Ninth Circuit Holds a Contractor Need Not Comply with CSLB License Law to Collect Under the Miller Act

The Miller Act (40 U.S.C. 3131, et seq.) is the exclusive bond recovery framework for contractors working on federal works of improvement.  Just recently, the Ninth Circuit Court of Appeal, in a decision certified for publication, significantly opened the playing field for contractors suing to collect sums due them.  (See Technica, LLC v. Carolina Casualty Insurance Company, et al., D.C.No. 3:08-cv-01673-H-KSC.)

In Technica, the subcontractor who “was not a licensed California contractor as required by California law” sued the general contractor and its surety for payment for work performed on a federal construction project in California.  The District Court granted the general’s and surety’s motion for summary judgment on the basis of Business & Professions Code § 7031(a), which “precludes any contractor from maintaining an action for collection of compensation for services if the contractor was not a licensed contractor during the performance of the contract.”  (Slip op. at 4.) 

Acknowledging this was a matter of first impression, the Ninth Circuit Court of Appeal reversed, holding the absence of a California contractor’s license did not bar the subcontractor from pursuing a Miller Act claim for payment under these circumstances.   Agreeing with the Eighth and Tenth Circuits, and distinguishing cases dealing with the substantive law of contracts, the panel held that rights and remedies under the Miller Act may not be conditioned upon State law. 

Specifically, the Court said, “the text of the Miller Act forecloses any argument that complying with state contractor licensing requirements is a condition to maintaining a Miller Act claim ....”  (Slip op. at 7, fn. 4.)  After discussing the Supreme Court, Eighth and Tenth Circuit cases, and distinguishing the Ninth Circuit cases cited by the general and the surety, the Court concluded:

“We therefore hold that the limitation in California Business and Professions Code § 7031(a) on the right of a non-licensed contractor to maintain an action for collection of [compensation for] unpaid services does not apply to an action under the Miller Act.  Manifestly the federal rights affording relief under a federally declared standard could be defeated if states were permitted to have the final say as to what defenses could and could not be properly interposed to suits under the Act.  [Citation.]”

In short, although not explicitly stated, the Court of Appeals seems to have invoked the “supremacy clause” (U.S. Const., Art. VI, para. 2), and as a result, the California Business & Professions Code § 7031(a) restriction does not apply to a contractor filing an action under the Miller Act.

How does this affect your business?  Questions?  Comment, or send me an email, and let’s discuss. 

Nothing in this blog is intended to create an attorney-client relationship.  This article is intended to provide a general overview of the current status of the law for informational purposes only, and is not intended to constitute, or serve as a substitute for, a professional legal consultation.  Laws change every day; please consult an attorney regarding the current status of the law, and how the law affects your specific circumstances. Thank you.