Unlicensed Contractors: $1.55 Million Fee Award To Defendant Alleging Successful Unlicensed Contractor Challenge Was Affirmed Under Civil Code Section 1717

Mountain Air Affirmative Defense Argument Rejected On Appeal.

               In American Bldg. Innovations LP v. Balfour Beatty Constr., LLC, Case Nos. G062471 et al. (4^th Dist., Div. 3 Sept. 3, 2024) (published), plaintiff was found to have violated the unlicensed contractor law by failing to pay workers’ compensation insurance payments on a project, losing a suit to the defendant because it was unlicensed.  Based on a subcontract contractual fees clause and Civil Code section 1717, defendant moved for and was awarded $1.55 million in fees.  (If we are reading this opinion correctly, plaintiff was seeking over $700,000 in unpaid construction compensation). 

               Defendant appealed, not challenging the reasonableness of the fee award.  Instead, it staked its appeal on Mountain Air, which held that an affirmative defense like an unlicensed contractor defense does not give rise to a fee award.  The 4/3 DCA affirmed, reading Mountain Air more broadly because it applied to a novation defense on a different agreement.  However, in the case before it, plaintiff was suing on a subcontract with a fees clause such that it was imperative licensure status needed to be demonstrated as part of its affirmative case.  Fee award affirmed, in a 3-0 opinion by Acting Presiding Justice Goethals.