Court Opinion

ID: 2680677
Source: CourtListenerOpinion
Date Created: 2014-06-26 21:00:30.960438+00
Date Added: 2024-06-11T12:40:40.904525
License: Public Domain

FILED
                           NOT FOR PUBLICATION                                 JUN 26 2014

                                                                          MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                          U.S. COURT OF APPEALS

                           FOR THE NINTH CIRCUIT

STELLAR J CORPORATION, a Texas                   No. 12-35780
corporation,
                                                 D.C. No. 3:09-cv-00353-JE
              Plaintiff-counter-defendant -
Appellee,
                                                 MEMORANDUM*
TRAVELERS CASUALTY AND
SURETY COMPANY OF AMERICA,

              Counter-defendant -
Appellee,

  v.

SMITH & LOVELESS, INC., a Kansas
corporation,

              Defendant-counter-claimant -
Appellant,

CITY OF RAINIER, OREGON FOR THE
USE AND BENEFIT OF SMITH &
LOVELESS, INC.,

              Counter-claimant - Appellant.

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
                   Appeal from the United States District Court
                            for the District of Oregon
                    Anna J. Brown, District Judge, Presiding

                       Argued and Submitted May 16, 2014
                                Portland, Oregon

Before: ALARCÓN, TASHIMA, and IKUTA, Circuit Judges.

      Smith & Loveless, Inc. (“Smith”) appeals from the district court’s order

granting Stellar J Corporation (“Stellar”) and Travelers Casualty and Surety

Company of America’s (“Travelers”) motion for partial summary judgment

dismissing Smith’s breach of contract counterclaims with prejudice. Before this

Court, Smith contends that an unlicensed contractor can file a counterclaim and

recover damages pursuant to Or. Rev. Stat. § 701.131(1) (2008), even though that

statute barred unlicensed contractors from filing a complaint for breach of contract.

      We affirm the judgment because we conclude that Or. Rev. Stat.

§ 701.131(1) (2008), when properly construed, precluded an unlicenced contractor

from recovering damages whether the contractor filed a cause of action in a

complaint or in a counterclaim.

      We have jurisdiction pursuant to 28 U.S.C. § 1291.

                                          I

                                          2
      Prior to being amended in 2007, Or. Rev. Stat. § 701.131(1)’s predecessor,

former Or. Rev. Stat. § 701.065(1), read in pertinent part:

              (1) Except as provided in subsection (2) of this section, a
      contractor may not perfect a claim of a construction lien, or
      commence a claim with the Construction Contractors Board, in
      arbitration or in any court of this state for compensation for the
      performance of any work or for the breach of any contract for work
      that is subject to this chapter, unless the contractor had a valid license
      issued by the board:

            (a) At the time the contractor bid or entered into the contract for
      performance of the work; and

           (b) Continuously while performing the work for which
      compensation is sought.

Or. Rev. Stat. § 701.065(1) (2005).

      Smith filed its counterclaims on April 10, 2009. As amended in 2007, and

effective as of January 1, 2008, Or. Rev. Stat. § 701.131(1) (2008) provided as

follows:

             (1) Except as provided in subsection (2) of this section, a
      contractor may not perfect a construction lien, file a complaint with
      the Construction Contractors Board or commence an arbitration or a
      court action for compensation for the performance of any work or for
      the breach of any contract for work that is subject to this chapter
      unless the contractor had a valid license issued by the board:

            (a) at the time the contractor bid or entered into the contract for
      performance of the work; and

                                          3
           (b) Continuously while performing the work for which
      compensation is sought.

Or. Rev. Stat. § 701.131(1) (2008) (emphasis added); see also Or. Laws 2007, ch.

793, § 6.

      The parties do not dispute that the Oregon Legislature amended the statute at

the request of Oregon’s Construction Contractors Board (“CCB” or “Board”) or

that the CCB sought to replace the term “claim” so as to alleviate confusion that

the statute related to filing an insurance claim, instead of a lawsuit or a

counterclaim, regarding construction work.

