U.S. Pipelining LLC v. Johnson Controls, Inc.
ORDER DENYING DEFENDANT JOHNSON CONTROLS, INC.'S AMENDED MOTION FOR SUMMARY JUDGMENT (ECF NO. 25 ). Signed by JUDGE HELEN GILLMOR on 10/31/2016. (afc) WRITTEN ORDER follows hearing held July 25, 2016 on defendant John son Controls, Inc.'s Amended M/SJ. Minutes of hearing: doc no. 51 . CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
U.S. PIPELINING LLC, a
JOHNSON CONTROLS, INC., a
ASSOCIATION OF APARTMENT
OWNERS OF KAANAPALI ALII, a
Hawaii nonprofit corporation; )
ALLANA, BUICK & BERS, a
foreign corporation; JOHN
DOES 1-10; JANE DOES 1-10;
DOE PARTNERSHIPS 1-10; DOE
CORPORATIONS 1-10; and DOE
Civil No. 16-00132 HG-RLP
ORDER DENYING DEFENDANT JOHNSON CONTROLS, INC.’S AMENDED MOTION
FOR SUMMARY JUDGMENT (ECF NO. 25)
Plaintiff U.S. Pipelining LLC filed a Complaint alleging
various contract and tort claims arising out of renovation work
it performed at a condominium complex on Maui.
One of the
Defendants, Johnson Controls, Inc., filed a motion for summary
judgment on the basis that Plaintiff was not a licensed
contractor pursuant to Hawaii law and is therefore statutorily
precluded from recovering in a civil action.
Johnson Controls, Inc.’s Amended Motion for Summary Judgment
(ECF No. 25) is DENIED.
On March 22, 2016, Plaintiff U.S. Pipelining LLC
(“Plaintiff”) filed a Complaint.
(ECF No. 1).
On May 19, 2016, Defendant Johnson Controls, Inc. (“Johnson
Controls”) filed DEFENDANT JOHNSON CONTROLS, INC.’S MOTION FOR
SUMMARY JUDGMENT (ECF No. 23) and CONCISE STATEMENT OF MATERIAL
FACTS IN SUPPORT OF DEFENDANT JOHNSON CONTROLS, INC.’S MOTION FOR
SUMMARY JUDGMENT (ECF No. 24).
On May 20, 2016, Johnson Controls filed DEFENDANT JOHNSON
CONTROLS, INC.’S AMENDED MOTION FOR SUMMARY JUDGMENT (ECF No. 25)
and AMENDED CONCISE STATEMENT OF MATERIAL FACTS IN SUPPORT OF
DEFENDANT JOHNSON CONTROLS, INC.’S MOTION FOR SUMMARY JUDGMENT
(ECF No. 26).
On May 26, 2016, Johnson Controls filed SECOND AMENDED
CONCISE STATEMENT OF MATERIAL FACTS IN SUPPORT OF DEFENDANT
JOHNSON CONTROLS, INC.’S MOTION FOR SUMMARY JUDGMENT.
On June 2, 2016, Johnson Controls filed NOTICE OF WITHDRAWAL
OF DEFENDANT JOHNSON CONTROLS, INC.’S MOTION FOR SUMMARY JUDGMENT
FILED MAY 19, 2016 [CM/ECF 23], CONCISE STATEMENT OF FACTS FILED
MAY 19, 2016 [CM/ECF 24], AND AMENDED CONCISE STATEMENT OF FACTS
FILED MAY 20, 2016 [CM/ECF 26].
(ECF No. 29).
On June 6, 2016, Plaintiff filed PLAINTIFF US PIPELINING
LLC’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO
DEFENDANT JOHNSON CONTROLS, INC.’S MOTION FOR SUMMARY JUDGMENT
(ECF No. 31) and PLAINTIFF U.S. PIPELINING, LLC’S CONCISE
STATEMENT OF FACTS IN OPPOSITION TO DEFENDANT JOHNSON CONTROL
INC.’S MOTION FOR SUMMARY JUDGMENT (ECF No. 30).
attached to Plaintiff’s Concise Statement, entitled “DECLARATION
OF JEREMY BOWMAN IN OPPOSITION TO DEFENDANT JOHNSON CONTROLS,
INC.’S MOTION FOR SUMMARY JUDGMENT,” was unsigned.
