Petition for Writ of Certiorari — Carpenters Southern California Administrative Corp. v. El Capitan Development Co.
Supreme Court brief1991
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91-489
OFFI@E OF THE CLERK
No. a
—— —
— —
In the Supreme Court
OF THE
United States
OCTOBER TERM, 1991
CARPENTERS SOUTHERN CALIFORNIA
ADMINISTRATIVE CORPORATION,
Petitioner,
VS.
EL CAPITAN DEVELOPMENT COMPANY,
Respondent.
PETITION FOR A WRIT OF CERTIORARI
TO THE CALIFORNIA SUPREME COURT
—
——
JAMES P. WATSON*® JOHN T. DECARLO
STANTON, Kay & WATSON PATRICK CONNOR
180 Sutter Street, DECARLO, CONNOR & SELVO
Third Floor 500 So. Virgil Avenue
San Francisco, CA 94104 Suite 320
(415) 788-3496 Los Angeles, CA 90920
DONALD T. MEADERS (213) 738-7959
KINDEL & ANDERSON
555 South Flower Street,
29th Floor
Los Angeles, CA 90071-2498
(213) 680-2222
*Counsel of Record
BOWNE OF GAN FRANCISCO, INC. + 190 NINTH ST. + 6.F.. CA 94103 + (415) 664-2300
QUESTIONS PRESENTED
1. Does § 514(a) of the Employee Retirement Income Se-
curity Act of 1974 (“ERISA”), 29 U.S.C. § 1144(a), preempt
Californa Civil Code § 3111, which permits fringe benefit trust
funds to record and foreclose mechanics’ liens to secure payment
of contributions owed to the funds for work performed by fund
participants on the liened property?
2. Does a state lien law, which creates a security interest in
improved real property to protect the pension and health benefits
of employees who worked on the property, and which is part of a
larger statutory framework to protect the workers’ entire wage
package, “relate to” ERISA-regulated employee benefit plans in
a manner which triggers the preemption clause of § 514(a) of
ERISA?
3. In enacting ERISA, did Congress intend to strip employ-
ees who receive pension and health benefits from multi-employer
trust funds of the protection of state lien laws, while leaving the
lien rights of employees who receive fringe benefits directly from
their employers undisturbed?
ii
TABLE OF CONTENTS
as Page
I
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II
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PEACE POPU MI sc cen scckcveredecseesens 2
IV
STATEMENT OF THE CAGE .....ccccsvccccssccccas 2
A. Preliminary Statement ..........0.ccccccccccces 2
Th FI pin e'vicbuesdeaveuacetenupaears 3
CA. PRUE ok bs oven ceeuceenewacuenesaes 4
V
REASONS THE WRIT SHOULD BE GRANTED..... 6
A. The Guidance of This Court is Needed to Resolve a
Conflict Among Lower Appellate Courts ......... 6
B. The California Supreme Court’s Decision Ignores the
Framework for Preemption Analysis Developed by
Bee GE a ccvccncdnussaiapmiuetse een ess 8
C. The Court Should Grant Certiorari to Clarify the
Scope of the Holding in Pilot Life Insurance Co. v.
| PUTT ere ee ee er PO 15
D. Preemption of State Lien Laws Leaves an Unex-
plained “Gap” in the Collection Remedies Available
to Multi-Employer Benefit Trust Funds........... 18
FE. Preemption of California Civil Code Section 3111
Disrupts the California Statutory Scheme for Protect-
ing the Wages and Benefits of Workmen ......... 20
VI
COPING EARN o 5 js ks 5 ckabe cea ethewe sae aeeeens 24
TABLE OF AUTHORITIES CITED
Cases
Alessi v. Raybestos-Manhattan, Inc. (1981) 451 U.S. 504,
ee 10
American Benefit Plan Administrators v. Foley, 2 EBC 1897
CCL ESe Ceol eke css bes yas versed cenees 18
American Telephone and Telegraph Co. v. Merry, (2d Cir.
EP OPTI T EEE TT TORT EE Ee 9,22
Carl Allen v. McWilliams Electric Co., (D. Mo. 1980) 494
Ee ee 18
Carpenters Health & Welfare Fund v. Parnas Corp., (1986)
ED vn ways es ccbevevederseceses 5, 6-7
Carpenters Health & Welfare Fund of Philadelphia v. Am-
oe a ee >, 6
Carpenters Pension Trist v. Kronschnabel, (9th Cir. 1980)
