Ninth Circuit Issues Pro-Contractor Licensing Ruling

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On July 10, the U.S. Court of Appeals for the Ninth Circuit issued its much anticipated and a pro-contractor ruling in MP Nexlevel of California, Inc. v. CVIN LLC. The appeal arose from a dispute over the scope of a California specialty contractor’s license and, more particular, involved whether the subcontractor’s performance of certain work was outside the scope of its license constituting a breach of contract and resulting in the contractor not being entitled to payment for its work (Cal. Bus. & Prof. Code § 7031(a)). In an unpublished opinion, the Ninth Circuit reversed and remanded the matter, finding that “Nexlevel’s work here was ‘incidental and supplemental’ to the installation of these fiberoptic systems,” as contemplated by Cal. Code Regs. Tit. 16, § 831.

Section 831 provides that

“For purposes of [Cal. Bus. & Prof. Code § 7059], work in other classifications is ‘incidental and supplemental’ to the work for which a specialty contractor is licensed if that work is essential to accomplish the work in which the contractor is classified. A specialty contractor may use subcontractors to complete the incidental and supplemental work, or he may use his own employees to do so.”

The Ninth Circuit confirmed that “California state courts, looking to the Contractors State License Board’s decisions, have construed ‘incidental’ and ‘supplemental’ to mean ‘necessary to the main purpose’ of the work.” Here, the Ninth Circuit recognized that “[c]ommunications systems inherently and necessarily require some connection to other points of contact. Otherwise, there is no ‘communication’ or ‘system.'”  As a result, “[t]o facilitate that connection, some infrastructure is also necessary.”  The Ninth Circuit confirmed that Nexlevel was properly licensed to install these communications systems and, even though it did not actually connect the fiberoptics cables, its Phase One work “provided the necessary infrastructure to support the communications system.”

Accordingly, the Ninth Circuit held that “to the extent the district court found that Nexlevel’s Phase One work was not ‘incidental and supplemental’ to the installation of the fiberoptic systems here, we REVERSE and REMAND to the district court.”

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