(ECF No. 30-
On June 7, 2016, the Court notified Plaintiff of the
On the same date, June 7, 2016, Plaintiff
filed a second, signed, DECLARATION OF JEREMY BOWMAN IN
OPPOSITION TO DEFENDANT JOHNSON CONTROLS, INC.’S MOTION FOR
(ECF No. 32).
On June 21, 2016, Johnson Controls filed REPLY IN SUPPORT OF
DEFENDANT JOHNSON CONTROLS, INC.’S MOTION FOR SUMMARY
JUDGMENT (ECF No. 43) and OBJECTIONS TO EVIDENCE SUBMITTED BY
PLAINTIFF U.S. PIPELINING LLC IN OPPOSITION TO DEFENDANT JOHNSON
CONTROLS, INC.’S MOTION FOR SUMMARY JUDGMENT (ECF No. 44).
its Objection, Johnson Controls requested that the Court strike
the Second Declaration of Jeremy Bowman (“the Second
Declaration”), or, in the alternative, that the Court disregard
all changes made by the Second Declaration.
On June 24, 2016, the Court filed a Minute Order concerning
the Second Declaration.
The Court cautioned Plaintiff for filing
an unsigned declaration and failing to seek leave of Court before
submitting an amended declaration.
The Court permitted the
filing of the Second Declaration, denying Johnson Controls’
request to strike the Second Declaration or to disregard
modifications made by the Second Declaration.
(ECF No. 45).
On July 24, 2016, Plaintiff submitted a Notice of Previously
Uncited Authority via e-mail.
(ECF No. 51).
On July 25, 2016, Johnson Controls filed OBJECTION TO
PLAINTIFF’S JULY 24, 2016 LR 7.8 SUBMISSION.
(ECF No. 50).
On the same date, July 25, 2016, the Court held a hearing on
Johnson Controls’ Amended Motion for Summary Judgment.
At the hearing, the Court instructed Plaintiff to file the
Notice of Previously Uncited Authority by July 26, 2016.
Court permitted Johnson Controls to file substantive objections
to Plaintiff’s notice by July 29, 2016.
On July 26, 2016, Plaintiff filed U.S. PIPELINING, LLC’S
NOTICE OF ADDITIONAL AUTHORITIES.
(ECF No. 52).
The filing did
not include copies of the authorities cited.
On July 29, 2016, Johnson Controls filed OBJECTION TO
PLAINTIFF’S ADDITIONAL EXHIBITS IN OPPOSITION TO MOTION [CM/ECF
(ECF No. 53).
On the same date, July 29, 2016, the Court filed a Minute
Order instructing Plaintiff to file the additional authorities
referenced in the Notice filed on July 26, 2016 by August 1,
The Court allowed Johnson Controls to file substantive
objections to Plaintiff’s notice by August 2, 2016. (ECF No. 54).
On August 1, 2016, Plaintiff filed U.S. PIPELINING, LLC’S
FILING OF ADDITIONAL AUTHORITIES.
(ECF No. 55).
On August 2, 2016, Johnson Controls filed OBJECTION TO
PLAINTIFF’S ADDITIONAL EXHIBITS IN OPPOSITION TO MOTION [CM/ECF
(ECF No. 56).
The Kaanapali Alii Renovation Project
On December 15, 2014, Defendant Association of Apartment
Owners of Kaanapali Alii ("the AOAO") hired Defendant Johnson
Controls, Inc. ("Johnson Controls") as a general contractor to
renovate the Kaanapali Alii condominium complex on the island of
(Strickler Decl. at ¶ 2, ECF No. 28-1; Ex. A of Johnson
Controls' Second Amended CSF, ECF No. 28-2).
a large, multi-state construction company.
at ¶ 4, ECF No. 32).
Johnson Controls is
(Bowman Second Decl.
The scope of the renovation work at the
Kaanapali complex was extensive.
