lot of back and forth with this estimate with the change orders, original scope, and adjustments, which is fine with us as it happens (especially with a new relationship on our first project together).

. . .

I have adjusted the estimate based on phone conversations we have had, as well as meetings with my team. You are correct about the racking, they are on a change order and we had not removed them from the OG bid. Further, I removed the admin costs. This was a line item we felt necessary due to the estimate changes and reviewing of blueprints to adjust for the issues that came to us. My team has spent a handful of hard hours reworking what we thought had been done. Our understanding was that this was cleared and to “put them on the estimate.” None-the-less, I understand your responsibility to get a number in front of your client you can make sense of, so not sweat there.

On July 27, 2023 and July 28, 2023, and subsequently around August 10, 2023, a series of emails ensued between Mr. Shull and Randy Conrad, the Respondent’s construction manager for the Arizona office.

On July 27, 2023, Mr. Conrad asked Complainant for a comprehensive completion schedule and daily summary with pictures. Mr. Conrad stated that Brandon Pettibone from REI had expressed dissatisfaction with the status of the project, and the effort regarding completing the project due to erratic scheduling while REI had been paying a security guard to be there (for the stated work hours).

Mr. Shull responded that he would have a schedule sent over, but also expressing that he felt there should be accountability on both ends due to poor plans for the project, mentioning the scopes being wrong as well as materials, design, expectations and timelines. Further, Mr. Shull noted that the data issues REI was experiencing that day was not something that had been within Complainant’s scope. Finally, Ms. Shull noted that he was losing faith in Respondent because Respondent’s two project managers were both on vacation and no manager was on site that night.

Mr. Conrad responded indicating he was still out of town and if Complainant needed someone on site, he would have a supervisor sent over. Mr. Conrad suggested that, based on Mr. Shull’s email, “we wrap up the REI and shake hands.”

Mr. Shull responded: “I will send a final invoice and walk from this job tonight.” However, 31⁄2 hours later, in another email, Mr. Shull sent the original invoice along with the change orders. In that email, Mr. Shull indicated that he would send a lien waiver to Respondent’s accounting division; Mr. Shull requested that Respondent issue a progress payment in the amount of 75% of the total. Mr. Shull further indicated he had been awaiting directions from REI. In this email, Mr. Shull also made a monetary settlement offer and an offer to sign a release and walk away.

On July 28, 2023, Mr. Shull sent a final invoice and requested full payment indicating he understood that another contractor had taken over the project.

On August 10, 2023, Mr. Shull emailed that his legal team would be handling the matter from then on.

On August 10, 2023, Mr. Conrad responded that Respondent was also turning the matter over to their legal team. Mr. Shull warned that Complainant was in breach of the MSA and there might be ROC issues for abandoning the project.

On August 10, 2023, Mr. Shull responded that he had not abandoned the project and had been awaiting instructions from Brandon/REI whether Complainant should come back or not to the project. Among other statements of allegations regarding the project, Mr. Shull stated that he had been fired without written notice.

On July 28, 2023, Complainant presented to Respondent a Pay Request (Invoice) dated July 27, 2023 in the amount of $91,690.87, with a 60% progress billing amount of $55,014.52.

. . . . .

At hearing, Brad Veale, the REI general store manager, testified that Chris Rochin was his main point of contact with Respondent and that, “after Chris was removed” from the project, there was a four to five day “gap” in the work and some elements of the project were still pending at that time.

Mr. Veale testified that Brandon Pettibone told him in late July 2023 that Complainant was not coming back to the job but that Brad needed to let Complainant come and collect its equipment. Mr. Veale recalled the following work having been done by Complainant at that time: the steel framing was done, some of the wall-racking, drywall patching and the painting with subsequent additional texturing, and the touch-up painting.

Mr. Veale also testified that the construction had not been an impediment to the store’s daily operations because most of it was being done at night; he indicated the store had been kept clean.

Mr. Veale testified that, on or about August 3, 2023, the black plastic came down and the store was able to get back to full operations.

Mr. Veale further indicated, however, there were issues with the data for the cash registers, and that the electrical and data lines for the registers were Respondent’s responsibilities in the construction work; Mr. Veale indicated that, to his knowledge, the need to open up the concrete to run the conduit to the cash registers was [unanticipated] additional work on the project. Mr. Veale noted that Chris [Rochin] had kept him updated on the conduit issues by telephone.

