In the Matter of the Licensing Order Issued to Gaffney Construction LLC, and Steven Gaffney, Individually.

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This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA
IN COURT OF APPEALS
A21-0441

In the Matter of the Licensing Order Issued to Gaffney Construction LLC, and
Steven Gaffney, Individually.

Filed February 14, 2022
Affirmed
Bratvold, Judge

Minnesota Department of Labor and Industry
OAH 8-1902-36513

Daniel M. Gallatin, Gallatin Law, PLLC, Hugo, Minnesota (for relators Gaffney
Construction LLC and Steven Gaffney)

Keith Ellison, Attorney General, Allen Cook Barr, Assistant Attorney General, St. Paul,
Minnesota (for respondent Minnesota Department of Labor and Industry)

Considered and decided by Bratvold, Presiding Judge; Reyes, Judge; and Frisch,
Judge.
NONPRECEDENTIAL OPINION
BRATVOLD, Judge
Relators challenge a decision by the commissioner of labor and industry revoking
one relator’s residential building contractor license and ordering both relators to cease and
desist from acting or holding themselves out as residential building contractors and to pay
a penalty. Relators argue the commissioner’s findings of violations are not supported by
substantial evidence and rest on legal error, the sanction imposed is arbitrary and
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capricious, and the administrative law judge (ALJ) was biased and made evidentiary errors.
We affirm.
FACTS
The following summarizes the commissioner’s factual findings after contested case
proceedings before an ALJ. Relator Steve Gaffney (individually, Gaffney) is the sole
owner of relator Gaffney Construction LLC (collectively, relators). The ALJ determined
respondent Minnesota Department of Labor and Industry (department) issued a residential
building contractor license, No. BC730208, to Gaffney Construction, effective
September 14, 2017, and valid until March 31, 2019.
In early 2017, J.S. (homeowner) hired Gaffney as a licensed real-estate agent to help
homeowner find and purchase a home. Gaffney also aided homeowner in the sale of her
current home. After failing to find an appropriate existing residence, Gaffney suggested
homeowner buy land and build a home. Homeowner testified that, by May 2017, she and
Gaffney agreed to build a new home. Gaffney also offered homeowner rent-free parking
for her recreational vehicle on Gaffney’s Forest Lake property after the sale of her current
home. Homeowner accepted this offer and later moved into a camper on Gaffney’s
property. In June 2017, homeowner bought land in Columbus Township.
In July 2017, Gaffney talked to homeowner about being the residential building
contractor for homeowner’s new home. Gaffney told homeowner he led a building firm in
the past. Gaffney agreed to begin construction in exchange for homeowner paying some
expenses. Gaffney testified homeowner wanted him to “move forward with construction
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of the house.” Relators did not hold a license as a residential building contractor at that
time.
Homeowner wrote three checks to relators totaling $16,300. On July 5, 2017,
homeowner wrote a $10,000 check to “Steve Gaffney Construction.” On July 19,
homeowner wrote a $2,500 check to “Steve Gaffney Construction.” On August 1,
homeowner wrote a $3,800 check to “Steve Gaffney.” Homeowner testified the checks
were for the costs of drafting building plans, excavating, and purchasing building materials.
Gaffney cashed the checks.
Gaffney’s physicians told him in August 2017 that he should not participate in
heavy labor because of a serious heart condition that would require bypass surgery. In
October 2017, Gaffney had bypass surgery and was hospitalized.
On October 11, 2017, Gaffney and homeowner signed a contract drafted by Gaffney
to have Gaffney Construction complete the building of homeowner’s house. The contract
stated, among other things, that Gaffney Construction would begin the work “within 30
days of October 11, 2017 and shall complete the work on or before January 31, 2018, time
being of the essence of this contract.”
In October or November 2017, homeowner began living in the basement of
Gaffney’s house at his invitation. On November 28, homeowner obtained a loan for the
construction costs. She deposited the loan proceeds in a trust account, from which Gaffney
“reimbursed himself” and paid vendors for working on the new home.
As of January 31, 2018, the house was not completed, and homeowner could not
move in. The ALJ found homeowner moved into the house on a temporary certificate of
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occupancy in May 2018, though construction was still ongoing. Leon Ohman, the local
building inspector, visited the house several times between November 2017 and
November 2019 to determine whether the final certificate of occupancy should be issued.
On April 15, 2019, Ohman found two violations. Ohman ordered relators to correct
the violations within seven days, but when he returned for another inspection four months
later, the violations had not been addressed. Ohman issued the final certificate of
occupancy stating the “dwelling and the garage meet the minimum building code
standards” on November 7, 2019.
Homeowner filed a complaint with the department in spring 2019 because “although
she had been allowed to move into her house, the house still wasn’t completed.” Wayne
Gartland was the investigator assigned to homeowner’s complaint. As a result of Gartland’s
investigation, the commissioner assessed a penalty of $31,300 against relators, revoked
Gaffney Construction’s license, and ordered relators to cease and desist both holding
themselves out as and acting as a residential building contractor. The licensing order
concluded relators “held themselves out as a residential building contractor . . . before
having a license,” breached the building contract, “failed to correct violations of the State
Building Code after violations were documented,” and “provided misleading or incomplete
information to the Commissioner.” The $31,300 penalty consisted of $16,300 for the
checks homeowner wrote to relators before the contractor license was issued, $2,500 for
installing a 20-year -old fireplace, $2,500 for insurance relators did not purchase , and a
$10,000 fine under Minn. Stat. § 326B.082, subd. 12(b) (2020) (allowing a $10,000 penalty
for each violation).
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Relators appealed the commissioner’s order. An ALJ conducted an evidentiary
hearing July 15–16, 2020, and received testimony from homeowner, Ohman, Gartland, and
Gaffney. In a November 5, 2020 order, the ALJ recommended that the commissioner deny
the appeal, affirm the revocation of the license, affirm the cease-and-desist order
prohibiting Gaffney from holding Gaffney Construction out as a residential building
contractor, and modify the penalty by reducing it to $16,300. On March 3, 2021, the
commissioner adopted the ALJ’s findings of fact and conclusions of law without change
and modified the penalty to $16,300.
Relators petitioned for a writ of certiorari.
DECISION
I. The commissioner’s factual findings are supported by substantial evidence and
are not based on legal error.