Johnson Controls was tasked
with overseeing the installation of a new central cooling plant,
a new heating, ventilation, and air conditioning system, lighting
fixtures, rooftop solar panels, and upgrading the plumbing and
(Ex. A of Johnson Controls’ Second Amended CSF at
According to Plaintiff U.S. Pipelining LLC ("Plaintiff"), in
February 2015, Ron Young ("Young"), a manager for Johnson
Controls, telephoned Jeremy Bowman ("Bowman"), chief operating
officer for Plaintiff.
(Bowman Second Decl. at ¶ 4).
is a Pennsylvania-based company that provides “the specialty
contracting service of rehabilitating damaged and worn-out piping
without the need [to] access the existing pipe from the outside.”
(Id. at ¶ 2).
Plaintiff states that it holds licenses in four
States and performs specialized pipelining work across the
country, often under the license of another contractor.
Bowman states Young apprised him of Johnson Controls’
renovation contract with the AOAO and indicated that the contract
required work on approximately 480 vertical stacks of piping.
(Id. at ¶¶ 4-5).
Bowman’s First Site Visit
On February 27, 2015, Bowman states he visited the work site
and met with Young and other officials from the AOAO and an
engineering firm, Defendant Alana, Buick, and Bers.
(Id. at ¶
Plaintiff and Johnson Controls disagree as to what was said
at the meeting.
Plaintiff asserts that during the February 27,
2015 site visit, Bowman asked Young whether Plaintiff would need
a license to perform its work in Hawaii.
(Id. at ¶ 7).
According to Bowman, Young answered "no," as Plaintiff was not
going to cut or replace any pipes, and Johnson Controls would
"run your [sub]contract through Dorvin Leis," Johnson Controls'
Young attests that he "made no such
statement" in response Bowman’s license inquiry, "either at that
time or otherwise." (Young Decl. at ¶ 4, ECF No. 43-1).
Bowman’s Second Site Visit
On or about March 5, 2015, Bowman states he conducted a
second site visit and met with one of the owners of Dorvin Leis.
(Bowman Second Decl. at ¶ 8).
Based on the discussion he had
with the person from Dorvin Leis, Bowman believed that Dorvin
Leis was unfamiliar with Plaintiff's techniques and would be
uncomfortable with acting as a supervisor of Plaintiff's work.
Bowman’s Third Site Visit
On April 6-10, 2015, according to Bowman, he conducted a
third site visit to the Kaanapali Alii complex.
(Id. at ¶ 10).
During the visit, Plaintiff’s representatives were allowed to
inspect some, but not all, of the pipes that were to be
Bowman states he met with Young at the site.
According to Bowman, Young told him that Plaintiff would not be
working under Dorvin Leis' contract, but under a direct contract
with Johnson Controls.
(Id. at ¶ 11).
Plaintiff contends that
Young told Bowman for a second time that Plaintiff would not need
a license to work in Hawaii, that Johnson Controls “would take
care of any licensing issues,” and that Plaintiff “would be
working ‘under the umbrella’ of [Johnson Controls'] licensing.”
(Id. at ¶ 12).
Young denies making any of the statements that
Bowman attributes to him.
(Young Decl. at ¶¶ 5-6).
Bowman attests that he did not challenge Young’s alleged
statements, as “[m]uch of U.S. Pipelining’s work concerns pipes
that are part of another larger scope of work, such that it is
common for U.S. Pipelining to work under the licensing of another
(Bowman Second Decl. at ¶ 11).
The Subcontract Between Plaintiff and Johnson Controls
On April 30, 2015, Plaintiff, through Bowman, signed a
Subcontract with Johnson Controls to rehabilitate the Kaanapali
Alii complex’s sewage pipes.
(Ex. B of Strickler Decl., ECF No.
The Subcontract contained a section that discussed
Plaintiffs’ obligations with respect to complying with applicable
laws and regulations.
Section 1.7, entitled “Compliance with
Applicable Laws” provided:
Subcontractor shall comply with all applicable federal,
state and local laws, ordinances and codes and all
lawful orders, rules and regulations thereunder.