      Smith maintains that, because Or. Rev. Stat. § 701.131(1) (2008) only

prohibited a contractor from “commenc[ing] . . . a court action,” it was not barred

from filing its counterclaims. The only authority cited by Smith in support of its

contention that Or. Rev. Stat. § 701.131(1) (2008) did not bar an unlicensed

contractor from filing a cause of action or a counterclaim for breach of contract is

dictum in a footnote in Pincetich v. Nolan, 285 P.3d 759 (Or. Ct. App. 2012).

      In Pincetich, the Oregon Court of Appeals held that Or. Rev. Stat.

§ 701.131(1) barred an unlicenced contractor from prevailing in an action the

contractor file for compensation for work pursuant to a construction contract. Id.

at 760, 762. In a footnote discussing the scope of Or. Rev. Stat. § 701.131(1), the

                                           4
court in Pincetich opined in dictum that the term “court action” in Or. Rev. Stat.

§ 701.131(1) “permit[s] an unlicensed contractor to file any counterclaim or

third-party claim, even if that claim seeks compensation for construction work,

provided the contractor does not commence a court action for compensation.” Id.

at 762 n.3. Smith contends that this footnote is “dispositive” of this case.

      This Court is “not bound by dicta of state appellate courts.” Minn. Mut. Life

Ins. Co. v. Ensley, 174 F.3d 977, 983 (9th Cir. 1999) (citation omitted). We have

also held, however, that “[i]n cases where the highest appellate court of the state

has not spoken, well-considered dicta should not be ignored.” Columbia Grain,

Inc. v. Or. Ins. Guar. Ass’n, 22 F.3d 928, 932 (9th Cir. 1994) (internal quotation

marks and citation omitted). The Pincetich footnote is not “well-considered”

dictum that this Court is bound to follow. The dispositive issue in Pincetich was

whether an exception to Or. Rev. Stat. § 701.131(1) applied to an unlicenced

contractor that filed suit. Pincetich, 285 P.3d at 760–61.

      Because the Pincetich footnote is not controlling in deciding the question

raised in this appeal, and in the absence of a dispositive ruling by the Oregon

Supreme Court, we must construe the intent of the Oregon legislature in drafting

Or. Rev. Stat. § 701.131(1) (2008). To interpret Oregon law, this Court has looked

to the Oregon Supreme Court’s decision in State v. Gaines, 206 P.3d 1042 (Or.

                                          5
2009). Powell’s Books, Inc. v. Kroger, 622 F.3d 1202, 1209 (9th Cir. 2010). In

Gaines, the Oregon Supreme Court restated its “methodology for interpreting a

statute” as follows:

      The first step remains an examination of text and context. But . . . we
      no longer will require an ambiguity in the text of a statute as a
      necessary predicate to the second step—consideration of pertinent
      legislative history that a party may proffer. Instead, a party is free to
      proffer legislative history to the court, and the court will consult it
      after examining text and context, even if the court does not perceive
      an ambiguity in the statute’s text, where that legislative history
      appears useful to the court’s analysis. However, the extent of the
      court’s consideration of that history, and the evaluative weight that the
      court gives it, is for the court to determine. The third, and final step,
      of the interpretative methodology is unchanged. If the legislature’s
      intent remains unclear after examining text, context, and legislative
      history, the court may resort to general maxims of statutory
      construction to aid in resolving the remaining uncertainty.

Gaines, 206 P.3d at 1050-51 (discussing Or. Rev. Stat. § 174.020) (citations

omitted).

