Tag: California Court of Appeals

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Court of Appeals Confirms One-Year Statute of Limitations for Disgorgement Claims That Is Not Subject to the Discovery Rule
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FTR v. Rio: Penalties Assessed Against School District for Withholding Contractor Funds

Court of Appeals Confirms One-Year Statute of Limitations for Disgorgement Claims That Is Not Subject to the Discovery Rule

Authors: Timothy L. Pierce, Hector H. Espinosa, and Samira F. Torshizi

In a recently published case dealing with issues of first impression, the California Court of Appeal Second Appellate District in Los Angeles held that the disgorgement penalty under Business and Profession Code § 7031(b) must be made within one year of completion or cessation of the performance of the project, and that time is not extended by the discovery rule.  Eisenberg Village of the Los Angeles Jewish Home for the Aging v. Suffolk Construction Company, Inc., 2020 WL 5035826 (Cal. Ct. App., Aug. 26, 2020).  BPC § 7031(b) permits a party who uses the services of an unlicensed contractor to recover any and all money paid to the contractor for its work—regardless of the quality of the work (indeed, even if the construction was flawless).  The purpose of this harsh forfeiture provision is to deter unlicensed contractors from performing construction.

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FTR v. Rio: Penalties Assessed Against School District for Withholding Contractor Funds

By Timothy L. Pierce and Benjamin Kussman,  K&L Gates, Los Angeles

In East West Bank v. Rio School District, 235 Cal. App. 4th 742 (2015), the California Court of Appeals upheld a trial court’s assessment of $1,537,404.96 in statutory penalties against the Rio School District (the “District”) for the District’s failure to timely release contractor funds pursuant to Public Contract Code Section 7107.  The Court concluded, in what constitutes a departure from another recent Court of Appeals ruling interpreting the same statutory provision[1], that Section 7101 does not allow a public entity to withhold contractor retainage on the basis of a dispute over the cost of contract work.

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