632 F.2d 745, cert. denied (1981) 453 U.s. 922, 101 S.Ct.
EEC ceca gicebeVieveoveesnssssnes 6, 22
Carpenters Southern California Administrative Corporation
v. El Capitan Development Company, (1991) 53 Cal.3d
Ee 5
Connolly Development, Inc. v. Superior Court (1976) 17
ec wesw wre k wks cecu es wees es 6 13, 20
CSCAC v. D&L Camp Construction, (9th Cir. 1984) 738
TOES ES 20
CSCAC v. Majestic Housing, (9th Cir. 1984) 743 F.2d 1341 20
Duffy v. King Cavalier, (1989) 218 Cal.App.3d 1517..... 14
Edwards v. Bethlehem Steel Corp. (Ind. App. 1990), 554
Ne ee ees Caves ene bess cbeeasis ss 7
FMC Corporation v. Holliday (1990) 498 U.S. _,, 111
ee ct ky cu kas eee ek eens see 10, 11
Fort Halifax Packing Co., Inc. v. Coyne (1987) 482 U.S. 1,
ES Eee 8, 12, 13
Franchise Tax Board v. Construction Laborers Vacation
Trust, (1988) 204 Cal. App.3d 955 ................. 10, 14
iv
TABLE OF AUTHORITIES CITED
CASES
Ironworkers Pension Fund vy. Terotechnology Corporation
(1990) 891 F.2d 548, cert. denied, (1991) _-. U.S. ___.,
NE eh aoe ook ty See kee tetas aeanee 5,7
Jones v. Rath Packing Co., (1977) 430 U.S. 519, 97 S.Ct.
Fe Eee a ee eee 11
Laborers Fringe Benefit Funds v. Northwest Concrete &
Construction, Inc. (6th Cir. 1981) 640 F.2d 1350, ..... 6, 17
Lane v. Goren, (9th Cir. 1983) 743 F.2d 1340 .......... 14
Lingle v. Norge Division of Magic Chef, Inc. (1988) 486
fs ee sk a rn 11
Mackey v. Lanier Collection Agency & Service (1988) 486
che & | se rrr rrr 6, 10, 14, 19
Malone v. White Motor Corp., (1978) 435 U.S. 497, 98
ee te a ay eg aac ahh we o 8
Martin v. Becker (1915) 169 Cal. 301 ................. 20
Massachusetts v. Morash (1989), 490 U.S. 107, 109 S.Ct.
aah ses co kee csc eae eae wee sete eeeuis 12
McMahon v. McDowell, (3d Cir. 1986), 794 F.2d 100... 7
Metropolitan Life Ins. Co. v. Massachusetts (1985) 471
Se ee EE SING wn sok ones kaseebiaeeeeenser ll
Morrison-Knudsen Construction Co. v. OWCP (1982) 461
Is wan nnd cdkecadeeseeueeenss 23.
NLRB v. Associated General Contractors of California, Inc.,
ee BE ere 8
Planned Consumer Marketing, Inc. v. Coats & Clark, Inc.,
(1968) S27 N.Y 3.26 185, $22 M.Bk.2d3 ............. 7
Pilot Life Insurance Co. v. Dedeaux, (1987) 481 U.S. 41,
EE onus 55 Cis on vee Senate eS 5, 8,9, 10, 13, 15
Plumber’s Local 458 v. H. Immel, Inc. (1989) 151 Wis. 2d,
8 aR ey lanai aye 6
Retirement Fund of the Fur Mendliaieiiee Industry v.
Getto & Getto, Inc., (S.D. N.Y. 1989) 714 F.Supp. 651 = 7
EE
Vv
TABLE OF AUTHORITIES CITED
CASES
Retirement Trust Fund of the Plumbing, Etc. v. Franchise
Tax Board, (9th Cir. 1990) 909 F.2d 1266............ 10
Sasso v. Vachris (1985) 484 N.E.2d 1359, 494 NYS 2d
EE Pn caer hte dF LET Rah Peo tone Meee gig rat 6, 17
Shaw v. Delta Airlines (1983) 463 U.S. 85, 103 S.Ct. 28909, 10
Sheet Metal Workers Pension Plan v. Columbia Savings &
Loan Association (1990) 221 Cal.App.3d Supp. 21..... 6,7
Stone v. Stone, (9th Cir. 1980) 632 F.2d 740, cert denied,
ta els Be ae OG oe) ee 9, 21
Sturgis v. Miller, F.2d _._ (U.S.C.A. No. 90-15054
SE a OPED ost ce'eccck bessscaneseeuaauen 7,14
Trustees for the Alaska Hotel & Restaurant Employees
Health & Welfare Fund v. Hansen, (Alaska 1984) 688
Pu RG K5 Ecc de Kisses ss bebe b eek cans DARE e ees 6
Tuttle v. Montford (1857) 7 Cal. 358 .................. 21
United States v. Carter (1956) 353 U.S. 210 77 S.Ct. 793 22
Vermeer v. Tomken Construction, (1980) 49 Or. App. 37-19
Constitutions
California Constitution Article XIV Section 3 ........... 20
Statutes and Codes
California Code of Civil Procedure Section 1182......... 20
California Civil Code:
EE ik cs ck bo Rea ce eee eke cee 2, 14, 23
SNE EOE Sn eccensres 2, 4, 5, 7, 9, 10, 11, 13, 14, 20, 21, 22
Employee Retirement Income Security Act of 1974:
avn euhekbbes Babee eee eee 2, 15, 19
ED ss vob ceed ese0bens wecen keene 18
a rere ere vole ideas 16
vi
TABLE OF AUTHORITIES CITED
