Maciel Builders LLC. v. US Framing International LLC.

Background

Maciel Builders LLC. alleged that US Framing International LLC. and affiliated entities and individuals engaged Maciel to perform carpentry work on the Ohlone Block B construction project in San Jose, California. Maciel alleged that it was not bonded or licensed as a subcontractor and that it told the defendants this on several occasions. It claimed that the defendants promised additional work, timely payment, and a substantial bonus.

Maciel alleged that it performed carpentry work and additional tasks, including acting as a hardware provider and modifying incorrectly sized panels and trusses. It submitted change orders totaling $102,540 as of November 2018, but alleged that it was not paid for the change orders or the promised bonus. Maciel also alleged that the defendants withheld amounts for insurance premiums it described as bogus.

The complaint asserted twelve counts: a request for declaratory judgment concerning the parties’ rights and duties under the written agreement; alternative claims for breach of contract, breach of the implied covenant of good faith and fair dealing, promissory estoppel, intentional misrepresentation, a promise made without intention to perform, interference with prospective economic advantage, conversion, an open book account, an account stated in writing, and quantum meruit; and a civil claim under the Racketeer Influenced and Corrupt Organizations Act, or RICO.

Other procedural rulings

Defendants Nicholas Rivera and Ivan Villalva moved to join the existing motion to dismiss. Because they sought only to adopt the arguments already presented, the court found no prejudice and granted the motion for joinder.

The court also struck Maciel’s two requests for judicial notice as untimely. It stated that the documents would not have affected the resolution of the motion in any event.

California licensing statute

The defendants moved under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint contains enough legally sufficient facts to state a claim for relief. They argued that California Business and Professions Code § 7031 barred the entire case because Maciel was an unlicensed contractor.

Section 7031 generally prevents a person acting as a contractor from suing to recover compensation for work requiring a contractor’s license unless the person was licensed throughout the relevant work. The court held that Maciel was a contractor under the statute because it performed carpentry services on the construction project. The court rejected Maciel’s argument that California Labor Code § 2750.5, which concerns whether a worker is an employee or independent contractor for employment-law purposes, changed that conclusion.

The court also rejected Maciel’s argument that the absence of a fully signed agreement prevented application of § 7031. The statute covers both acts and contracts, and the court held that performing the contracting work was enough for the statute to apply.

State-law claims

The court held that § 7031 barred all ten state-law claims, Counts 2 through 11. Although some claims were characterized as tort claims, the court determined that they all effectively sought compensation for Maciel’s unlicensed construction work. The court therefore dismissed those counts without leave to amend, meaning the court did not permit Maciel to revise those claims in this case.

Federal claims and disposition

The court concluded that § 7031 did not bar Count 1, Maciel’s request for declaratory judgment under 28 U.S.C. § 2201, or Count 12, Maciel’s civil RICO claim under 18 U.S.C. § 1962. Because the defendants had relied only on § 7031 in seeking dismissal, the court denied the motion as to Counts 1 and 12. The court noted concerns about whether the RICO allegations could ultimately satisfy RICO’s requirements, but it did not dismiss that claim on that basis.

The final order granted the motion to dismiss as to Counts 2 through 11 without leave to amend and denied the motion as to Counts 1 and 12.