30 Cal. App. 5th 945
Cal. Ct. App. 5th2018Background
- Bernards Bros., the general contractor, listed JMS Air Conditioning (JMS) as the division-23 HVAC subcontractor on a public-works project for Santa Monica Community College District (the District); JMS held a C-20 HVAC license and had a subcontract worth ~$8.2M.
- Bernards sought to substitute another subcontractor, citing JMS's alleged failure to perform and possible lack of proper licensure; JMS timely objected, triggering a §4107 substitution hearing under the Subletting and Subcontracting Fair Practices Act.
- The District delegated the hearing to facilities manager Greg Brown (with campus counsel advising); the hearing was informal (two-hour limit, no cross-examination, written submissions unlimited) and both sides submitted extensive materials including an expert licensing opinion from Robert B. Berrigan asserting JMS lacked a C-4 boiler license for certain boiler work.
- Brown approved the substitution on grounds of failure to perform and lack of license, relying heavily on Berrigan for the licensing conclusion; he found JMS had done over $3M of boiler/piping work and offered no expert to rebut Berrigan.
- JMS sought writ review; the superior court denied the petition (finding insufficient evidence for failure-to-perform but substantial evidence for lack-of-license), and JMS appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §4107 permits only the awarding authority itself (not a delegate) to conduct contested substitution hearings | Section text omits "duly authorized officer" when referencing hearings; Legislature intended award authority itself to decide | Delegation is permissible; reading §4107 in context and using statutory purpose supports delegation; §4114 further contemplates delegation | Delegation is allowed; Brown had jurisdiction to hold the hearing |
| Whether the substitution hearing deprived JMS of due process (hearing officer, no cross-examination, short hearing, notice) | Lack of board hearing, no cross-exam, two-hour limit, late specificity on boiler issue denied meaningful opportunity to defend | JMS had neutral decisionmaker, unlimited written submissions, opportunity to present live testimony and to request continuance; notice met §4107 and due process standards for limited statutory right | Procedural protections satisfied given narrow statutory rights implicated; no due process violation |
| Proper standard of review for judicial review of the substitution decision | JMS: independent review because decision affects fundamental vested rights (economic and licensing consequences) | District: substantial-evidence review because decision only affects limited ancillary rights under the Act | Substantial-evidence standard applies; substitution decision did not substantially affect a fundamental vested right |
| Sufficiency of evidence to support substitution (licensure and performance grounds) | JMS: no substantial evidence that JMS lacked C-4 or C-36 authority; rebuttal evidence showed boiler/plumbing work was incidental/essential to C-20 | Bernards/District: Berrigan's expert statement supported lack of C-4 licensure for boiler work; evidence showed extensive boiler/piping scope and performance complaints | Substantial evidence supports lack-of-license as to boiler work (C-4) but not sufficient evidence to support lack-of-license as to plumbing work (C-36); overall substitution upheld on boiler-license ground |
Key Cases Cited
- Southern Cal. Acoustics Co. v. C. V. Holder, 71 Cal.2d 719 (summarizes Act's anti-bid-shopping purpose)
- Hannah v. Larche, 363 U.S. 420 (due process balancing for administrative hearings)
- Strumsky v. San Diego County Employees Retirement Assn., 11 Cal.3d 28 (standard of review when fundamental rights implicated)
- Bixby v. Pierno, 4 Cal.3d 130 (defining "fundamental vested right" test)
- Lungren v. Deukmejian, 45 Cal.3d 727 (statutory construction and legislative intent principles)
- Wences v. City of Los Angeles, 177 Cal.App.4th 305 (administrative reprimand and effect on fundamental rights)
- City of Fontana v. California Dept. of Tax & Fee Administration, 17 Cal.App.5th 899 (deference to agency credibility determinations)
- Kawasaki Motors Corp. v. Superior Court, 85 Cal.App.4th 200 (distinguishing regulatory interference with contractual rights)
- Saleeby v. State Bar, 39 Cal.3d 547 (confrontation and cross-examination not always required in administrative hearings)