STATUTES AND CODES
PIF EETE SORT TET EET UTE TS & hom 5m ke
I cc snk eek be eeb an beh eekes ceeees 2
ts. cee biahshu hd eecacha cen 2, 16, 18, 19
28 U.S.C.:
GS cc au: abe Gee eh bash eee berate 2
ass cu 6s chk O64 KS Oe e bd OS G0 ea GOK eES 2
29 U.S.C.:
ae ee iict ec nue ee Ewe baw eak's 3
ae oes Soar ca kd eee ea ee ES 18
re es eS i ek i idee a aie 19
ED, nas vacnceacessebennenesa 3
rr sr eu weak kb eee 23
re eek kin nb d¥ boa o ee ck beeeewees 23
ee ea od ae ek ee 15
a Seek A kN iR eke nekeaeW adeeb seuen 3
tne capi gn nk eee e aA eke ken 3
EE RGMEDOIED 5 og cn ccacencacecveceteses 19
cack ees Oks KwabeA be 50 0eaR ARSED 15, 18
EN is cac44c bs 0b 50s Rs bike ROR Rea ee Dee 2,5
ig ek te ho ee eek at am ae
EE ina on koa 5 bh eae Swe OMEN SRS ER ASS 2, 16, 18
Labor Management Relations Act of 1947:
ee eo eels Len ee ost h esata eauen 19
et so aa. Leen keke aaa ees 19
SCT FUSIONS) OG GB) oon ceca ccccesenceccscas 3
Other Authorities
Daniel Q. Mills, “Industrial Relations and Manpower in
Construction” (Cambridge; MIT Press, 1977) p. 385... 7-8
Dunlop, The Structure of Collective Bargaining (New York;
Free Press of Glencoe, 1961) pp. 255 .........ceceees 7
No.
In the Supreme Court
OF THE
United States
OCTOBER TERM, 1991
CARPENTERS SOUTHERN CALIFORNIA
ADMINISTRATIVE CORPORATION,
Petitioner,
VS.
Et CAPITAN DEVELOPMENT COMPANY,
Respondent.
PETITION FOR A WRIT OF CERTIORARI
TO THE CALIFORNIA SUPREME COURT
Petitioner Carpenters Southern California Administrative Cor-
poration respectfully prays that a writ of certiorari issue to review
the judgment of the Supreme Court of the State of Caufornia
entered in this case on June 20, 1991.
I
CPINIONS BELOW
The opinion of the California Supreme Court (Appendix A,
infra) is reported at 53 Cal.3d 1041. The first decision of the
District Court of Appeal in this action (Appendix B, infra) is not
officially reported. The order of the California Supreme Court
directing the District Court of Appeal to reconsider its initial
decision (Appendix C, infra) is not officially reported. The
second opinion of the District Court of Appeal (Appendix D,
infra) is not officially reported.
2
Ul
JURISDICTION
The opinion of the California Supreme Court was filed on
June 20, 1991.
The jurisdiction of this Court is invoked pursuant to the
provisions of 28 U.S.C. § 1254(1).
This Petition is timely filed with this Court under the provisions
of 28 U.S.C. § 2101(c).
Il
STATUTORY PROVISIONS
The relevant statutory provisions are: (1) California Civil Code
§ 3111; (2) California Civil Code § 3110; (3) § 514(a) of the
Employee Retirement Income Security Act of 1974, 29 U.S.C.
§ 1144(a); (4) §514(c) of the Employee Retirement Income
Security Act of 1974, 29 U.S.C. § 1144(c); (5) § 502(a) of the
Employee Retirement Income Security Act of 1974, 29 U.S.C.
§ 1132(a); (6) § 515 of the Employee Retirement Income Secur-
ity Act of 1974, as subsequently amended, 29 U.S.C. § 1145.
Pertinent portions of these statutory provisions are reproduced
at Appendix E, infra.
IV
STATEMENT OF THE CASE
A. Preliminary Statement
The California Supreme Court has erroneously held that
§ 514(a) of the Employee Retirement Income Security Act of
1974 (“ERISA”) preempts a California statute that facilitates
the collection of fringe benefit contributions from delinquent
employers by employee benefit trust funds. In so doing, the
California Supreme Court has misapplied the law and reached a
result that is flatly contrary to the language and intent of ERISA
—the very federal law that supposedly preempts the statute. The
result strips employee benefit trust funds of a valuable tool for
3
assuring that employers make fringe benefit payments on behalf
of covered employees. Contrary to both federal and state policy,
the decision below protects delinquent employers at the expense
of innocent pian participants.
