ROC: Are the Apples the Same or Different?
Should res judicata or collateral estoppel bar civil actions
or issues after a final ROC Decision and Order?
This article was prepared in conjunction with
Sharon Shively's March 3, 2017, presentation at "Arizona Construction Law 2017:
Annual Update of Recent Developments," sponsored by the State Bar of Arizona.
principles of collateral estoppel and res judicata apply to bar issues or
actions, heard in the administrative hearing process through the Arizona
Registrar of Contractors (ROC), from being raised in civil court? To date, the
answers are “yes and no” and “it depends.” Oftentimes, this question is
manifested by the inquiry of “how many bites of the apple should be permitted?”
But that answer depends on whether the apples are the same or different. Let’s
review the legal principles first.
The Preclusive Doctrines
judicata bars a later suit based on the same cause of action and will
preclude a claim when a former judgment on the merits was rendered by a court of
competent jurisdiction and the matter now is at issue between the same parties
or their privies was, or might have been determined in the former action.
Res judicata generally applies to valid and final adjudicative
determinations by administrative tribunals. Id.
doctrine of “collateral estoppel” bars a party from relitigating an issue
identical to one he has previously litigated to a determination on the merits in
another action. Id. Issue preclusion minimizes inconsistent
determinations of factual issues among different forums and promotes judicial
Arizona cases on the issue typically start with a citation to J.W. Hancock
Enterprises v. Arizona State Registrar of Contractors.
In Hancock, the homeowners filed a complaint with the Registrar regarding
a dispute between them and the contractor as to whether the supplement to a
contract required installation of Zonolite wall insulation. A hearing was held
in which the contractor represented itself. The Registrar issued a Decision and
Order finding that the parties had contracted for an insulation package
including Zonolite wall insulation. Based on that finding, the Registrar found a
violation of A.R.S. § 32-1154(A)(3), which requires licensed contractors to
comply with the applicable plans and specifications. The contractor was required
to install the Zonolite or have its license suspended. After retaining counsel,
the contractor, claiming it had additional evidence to offer, petitioned for a
rehearing that was denied. A statutory appeal followed which affirmed the
Registrar’s decision. The contractor filed a declaratory judgment action which
it lost on summary judgment based on the decision in the statutory appeal. The
contractor argued that the Registrar of Contractors’ decision was an
unconstitutional usurping of judicial power. The Arizona Court of Appeals
“the construction and interpretation of
disputed contract terms by the Registrar of Contractors pursuant to A.R.S. §
32-1154(A)(3) may constitutionally be exercised by the Registrar ancillary to
its regulatory function.” Id.
Seemingly, the Court found that the factual issue of failing to install the
Zonolite was a violation of the statute, which fact also supported a breach of
contract claim. Having found the violation, the Court based its decision barring
the relitigation of whether there was a breach of contract on the doctrine of
The Court did note that
“[t]he Registrar’s power is limited to
suspending or revoking a contractor’s license, or attaching conditions to the
license. Money damages may not be awarded.” Id. at 125.
Interestingly, not one of the cases which involve a Registrar of Contractors
hearing and cites to Hancock are reported cases, whether in federal or
state court. In Pierce v. Laydon Leasing, Inc. dba Custom Pools, 2011 WL
1631931 (App. 2011), the Court of Appeals affirmed a Mohave County trial court
ruling that a Registrar of Contractors decision was binding on the issue of
whether the construction of a pool was so defective that the pool failed,
causing damage to the house. The Court held that this issue was litigated before
the Registrar on claimed violations of A.R.S. § 32-1154(A)(1), (3), (7), and
(23), the Registrar found in favor of the pool contractor, and thus granted the
contractor’s motion for summary judgment. The Court held that the issue was
actually litigated before the agency, the parties had a full and fair
opportunity to litigate the issue, resolution of the issue was essential to the
decision, there was a valid final decision on the merits and there was a common
identity of the parties. Id. The Pierces argued that they should not be
precluded from civil litigation, as the remedy sought in court (money damages)
was different than the remedy sought in the administrative hearing. The Court
disagreed, stating that such an argument was relevant to a res judicata
analysis, not a collateral estoppel analysis. Having found against the
homeowners on the factual issue of the cause of the damage to the home (finding
it was not the installation of the pool that was defective causing the
problems), the Pierces could not re-litigate that issue in court. Presumably,
had the Pierces been successful in the administrative hearing, they could have
filed a lawsuit in civil court for damages, with the factual finding in their
favor being subject to issue preclusion against the contractor.
unreported Arizona District Court case, Judge Neil Wake analyzed the preclusive
effect of Registrar proceedings on Superior Court proceedings. First, the Court
acknowledged that federal law requires the court to give the Registrar
proceedings “the same full faith and credit ... as they have by Law or usage in
the courts of [Arizona].”
