Even Contractors have Due Process Rights

By: Christopher Solop

The Mississippi Supreme Court recently issued a decision addressing a contractor’s due process rights before the Mississippi State Board of Contractors (“the Board”). [click on link below to decision]. In that case, Pyramid Interiors Distributors (“Pyramid”) filed a complaint with the Board claiming that Hobbs Construction, LLC (“Hobbs”) owed it approximately $13,390.00 for material furnished on a project. Hobbs disputed the amount claimed and agreed to pay $11,570.00 by a date certain. Pyramid agreed to the compromise. When Hobbs did not pay the agreed amount, Pyramid notified the Board and the complaint was amended to reflect this fact. Hobbs was notified of the amendment and that it could have its Certificate of Responsibility (“COR”) suspended or revoked based upon these allegations. Thereafter, the Board scheduled a hearing and notified the parties. Neither Pyramid nor Hobbs appeared on the scheduled hearing date. The investigator for the Board did testify before the Board that Hobbs had not paid Pyramid and that Hobbs had been the subject of eight (8) prior complaints of non-payment. All of these complaints had been resolved in favor of Hobbs.

After some discussion, the Board ultimately voted to revoke Hobbs’s COR, in part because of its past record of nonpayment. Hobbs requested the Board delay the effective date of the revocation pending an appeal of the decision, which was denied. Hobbs proceeded to chancery court where it was granted an injunction delaying the revocation of Hobbs’s COR. In the decision on the merits, the chancery court reversed the Board, finding “that the Board’s decision was not supported by substantial evidence, was arbitrary and capricious, was beyond the Board’s power to make, and violated Hobbs’s constitutional rights [to due process].”

The Board appealed the decision to the Mississippi Supreme Court which affirmed the decision of the chancery court, finding that Hobbs’s due process rights had been violated when the Board’s complaint failed to advise Hobbs that past claims brought before the Board would be considered in the decision whether to suspend or revoke Hobbs’s COR.

There are several important lessons for contractors in this decision. The first is avoid payment disputes with subcontractors and suppliers who frequently file a complaint with the Board as leverage to secure payment. Second, read any complaint filed against you carefully. Finally, attend any scheduled hearing before the Board, regardless of whether you retain legal counsel, and defend yourself against the allegations asserted in the complaint.