Johnson Power Solutions (JPS) was a subcontractor that Complainant brought in to do some of the electrical work. Jacob Johnson is the owner of JPS; he credibly testified regarding the limited amount of electrical work the company performed. JPS took down all the existing lighting in the ceiling and, later, JPS returned to the project to run the conduit (but not the electrical lines) from the junction box in the back of the store and through the opened-floor to the future location for the registers. Mr. Johnson testified that his $700.00 invoice consisted of $500.00 for the demolition work and $200.00 for after-hours work, and that the remaining invoice for $2,000.00 was for the conduit work.

Mr. Johnson testified that he worked one day and one night on the REI job for approximately 12 to 14 hours total. Mr. Johnson testified that Complainant had wanted JPS to bid and perform some other work on the REI job but, due to not being paid by Complainant for the work already performed, JPS would not come back on the job.

Elite Electrical was a subcontractor that Complainant brought in to do some electrical work. Rudy Martinez, owner of Elite Electrical and Solar LLC (Elite), credibly testified at hearing regarding the electrical work his company completed at REI. Mr. Martinez testified that, when he looked at the blueprints, there were no circuits/power runs to the registers and they then installed five new circuits from the panel along with the lines needed to bring power to the registers.

Subsequent to the new circuit work, Elite provided the following work: completed the rough-in by installing outlets; adjusted the lighting over the kiosks; ran power from panel down the wall and through the opened-floor/conduits for electrical at the register site; completed installation of the Unistrut over the new register site; and ran electrical lines through the ceiling, strapping the lines to the Unistrut structure. Further, Elite installed the lighting fixtures that were on-site and available to be installed; however, other lighting fixtures were back ordered.

Mr. Martinez testified that the Elite work on REI site comprised approximately 25 hours.

Lloyds Interior Finishes LLC (LIF) was a subcontractor that Complainant brought in to both stock and hang the drywall, and tape and texture (to a Level 3 finish) for painting, ostensibly to match the existing finish. Lloyd Shull is the owner of LIF. Lloyd Shull credibly testified that he hung the drywall and also helped install the new insulation. The LIF invoice dated July 5, 2023 for that work was $3,200.00. Once the walls were painted to match the existing finish, there was “glare” from all the lighting, and the “project manager” and project supervisor told LIF to bring the finish up to a Level 5. LIF then proceeded to skim that entire wall area and repaint; additionally, at that point, there was some other touch-up painting that LIF performed. The LIF invoice dated July 9, 2023 for the Level 5 work was $1,500.00.

Lloyd Shull testified that 1 to 2 weeks later, he met with the supervisor and, when they walked the job, there were no complaints and nothing else needed to be done on the drywall and painting work. Lloyd Shull testified that with the drywall installation, the insulation installation, the Level 3 painting, and the finish reworking to Level 5 and the second painting, his total hours on the project were 68 hours.

Jason Rose, a 5-year employee of Complainant, credibly testified with specificity as to the work Complainant completed on the REI project; he indicated that he had provided most of the work and had worked the majority of the time Complainant was on the project. Mr. Rose testified regarding the following work having been performed by or through Complainant:

installation of the steel beams and steel framing in the “online” back/storage area of the store;

installing the insulation at the completed walls in the back area;

jackhammering the floor opening for the conduit run to the register location; pulling the electrical through the ceiling;

taking down the ceiling lights, then taking out the drop ceiling, “cleaning up” the electrical lines that were in the ceiling and building up the drywall to the ceiling;

completing the Unistrut and all electrical wiring on the Unistrut for the lights in front and over counters;

installing the MDF boards behind the to-be-installed racks;

installation of some racks (i.e., moving existing racks from 1 wall to another wall);

installing a temporary door which Mr. Rochin asked them to install and “make it work” that required some drywall adjustment;

the installation of the front counter (register area) at which location the countertops did not match but Mr. Rochin said to install them anyway; and,

the painting for Level 3 finish which they subsequently retextured for a Level 5 finish (on the walls in the front and counter area).