Subcontractor shall, without additional expense to
Contractor, obtain all licenses and permits required
for the prosecution of the Work. Contractor makes no
express or implied representations concerning the
applicability of any prevailing wage requirements to
the Work to be performed under this Subcontract, and
Subcontractor shall be liable to Contractor for any
prevailing wage assessments against Contractor in
connection with Subcontractor's Work unless
specifically waived in writing by Contractor.
(Id. at p. 5, ¶ 1.7).
The subcontract also contained two merger clauses.
first merger clause stated that the Subcontract and its
attachments “constitute the entire and integrated understanding
and agreement . . . and supersedes all prior understandings,
representations, communications and agreements, whether written
(Id. at p. 1).
The second merger clause applied
similar language, providing that “[t]his Subcontract shall
constitute the entire and only agreement between the parties
. [,] superseding any previous agreements or understandings.”
(Id. at p. 11, ¶ 7.10).
Pursuant to the Subcontract, Plaintiff began its work at the
Kaanapali Alii complex.
(Bowman Second Decl. at ¶ 14).
Plaintiff did not obtain a contractor license from the State of
(Id. at ¶ 13; Ex. A of Diwik Decl., ECF No. 28-8).
Complaint states that Plaintiff was registered to conduct
business as a foreign entity in the State of Hawaii.
at ¶ 1, ECF No. 1).
Johnson Controls was registered in Hawaii as
a foreign profit corporation, and was licensed as both a general
building contractor and specialty contractor.
(Exs. A, B of
Merchant Decl., ECF Nos. 30-3, 30-4); Haw. Admin. R. 16-77-28(a).
During the course of the renovation work at the Kaanapali
Alii complex, a dispute arose between the Parties regarding
(Bowman Second Decl. at ¶¶ 17-20).
avers that Johnson Controls unilaterally altered the scope of
Plaintiff’s work, shortened the time for completion, and
restricted Plaintiff’s access to the work site.
(Id. at ¶ 17).
In addition, the Complaint alleges that the condition of the
pipes Plaintiff was contracted to rehabilitate was significantly
worse than Johnson Controls represented.
(Complaint at ¶¶ 36-
According to the Complaint, the newly discovered condition
of the pipes and Johnson Controls’ unilateral actions caused
delays and added costs to Plaintiff’s work.
(Id. at ¶¶ 45-51;
The Complaint states that the modified scope of the work
required Plaintiff to hire third-party contractors to conduct
specialized pipe cleaning work that Plaintiff was not capable of
(Id. at ¶¶ 52-55).
Bowman attests that when Johnson
Controls was presented with Plaintiff’s invoices and payment
requests concerning the additional work performed, it refused to
pay Plaintiff and raised, for the first time, Plaintiff’s status
as an unlicensed contractor in the State of Hawaii.
Second Decl. at ¶¶ 18-19).
STANDARD OF REVIEW
Summary judgment is appropriate when there is no genuine
issue as to any material fact and the moving party is entitled to
judgment as a matter of law.
Fed. R. Civ. P. 56(c).
summary judgment there must be sufficient evidence that a
reasonable jury could return a verdict for the nonmoving party.
Nidds v. Schindler Elevator Corp., 113 F.3d 912, 916 (9th Cir.
The moving party has the initial burden of "identifying for
the court the portions of the materials on file that it believes
demonstrate the absence of any genuine issue of material fact."
T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d
626, 630 (9th Cir. 1987) (citing Celotex Corp. v. Catrett, 477
U.S. 317, 323 (1986)).
The moving party, however, has no burden
to negate or disprove matters on which the opponent will have the
burden of proof at trial.
The moving party need not produce any
evidence at all on matters for which it does not have the burden
Celotex, 477 U.S. at 325.
The moving party must show,
however, that there is no genuine issue of material fact and that
he or she is entitled to judgment as a matter of law.
burden is met by pointing out to the district court that there is
an absence of evidence to support the non-moving party's case.
If the moving party meets its burden, then the opposing
party may not defeat a motion for summary judgment in the absence
of probative evidence tending to support its legal theory.
Commodity Futures Trading Comm'n v. Savage, 611 F.2d 270, 282
(9th Cir. 1979).
