Mouris Ahdout v Majid Hemjatjah 213 CA4th 21 (2013)

gavel-2Court has jurisdiction to reverse arbitrator’s decision which refused to disgorge construction fees to consumer for contractor’s license violation.  Business and Professions Code Section 7031 claims(for disgorgement of compensation received by unlicensed contractors) constitute a “public policy”exception to the general prohibition of judicial review of arbitration awards.

Where an unlicensed contractor was a general partner of one of the two owners of an LLC (Limited Liability Company) designed to develop realty, and the general partner received its fee of 25% of the project’s total construction costs, it was reversible error for an arbitrator to refuse to order the general partner to disgorge all of its earned construction fees upon the LLC’s demand therefore on the grounds that the general partner’s contractor was unlicensed.  Courts (and arbitrators) may not resort to equitable considerations to defy such public policy. (I.e. that an unlicensed contractor cannot recover any money earned for a project)

Mouris Ahdout v. Majid Hemjatjah 213 CA4th 21 (2013)
Following the arbitrator’s award of fees to the contractor, the LLC petitioned the court to vacate such award, which the trial court denied.  The case was reversed and remanded by the 2nd district in favor of the LLC.

Note: Full disgorgement by an unlicensed contractor of its otherwise earned fees, even when the payor knows that the contractor was unlicensed is a harsh, if not draconian remedy, yet it is statutory California law which arbitrators must obey.

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