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Muddy Boys, Inc. v. Department of Commerce

Court of Appeals of Utah

March 7, 2019

Muddy Boys, Inc., Petitioner,
Department of Commerce, Division of Occupational and Professional Licensing, Respondent.

          Original Proceeding in this Court

          David R. Nielson and Michael D. Lichfield, Attorneys for Petitioner

          Sean D. Reyes and Brent A. Burnett, Attorneys for Respondent

          JUDGE RYAN M. HARRIS authored this Opinion, in which JUDGES MICHELE M. CHRISTIANSEN FORSTER and KATE APPLEBY concurred.

          HARRIS, JUDGE:

         ¶1 In this case, we are asked to decide whether a contractor who successfully defends itself in an administrative enforcement action brought against it by the Utah Division of Occupational and Professional Licensing (DOPL) may as the "prevailing party" recover attorney fees and costs from DOPL. See Utah Code Ann. § 58-55-503(5)(d) (LexisNexis 2016). In administrative decisions, DOPL and the Department of Commerce (the Department) each interpreted the governing statute as forbidding such fee awards. Muddy Boys, Inc. (Muddy Boys) challenges those decisions and, although we acknowledge that the statute is not entirely clear, we think the Department has the better of the arguments. Accordingly, we decline to disturb the Department's decision.


         ¶2 Muddy Boys is a drywall contractor that on occasion subcontracted work to a then-licensed company known as ITY LLC (ITY1). Unbeknownst to Muddy Boys, ITY1 lost its contractor's license, and its principal formed a new company known as ITY of Texas LLC (ITY2), but the new company was unable to obtain a contractor's license. ITY2 nevertheless falsely assured Muddy Boys that it was licensed, and offered as proof a state certificate that resembled a license. Muddy Boys apparently fell for the ploy and, under the impression that ITY2 was licensed, continued to subcontract work to the new entity on multiple projects.

         ¶3 In November 2015, DOPL filed an administrative action against Muddy Boys, accusing it of hiring an unlicensed subcontractor on fifty-eight separate projects, which DOPL contended was a violation of Utah Code section 58-55-501(3), and asserting that Muddy Boys should be assessed a $2, 000 fine for each violation, pursuant to Utah Code section 58-55-503(4)(h). In total, DOPL sought to impose a $116, 000 fine on Muddy Boys, and also asked for an order placing Muddy Boys's contractor license on probation. As the proceeding progressed, DOPL took the position that these violations were strict liability offenses, and that it did not matter that Muddy Boys may have been unaware that it was hiring an unlicensed subcontractor. DOPL also took the position that Muddy Boys had committed similar offenses before, which increased the fine from $1, 000 per occurrence to $2, 000 per occurrence. See Utah Code Ann. § 58-55-503(4)(h) (LexisNexis 2016). Muddy Boys maintained that it had never committed any such violations in the past.

         ¶4 After substantial motion practice, Muddy Boys prevailed on both of these preliminary issues: (1) DOPL eventually conceded that it needed to prove that Muddy Boys intentionally, knowingly, or recklessly hired an unlicensed subcontractor, and (2) the administrative law judge (ALJ) assigned to the case ruled that any violation in this case would be Muddy Boys's first. After these issues were decided, the case went to trial in November 2016 before the ALJ. Following several hours of testimony, the ALJ ordered a lunch recess and, upon returning from lunch, DOPL made a unilateral motion to dismiss the case with prejudice, which the ALJ granted. At the time, DOPL offered no reason for its motion, although Muddy Boys contends in its brief that DOPL made its motion because it "finally recognized that it could not prove recklessness."

         ¶5 Soon after the case was dismissed, Muddy Boys filed a motion before the ALJ, pursuant to a briefing schedule set by the ALJ, seeking to recover more than $80, 000 of attorney fees and costs it incurred in defending against DOPL's action. In response, DOPL did not challenge the amount or reasonableness of the proposed fees, but opposed the motion on legal grounds, asserting that attorney fees were not recoverable at all under the relevant statute. In January 2017, after briefing was complete, Muddy Boys submitted the matter to the ALJ for decision. But the ALJ did not issue a decision on Muddy Boys's motion. Instead, more than five months later, in June 2017, the director of DOPL (the Director) issued a lengthy order denying Muddy Boys's motion on the ground that the applicable statute, which authorized "courts" to award fees, did not allow fee awards by administrative tribunals. See Utah Code Ann. § 58-55-503(5)(d) (LexisNexis 2016).

         ¶6 After the Director issued his decision, and concerned about whether DOPL had communicated ex parte with the ALJ about the motion and whether the ALJ had drafted (but not issued) a recommended decision, Muddy Boys on two separate occasions asked DOPL to produce copies of any communications it might have had with the ALJ about the motion. DOPL refused.

         ¶7 Muddy Boys appealed the Director's decision to the Department. In addition to appealing the merits of that decision, Muddy Boys also asked the Department to address two peripheral issues: (a) whether the Director had a conflict of interest, based on the fact that his agency would have had to pay any fee award out of budgeted funds, such that the Director should not have rendered a substantive decision on its motion; and (b) whether DOPL should be compelled to produce any communications it may have had with the ALJ.

         ¶8 In November 2017, the Department issued an order affirming the Director's decision declining to award fees, but reached that conclusion on completely different grounds, determining that the attorney fees provision in question applied only to proceedings brought pursuant to subsection (5) of Utah Code section 58-55-503, and not to proceedings brought pursuant to subsection (4). In its order, ...

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