LEGAL ISSUES


Code of Civil Procedure section 340. Te Court reasoned it was more akin to a penalty as opposed to restitution (i.e., the return of money improperly taken) since “[i]t deprives the contractor of any compensation for labor and materials used in the construction while allowing the plaintiff to retain the benefits of that construction . . . regardless of any fault in the construction by the unlicensed contractor.” Having determined that the


one-year statute of limitation under Code of Civil Procedure section 340 applies to disgorgement claims under Business and Professions Code section 7031, the Court of Appeal turned next to when the one-year statute of limitation begins to accrue (i.e., when the clock starts to run). Te Court of Appeal found that a disgorgement claim under Business and


Professions Code section 7031 accrues or begins to run “when an unlicensed contractor completes or ceases perfor- mance of the act or contract at issue.” Suffolk completed its work on


the project in June 2010, and while it performed additional work to remedy the hot water issue in 2012, Eisenberg did not allege its disgorgement claim until May 2015. Tat was nearly five years after the project was completed and three years after Suffolk stopped performing work on the project.


Conclusion Eisenberg is a hugely important


case for those involved in construction. At present, it is the only case addressing the statute of limitations applicable to disgorgement claims under Business and Professions Code section 7031. While there is the


possibility that another court of appeal could find differently, at least for now Eisenberg is the law of the land in California. One unanswered question under


Eisenberg is whether the one-year statute of limitations applies to the claim preclusion remedy under Business and Professions Code section 7031. I don’t believe it would, since a project owner would not be able to raise a claim preclusion defense until a contractor files a payment claim against a project owner, which could be as long as four years after work is performed. 


Garret Murai is a partner at Nomos


LLP located in Oakland. He is the editor of the California Construction Law Blog which can be found at www.calconstruc- tionlawblog.com.


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