Unleashing the evils of Pandora

So, Zeus was sitting around one day, kinda bored. He’d created man, which had turned into a fiasco because Prometheus gave them fire without his permission. Now, man was threatening to challenge the gods for supremacy. Then Zeus had a brainstorm. He’d create woman, which while enticing to man, was really a hidden punishment.

Zeus’s first woman was Pandora (which means “all-giving” in Greek). While she was a stunner, she also had an alluring jar (later translations called it a box) with some nasty ingredients. Pandora opened the jar, letting loose its contents. Doing so set free all of the evils now faced by humanity.

Thus was born the modern saying of being careful of your actions because they could result in opening Pandora’s Box of troubles or problems. Jeff Tracy, Inc. recently experienced this phenomenon.

Jeff Tracy, Inc. was a general contractor specializing in landscape. It did its business as Land Forms. It successfully bid on the renovation of a park in Pico Rivera for more than $5 million. Land Forms eventually was paid a total of $5,487,370.05, but it claimed that it was owed about $520,000 more.

Negotiations failed so Land Forms sued the city of Pico Rivera for the $520,000 plus other damages. This is where Land Forms learned the true meaning “Pandora’s Box.”

Pico Rivera countersued Land Forms, saying that it was not a qualified licensed contractor. As you know, a contractor must be licensed to be able to be paid for construction work. Part of applying for a license includes identifying either a responsible managing officer or a responsible managing employee (“RME”).

This is the individual who proves that he or she has the requisite knowledge of building, safety, health and lien laws of the state. If Land Forms didn’t have an RME, then its license was void and invalid.

Now, this is where it really hurts. If Land Forms failed to have a legitimate RME, then it loses not only its right to sue for the unpaid $520,000, but it also must disgorge all of the $5,487,370.05 it has already received.

Investigation into James Nale (great name for a contractor, right?), the designated RME, revealed that he’d never been a Land Forms employee and never provided any direction or advice on the park project.

After hearing this, the court concluded, “Land Forms was barred from bringing its breach of contract claim against the city and was required to disgorge all compensation the city paid Land Forms for work on the project.”

Ouch! I was never involved in any aspect of this case so I can’t render any opinions about the wisdom of Land Forms’ actions. On its face, however, Land Forms was better off keeping the $5,487,370.05 rather than chasing after the $520,000.

But I did learn two lessons from this.

First, I’m going to make sure all of my contractor clients appreciate the rules about RMEs and being properly licensed. Second, avoid Pandora’s Box. Before suing someone make sure they don’t have a better case against you than you have against them.

Carl Kanowsky of Kanowsky & Associates is an attorney in the Santa Clarita Valley. He may be reached by email at cjk@kanowskylaw.com. Mr. Kanowsky’s column represents his own views, and not necessarily those of The Signal. Nothing contained herein shall be or is intended to be construed as providing legal advice.