I was sued for breach of contract by a contractor but after a lot of doing back and forth, we have discovered that the contractor is not duly licensed.
My lawyer thinks that I cannot get back lawyer fees for all the expenditures I have already made.
Is that true?
Would I have to sue for fraud because discovery is recent?
I understand disgorgement is a way to go but there is not much to disgorge.
Business and Professions Code section 7031 provides that you can recover all monies paid to an unlicensed contractor. Code of Civil Procedure section 1029.8 provides that you can recover treble damages (up to $10,000) if damaged by someone who does not have a required license, plus costs and attorneys' fees. I would recommend a cross-complaint for recovery of money paid to an unlicensed contractor and allege the treble damages and right to fees under section 1029.8
It is unlikely that adding in fraud claims here will be useful -- or necessary. Your contractor either was or was not licensed at the time of the work. If not, you are entitled to disgorgement of all money paid to the contractor and damages. Before you shrug that off because the amount you paid was not substantial, consider the leverage. ALL of the work that the contractor did while unlicensed -- on ALL jobs for anyone -- is subject to disgorgement. Ordinarily that will be a combined sum that creates a powerful incentive for the contractor to settle out just about any case.
It will also be worthwhile to look at whether a previous license was invalid by operation of law for failure to pay renewal fees or for failure to have on file work comp coverage or a work comp exemption. Expanding the unlicensed period (by virtue of the statutes that suspend the license by operation of law, without notice or action to the contractor) usually opens up the disgorgement period considerably -- a powerful litigation tool. It may also motivate CSLB to refer the matter for criminal prosecution, if the contractor was never licensed, or can be shown to have deliberately concealed the fact of the lack of license. That evidence can also cause CSLB itself to issue citations or bring an enforcement action. Garden variety (non-aggravated, no fraud) CSLB violations can cost a contractor somewhere around 10 grand to resolve if everything goes smoothly, so these are potentially powerful considerations of leverage for possible settlement.
FYI - There is no requirement for a contractor to be licensed if it does not advertise itself as "licensed" and if the job is valued under $500. If he's advertising, that's another type of violation.
If the job required a licensed contractor, have your lawyer look into filing a complaint with the California Contractors State License Board. There is a process for prosecuting these types of issues, and their determination may be required to in fact deem this activity as "unlicensed" before the court. Once filed, have your lawyer consider seeking a stay in the current dispute until the determination by the licensing board as to the lawfulness of the activity.
If you cannot get a stay, you may have options to seek leave to amend your answer, and possibly file a counterclaim against the unlicensed contractor. I encourage you to initiate the complaint process so as to leverage the issue with the unlicensed contractor, and maybe get the action dismissed if things start going your way.
I believe your lawyer will be best situated to tell you about the likelihood of an attorneys' fees award. These are rarely awarded by the way, however, if you can prove that the contractor's acts warrant harsh punishment, you might get a judge to agree, but this is not routine.
With regards to disgorgement, and recovering additional sums, collections of judgments can be the most difficult part of the litigation process, especially if you're dealing with fly-by-night operators, but it sounds like you understand that already. I'd consider a dismissal of the lawsuit a win, but you're going to have to cause the contractor some discomfort before you can get there.
Your lawyer should file a cross-complaint for breach of contract and failure to be licensed, and demand all amounts paid for the unlicensed work. Your lawyer could also file a motion to dismiss. But that would probably not get you any money back.
Generally, unless there is a statute or a contract provision that provides for attorneys fees, each party is required to pay their own fees.
A suit for fraud might get you additional damages, but not fees.
Your lawyer has more information than any of us have. To give you a better answer, we would need to see any contract and to know more about the case. It sounds like your attorney is giving you proper advice.
Disgorgement means you get back all what you paid him. So, if you are saying it was not much, I wonder why on earth, this contractor sued you in the first place.
No right to attorneys fees in the contract and no right by statute = no recovery of fees.
One possibility is if you served a request for admission and it was responded to inaccurately, you may be able to recover some fees that way. Your counsel will need to analyze that.
It seems to me that you may want to look at this situation under a "cost benefit" analysis. What do I mean ?
1. It's clear that you can achieve an Order for Disgorgement (but there's "not much to disgorge") so that mechanism isn't worth "investing" more attorneys fees.
2. It also seems clear that you may be able to receive a judgment for the attorneys fees required to pursue the Unlicensed person in Superior Court, but there's no assurance that an Unlicensed person has enough assets to repay your Judgment (by way of example, you shouldn't count on seizing payments from his future work because there isn't going to be any future work in the contracting industry). The expenditure of attorneys fees to try and get a judgment for attorneys fees likewise isn't a good investment.
3. The better (i.e. least expensive) pursuit may be to (a) ask you attorney to get the Plaintiff's case dismissed (an unlicensed contractor is not allowed to even file a lawsuit and so his Plaintiff's claim is subject to Summary Dismissal), then (b) encourage the CSLB to investigate and process through their own (taxpayer paid) attorney - the Attorney General's Office. The CSLB action has, as its primary remedy, sanctioning the unlicensed person and obtaining a Restitution order in your favor for all monies you've spent to date.
Hope this response was practical, and helpful. Jim Greer
Attorney's fees are available if there is a contract allowing the prevailing party in litigation to recover attorney's fees or if there is a statute that allows for recovery of attorney's fees. In order to fully answer your question, I would need to know whether you have a contract and whether there is an attorney's fees provision in it.
I would also have an attorney determine whether there are any statutes that may justify attorney's fees. This would require review of your legal documents.
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