      In general, commencing an “action” refers to filing suit. See BLACK’S LAW

DICTIONARY (9th ed. 2009) (West 2014) (defining “action,” in part, as “[a] civil or

criminal judicial proceeding”). For example, in Abbott v. Baldwin, 36 P.3d 516

(Or. Ct. App. 2001), in the context of a request for post-conviction relief, an

Oregon intermediate appellate court explained that “[t]he term ‘action’ . . . has a

well-established legal meaning,” which “is a discrete judicial proceeding involving

                                          6
a demand for relief that must be independently commenced and adjudicated.” Id.

at 521–22 (citing Or. R. Civ. P. 1(A), 3, 70; BLACK’S LAW DICTIONARY 29 (6th ed.

1990)). The court in Abbott also explained that “action” “has essentially the same

meaning as the term ‘case.’” Id. at 522 (citing State v. Cunningham, 985 P.2d 827,

831 (Or. Ct. App. 1999); Or. R. Civ. P. 1(A)). As the court in Abbott

acknowledged, an Oregon intermediate appellate court in State v. Cunningham

stated “[e]ven within the legal context . . . the meaning of the word [‘case’] is not

narrow” and can be defined as:

      “A general term for an action, cause, suit or controversy, at law or in
      equity; a question contested before a court of justice; an aggregate of
      facts which furnishes occasion for the exercise of the jurisdiction of a
      court of justice. A judicial proceeding for the determination of a
      controversy between parties wherein rights are enforced or protected,
      or wrongs are prevented or redressed; any proceeding judicial in its
      nature.”

Cunningham, 985 P.2d at 831 (quoting BLACK’S LAW DICTIONARY 195 (5th ed.

1979)) (emphasis in original). Accordingly, both Abbott and Cunningham indicate

that the term “action,” which “has essentially the same meaning as the term

‘case,’” refers to “‘any proceeding judicial in its nature.’” Abbott, 36 P.3d at 522;

Cunningham, 985 P.2d at 831.

      Or. Rev. Stat. § 701.131(1) (2008) applies to a “court action for

compensation for the performance of any work or for the breach of any contract for

                                           7
work that is subject to this chapter.” Or. Rev. Stat. § 701.131(1) (2008). This

language indicates that the statutory term “court action” means a “claim” or “cause

of action” because application of the statute turns on a party’s assertion of a right

to payment for work subject to Chapter 701, not the form of the filing. See, e.g.,

Ram Technical Servs., Inc. v. Koresko, 208 P.3d 950, 961 (Or. 2009) (stating

“claim” is defined as “‘[t]he aggregate of operative facts giving rise to a right

enforceable by a court.’” (quoting BLACK’S LAW DICTIONARY 264 (2004));

BLACK’S LAW DICTIONARY (9th ed. 2009) (West 2014) (defining “cause of action”

as “[a] group of operative facts giving rise to one or more bases for suing; a factual

situation that entitles one person to obtain a remedy in court from another person”).

      Turning to general maxims of statutory construction, “courts must refuse to

give literal application to language when to do so would produce an absurd or

unreasonable result.” McKean-Coffman v. Emp’t Div., 824 P.2d 410, 414 (Or.

1992). The purpose of Or. Rev. Stat. § 701.131(1) was “to deter unlicensed

contractors from performing construction work by denying them the ability to

pursue claims for compensation for their work.” Pincetich, 285 P.3d at 762

(emphasis added). In light of this purpose, to interpret the words “commence . . . a

court action” in Or. Rev. Stat. § 701.131(1) (2008) to exclude counterclaims filed

by contractors that are unlicenced is unreasonable and contrary to the intent of the

                                           8
legislature to bar unlicensed contractors from recovering compensation for their

work. Such an interpretation would permit unlicenced contractors to recover

damages when they are sued, but not when they file a complaint for breach of

contract. There is no principled basis for such an irrational interpretation of Or.

Rev. Stat. § 701.131(1) (2008).

       After Pincetich was published, the CCB informed the Oregon legislature that

the use of “court action” in Or. Rev. Stat. § 701.131(1) (2008) had had an

“unintended consequence.” In pertinent part, the statute was amended to make it

clear that an unlicenced contractor could not “commence . . . a claim in a court of

this state for compensation for the performance of any work or for the breach of

any contract for work that is subject to this chapter, unless the contractor had a

valid license.” See Or. Rev. Stat. § 701.131(1) (2014); Or. Laws 2013, ch. 251,

§ 5.