The Court noted that, in Arizona, “[b]oth doctrines of res judicata and
collateral estoppel may apply to decisions of administrative agencies acting in
a quasi-judicial capacity.”
Importantly, however, the Court distinguished between the two doctrines:
Under the doctrine of res judicata,
a judgment on the merits in a prior suit involving the same parties or their
privies bars a second suit based on the same cause of action. This doctrine
binds the same party standing in the same capacity in subsequent litigation on
the same cause of action, not only upon facts actually litigated but also upon
those points which might have been litigated. ...
Collateral estoppel is a doctrine of issue preclusion. It bars a party from
relitigating an issue identical to one he has previously litigated to a
determination on the merits in another action. The elements necessary to invoke
collateral estoppel are:
the issue is actually litigated in the previous proceeding;
there is a full and fair opportunity to litigate the issue;
resolution of such issue is essential to the decision;
there is a valid and final decision on the merits; and
there is a common identity of parties.
Court focused on the major difference between res judicata and collateral
estoppel in that case by noting that the former bars relitigation of every issue
that may have been litigated, but the latter precludes relitigation only
of issues actually litigated. Id.
Court concluded that res judicata did not apply to bar a breach of
contract claim before the Court, because the owner’s complaint to the Registrar
about the workmanship was not a suit for breach of contract. Moreover, the Court
noted that the owner (Cathay) could not sue for breach of contract in front of
the Registrar because the Registrar has a statutory jurisdiction limited to
certain powers it may exercise over contractors. While the Registrar has power
to resolve bona fide contractual disputes involving licensed contractors to
determine whether a contractor has violated the statutory provision that
prohibits departure from plans or specifications without consent, it is a power
ancillary to the Registrar’s regulatory mission and is viewed as extending to
all contractual disputes necessary to adjudicating an alleged regulatory
narrowing the issue to one of collateral estoppel, the Court reviewed which
factual issues were determined in the Registrar hearing and whether the
Registrar had jurisdiction over those issues by referring to A.R.S. § 32-1154.
Finding that two of the issues which were adjudicated in the Registrar hearing
would also constitute breaches of contract, the Court held that the Owner was
collaterally estopped from re-litigating those specific issues.
Hayes v. Dexter Construction, Inc.,
the Registrar of Contractors issued a final order revoking a contractor’s
license unless it fixed the homeowner’s wood floors before the effective date of
the order. Other homeowner complaints in addition to the wood floors were also
raised before the ROC. The homeowners filed a civil action seeking damages for
breach of contract concurrently with the ROC complaint. The contractor argued
that the trial court erred in awarding damages for claims that had been
previously adjudicated by the ROC because only damages related to the wood
floors should have been litigated. The trial court concluded that the homeowners
were not precluded by res judicata from seeking money damages for the
breach of contract and the Court of Appeals agreed.
CDC Pools, Inc. v. Eagleson,
the trial court dismissed a contractor’s declaratory judgment complaint after it
was stayed pending the resolution of an appeal of a Registrar’s Decision and
Order. In that case, the homeowners filed an administrative complaint with the
Register alleging several violations of A.R.S. § 32-1154(A). The ROC
investigator issued a corrective work order, but ultimately at the hearing the
administrative law judge, finding that the parties had rescinded the contract,
dismissed the ROC complaint. While the ROC complaint was pending, the contractor
filed a civil action for a declaratory judgment that the contract had been
terminated and the homeowners were not entitled to anything more under the
contract, and sought attorneys’ fees and costs. When the contractor filed a
motion for summary judgment, the homeowners requested a stay pending resolution
of their appeal from the ROC ruling that had been entered in the interim. The
court granted the stay, denied the motion for summary judgment without
prejudice, and stated that the court action would be “superfluous” if the ROC’s
ruling was affirmed on appeal. The appeal was ultimately dismissed as untimely,
effectively affirming the ROC ruling and leaving it as the final ruling. The
court then dismissed the civil action with prejudice and denied all relief. The
appellate court agreed that the declaratory judgment action was properly
dismissed, as such an action cannot be brought to review an administrative
decision where there exists a procedure to appeal from the administrative
ruling. Id. The court further stated that a declaratory judgment action
may not be used to preempt or prejudge issues that are committed for initial
decision to an administrative body. The court went even further, however, and
also concluded that, based on the Hancock case, the administrative ruling
barred the declaratory judgment action based on the collateral estoppel
Nick Hardy Construction v. Nyberg,
Nyberg hired Hardy to construct a home. During construction, she saw cracks and
heaving in the concrete slab. She filed a complaint with the Registrar of
Contractors listing ten items, some of which related to the concrete slab. At
the administrative hearing, Nyberg testified that the non-concrete items were no
longer issues. The administrative law judge found that the concrete slab did not
comply with industry and workmanship standards and that the contractor thus
violated A.R.S. section 32-1154(A)(3). Hardy did not appeal, made the repairs,
and filed a notice of compliance with the Registrar of Contractors. The
administrative law judge found that Hardy had complied with the terms and
conditions of the ROC Order and recommended the matter be closed, and the ROC
agreed. The homeowner appealed to the Superior Court, which affirmed the ROC
the ROC proceedings, Hardy sued Nyberg for breach of contract and unjust
enrichment for amounts due under the contract. Nyberg filed a counterclaim for
breach of contract, negligence related to the concrete slab, and false reporting
of a lien. On competing motions for summary judgment, Hardy argued that
collateral estoppel and res judicata barred the counterclaims because the
concrete slab workmanship had been litigated previously in the ROC proceedings.