The opposing party must present admissible
evidence showing that there is a genuine issue for trial. Fed. R.
Civ. P. 56(e); Brinson v. Linda Rose Joint Venture, 53 F.3d 1044,
1049 (9th Cir. 1995).
"If the evidence is merely colorable, or
is not significantly probative, summary judgment may be granted."
Nidds, 113 F.3d at 916 (quoting Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249-50 (1986)).
The Court views the facts in the light most favorable to the
State Farm Fire & Casualty Co. v. Martin, 872
F.2d 319, 320 (9th Cir. 1989).
Opposition evidence may consist
of declarations, admissions, evidence obtained through discovery,
and matters judicially noticed.
477 U.S. at 324.
Fed. R. Civ. P. 56(c); Celotex,
The opposing party cannot, however, stand on
its pleadings or simply assert that it will be able to discredit
the movant's evidence at trial. Fed. R. Civ. P. 56(e); T.W. Elec.
Serv., 809 F.2d at 630.
The opposing party cannot rest on mere
allegations or denials.
Fed. R. Civ. P. 56(e); Gasaway v. Nw.
Mut. Life Ins. Co., 26 F.3d 957, 959-60 (9th Cir. 1994).
the non-moving party relies only on its own affidavits to oppose
summary judgment, it cannot rely on conclusory allegations
unsupported by factual data to create an issue of material fact.
Hansen v. United States, 7 F.3d 137, 138 (9th Cir. 1993); see
also Nat’l Steel Corp. v. Golden Eagle Ins. Co., 121 F.3d 496,
502 (9th Cir. 1997).
Defendant Johnson Controls, Inc. (“Johnson Controls”) seeks
summary judgment against Plaintiff U.S. Pipelining LLC
(“Plaintiff”), as Plaintiff was not a licensed contractor
pursuant to Hawaii law when it performed sewage pipe
rehabilitation work at the Kaanapali Alii condominium complex.
I. HAWAII’S CONTRACTOR LICENSING LAW AS A DEFENSE TO PLAINTIFF’S
Chapter 444 of the Hawaii Revised Statutes generally
requires contractors to obtain a license before embarking on any
renovation work on real property.
Admin. R. § 16-77-4.
Haw. Rev. Stat. § 444-9; Haw.
Chapter 444's terms provide that an
unlicensed contractor is precluded from suing on a contract for
the reasonable value of its work.
Haw. Rev. Stat. § 444-22.
Here, the Parties do not dispute that Plaintiff was not a
licensed contractor pursuant to Hawaii law when it conducted the
pipe rehabilitation work at the Kaanapali Alii complex.
A. The Purpose of Hawaii’s Contractor Licensing Law is to
Protect the General Public
In Jones v. Phillipson, property owners alleged that an
unlicensed contractor failed to complete construction of a
987 P.2d 1015 (Haw. Ct. App. 1999).
Among the issues
the Hawaii Intermediate Court of Appeals addressed was whether
the property owners could maintain a cause of action against the
unlicensed contractor, when Chapter 444 barred the unlicensed
contractor for recovering claims against the property owners.
Holding in the affirmative, the appellate court emphasized that
the state legislature enacted Chapter 444 to “protect the general
public against dishonest, fraudulent, unskillful or unqualified
Id. at 1023 (quoting Sen. Stand. Comm. Rep. No.
630, in 1957 Senate Journal, at 617).
The Jones decision made
clear that members of the general public are the persons Chapter
444 was designed to protect.
Id. at 1022.
Jones decision indicates that the Hawaii Courts avoid
interpreting Chapter 444's licensing provisions in a manner that
defeats the public protection purpose of the statute.
The Hawaii Supreme Court has stated that when courts are
interpreting a Hawaii statute they (1) examine the context of the
entire statute, (2) apply “the reason and spirit of the law,” and
(3) reject “every construction which leads to an absurdity.”
Lales v. Wholesale Motors Co., 328 P.3d 341, 354 (Haw. 2014).
Statutory interpretation generally requires a court to construe
the law in a manner that is consistent with its purpose.
