{"id":246,"date":"2026-04-28T12:00:00","date_gmt":"2026-04-28T12:00:00","guid":{"rendered":"https:\/\/california.shuster.info\/?p=246"},"modified":"2026-04-28T12:00:00","modified_gmt":"2026-04-28T12:00:00","slug":"avl-test-systems-hensel-phelps-fixed-part-structure-contractor-licensing-exemption","status":"publish","type":"post","link":"https:\/\/california.shuster.info\/?p=246","title":{"rendered":"AVL Test Systems v. Hensel Phelps Construction \u2014 Whether Equipment Becomes “Fixed Part of the Structure” for Contractor Licensing Exemption Is a Question of Fact"},"content":{"rendered":"
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Case<\/dt>\n
AVL Test Systems, Inc. v. Hensel Phelps Construction Co.<\/dd>\n
Court<\/dt>\n
4th District Court of Appeal, Division One<\/dd>\n
Date Decided<\/dt>\n
2026-04-28<\/dd>\n
Docket No.<\/dt>\n
D086160<\/dd>\n
Status<\/dt>\n
Reported \/ Citable<\/dd>\n
Topics<\/dt>\n
Contractors State License Law; Business and Professions Code section 7031; Business and Professions Code section 7045; finished products exemption; emissions testing equipment; California Air Resources Board<\/dd>\n<\/dl>\n<\/div>\n

Background<\/h2>\n

AVL Test Systems, Inc. is a manufacturer of vehicle emissions testing equipment. Hensel Phelps Construction Co. was building a facility for the California Air Resources Board (CARB) and contracted with AVL to supply and install AVL’s emissions testing equipment in the building. By 2021, Hensel Phelps had paid AVL more than $73 million on the project. AVL filed a demand for arbitration seeking additional payments.<\/p>\n

Hensel Phelps defended in the arbitration on the ground that AVL was an unlicensed contractor and was therefore precluded by Business and Professions Code section 7031(a) from recovering compensation for any work requiring a contractor’s license. AVL filed a separate court action seeking a declaration that its claims were not barred because, under section 7045, the sale or installation of finished products that do not become a fixed part of the structure is exempt from contractor licensing requirements.<\/p>\n

The parties filed cross-motions for summary judgment. The trial court granted Hensel Phelps’s motion, ruling as a matter of law that AVL’s emissions equipment became a fixed part of the structure and that section 7045 therefore did not exempt AVL from the licensing requirement. AVL appealed.<\/p>\n

The Court’s Holding<\/h2>\n

The Fourth District Court of Appeal, Division One, reversed and remanded. The court held that whether goods installed become a fixed part of the structure for purposes of the section 7045 exemption is a question of fact, not law, when supported by conflicting evidence.<\/p>\n

Under California Supreme Court precedent and prior appellate decisions, the section 7045 exemption applies to the sale or installation of finished products, materials, or articles of merchandise that do not become a fixed part of the structure. Whether particular goods become a fixed part of the structure depends on a factual evaluation of how the goods are integrated, the permanence of their installation, the difficulty of removal, and similar physical and functional characteristics.<\/p>\n

The voluminous record before the trial court included thousands of pages of briefing, hundreds of exhibits, and competing expert declarations from both sides. The conflicting evidence was sufficient to create a triable issue of fact about whether AVL’s emissions testing equipment became a fixed part of the CARB facility. With substantial conflicting evidence on the key factual issue, the trial court should have denied both summary judgment motions and submitted the question to a trier of fact.<\/p>\n

The court’s disposition reverses the judgment in favor of Hensel Phelps and remands for further proceedings, including possibly a trial on the section 7045 exemption issue. The court did not resolve the merits of whether AVL’s equipment ultimately qualifies for the exemption.<\/p>\n

Key Takeaways<\/h2>\n