A telecom contractor seeking more than $18 million for work performed on a fiber network installation project experienced a setback when a California federal appeals court judge this week reversed a lower court ruling.
At issue is a dispute over the scope of a California specialty contractor’s license. Minnesota-based MP Nexlevel of California is licensed to install low-wattage communications systems like telephone and cable lines. CVIN LLC received a grant from the National Telecommunications and Information Administration to construct a fiber optic internet network throughout California’s Central Valley.
Nexlevel was hired to excavate, trench, drill and build underground conduit to carry the fiber optic cables; it was not contracted to insert and actually connect the fiber to complete the installation. Nexlevel completed the work but CVIN did not pay them, according to the decision issued this week by U.S. Court of Appeals Judge Lawrence O’Neill.
In the dispute that dates back to 2014, Nexlevel sued CVIN, claiming breach of contract. CVIN claimed it didn’t owe the money to Nexlevel because Nexlevel wasn’t licensed to do the work. The district court agreed with CVIN earlier this month, saying the work was not within Nexlevel’s scope of license.
In defending his reversal, Judge O’Neill said that in California, a contractor who performs unlicensed work isn’t entitled to recover payment. However, a specialty contractor can perform and recover payment for work that “is ‘incidental and supplemental’ to the work for which a specialty contractor is licensed if that work is essential to finish the work in which the contractor is classified.”
Here, Nexlevel was licensed under a C-7 Low Voltage Systems Contractor specialty license and the parties agree fiberoptics qualify as low voltage systems under a C-7 license. The earlier ruling stated Nexlevel’s work wasn’t incidental or supplemental to the installation. Judge O’Neill said it is, and state courts find that means “necessary to the main purpose” of the work.
“Nexlevel was licensed to install these communications systems. Even though Nexlevel did not actually connect the fiber optic cables, Nexlevel’s Phase One work provided the necessary infrastructure to support the communications system,” wrote Judge O’Neill in explaining his decision to reverse the previous ruling and send the case back to district court.
The case is MP Nexlevel of California, Inc, et al v. CVIN, LLC is under case number 1:14-cv-00288.
July 19, 2018
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