Appellate courts review an agency’s final decision in a contested case in accordance
with the Minnesota Administrative Procedure Act (MAPA), Minn. Stat. §§ 14.001
–.69
(2020). Eneh v. Minn. Dep’t of Health, 906 N.W.2d 611, 613 (Minn. App. 2018). An
administrative agency’s decision enjoys a presumption of correctness; the appellate court
defers to the agency’s expertise and special knowledge in its field. In re Annandale
NPDES/SDS Permit Issuance, 731 N.W.2d 502, 513 (Minn. 2007).
A reviewing court may reverse or modify an agency’s decision if the decision:
(a) violates a constitutional provision; or (b) exceeds the statutory authority or jurisdiction
of the agency; or (c) is made upon unlawful procedure; or (d ) is affected by other error of
law; or (e) is unsupported by substantial evidence; or (f) is arbitrary or capricious. Minn.
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Stat. § 14.69. “Substantial evidence is defined as (1) such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion; (2) more than a scintilla of
evidence; (3) more than some evidence; (4) more than any evidence; or (5) the evidence
considered in its entirety.” Cannon v. Minneapolis Police Dep’t, 783 N.W.2d 182, 189
(Minn. App. 2010) (quotation omitted).
The commissioner may revoke a contracting license if the commissioner finds that
the person holding the license “committed one or more violations of the applicable law.”
Minn. Stat § 326B.082, subd. 11(b)(1) (2020). If the commissioner determines a license
should be revoked, then the commissioner must issue an order. Id., subd. 12(a) (2020). The
commissioner’s order “may include an assessment of monetary penalties and may require
the person to cease and desist from committing the violation.” Id., subd. 12(b) (2020). The
monetary penalty “may be up to $10,000 for each violation or act, conduct, or practice
committed by the person.” Id.
The commissioner found relators committed four violations: they (1) acted or held
themselves out as a residential building co ntractor without a license; (2) breach ed the
construction contract with homeowner and thereby injured her; (3) “did not timely comply
with correction orders” issued by a certified building official; and (4) provided incomplete
information to the commissioner about insurance policies for homeowner’s project.
Relators argue the commissioner’s findings are not supported by substantial evidence or
are affected by legal error. Because the commissioner assessed a penalty of $16,300, we
must affirm two violations to affirm the commissioner’s decision. Id.
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A. Relators act ed or held themselves out as a residential building
contractor without a license.

