Opinion ID: 583562
Heading Depth: 2
Heading Rank: 2

Heading: The Scope of the District's Licensing Statute

Text: 7 Where a defendant resists a suit for compensation on the ground that the plaintiff failed to register under the District's licensing statute, its courts will not allow the defense unless the statute covers the services for which compensation is sought, as opposed to the plaintiff's services generally. See Karr v. C. Dudley Brown & Assoc., Inc., 567 A.2d 1306, 1308 (D.C.1989) (unlicensed contractor could recover for services that did not fall within scope of licensing statute); Dunn v. Finlayson, 104 A.2d 830, 832 (D.C.1954) (same). Therefore, even if A-L Associates has acted as an employer-paid personnel service on other occasions, we look only to the services that A-L claims to have performed on this particular occasion. Here the parties agree, for purposes of summary judgment, that A-L engaged in a facilitation of a merger between two law firms. 8 The District of Columbia's consumer protection laws require certain businesses to be licensed and registered with the District's Department of Consumer and Regulatory Affairs. Among the businesses required to be licensed are employer-paid personnel services. See D.C.CODE ANN. § 36-1002(a)(1) (1988) (No individual, partnership, association, corporation, or subcontractor shall operate an employment agency, employment counseling service, employer-paid personnel service, or job listing service in the District without first obtaining a license for that purpose from the Mayor.). 9 The district court concluded that the District's licensing statute covering employer-paid personnel services includes businesses that facilitate mergers between two firms. [295 U.S.App.D.C. 364] The court held that, under a strict construction of the District's licensing statute, A-L served as a consultant to employers to identify, appraise, or recommend individuals for executive, managerial or professional positions, and its services constituted employment advice or counseling to employers under sections 36-1001(3) and 36-1002(a). Memorandum Opinion, at 9. The court rejected A-L's argument that section 36-1002(a)(1) did not apply because A-L merely facilitated a merger of two firms' partners and did not render advice to an employer for the purpose of obtaining employees. Id. at 6. Looking at the legislative history of the District's licensing statute, the court reasoned that excluding merging law firms from the statute's protection would freeze out one of the largest consumer groups for these services, and would be contrary to the legislative purpose of the statute. Id. at 9. We disagree. 10 Neither the plain language of the District's licensing statute nor the legislative history surrounding the statute support the district court's conclusion that it covers law firm mergers. Section 36-1001(3) defines an employer-paid personnel service as an entity that for a fee, procures, offers, or attempts to procure job-seekers for employers, or provides employment advice or counseling to employers or to other persons designated by employers and who is compensated solely by employers.... D.C.CODE ANN. § 36-1001(3) (1988). And section 36-1001(2) defines an employer as an individual or business that employs one or more individuals and that receives or seeks to receive the service of an employment agency or employer-paid personnel service for the purpose of obtaining employees or advice concerning employees. D.C.CODE ANN. § 36-1001(2) (1988) (emphasis added). Thus, the statute covers services aimed at providing employers with individual employees or advice concerning individual employees. Nothing in the statute addresses the merger of two entities. 11 In its decision, the district court focused on A-L's distinction between a merger of partners and a merger of both partners and associates, holding that such a distinction would deprive the statute of any logical meaning. Memorandum Opinion, at 7. In so limiting its focus, however, the court failed to address the much broader question whether mergers, in general, are covered by the statute. The Partners argue that the licensing statute was intended to cover mergers. But under their reading of the statute, all businesses, such as investment banking firms, that facilitate mergers between companies would arguably have to be licensed in the District as employer-paid personnel services. We cannot imagine that the District's licensing statute was meant to cover these situations. And more importantly, nothing in the language indicates that it was. 12 Even if we turn to the legislative history cited by the district court, it offers no help in concluding that the District's licensing statute includes mergers. The Council Report to which the district court refers states that the purpose of the licensing statute is to protect consumers of the counseling services provided by an employer-paid personnel service. Memorandum Opinion, at 8 (citing COUNSEL OF THE DISTRICT OF COLUMBIA, REPORT TO COUNCILMEMBERS, at 2 (June 26, 1984)). The Council Report also indicates that the statute's bond requirements were increased to include employee search firms that place executives and other highly paid employees. Id. at 9. But nothing in the legislative history cited by the district court says that the services covered by the statute include facilitating a merger. Because neither the plain language of the statute nor its legislative history supports the district court's conclusion that the statute includes mergers, we reverse the district court's grant of summary judgment and remand for further consideration of A-L's complaint. Furthermore, because we are satisfied that the transaction in this case clearly involved a merger of two firms, we need not address the more difficult questions of whether the hiring of a number of lawyers is a merger or whether partners are employees under the licensing statute. 13 [295 U.S.App.D.C. 365] We also note that District of Columbia law is not clear on the effect of a failure to comply with the District's licensing statute. The district court ruled that courts void contracts when an entity conducts business without a license, provided that the business is in fact required to have a license, and that the activities giving rise to the contractual relationship are activities covered by the relevant licensing statute. Memorandum Opinion, at 2-3 (citing Family Construction v. District of Columbia Dep't of Consumer and Regulatory Affairs, 484 A.2d 250, 254 (D.C.1984); Highpoint Townhouses, Inc. v. Rapp, 423 A.2d 932, 935 (D.C.1980). A case recently decided by the District of Columbia Court of Appeals, however, suggests that a failure to comply with the district's licensing statute is insufficient to void a contract where, as in this case, the party seeking to void the contract does not allege an injury as a result of the failure to perform the contract as promised. See Beard v. Goodyear Tire & Rubber Co., 587 A.2d 195 (D.C.1991) (distinguishing Family Construction because it did not present the question whether a consumer who claims no injury whatever as a result of the transaction is entitled to have the contract voided on the basis of nonregistration alone). Because we conclude that the District's licensing statute does not apply to the transaction in this case, we need not resolve any apparent tension in the application of District of Columbia law.