Mr. Rose noted that some of the photographed work was not work that Complainant had performed, mentioning:

the duct work;

the existing border on wainscotting that had previously been glued on, which Complainant had then demoed.

Mr. Rose opined that 97% of the work Complainant was supposed to do was done when they were asked to leave. Mr. Rose was unaware of any other demolition work that would have needed to be done by Crestwood and, he opined, certainly not 155 hours of demolition as was invoiced by Crestwood. Mr. Rose believed that Complainant’s painting and repainting work had taken about 60 hours and he opined that there was nothing about the installation of drywall or its painting that would have taken 212 hours as was invoiced by Crestwood.

Complainant was unable to complete some of the scope work due to either Respondent or REI not having the needed material on site at that time. In terms of being unable to complete some of the work, Mr. Rose noted the following: the new racks were not in and the light fixtures were not all in. Mr. Rose projected that 2 men would have taken about 2 hours to install those light fixtures.

James D. Lord, owner of Crestwood, testified at hearing regarding Crestwood’s work at REI. Mr. Lord could not recall the date when Crestwood came back onto the REI project; he indicated that he supervised the work but also noted that he was “in and out” on the site. Mr. Lord testified that, when he came back to the REI project, the work to be done was not as had been reflected on the original plans he had seen in 2022 and that he only had his bid set of plans. Mr. Lord did not provide the date on which Crestwood completed the REI work.

When discussing the Crestwood work to complete the project as compared to the provisions of Complainant’s original estimate for the project, Mr. Lord indicated the following:

As to Item 1.1 Demo, on Complainant’s estimate for the West RSPU area, Mr. Lord indicated that Crestwood did “some” lighting removal but noted that the framing and concrete saw cut were already done when Crestwood came back on the job;

As to Items 1.2, 1.3, and 1.4, Crestwood did not do any of these as they were already done;

As to Item 1.5 Drywall, “from what [he] recalled,” Crestwood repaired “a fair amount” in that “pieces” throughout did not match “what the owner wanted or pre standard;”

As to Item 1.6 Electrical, Crestwood did “a fair amount” of electrical, mentioning installing some wire, outlets, and junction boxes, and Crestwood found the breakers were not clearly marked;

As to Item 1.7 Painting, Crestwood did “quite a bit” of painting, repainting a few walls and “a lot of” touch up painting in the area that became the new retail space;

As to Item 1.8 Wainscotting, Mr. Lord indicated that the wainscotting had not been installed per the plans behind the registers, and Crestwood removed it and a carpenter reinstalled it using screws rather than pin nails, also “he believed” Crestwood did all the wainscotting “in the back;”

As to Item 1.9 Rack Installation, Crestwood installed only the top portions of the racks, the bottom portions were already installed;

As to Item 1.10 Electrical, Mr. Lord indicated Crestwood installed the lighting fixtures in the storage area, in the back warehouse and at the cash registers, noting that the fixtures “could not be found” and they had to purchase them;

As to Item 1.11 Lighting Mounts, Mr. Lord indicated that the Unistrut was only partially completed and Crestwood had to “redo” the Unistrut;

As to Item 1.12 Door Installation, Mr. Lord did not recall what Crestwood had done;

As to Item 1.13 Baseboards, Mr. Lord did not recall what Crestwood had done;

As to Item 1.14 Paneling, Mr. Lord indicated Crestwood “might” have done this in the back;

As to Item 2.1 Demo in the North area, Mr. Lord indicated that Crestwood demolition had included removing the acoustic ceiling and the floor grinding, but could not recall whether they had removed the counters at the beginning of the project;

As to Item 2.2 Paint/Drywall (for touch up after demolition), Mr. Lord indicated Crestwood painted “in all areas of the store;”

As to Item 2.3 Paneling, Mr. Lord indicated Crestwood “added” this because of the storage area;

As to Item 2.4 Lighting Mount, Mr. Lord indicated Crestwood did “large portions” of the Unistrut “but not all;”

As to Item 2.5 Baseboard, Mr. Lord did not recall what Crestwood had done;

As to Item 2.6 Lighting Install, Mr. Lord indicated Crestwood had installed track lighting in the storage room and at the back (sales area);

As to the Bathrooms [Items 3.1 and 3.2], Mr. Lord indicated that Crestwood installed hand dryers, did some tile work, and did touch-up paint.

