The firm represented a general contractor in a dispute with a subcontractor on a public works construction project. Disputes arose because the subcontractor failed to provide certified payroll documentation, bonds, and failed to meet schedule requirements. Due to these problems, the general contractor withheld funds from the subcontractor. The subcontractor sued the general contractor and its sureties for breach of contract, fraud, and prompt payment penalties. As part of its claim, the subcontractor asserted a claim for over $8 million in lost profits allegedly caused by the general contractor. During litigation, the firm discovered the subcontractor’s California contractor’s license had been suspended during a period of the project because the subcontractor had let its workers’ compensation coverage expire and had failed to obtain new coverage. Unbeknownst to the general contractor, the subcontractor worked without insurance, exposing both its employees and the general contractor to significant risk. The subcontractor was able to obtain a meaningless workers’ compensation insurance policy years after the work had been performed and convinced the California State License Board (CSLB) to retroactively reinstate its license.
The case proceed to trial. At trial, the firm was able to prove the license reinstatement request to the CSLB was fraudulent. The subcontractor claimed its lack of workers’ compensation insurance was due to circumstances beyond its control. However, the firm proved coverage had been cancelled because of a payment dispute between the subcontractor and the workers’ compensation insurance carrier. Further, the firm proved the subcontractor knew its coverage was canceled and its license was suspended by the CSLB, but continued to perform work on the project with a suspended license and no workers’ compensation insurance. As a result of the firm’s efforts, the trial court found the subcontractor was not properly licensed and was barred from any recovery. Additionally, the trial court awarded the firm’s client all of its attorneys’ fees and costs to defend the lawsuit. The subcontractor appealed.
The Fourth District Court of Appeal agreed with the firm and affirmed the judgment in favor of the general contractor. The court recognized that the subcontractor was not duly licensed at all times and its false representations to the CSLB to obtain reinstatement were insufficient to avoid the consequences of Business and Professions Code section 7031.
A copy of the published decision can be viewed here.
Am. Bldg. Innovation Lp v. Balfour Beatty Constr. (Sep. 3, 2024, Nos. G062471, G062965) ___Cal.App.5th___ [2024 Cal. App. LEXIS 543]
Counsel: Jason R. Thornton, Daniel P. Scholz, and Scott M. Bennet