FILED NOT FOR PUBLICATION JUN 26 2014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.