As to Item 4 Deep Cleaning, Mr. Lord acknowledged that the project had not been ready for that.

Mr. Lord estimated that about 60% of the items were completed when Crestwood came back on the job and he did not recall anything Crestwood did that was a change from the plans. However, Mr. Lord also spoke about: (a) having a subcontractor come in and build a hard vent to cool the warehouse area; (b) having to rebuild soffits; and (c) having carpenters move/slide the installed cash register/cabinets about an inch or two to be ADA accessible.

On or about October 25, 2023, Crestwood provided to Respondent a general descriptive breakdown of the work indicated to have been completed on the REI project. The Crestwood breakdown indicated it was “inclusive of all work completed by Crestwood General Contracting” and stated as follows:

1. Painting: Crestwood painted various areas of the property including repainting the front-line wall behind the registers, the front wall at the entry and the back area ceiling and walls in front of the storage area. This required complete repaint as the paint which had been completed was substandard.

2. Wainscotting: The plywood wainscotting in the front line behind the registers was installed incorrectly and not completed. We secured the wainscotting properly and installed the corner guards.

3. Rack Installation: The rack is located in the new warehouse area and was not installed. It was in multiple pieces and was completed by our firm and brought to code and fully working.

4. Install Lighting Fixtures: Crestwood installed all lighting fixtures on existing partially completed Unistrut. The strut was completed, and the fixtures were installed over the new sales counter, in the new warehouse and in the back sales area in front of the warehouse doors.

5. Lighting Mounts: The Unistrut was partially installed by previous contractors and was completed by Crestwood GC.

6. Paint and Drywall: Drywall patches were made by Crestwood in various locations and paint was touched up. This included the new warehouse area, the back sales area and the AC Duct locations.

7. Touch Up paint was performed at various locations throughout the building as directed by the owner or contractor.

8. Paint Interior Walls and Door Jambs: At the direction of the General Contractor and the direction of the owner, various interior walls were repainted and included various doors and jambs as required.

9. Complete MDF: The MDF installed in the back of store was incorrectly installed. The MDF was removed and reinstalled per plan.

10. Frame and Tape warehouse area in back sales floor. Install new 2x4 studs, drywall and paint to match as required. Area had been previously demoed by others.

11. Have HVAC contractor manufacture new duct work over sales area and install.

12. Remove and reset frontline cabinets as required.

The aforementioned list were all items which required various degrees of work and time to be completed. I can gladly meet at the site and walk you or anyone else through the work who may have concerns. Overall, it seems a fair amount of work was started but no work was actually completed.

Crestwood invoiced Respondent for the amount of $73,350.00. Crestwood indicated that it had performed the following work per category: 155 hours of demolition work; 255 hours of electrical work; 212 hours of drywall and painting work; and, 193 hours of carpentry work. Neither the breakdown nor the invoice gave an indication of hours per a specific portion of category work. Crestwood had agreed to provide labor to perform work at $90.00 an hour.

Mr. Lord indicated that Crestwood workers clocked in and out on their cell phones and that those cell phones had trackers on them, so the workers could be tracked that they were on the job. Other than giving an estimated 48 hours of time on the initial demolition Crestwood had done, Mr. Lord was unable to provide any further information on the dates, hours, or number of men that had subsequently worked at the REI project; he indicated that he did not have that “system” any more.

Regarding the 155 invoiced demolition hours, Mr. Lord stated that Crestwood had done about 48 hours of demolition work before Crestwood left the job; he indicated it was the work of 3 men on 2 nights. Mr. Lord indicated, therefore, that about 107 hours of demolition were attributable to when Crestwood came back.

Regarding the 255 invoiced electrical hours, Mr. Lord stated it was 2, or 3, electricians “for multiple days” and noted that large globes over the registers were “a nightmare” to wire in. Further, that there was track lighting “all over the store” that had to be hung along with lights in the storage area that had to be hung at a 20’ height.

Regarding the 212 paint/drywall invoiced hours, Mr. Lord described it as “various” including the physical work of painting and also cleaning the painting equipment.

Regarding the 193 carpentry invoiced hours, Mr. Lord stated that it included the installation of the MDF, fixing the wainscoting, framing the soffits in the back, the cabinets and the rack installation.