The trial court agreed with Hardy that res judicata and collateral
estoppel applied and precluded the homeowner’s counterclaims. The court reasoned
that Nyberg had testified that all other issues had been resolved and that only
the concrete slab issues remained, and that she failed to disclose or assert a
claim for money damages or seek restitution during the ROC proceeding.
appeal, Nyberg argued that she should not be precluded from bringing a breach of
contract claim for associated damages. Hardy conceded that res judicata
and collateral estoppel should not have applied to bar Nyberg’s breach of
contract counterclaim. The appellate court agreed and concluded that, while the
ALJ’s findings have preclusive effect, citing Hancock, the ROC cannot
award compensatory damages, relying on Bentivegna v. Powers Steel & Wire
quoting “to fully protect a plaintiff’s rights, he must be allowed to seek money
damages in the courts in addition to any remedies available through the ROC
complaint procedure.” Moreover, the appellate court concluded that, even though
Nyberg testified at the ROC hearing that the other items on her complaint list
were no longer a problem, because she wasn’t a party to the ROC hearing (just a
complaining witness), she was not precluded from presenting evidence on those
issues as part of her claim for damages. In support of that statement, the court
cited to Twin Peaks Const. Inc. of Nevada v. Weatherguard Metal Construction.
In 34 Degrees North, LLC v. Mountain View
Construction, LLC, 2016 WL 7209664, a commercial owner filed an ROC
complaint against the original general contractor, who was ordered to take
corrective action. Because the owner had selected a new general contractor, the
original general contractor did not have the opportunity to correct anything.
Nonetheless, the administrative law judge found that two of nine charges had
merit, and the ROC placed the general contractor on 120 days of discipline.
Subsequently, the owner filed a civil suit against the
original contractor and the follow-on general contractor. The original general
contractor filed a Motion for Summary Judgment, claiming that collateral
estoppel under the Hancock case barred the claim. The trial court agreed.
On appeal, the owner claimed that collateral estoppel
should not apply because the owner wasn’t a “party” to the ROC proceeding.
Unfortunately, the appellate court punted on this issue and assumed, without
deciding, that even if the owner wasn’t a party, and even if collateral estoppel
was not a bar, the motion for summary judgment was still properly granted
because the owner had no standard of care expert.
Two Elements for Collateral Estoppel May Be Missing in Administrative Hearings
The Same “Parties” Are Not Involved. The Twin Peaks court noted
that A.R.S. § 32-1154 “prohibits specified conduct by the holder of a
contractor’s license, which is granted by the Registrar.” Id. at 380. The
statute authorizes the Registrar to investigate, impose civil penalties,
including suspension and revocation of a license if a violation is found. Under
A.R.S. § 32-1154(B), the Registrar is required to investigate a complaint, hold
a hearing, and issue a final determination about the licensee’s status, subject
to judicial review. Accordingly, the Court concluded that the complainant is not
a party to the action, even though a complaint was filed to start the process.
If that is the case, of course, as the Nygard court agreed, then
collateral estoppel and res judicata would never apply.
we are left in ambiguity. If the complaining owner or contractor in an ROC
proceeding is not a party to the proceeding, then neither collateral estoppel
nor res judicata can apply. Only one of the cases discussed above follows
that reasoning, however. Additionally, none of the cases address whether the ROC
proceedings are really “fully and fairly” litigated – another requirement to
find preclusive effect.
