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In Snider v. Dickinson Elks Building, LLC, 907 N.W.2d 397 (ND 2018), the North Dakota Supreme Court clarified the consequences contractors engaged in the business of construction, repair, alteration or demolition can face if they don’t obtain a license before beginning work.  The Court declared that North Dakota’s licensing statute, N.D.C.C. § 43-07-02, precludes a contractor from bringing and maintaining an action or claim related to its contracting activity for the period it is not licensed.

In Snider v. Dickinson Elks Building, LLC, 907 N.W.2d 397 (ND 2018), RJ Snider Construction contracted to provide materials and labor for construction work on a property owned by Dickinson Elks Building, LLC.  RJ Snider was not a licensed contractor in North Dakota and so it applied for a contractor license from pursuant to N.D.C.C. §§ 43-07-02 and 43-07-04.  RJ Snider received its license on February 6, 2012 — 43 days after RJ Snider entered into its contract and began furnishing labor and materials.

RJ Snider performed work under the contract from December 26, 2011 to November 30, 2012. Dickinson Elks paid RJ Snider for the work performed between December 26, 2011 and February 1, 2012, but Dickinson Elks didn’t make complete payments to RJ Snider for the work performed between February 2 and November 30, 2012.  RJ Snider filed a construction lien in the amount of $198,255 and commenced suit against Dickinson Elks.

Dickinson Elks argued that N.D.C.C. § 43-07-02 precluded RJ Snider’s claims because RJ Snider didn’t obtain its contractor license until after it entered into the contract and started work pursuant to the contract. Dickinson Elks asserted that the statute required RJ Snider be licensed in the State of North Dakota at the time of contract formation or commencement of work in order to maintain a claim related to the work performed under the contract.

N.D.C.C. § 43-07-02, subd. 1 provides:

A person may not engage in the business nor act in the capacity of a contractor within this state when the cost, value, or price per job exceeds the sum of four thousand dollars nor may that person maintain any claim, action, suit, or proceeding in any court of this state related to the person’s business or capacity as a contractor without first having a license as provided in this chapter.[1]

The Court undertook its analysis of the statute by breaking it in two parts. The Court explained that the first part of the statute states that a person may not engage in the business or act in the capacity of a contractor without a license when the value or cost of the job exceeds $4,000.  The second part provides that a person may not maintain any claim, action or suit relating to their business or capacity as a contractor without a license.  Because the final clause “without a license” modifies both parts, the Court interpreted the statute to only permit a contractor to bring a claim related to its contracting activity for periods when the contractor is licensed.

Because RJ Snider began work as a contractor on the project before it was licensed in the State of North Dakota, the Court precluded RJ Snider from maintaining its claim for damages for the period it was not licensed (December 26, 2011 to February 6, 2012). The Court, however, allowed RJ Snider to assert a claim for damages for the period it was licensed.

The Snider decision confirms that contractors in North Dakota performing jobs that exceed $4,000 before they obtain a license from the State of North Dakota aren’t entitled to maintain an action or bring a claim relating to their business or capacity as a contractor during the period they are unlicensed.  The focus is on the date the contractor began to provide services and the date the contractor obtained its license.

The North Dakota Legislature amended the statute since the events giving rise to the Snider decision by adding four subdivisions.  The statute was amended in 2015 to include language making it a class A misdemeanor for any person acting in the capacity of a contractor without a license.  N.D.C.C. § 43-07-02, subd. 2.  Therefore, if the facts of Snider were to arise today, not only would the contractor be precluded from maintaining its action for payment during the time it was not licensed, but the contractor could be prosecuted for a misdemeanor for completing work before it was licensed.  The legislature also made it a felony offense for any person who commits construction fraud.  N.D.C.C. § 43-07-02, subd. 3, 4, 5.

The risks contractors face by beginning work without a license are significant given the Snider decision and the 2015 amendments to the statute.  Please contact Lauren Nuffort with questions about this decision and how it may impact your work in North Dakota.

 

[1] When this action was commenced, N.D.C.C. § 43-07-02, subd. 1 required a minimum of $2,000 per job.