Mr. Lord testified that Crestwood billed Respondent in October 2023 and was paid within 30 days, stating that Respondent was “pretty quick” because they had “worked out the kinks in their relationship.”

Respondent paid Crestwood $143,350.00 on November 15, 2023. The Respondent’s payment paperwork indicates the following:

An October 23, 2023 bill, #1034REV, originally for $73,350.00, with an amount due of $43,350.00;

An October 24, 2023 bill, #1035, originally for $100,000.00, with an amount due of $100,000.00; and

A November 2, 2023 Credit, #1037 [as applied to #1034REV] in the amount of $30,000.00.

On June 12, 2024, Randy Conrad executed a sworn Affidavit regarding the REI project on behalf of Respondent. The Affidavit recites that, to his knowledge, Respondent had approved the Complainant’s “work order” and change orders that totaled $58,191.44. The Affidavit recites that REI contacted him on July 27, 2023 to discuss “concerns about the progress on, and workmanship” at the project; the Affidavit further recites that Mr., Conrad then contacted Mr. Shull on July 27, 2023 “to discuss concerns about the workmanship and Project schedule.” Regarding Crestwood’s invoice of $73,350.00, Mr. Conrad states that “approximately $72,000.00 was to correct [Complainant’s] work or complete the work [Complainant] failed to perform.”

Kevin Sullivan, General Manager for Arizona, testified regarding the MSA and its provisions, including that an estimate from a subcontractor is sufficient for the subcontractor to begin work, that the estimate becomes the “scope” of work, and that a written contract and signatures are not required. In contrast to beginning work, Mr. Sullivan indicated that the MSA requires a written authorization for any changes in scope and/or price. Mr. Sullivan noted that when a contractor defaults, Respondent is permitted to back charge that contractor regarding the cost of completing the work.

Mr. Sullivan testified that he was never on the REI job site. Mr. Sullivan indicated he was not familiar with the 2022 Crestwood bid and had not compared the plan to either Complainant’s estimate or invoice or to Crestwood’s invoice. Mr. Sullivan indicated that Mr. Conrad would have been the person who “approved” Complainant’s original estimate.

Mr. Sullivan testified that he did not see a purchase order from Crestwood and he believed that it was a verbal agreement between Crestwood and Mr. Conrad. Mr. Sullivan’s understanding was that Respondent agreed to pay whatever was billed to Respondent to get the REI job done.

Mr. Sullivan testified that Mr. Conrad left employment of Respondent “a few months ago” and that he last talked with Mr. Conrad “a few months ago.”

Regarding the change orders, Mr. Sullivan acceded to Mr. Conrad’s Affidavit that Mr. Conrad, i.e., Respondent, had approved Complainant’s original estimate and change orders totaling $58,191.44; however, he opined that the change orders should not have been approved, because the change orders were never signed and it was not Respondent’s policy to verbally approve change orders.

Mr. Sullivan indicated that he had been copied on the [July 27, 2023] communications regarding Complainant “not going to do more” work and that he had been in touch with Mr. Conrad during the Complainant’s work and thereafter. In this case, Mr. Sullivan opined that, based on the numbers, Respondent had to pay Crestwood an amount that exceeded both Complainant’s original invoice and the alleged “approved” amount and, therefore, Respondent owed no money to Complainant.

Mr. Sullivan testified that Respondent had not yet submitted a bill to REI due to an REI internal system issue, which issue was that the REI portal “cannot accept” Respondent’s bill.

Respondent’s position is that Complainant breached the MSA by walking off the job and that, under the applicable MSA, Respondent is not required to pay Respondent but is required to offset its damages in having to pay another contractor to finish the work against Complainant’s invoices. Respondent argued that, based on the numbers, it had offset its damages against Complainant’s invoice and that, based on the MSA, the parties should be required to go to arbitration regarding the damages.

Complainant’s position is that it completed work for Respondent for which it has never been paid. Complainant argued that it completed work, i.e., 60% of the work for which it contracted and of which it could perform based on the materials available at the site at the time. Further, Complainant argued that Respondent has failed to pay on the submitted invoice, for which Respondent is in violation of Ariz. Rev. Stat. § 32-1154(A)(10).