A residential building contractor must be “licensed as a residential building
contractor by the commissioner.” Minn. Stat. § 326B.805, subd. 1 (2020). With limited
exceptions not relevant here, “no persons required to be licensed by subdivision 1 may act
or hold themselves out as a residential building contractor . . . without a license issued by
the commissioner.” Id., subd. 3 (2020).
The commissioner found relators held themselves out “as capable to perform
residential home construction, accepted money for this work, and acted as [a] residential
building contractor[]” without a license. Record evide nce supports this finding.
Homeowner testified she agreed with Gaffney to build her house “in April of 2017.”
Gaffney and homeowner had more discussions in July, and they agreed Gaffney would
proceed if homeowner paid for expenses. Gaffney accepted $16,300 in payments from
homeowner in July and August 2017. The ALJ found homeowner credibly testified that
“she understood that the[] payments were to underwrite the costs of drafting building plans,
excavating and purchasing building materials.” Gaffney testified he paid a drafting
company in July 2017 for designing the plans “ultimately used for [homeowner’s] house.”
It is undisputed relators did not have a residential building contractor license when Gaffney
agreed to build the house and accepted these payments because the department did not
issue the license until September 2017.
Relators argue the commissioner’s determination lacks substantial evidence for four
reasons. First, relators argue homeowner knew Gaffney was not licensed when she made
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the July and August payments. But homeowner’s knowledge is irrelevant to a violation of
Minn. Stat. § 326B.805, subd. 1. As the department argues in its brief, Minnesota
“prohibits [unlicensed] people from offering to perform construction services.” The
situation is akin to a person offering to perform legal services while disclosing to the
potential client that they are not a licensed attorney. See In re Disciplinary Action Against
Grigsby, 815 N.W.2d 836, 839, 841–42 (Minn. 2012) (determining a lawyer committed
misconduct by filing an appellate brief on behalf of a former client after being suspended,
even though the client knew of the lawyer’s suspension when he filed the brief).
Second, relators argue Gaffney accepted the payments from homeowner to pay for
his living expenses, not to build the home. In essence, relators ask us to reject the
commissioner’s determination that homeowner “testified credibly” she understood the
payments were to underwrite costs for her home. We are not persuaded because this court
defers to the “credibility determinations made by an agency’s fact-finder.” In re License of
Thompson, 935 N.W.2d 147, 156 (Minn. App. 2019), rev. denied (Minn. Dec. 17, 2019).
Third, relators contend the building contract was signed after the license was issued.
While accurate, this fact does not undermine the commissioner’s finding that relators acted
or held themselves out as a residential building contractor before Gaffney Construction had
a license. The violation did not occur when the contract was signed, but when relators acted
or held themselves out as a residential building contractor in July and August 2017. See
Minn. Stat. § 326B.805, subd. 3 (providing “no persons required to be licensed” by law
may “act or hold themselves out as a residential building contractor”).
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Fourth, relators argue no “special skills” were provided to homeowner before the
contract was signed, and the statutory definition of residential building contractor requires
the performance of “two or more special skills.” A person is a res idential building
contractor if they are in the business of “building residential real estate, or of contracting
or offering to contract with an owner to build residential real estate, by providing two or
more special skills,” which are defined by statute as excavation, masonry or concrete,
carpentry, interior finishing, exterior finishing, drywall and plaster, residential roofing, or
general installation specialties. Minn. Stat. § 326B.802, subds. 11, 15 (2020) (emphasis
added).
We reject this argument. The plain language of subdivision 3 does not require proof
a person performed special skills as a residential building contractor; it only requires proof
of acting or holding oneself out as a residential building contractor who could perform such
special skills. See Minn. Stat. § 326B.805, subd. 3. The definition of a residential building
contractor includes those in the business of “offering to contract” with another “to build
residential real estate, by providing two or more special skills.” Minn. Stat. § 326B.802,
subd. 11. As discussed above, the commissioner found homeowner credibly testified she
paid relators to provide excavation and “building materials.” The special skills listed in the
appliable statute include both excavation and interior and exterior finishing. See id. ,
subd. 15. The applicable statutes prohibit exactly what relators did: they acted or held
themselves out as a residential building contractor when Gaffney offered to build a home
for homeowner before Gaffney Construction had a residential building contractor’s license.
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Thus, the commissioner’s finding that relators acted or held themselves out as a
residential building contractor without a license is supported by substantial evidence and
is not affected by legal error.
B. Relators breached the contract with homeowner.
Residential building contractors are subject to discipline if they “performed
negligently or in breach of contract, so as to cause injury or harm to the public.” Minn. Stat
§ 326B.84(4) (2020). The commissioner found relators breached the contract with
homeowner as follows: (1) the house was completed “nearly two years after the
agreed-upon completion date for construction”; (2) neither “Gaffney nor his firm
maintained a list of each party that furnished materials or labor towards construction of
[homeowner’s] home and the dollar amounts that were expected to be due”; (3) “Gaffney
and his firm deviated from the agreed-upon specifications without obtaining signed change
orders”; and (4) relators “failed to maintain workers’ compensation insurance, general risk
insurance, and builders’ risk insurance.” We need only consider the first of these breaches.
Relators argue the commissioner’s conclusion that a breach of contract occurred
was erroneous for three reasons, which we discuss in turn. First, relators contend they
“substantially performed all the essential elements” of the contract. We are not persuaded.
The contract specifically provides, “time being of the essence.” The contract included a
promise to complete the home in January 201 8. Relators missed that date by 22 months;
the final certificate of occupancy was not issued until November 2019. We interpret and
apply unambiguous contract terms that declare time is of the essence. See Grant v. Munch, 55 N.W. 902, 903 (Minn. 1893) (“[T]he intention of the parties must govern, and if the
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intention clearly and unequivocally appears from the contract, by means of some express
stipulation, that time shall be essential, then the time of completion, or of performance, or
of complying with the terms, will be regarded as essential in equity, as much as in law.”).
Because relators and homeowner included “time being of the essence” in the contract, the
commissioner did not err by determining the delayed completion was a material breach.
Cf. Baker Domes v. Wolfe, 403 N.W.2d 876, 878 (Minn. App. 1987) (pointing to the
parties’ failure to include a “time is of the essence” clause as a reason to reject the argument
that time was of the essence).
Second, relators argue the commissioner’s findings failed to include harm to the
public or homeowner from the breach. We disagree. The commissioner determined
relators’ “substandard performance injured” homeowner, commenting on the 22-month
delay in completion of the contract and homeowner living in Gaffney’s basement for
months before she moved into the unfinished house “while construction was still
underway.” These findings support the commissioner’s conclusion that homeowner was
harmed by the breach of contract.
Third, relators argue the harsh, early winter and Gaffney’s medical issues excuse
any breach of contract because of the force majeure clause in the contract. The
commissioner determined the force majeure clause did not apply because cold temperatures
between November and January were foreseeable and Gaffney’s physicians informed him
in August that he needed surgery and that he should not perform heavy labor. We are not
persuaded that this determination is erroneous. Force majeure includes unanticipated or
uncontrollable events. See Black’s Law Dictionary (11th ed. 2019) (defining a force
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majeure event as unanticipated and uncontrollable). Additionally, relators never provided
written notice to the homeowner though the force majeure clause required “prompt written
notice” of “causes beyond either party’s reasonable control.” Even if we accept relators’
force majeure argument for weather delays from November 2017 to January 2018 and
health delays from April 2018 to June 2018, approximately 16 months still passed before
relators completed construction. Thus, the commissioner correctly rejected relators’ force
majeure defense.
In sum, to affirm the commissioner’s penalty of $16,300, we need only affirm the
commissioner’s determinations that relators committed two violations. See Minn. Stat.
§ 326B.082, subd. 12(b) (stating a fine of up to $10,000 can be assessed for each violation).
Because we discern no error in the commissioner’s determination that relators (1) acted or
held themselves out as a residential building contractor without a license, and (2) breached
the contract with homeowner by completing construction long after the agreed-upon date,
we need not determine whether relators committed other violations. Based on the two
violations discussed, we affirm the commissioner’s determination that relators violated
applicable law and the commissioner’s decision to revoke Gaffney Construction’s license.
II. The sanctions imposed by the commissioner are neither arbitrary nor
capricious.

