Florida Supreme Court to Contractors: Unlicensed? No Relief for Contract Violations!
Around the State
The Florida Supreme Court has ruled that, under a “draconian” 2005 Florida law, an unlicensed contractor cannot sue for breach of contract, even when they have been wronged and even when the party against whom they are seeking relief knew of their unlicensed status.
“[A]s a matter of state policy, the Legislature has imposed a substantial penalty on the unlicensed contractor as the wrongdoer with regard to a construction contract,” Justice Charles T. Canady wrote on behalf of the high court. “Under the amended section 489.128 [of the Florida Statutes], the unlicensed contractor has no rights or remedies for the enforcement of the contract.”
The plaintiff in the case was a general contractor, T&G Corp., who in 2004 subcontracted with Earth Trades Inc. on a parking garage project. Earth Trades filed a breach of contract action against T&G, over a payment dispute. T&G countersued, arguing that Earth Trades was in fact the breaching party.
In the litigation that followed, T&G argued that Earth Trades was legally barred from bringing any breach of contract suit against T&G, even if T&G was at fault. The reason? Earth Trades was not licensed.
T&G invoked what was at the time a new statute, 489.128(1), enacted by the Florida Legislature: “As a matter of public policy, contracts entered into on or after Oct. 1, 1990 by an unlicensed contractor shall be unenforceable in law or in equity by the unlicensed contractor.”
Earth Trades, for its part, argued that it was immune from being sued by T&G because of the common law doctrine of in pari dilecto. Under the doctrine, named after the Latin axiom In pari delicto potior est conditio defendentis – “In a case of equal fault, the position of the [defending] party is the better one” – a plaintiff may generally not recover damages resulting from a wrongdoing the plaintiff himself participated in. Earth Trade argued that T&G was equally culpable in whatever wrong Earth Trade was alleged to have committed, since T&G knew or should have known that Earth Trade was unlicensed.
A trial court ruled in favor of T&G; an appeals court agreed, but in doing so contradicted the rulings of other appellate courts, which had found that a party cannot sue unlicensed contractors if the party was aware of the lack of a license at the time of the wrongdoing. It was up to the Supreme Court to decide which interpretation of the law was correct.
Canady dismissed Earth Trades’s invocation of in pari delicto, reminding the defendant that that defense only applied to situations where both parties participated in the same wrongdoing that was at issue in a particular case; it “does not require simply that both parties be to some degree wrongdoers.” In addition, the doctrine only applies when the two wrongs are “substantially equivalent.”
Canady did not address the question of whether the two companies engaged in the wrongdoing; rather, relying on the language of statute 489.128(1), the court found that it was the intent of the Legislature to “place[…] the onus of unlicensed contracting on the unlicensed contractor,” instead of distributing that burden equally to both parties, as had been the case before passage of the 2003 law.
As an unlicensed contractor, Canady said, Earth Trade was entitled to defend itself against claims brought against it by T&G, but was statutorily barred from bringing its own.
“Thus, to avoid the draconian effects of the statute, the unlicensed contractor need only comply with the law,” Canady concluded. “In light of the state’s policy, we hold that a party’s knowledge that a contractor is unlicensed is insufficient as a matter of law to establish the defense of in pari delicto.”
Reach Eric Giunta at firstname.lastname@example.org or at (954) 235-9116.