(quoting Ah Mook Sang v. Clark, 308 P.3d 911, 926 (Haw. 2013)).
A review of the legislative history and regulations
concerning Chapter 444 confirms that the statute protects members
of the general public from unlicensed contractors.
legislative history makes a clear distinction between the general
public and contractors.
Both the House and Senate Standing Committee Reports
indicate Chapter 444's licensing requirements were put in place
to “ensure the health and safety of the public by requiring that
contractors possess a minimum level of expertise, experience and
Hse. Stand. Comm. Rep. No. 727-96, in 1996 House
Journal, at 1309; Sen. Stand. Comm. Rep. No. 630, in 1957 Senate
Journal, at 617.
The Department of Commerce and Consumer
Affairs’ regulations provide that “primary intent of the
legislature” was to safeguard the general public from “persons
engaged in the construction industry, and . . . incompetent,
inexperienced, unlawful, and unfair practices of contractors with
whom the public contracts.”
Haw. Admin. R. 16-77-2.
Chapter 444's licensing framework was enacted for the
benefit or protection of the general public.
history, implementing regulations, and case law concerning
Chapter 444 refer to the general public and contractors in
dichotomous, mutually exclusive terms.
Jones, 987 P.2d at 1022-
Johnson Controls, as a contractor, is not a member of the
general public for the purposes of Chapter 444.
If the state
legislature intended to protect general contractors such as
Johnson Controls from subcontractors such as Plaintiff, it would
have so stated.
See Lales, 328 P.3d at 355.
may not use Chapter 444 as a defense to Plaintiff’s lawsuit.
B. Other State Courts Have Precluded Contractors from Using
State Licensing Statutes as a Defense to Contract Claims
State courts across the country have held that
“the policies that bar recovery against a member of the general
public do not apply in suits against licensed professionals in
the same business.”
Gene Taylor & Sons Plumbing Co. v.
Corondolet Realty Trust, 611 S.W.2d 572, 576 (Tenn. 1981) (citing
Fillmore Products, Inc. v. Western States Paving, Inc., 561 P.2d
687 (Utah 1977) and other cases).
The general rule precluding
recovery does not apply because “[t]he purpose of protecting the
public interest by denying enforceability does not exist when
dealing with claims between contractors.”
Teseniar v. Prof'l
Plastering & Stucco, Inc., 754 S.E.2d 267, 274 (S.C. Ct. App.
2014) (citing Kennoy v. Graves, 300 S.W.2d 568 (Ky. App. 1957)).
The public protection purpose behind contractor licensing must be
considered when analyzing claims involving unlicensed
contractors, as literal interpretations of a statute may be
inconsistent with the objective of the licensing statute and the
policies supporting it.
Bremmeyer v. Peter Kiewit Sons Co., 585
P.2d 1174, 1176 (Wash. 1978) (en banc).
Johnson Controls, as the general contractor, approached
Plaintiff about possible participation in the renovation of the
Kaanapali Alii condominium.
Johnson Controls entered into a
contract with Plaintiff for Plaintiff to serve as a subcontractor
on the project.
As the Court of Appeals of Maryland indicated,
the interests of the general public are better served by placing
the burden on a general contractor to ensure that the
subcontractors it chooses to hire are competent.
Court held that the law does not render unenforceable a contract
between a general contractor and a unlicensed subcontractor.
Stalker Bros., Inc. v. Alcoa Concrete Masonry, Inc., 30 A.3d 885,
890 (Md. 2011).
Allowing a general contractor to escape a
lawsuit on the basis that the subcontractor it deemed qualified
for the job is unlicensed would require the statute to be
construed “more broadly than necessary for the achievement of its
The statute should not be transformed into an
unwarranted shield for the avoidance of a just obligation.”
Olivas v. Sibco, Inc., 535 P.2d 1339, 1341 (N.M. 1975) (internal
quotations and citations omitted).