Sanctions lie within an agency’s discretion. In re Comm’n Investigation of Issues
Governed by Minn. Stat. § 216A .036, 724 N.W.2d 743, 748 (Minn. App. 2006). A
reviewing court may reverse an agency decision if it is arbitrary and capricious. Minn. Stat.
§ 14.69. “[A]n agency ruling is arbitrary and capricious if the agency (a) relied on factors
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not intended by the legislature; (b) entirely failed to consider an important aspect of the
problem; (c) offered an explanation that runs counter to the evidence; or (d) the decision is
so implausible that it could not be explained as a difference in view or the result of the
agency’s expertise.” Citizens Advocating Responsible Dev. v. Kandiyohi Cnty. Bd. of
Comm’rs, 713 N.W.2d 817, 832 (Minn. 2006). In imposing a sanction, an agency must
consider: (1) “the willfulness of the violation”; (2) “the gravity of the violation”; (3) “the
history of past violations; (4) the number of violations; (5) the economic benefit gained by
the person by allowing or committing the violation; and (6) other factors that justice may
require.” Minn. Stat. § 14.045, subd. 3(a).
Relators support their argument that the commissioner’s decision was arbitrary and
capricious by citing In re Excess Surplus Status of Blue Cross & Blue Shield of Minn.,
624 N.W.2d 264, 278 (Minn. 2001). In Blue Cross, the supreme court stated, “rejection of
the ALJ’s recommendations without explanation” may make an agency decision arbitrary
and capricious. Id. We are not persuaded because citation to Blue Cross is inapt. The
commissioner did not reject the ALJ’s recommendation but adopted it along with the ALJ’s
reasoning.1