There Is No Full and Fair Opportunity to Litigate. For
those lawyers that routinely practice before the Registrar of Contractors, few
would take the position that those proceedings are at all similar to the full
and fair opportunities to litigate that are present in civil court. The
significant differences in procedure and opportunity between the two forums can
easily lead to the same issue being determined differently, depending on the
forum selected. For example, there is no opportunity for the same level of
discovery, disclosure and evidentiary rules and protections in ROC proceedings
that there is in civil court. Indeed, there are no rules for disclosure and
exchange of documentation, the evidentiary rules do not apply, and hearsay is
virtually always admitted in administrative hearings.
Accordingly, administrative decisions will often be made based on evidence that
is insufficient and unreliable and would not be admissible in civil court.
Construction entities can represent themselves in administrative proceedings,
but not in trial court. Of course, not surprisingly, almost no unrepresented
party would understand that the result of an administrative proceeding might
have a preclusive impact on their right to litigate in a court of law.
the trial court opportunities of pre-trial discovery, evidentiary objections,
skilled cross examination, a lawyer’s skilled trial presentation, and the
availability of a jury, it is likely that a court decision will be different
from or inconsistent with a decision made by an administrative law judge.
Final Decisions and Orders from the ROC Should Not Preclude a Party from
Pursuing a Trial Court Action
significant differences noted above support a legal analysis that neither a
contractor nor an owner should be precluded from pursuing a civil action in
trial court, notwithstanding a Final Decision and Order issued by the Registrar
there is the basic question of whether the complainant is actually a “party” to
the dispute or just a witness.
while there may be a possibility that findings of fact in any particular case
may be inconsistent between the two forums, the goals, procedures and safeguards
of the two forums are different enough that the Court should not be bound by the
It should be noted here, however, that, as of this writing, Arizona Senate Bill
1072 (2017) is pending in the Arizona Legislature. That bill amends A.R.S. §
12-910 relating to the judicial scope of review of final administrative
decisions. Because the bill is still being amended and modified, it is not known
whether the final version, if passed and adopted, will alter the analysis above.
Moreover, the Arizona Registrar of Contractors could consider adding new rules
that require a more robust disclosure and discovery process and develop new
safeguards. If adopted, such new rules may also impact the above analysis.
 Better Homes Construction, Inc. v. Goldwater,
203 Ariz. 295, 53 P.3d 1139 (App. 2002), citing Gilbert v. Bd. Of
Med. Exam’rs, 155 Ariz. 169, 745 P.2d 617 (App. 1987), superseded
on other grounds by statute as stated in Goodman v. Samaritan Health
System, 195 Ariz. 502, 990 P.2d 1061 (App. 1999).
 142 Ariz. 400, 690 P.2d 119 (App. 1984)
 Interestingly, there was no issue raised about the
Registrar of Contractors using its own employees as hearing officers in
this case. The Office of Administrative Hearings was legislatively
created in 1995 and took effect on January 1, 1996. See e.g., R.L.
Augustine Const. Co., Inc. v. Peoria Unified School Dist. No. 11,
188 Ariz. 368, 936 P.2d 554 (1997).
 Following up on that theme, in 1990, Sunpower of
Arizona appealed a decision of the Registrar, after hearing, that
Sunpower was required to remove solar equipment it had installed and
return the full amount paid to a homeowner. Sunpower of Arizona v.
Arizona State Registrar of Contractors, 166 Ariz. 437, 803 P.2d 430
(App. 1990). Sunpower argued that being required to refund the money
paid was “money damages,” essentially a rescission of the contract and
not within the scope of the Registrar’s regulatory powers. The Court of
Appeals disagreed holding that such awards are restitutionary and are
within the powers of the administrative agency.
 Design Trend Intern. Interiors, Ltd. v. Cathay
Enterprises, Inc., 2011 WL 1135887 (D. Ariz. 2011), on rehearing
2012 WL 727528 (D. Ariz. 2012) (judgment revised on rehearing)
 Id., citing Hawkins v. State, 183 Ariz.
100, 900 P.2d 1236 (App. 1995).
 Id. (quoting Gilbert v. Bd. Of Med. Exam’rs,
155 Ariz. 169, 745 P.2d 617 (App. 1987).
 Id. citing Sunpower of Arizona v. Arizona Registrar of Contractors, 166 Ariz.
437, 803 P.2d 430 (App. 1990)
 2012 WL 27597 (App. 2012)
 Id. citing Bentivegna v. Powers Steel & Wire
Prods., Inc. 206 Ariz. 581, 81 P.3d 1040 (App. 2003)
 2014 WL 2801802 (App. 2014)
 2016 WL 159344 (App. 2016)
 206 Ariz. 581, 81 P.3d 1040 (App. 2003)
 214 Ariz. 476, 154 P.3d 378 (App. 2007)