C. Allowing Johnson Controls to Use Hawaii’s Contractor
Licensing Law to Defeat Plaintiff’s Claims Would Lead to an
The Hawaii Courts have consistently demonstrated a
willingness to construe the State’s professional licensing laws
in a flexible manner that avoids unjust results while fulfilling
the legislature’s intent to protect the general public.
e.g., Geothermal Res. Grp., Inc. v. Puna Geothermal Venture, 216
F.Supp.2d 1133, 1138-39 (D. Haw. 2001) (finding that Chapter
444's bar against recovery did not apply, as the plaintiff’s
“activities may lie somewhere on the perimeter of what
constitutes ‘professional services.’”).
In Wilson v. Kealakekua Ranch, Ltd., an architect failed to
pay his architectural license renewal fee, and was therefore
unlicensed for the duration of his work on a project.
525 (Haw. 1976).
The Hawaii Supreme Court held that the contract
between the architect and the client was nonetheless valid, as
the technical violation of the State’s licensing law did not
warrant an absolute bar against an otherwise competent
professional’s ability to be compensated for his work.
The Supreme Court recognized that when a licensing statute
is designed to protect the public against fraud and incompetence,
there are instances when courts should refrain from mechanically
applying the law.
The Supreme Court quoted Corbin on Contracts
on treatment of a person violating a statute:
He may have rendered excellent service or delivered
goods of the highest quality, his non-compliance with
the statute seems nearly harmless, and the real
defrauder seems to be the defendant who is enriching
himself at the plaintiff's expense. . . . Justice
requires that the penalty should fit the crime; and
justice and sound policy do not always require the
enforcement of licensing statutes by large forfeitures
going not to the state but to repudiating defendants.
Id. at 528 (quoting Corbin on Contracts § 1512, pp. 712-714
A significant aspect of the Wilson holding was the Supreme
Court’s finding that the architect’s failure to renew his license
bore little relation to his competence and skills.
Id. at 529-
Moreover, the Supreme Court observed that the state
registration board previously determined that the architect was
sufficiently qualified when he passed the initial licensing
examination and character tests.
The tenuous connection between the architect’s failure to
renew his license and the licensing statute’s purpose led the
Hawaii Supreme Court to express significant concern about the
ramifications that would result from a bright-line ruling
precluding recovery for a technical violation.
In Shultz v. Lujan, a couple hired a contractor to repair
hurricane damage to their home.
948 P.2d 558 (Haw. Ct. App.
The contractor was licensed to perform non-structural
remodeling, cabinetry and fixture work.
The scope of the work at
the home, however, involved structural repairs for which the
contractor was unlicensed.
Id. at 559.
444's seemingly absolute bar on recovery for unlicensed
contractors, the Hawaii Intermediate Court of Appeals permitted
the contractor to recover payment for the portion of the work for
which he was licensed.
Id. at 563.
As with the Hawaii Supreme
Court in the Wilson decision, the Intermediate Court of Appeals
in Shultz expressed concern that a bright-line ruling barring
recovery would invite unjust and unreasonable outcomes.
appellate court was particularly worried that a mechanical
interpretation of Chapter 444 “might encourage some unscrupulous
homeowners to take advantage of licensed contractors by
contracting with them to do primarily licensed activity, but
including therein a small amount of unlicensed activity.”
The Intermediate Court of Appeals reasoned that allowing the
contractor to obtain payment for the licensed work it performed
would “constitute a just and reasonable construction of HRS §
In Hiraga v. Baldonado, a homeowner engaged a contractor to
repair her home.
31 P.3d 222 (Haw. Ct. App. 2001).
entering into a contract, the contractor discussed some of the
disclosures as required by Haw. Rev. Stat. § 444-25.5, such as
the issuance of a surety bond and the parties’ lien rights.
The contractor’s disclosures, however, did not meet
the technical requirements of Haw. Rev. Stat. § 444-25.5.
Haw. Rev. Stat. § 480-12 provides that contracts in
violation of Haw. Rev. Stat. § 444-25.5 are void and
unenforceable at law or in equity.
Id. at 228.
Intermediate Court of Appeals found the contract between the
parties void, but permitted the contractor to recover the value
of his work in quantum meruit.
The appellate court reasoned that
the homeowner should not be unjustly enriched because the
contractor committed a technical violation of Haw. Rev. Stat. §
444-25.5's disclosure requirements.