1 The ALJ reasoned,
there is useful public purpose in levying a penalty that requires
Mr. Gaffney to surrender the money that he received for home
construction, but before he was licensed as a residential
building contractor. A fine of $16,300 has a direct, one-to-one
relationship with the benefits that Mr. Gaffney should not have
obtained in the first instance. Likewise, the signaling that the
Department makes to others from such a penalty, so as to deter
them from similar misconduct, is clear: If unlicensed builders
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Relators also argue the commissioner ignored “mandatory elements” when
imposing the sanctions against relators. While relators cite no caselaw or statutory authority
to identify “mandatory elements,” we understand the argument to refer to the factors listed
in Minn. Stat. § 14.045, subd. 3. The commissioner adopted the ALJ’s reasoning, and the
ALJ cited these factors as supporting the decision to sanction Gaffney $16,300. Relevant
to our analysis of this issue, the commissioner concluded there was a “useful public purpose
in levying a penalty that requires Mr. Gaffney to surrender the money that he received”
before he was licensed. Reduction of the penalty was warranted, however, because as the
ALJ explained, the “connections between” the factors and the other violations “are much
less clear.” The commissioner therefore applied the statutorily required factors, and we
conclude the commissioner’s sanctions are neither arbitrary nor capricious.
III. We decline to consider relators’ argument about ALJ bias and evidentiary
rulings.

Relators argue the ALJ “displayed plain bias and contradicted his own
acknowledgement of his role,” as well as made evidentiary errors. Relators raised neither
issue to the ALJ or the commissioner. Generally, we do not consider issues raised for the
first time on appeal. Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988). We therefore need
not consider these issues further.
Affirmed.

receive money for home construction, they won’t be able to
keep it.