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction and has been properly brought before OAH for adjudication.

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 is 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.

Unless otherwise provided by law, a party asserting a claim, right, or entitlement bears the burden of proof; a party asserting an affirmative defense has the burden of establishing the affirmative defense. The standard of proof on all issues in this matter is that of a preponderance of the evidence.

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)(10) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license,

[f]ailure by a licensee or agent or official of a licensee to pay monies in excess of $750 when due for materials or services rendered in connection with the licensee's operations as a contractor unless the licensee proves that the licensee lacks the capacity to pay and has not received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased.

Ariz. Rev. Stat. § 32-1156.01 states, in pertinent part, that after a hearing an Administrative Law Judge may provide restitution to any person who is injured by an action of a licensee.

There is no evidence that Respondent ever contacted Complainant regarding work having not been done in accordance with either the plans or with any on-the-job instructions from Mr. Rochin while Complainant was on the job. Complainant was not contacted by Respondent with regard to any further work required or requested to be done or repaired. Complainant did not receive a punch list from Respondent.

There is no evidence that Respondent ever filed a workmanship complaint with the ROC against Complainant.

Mr. Lord’s testimony was not only inconsistent, it provided no credible support for the Crestwood-stated completed work comprising 815 hours of work. Even reasonably presuming that 3 men had done the work stated to have been done, that would approximate 271 hours each for a total of nearly 33 plus [8 hour] days, or 11 [8 hour] days each man. In the instant case, Complainant last worked on the site on July 27, 2023 and into the morning of July 28, 2023. Mr. Veale, testified that there was a 4 to 5 day gap when no contractor was working; further, he testified that the plastic was down and the store was open on or about August 3, 2023, which was 5 days after Complainant left the job site. The hearing record does not support accuracy of the Crestwood invoice.

The evidence in the hearing record established that Complainant sent a pay request for a progress payment for 60% of Complainant’s July 27, 2023 invoice. The evidence of record demonstrated that Respondent had approved $58,191.44 for payment to Complainant. The evidence of record demonstrated that Respondent owed monies to Complainant that were not yet paid to Complainant at the time Complainant filed the Complaint; further, that Respondent owed monies to Complainant that were not yet paid to Complainant at the time of the administrative hearing.

Therefore, the only issue remaining is whether Respondent raised a sufficient justification for failing to tender payment to Complainant. Respondent bears the burden to establish a sufficient justification. Respondent denies it owes monies to Complainant based on its MSA with Complainant.

The hearing record demonstrates that Respondent paid Crestwood $143,350.00 on November 15, 2023; Respondent’s payment record appears to have reduced the amount paid on the REI job from $73,350.00 to $43,350.00. The hearing record demonstrates that Respondent had capacity to pay Complainant.

In this case, Respondent failed to demonstrate both that it lacks the capacity to pay Complainant the monies owed and that it has not been paid by REI for the work Complainant performed. It strains credulity to believe that a large nationwide company such as REI has a “system” that will “not accept” a vendor’s billing or that such a company has no other mechanism for a vendor to submit a billing.

Complainant has established by a preponderance of the evidence that Respondent violated Ariz. Rev. Stat. § 32-1154(A)(10); therefore, Complainant also established cause for the Registrar to discipline Respondent’s ROC License No. 263330, B-1 General Commercial Contractor License.

RECOMMENDed order

Based on the foregoing,

IT IS RECOMMENDED that fifteen (15) calendar days from the effective date of the Final Order in this matter, Respondent Interstate Restoration LLC dba First Onsite Property Restoration’s ROC License No. 263330, shall be suspended until Respondent provides the Registrar with sufficient proof that $58,191.44 has been tendered to Complainant in certified funds.

IT IS FURTHER RECOMMENDED that after the Registrar has received Respondent’s proof of payment to Complainant, Complaint 2024-03814 may be closed.

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, April 11, 2025.

/s/ Kay A. Abramsohn

Administrative Law Judge

Transmitted electronically to:

Tom Cole, Director

Registrar of Contractors

Dwayne E. Ross, Esq.

Anthem Law

[email redacted]

Joel M. Crank, Esq.

[email redacted]

By: OAH Staff