In Ori Anuenue Hale v. Kasan Constr. Corp.,  2012 Haw. App. LEXIS 49, January 17, 2012, the ICA was asked to overturn an arbitration award on behalf of a contractor on public policy grounds, due to violations of Hawaii's licensing and lien laws.  Kasan Construction Corp. ("Kasan") prevailed in an arbitration with owner Ori Anuenue Hale ("Ori").  Kasan had contracted for construction services with another company, Building Tech, which in turn had contracted with Ori. 

Building Tech was not a licensed contractor.  Arbitration awards, while afforded great deference on appeal, are nevertheless subject to vacatur on certain limited grounds.  Violation of public policy is one of statutory bases for vacating an arbitration award.  Hawaii's contractor licensing laws and rules are expressly promulgated for the protection of the public.  (See Haw. Rev. Stat. sec. 444-4, empowering the contractors license board to "adopt, amend or repeal such reules as it may deem proper fully to effectuate this chapter and carry out the purpose thereof, which is the protection of the general public.").

Under Hawaii's lien laws, a subcontractor who contracts with an unlicensed general contractor loses his lien rights.  Haw. Rev. Stat. sec. 507-49(b), and pursuant to Hawaii's licensing laws, a contractor who contracts for work without a license, loses all rights to pursue a civil action.  Haw. Rev. Stat. sec. 444-22.

In this case, Kasan was licensed, but the entity with whom it contracted (Building Tech) was not.  At arbitration, Ori argued that, therefore, Kasan had no lien rights and was not entitled to pursue its lien claims with Ori, because it was working for an unlicensed contractor.  Ori argued that any finding to the contrary and any award of damages to Kasan, would violate Hawaii's strong public policy against unlicensed contracting.  The arbitrator rejected this argument, finding that although Building Tech was concededly unlicensed, and although Kasan concededly did contract with Building Tech, Building Tech was an authorized agent of the owner and therefore Kasan actually contracted with the owner.  

The ICA refused to review this finding, and rejected the public policy argument raised on appeal.  Without seeing the contract between Kasan and Building Tech it is impossible to determine whether the arbitrator's finding of "agency" was supported in any way.  If in fact Building Tech had a contract with the owner, was paid for its services and those of Kasan (and especially if it charged the owner a markup on Kasan's services), then it is difficult to conceive of how Building Tech could not have been acting as a general contractor, and therefore how Hawaii's public policy on licensing was not in fact violated not only by the ultimate award, but also by the arbitrator's finding that a subcontractor can contract for work with an unlicensed entity that is in fact acting as a general contractor, without running afoul of Hawaii's licensing laws.  In any event, the ICA refused to review the arbitrator's finding and on that basis, affirmed.   The text of this unpublished case is available at the judiciary website, here.