       We are persuaded that to interpret Or. Rev. Stat. § 701.131(1) (2008) to bar

an unlicensed contractor from filing a claim for breach of contract, but to permit

one to recover in a counterclaim, would be an absurd and unreasonable result,

clearly contrary to legislative intent. The district court did not err in dismissing

Smiht’s counterclaims with prejudice.

                                           II

                                           9
      Smith also contends that it is excepted from Or. Rev. Stat. § 701.131(1)

(2008), pursuant to Or. Rev. Stat. § 701.131(2)(a) (2008). But Smith was not

licensed by the CCB when it filed its counterclaims on April 10, 2009. There is no

question that Smith cannot meet the requirement in Or. Rev. Stat.

§ 701.131(2)(a)(B) (2008) that “[a]t the time the contractor . . . commenced any

proceeding subject to the provisions of subsection (1) . . . the contractor was

licensed by the board.” Or. Rev. Stat. § 701.131(2)(a)(B) (2008).

                                         III

      Additionally, Smith contends that it was not a “contractor,” pursuant to Or.

Rev. Stat. § 701.005(5)(a) (2008), because the “Biological Wastewater Treatment

Unit and Aeration Diffuser System” (collectively, the “Treatment Unit”) it sold to

and contracted to installed for Stellar “is removable” and, therefore, not “attached

to real estate.” Smith’s unsupported generalization that the Treatment Unit is

removable does not alter the fact, as admitted by Smith, that the Treatment Unit

was attached to the City of Rainier’s wastewater treatment facility. The district

court did not err in concluding that Smith was a contractor. See Or. Rev. Stat.

§ 701.005(5)(a) (2008) (defining “contractor” by whether person’s work is

“attached to real estate”); L.H. Morris Elec., Inc. v. Hyundai Semiconductor Am.,

                                          10
66 P.3d 509, 512 (Or. Ct. App. 2003) (holding question of person’s status as a

“contractor” depends on whether work in question was attached to real estate).

                                          IV

      Smith also asserts that the dismissal of its counterclaims should have been

without prejudice. Smith maintains that, in order to file its counterclaims pursuant

to Rules 12 and 13 of the Federal Rules of Civil Procedure, it was not able timely

to avail itself of the exception in Or. Rev. Stat. § 701.131(2)(a) (2008). Smith,

though, has not provided this Court with any authority that Rules 12 and 13 may

trump Oregon’s substantive law.

                                          V

      Smith also maintains that Stellar is equitably estopped from raising Or. Rev.

Stat. § 701.131(1) (2008) because it was on notice that Smith did not have a

license. The minimum requirements for the application of equitable estoppel are

not satisfied here. Smith has not shown the existence of evidence from which a

reasonable trier of fact could conclude that Stellar falsely represented to Smith that

it did not need a license, that Stellar did so with the intention that Smith would not

act to obtain license, and that Smith was induced not to do so. See Day v.

Advanced M&D Sales, Inc., 86 P.3d 678, 682 (Or. 2004) (stating elements of

equitable estoppel).

                                          11
                                          VI

      Lastly, Smith argues that it should be allowed to sever and proceed with its

counterclaims to the extent they involve the manufacture and sale, but not

installation, of equipment, based on a “severability clause” in the parties’

subcontract. The work in the subcontract’s “scope of work” provision, however,

constituted work as a “contractor.” See Or. Rev. Stat. § 701.005(5)(a) (2008)

(defining “contractor”). Additionally, contractors may not avoid Or. Rev. Stat.

§ 701.131(1) by defining covered “work” in a “patchwork, pick-and-choose

fashion.” Parthenon Constr. & Design, Inc. v. Neuman, 999 P.2d 1169, 1173–74

(Or. Ct. App. 2000).

