Muddy Boys, Inc. v. Dep't of Commerce

• Decision Date: 07 March 2019
• Docket Number: No. 20170938-CA,20170938-CA
• Citation: 440 P.3d 741
• Parties: MUDDY BOYS, INC., Petitioner, v. DEPARTMENT OF COMMERCE, DIVISION OF OCCUPATIONAL AND PROFESSIONAL LICENSING, Respondent.
• Court: Utah Court of Appeals

440 P.3d 741

MUDDY BOYS, INC., Petitioner,

v.DEPARTMENT OF COMMERCE, DIVISION OF OCCUPATIONAL AND PROFESSIONAL LICENSING, Respondent.

No. 20170938-CA

Court of Appeals of Utah.

Filed March 7, 2019

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

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

Judge Ryan M. Harris authored this Opinion, in which Judges Michele M. Christiansen Forster and Kate Appleby concurred.

Opinion

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.

BACKGROUND

¶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, the Department expressly "decline[d] to address" either of the peripheral issues Muddy Boys raised.

ISSUE AND STANDARD OF REVIEW

¶9 Muddy Boys asks us to review the Department’s order, and argues that both the Department and the Director erred in concluding that the applicable statute, Utah Code section 58-55-503(5)(d), does not allow Muddy Boys to recover attorney fees and costs. A party’s challenge to an administrative agency’s analysis of a statute presents an issue of statutory interpretation that we review for correctness. Cook v. Department of Commerce , 2015 UT App 64, ¶ 12, 347 P.3d 5.¹

ANALYSIS

¶10 The main issue presented here is whether Muddy Boys is entitled to recover the attorney fees and costs it incurred in successfully defending against DOPL’s administrative action. "In Utah, attorney fees are awardable only if authorized by statute or contract." R.T. Nielson Co. v. Cook , 2002 UT 11, ¶ 17, 40 P.3d 1119 (quotation simplified). Muddy Boys asserts that it has a statutory entitlement to recover such fees and costs pursuant to the 2014 version of Utah Code section 58-55-503(5)(d),² which provides that, "[i]n an action brought to enforce the provisions of this section, the court shall award reasonable attorney fees and costs to the prevailing party." Utah Code Ann. § 58-55-503(5)(d) (LexisNexis 2016).

¶11 Section 503 is comprised of five subsections, each discussing different kinds of penalties, sanctions, and citations that may be imposed for violations of other sections of title 58, part 55. See id. § 58-55-503. Relevant here, subsection (4), among other things, allows DOPL’s director to issue administrative citations for certain violations. Id. § 58-55-503(4). Subsection (4) envisions administrative hearings regarding alleged violations, which hearings may be initiated either by DOPL, id. § 58-55-503(4)(a) (giving DOPL the option of requiring an alleged violator to "appear before an adjudicative proceeding" conducted under Utah’s Administrative Procedures Act (UAPA) ), or by the alleged violator, id. § 58-55-503(4)(b)(ii) (allowing any person receiving a citation to "contest the citation at a hearing conducted under" UAPA). Subsection (4)(h) authorizes DOPL’s director to impose fines of "up to $1,000" for first violations, and "up to $2,000" for subsequent violations. Id. § 58-55-503(4)(h). Subsection (5) states:

(a) A penalty imposed by the director under Subsection (4)(h) shall be deposited into the Commerce Service Account created by Section 13-1-2.

(b) A penalty that is not paid may be collected by the director by either referring the matter to a collection agency or bringing an action in the district court of the county in which the person against whom the penalty is imposed resides or in the county where the office of the director is located.

(c) A county attorney or the attorney general of the state is to provide legal assistance and advice to the director in any action to collect the penalty.

(d) In an action brought to enforce the provisions of this section, the court shall award reasonable attorney fees and costs to the prevailing party.

Id. § 58-55-503(5). The question presented here is whether a party who prevailed in administrative proceedings initiated pursuant to subsection (4) is entitled to recover attorney fees under subsection (5)(d), or whether the attorney fees provision is more limited in scope.

¶12 The question presented is one of statutory interpretation, and when faced with such a question, "our primary goal is to evince the true intent and purpose of the Legislature." State v. Stewart , 2018 UT 24, ¶ 12, 438 P.3d 515 (quotation simplified). "The best evidence of the legislature’s intent is the plain language of the statute itself." Id. (quotation simplified). "[A]bsent a contrary indication," we assume "that the legislature used each term advisedly according to its ordinary and usually accepted meaning." Marion Energy, Inc. v. KFJ Ranch P’ship , 2011 UT 50, ¶ 14, 267 P.3d 863. "Wherever possible, we give effect to every word of...