Id. at 229.
court also found any potential for abuse of the contractor’s
ability to recover in quantum meruit insignificant, as a
homeowner injured by an unfair or deceptive practice has the
statutory right to sue for damages sustained, and any contractor
who violates the technical disclosure requirements is statutorily
subject to a fine and other penalties.
The Wilson, Shultz, and Hiraga holdings demonstrate that the
Hawaii Courts have consistently refused to utilize a mechanical
application of the State’s licensing and contracting laws where
unjust outcomes would result.
The three decisions instruct
courts to apply a holistic approach when analyzing the State’s
professional licensing scheme.
The Supreme Court’s approach
serves the legislature’s intent of protecting the general public
and disincentivizes abuse of the law.
Johnson Controls relies upon the Hawaii Supreme Court’s
decision in Butler v. Obayashi to support its position that
Chapter 444 operates as an absolute bar to Plaintiff’s claims.
The Butler opinion, however, addressed a straightforward question
of whether a homeowner’s knowledge of a contractor’s unlicensed
status operates as an exception to Chapter 444.
785 P.2d 1324
The Butler case did not address the complexities
and policy considerations present here and in the Wilson, Shultz,
and Hiraga decisions.
The Butler holding is not controlling in
Allowing Johnson Controls, a multi-state general contractor,
to use the State’s licensing laws as an absolute defense to a
subcontractor’s claims could result in injustice.
licensed in four States and attests that it performs specialized
pipelining work across the country, often under the license of
(Bowman Second Decl. at ¶ 11, ECF No. 32).
Johnson Controls sought Plaintiff out for work on the project.
mechanical application of Chapter 444 that does not consider the
purpose of the statute, the legislature’s intent, and the
positions of the parties, could result in a forfeiture of more
than a million dollars’ worth of claims to Johnson Controls’
The state legislature could not have intended Chapter
444 to be used in such a manner.
Wilson, 551 P.2d at 528.
Johnson Controls may not use Hawaii’s contractor licensing
law as a defense to Plaintiff’s contract and tort claims in this
I. Johnson Controls’ Objection to Plaintiff’s Filing of
Johnson Controls objects to Plaintiff’s initial submission
and subsequent filing of additional authorities.
Controls argues that Plaintiff’s authorities should be stricken
or disregarded, as (1) Plaintiff initially submitted the notice
of additional authorities less than 24 hours before the hearing
on Johnson Controls’ amended motion for summary judgment, and (2)
Plaintiff’s subsequent filing of the notice failed to include
copies of the actual authorities referenced, as required by
District of Hawaii Local Rule 7.8.
The authorities have been filed.
The objections of
Defendant Johnson Controls have been considered.
interests of a full examination of the issues before the Court,
the Court will consider the additional authorities presented by
Johnson Controls’ objection is DENIED.
II. Johnson Controls’ Amended Motion for Summary Judgment
Defendant Johnson Controls, Inc. may not use Plaintiff U.S.
Pipelining LLC’s status as an unlicensed contractor as a defense.
The Hawaii statute concerning contractor licensing, Haw. Rev.
Stat. ¶ 444-1 et seq., is designed to protect the general public,
not to protect contractors from each other.
Johnson Controls’ Amended Motion for Summary Judgment (ECF
No. 25) is DENIED.
IT IS SO ORDERED.
Dated: October 31, 2016, Honolulu, Hawaii
U.S. PIPELINING LLC, a foreign limited liability company vs.
JOHNSON CONTROLS, INC., a foreign corporation; ASSOCIATION OF
APARTMENT OWNERS OF KAANAPALI ALII, a Hawaii nonprofit
corporation; ALLANA, BUICK & BERS, a foreign corporation; JOHN
DOES 1-10; JANE DOES 1-10; DOE PARTNERSHIPS 1-10; DOE
CORPORATIONS 1-10; and DOE ENTITIES 1-10; Civil No. 16-00132 HGRLP; ORDER DENYING DEFENDANT JOHNSON CONTROLS, INC.’S AMENDED
MOTION FOR SUMMARY JUDGMENT (ECF NO. 25)
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