      AFFIRMED.

                                          12
                                                                               FILED
Stellar J v. Smith & Loveless, No.12-35780                                        JUN 26 2014

                                                                            MOLLY C. DWYER, CLERK
IKUTA, J., dissenting:                                                       U.S. COURT OF APPEALS

      The Oregon Supreme Court has given us our marching orders. “When the

text of a statute is truly capable of having only one meaning, no weight can be

given to legislative history that suggests—or even confirms—that legislators

intended something different.” State v. Gaines, 346 Or. 160, 173 (2009). The

Oregon Supreme Court expects the state legislature to know this rule, and quoted

(with approval) Representative Max William’s statement that “We still have to

mean what we say when we say it. We can’t say, black and then * * * all agree that

black meant white. That’s not going to work.” Id. at 173 n.10.

      Here, the text of section 701.131(1), as it existed in 2008, prohibits an

unlicensed contractor from commencing “a court action for compensation for the

performance of any work or for the breach of any contract for work that is subject

to” the contractor licensing law. See Or. Rev. Stat. § 701.131(1) (2008) (emphasis

added). Oregon state courts define the term “action” to mean the “judicial

proceeding involving a demand for relief that must be independently commenced

and adjudicated,” Abbott v. Baldwin, 178 Or. App. 289, 298 (2001), while the term

“claim” merely refers to “[t]he aggregate of operative facts giving rise to a right

enforceable by a court,” Ram Technical Servs., Inc. v. Koresko, 346 Or. 215, 236
(2009).1 In other words, the plain language of the 2008 statute prohibits unlicensed

contractors from bringing independent court actions, but not from bringing claims

or counterclaims.

      The 2008 statute amended an earlier version of § 701.131(1) that was

broader in scope: it prohibited an unlicensed contractor from raising “a claim” in

state court. Or. Rev. Stat. § 701.065(1) (2006); see also Splinters, Inc.v.

Andersen/Weitz, 192 Or. App. 632, 639–41 (2004) (applying statute to unlicensed

contractor’s counterclaims). There can be no doubt that the 2008 amendments

changed the law when it changed the word “claim” to “court action.” As a state

appellate court succinctly stated:

             [b]y changing the language of the claims bar to prohibit
             an unlicensed contractor from commencing a court
             action, rather than a claim, the amendments permit an
             unlicensed contractor to file any counterclaim or
             third-party claim, even if that claim seeks compensation
             for construction work, provided the contractor does not
             commence a court action for compensation.

Pincetich v. Nolan, 252 Or. App. 42, 48 n.3 (2012). In other words, “the

amendments had a substantive effect.” Id. The state legislature apparently agreed.

      1
        Abbott also defines the term “action” to mean the same as the term “case,”
178 Or. App. at 298, which likewise refers to the entire proceeding, not an
individual claim or counterclaim, see State v. Cunningham, 161 Or. App. 345, 352
(1999).

                                          2
In 2013, the legislature once again amended § 701.131 to return it to its original

broader scope. Under the 2013 amendments, the “court action” language is gone,

and the new version of § 701.131 now prohibits an unlicensed contractor from

commencing a “claim” for contractor work. Or. Rev. Stat. § 701.131(1) (2013).

      In sum, while the 2008 statute was in effect, unlicensed contractors could

bring counterclaims. The majority ignores the plain language of the 2008 statute

by giving effect to what the majority thinks the legislature probably meant. Op. at

8–12. Under Oregon law, “[t]hat’s not going to work.” Gaines, 346 Or. at 173

n.10. Though the legislature might have meant to prohibit “causes of action,” that

is not what it said. Because the 2008 version of Or. Rev. Stat. § 701.131(1) does

not apply to counterclaims, I would reverse and remand for further proceedings.

There is nothing either absurd nor unreasonable about giving effect to the language

the state legislature enacted.

      For these reasons, I respectfully dissent.

                                          3