Any contractor seeking to assert a claim for payment in a lawsuit or arbitration must show that it was “duly licensed” to perform its work. In Pacific Caisson & Shoring Inc. v. Bernards Brothers, Inc., 198 Cal.App. 681 (2011) (published August 19, 2011) the question was whether a subcontractor was “duly licensed” when it held only a Class A license (General Engineering) even though the contract documents required a C-12 license (Earthwork and Paving).

The case arose from a public works project to construct a medical center. The claimant subcontracted to perform temporary excavation and support work. The subcontractor also agreed to provide certain engineering calculations and design parameters. The prime contract documents (which were incorporated into the subcontract) provided that this work was to be performed by a C-12 (Earthwork and Paving) licensed contractor. The subcontractor did not have a C-12 license but it did have a Class A license (General Engineering).

Eventually the subcontractor filed a lawsuit to collect allegedly unpaid amounts due for its work. At trial the prime contractor sought to invalidate the claim on the basis that the subcontractor was not “duly licensed” because it did not hold the specified C-12 license. The trial court agreed, judgment was entered in favor of the prime contractor, and the subcontractor appealed.

On appeal, the subcontractor argued that the specified C-12 license was essentially a “lesser” license, and would have been superfluous on this project as it is fully encompassed within the Class A license requirements. The prime contractor none of that mattered because the C-12 license was explicitly specified in the contract documents.

The court of appeals agreed with the subcontractor and vacated the trial court’s judgment. The court focused its analysis on the formal license classification descriptions for each license (see them here: Class A and C-12), and how they each qualified the subcontractor to perform the scope of work. The court essentially determined that the activities required in the subcontract fell beyond the purview of the C-12 license. The subcontract required specialized engineering knowledge and skill, along with the provision of calculations and temporary shoring work. The court concluded that these tasks were not the expertise of a C-12 contractor, but could be performed by a Class A contractor. Accordingly, the court held that the subcontractor was duly licensed notwithstanding its lack of the specified C-12 license.

The court also addressed the prime contractor’s argument that the contract document requirement of a C-12 license should control the analysis. The court discarded this theory, noting that the laws allowing public entities to specify license classifications in contract documents were meant to facilitate the evaluation of bidder qualification not determine proper licensure in third-party payment claims.