$16,500,000 Arbitration Award Against an Unlicensed Contractor

What happened

The dispute arose from a condominium project. The company involved held only a C-15 flooring and floor covering license. It did not hold the required Class B general contractor license during construction, yet it took part in work that needed that license, including drywall, doors, waterproofing and concrete.

What the defense argued

In arbitration, the company argued that it did not need a Class B license because it did not act as a general contractor. It said it acted only as a manager and consultant and that licensed contractors did most of the construction work.

Etehad Law argued that working without the proper Class B license was a per se violation of the Contractors’ State License Law. If that argument was right, our client was entitled to millions of dollars in disgorgement damages. The arbitrator ruled against our client.

How Etehad Law handled it

An arbitration award must be confirmed by a trial court to become final. Etehad Law opposed confirmation, but the trial court confirmed the award, ruling that it had no power to review the arbitrator’s decision for errors of fact or law.

The firm appealed. The Court of Appeal unanimously reversed. It held that section 7031(b) of the Contractors’ State License Law, which addresses unlicensed contractors, is an explicit legislative expression of public policy, so the general rule against judicial review of arbitration awards did not apply. The case went back to the trial court for a fresh review of whether section 7031(b) applied.

Outcome

Etehad Law returned to the core licensing issue in arbitration and prevailed. The result was a $16,500,000 arbitration award in our client’s favor.