B. Nature of the Suit
This is an action instituted by the Carpenters Southern Califor-
nia Administrative Corporation (“CSCAC”). CSCAC is the
administrator of certain multi-employer benefit trust funds (“the
Carpenters Trust Funds”). The Carpenters Trust Funds provide
pension, health and welfare, vacation and apprenticeship benefits
to covered carpentry employees and their families. The Funds are
multi-employer benefit trust funds organized pursuant to the
provisions of § 302(c)(5) and (6) of the Labor Management
Relations Act of 1947, as amended, 29 U.S.C. § 186(c) (5)-(6).
The Carpenters Trust Funds are employee pension benefit
plans or employee welfare benefit plans within the meaning of
ERISA; see 29 U.S.C. §§ 1002(1) and 1002(2) (a). The Funds
derive their revenues from contributions made by employers on
behalf of covered carpentry employees, pursuant to the provisions
of collective bargaining agreements executed by the employers
and by unions affiliated with the United Brotherhood of
Carpenters and Joiners of America (collectively the “Union’’).
Such collective bargaining agreements require that employers
contribute a specified sum to each trust fund for each hour
worked by covered employees.
CSCAC is a “fiduciary,” as that term is defined in ERISA, 29
U.S.C. § 1062(21)(A). One of its duties as administrator of the
Carpenters Trust Funds is to collect contributions from signatory
employers who have failed to pay the required trust fund contri-
butions. To ensure the continued ability of the Carpenters Trust
Funds to provide benefits, CSCAC is obligated, by contract and
by federal law, to use its best efforts to colect the delinquent
contributions.
The present action was instituted in the Superior Court of the
State of California for the County of Kern. The suit sought
foreclosure of mechanics liens on property located in Kern
County, which was owned and developed by respondent El
4
Capitan Development Company (“El Capitan”). The action was
founded on the provisions of California Civil Code § 3111, which
permits multi-employer trust funds to record and foreclose
mechanics’ liens to recover unpaid fringe benefit contributions
owed to such trust funds on behalf of covered employees who
perform work to improve the liened property.
Civil Code § 3111 provides:
“For the purposes of this chapter, express trust funds estab-
lished pursuant to a collective bargaining agreement to which
payents are required to be made on account of fringe benefits
supplemental to a wage agreement for the benefit of a
claimant on particular real property shall have a lien on such
property in the amount of the supplemental fringe benefit
payments owing to it pursuant to the collective barganing
agreement.”
Under this statute, if the trust fund is not paid—i.e., if a
contractor fails to make employee fringe benefit contributions for
work performed on a construction project—the trust fund can
record a mechanics’ lien on the property and can foreclose the
lien to compel payment of the debt. The mechanics’ lien remedy
is thus an effective menas of assuring that contractors fulfill their
promise to pay fringe benefit contributions.
In the present case, CSCAC sought to recover delinquent
contributions owed by a contractor whose employees performed
work on a residential real estate development owned by El
Capitan. The total sum claimed is $121,729.23, plus interest and
costs. Though a default judgment was obtained against the
contractor, efforts to directly collect contributions from the delin-
quent contractor failed. CSCAC therefore timely recorded
mechanics’ liens on the Ei Capitan property and sought foreclo-
sure of the liens in the present action as a means of collecting the
trust fund contributions.
C. Proceedings Below
E] Capitan filed a demurrer to CSCAC’s complaint, asserting
that CSCAC’s right to maintain the present action is preempted
5
by § 514(a) of ERISA, 29 U.S.C. § 1144(a), which provides, in
pertinent part:
“T]he provisions of this subchapter and subchapter III of
this chapter shall supersede any and all state laws insofar as
they may now or hereafter relate to any employee benefit
plan...”
The trial court sustained the demurrer of El Capitan; judgment
was entered by the Kern County Superior Court on August 8,
1985 and a timely appeal was filed by CSCAC.
In reliance on the opinion in Carpenters Health & Welfare
Fund v. Parnas Corp., (1986) 176 Cal. App.3d 1196, the Court of
Appeal reversed the trial court and held that Civil Code § 3111
was not preempted by ERISA (E/ Capitan I, Appendix B, infra.)
E] Capitan filed a petition for review in the California Supreme
Court, asserting that the decision of this Court in Pilot Life
Insurance Co. v. Dedeaux, (1987) 481 U.S. 41, 107 S.Ct. 1549,
compelled a ruling that § 3111 is preempted. The California
Supreme Court remanded the case to the Court of Appeal for
further consideration in light of Pilot Life. (Appendix C, infra.)
On remand, the Court of Appeal reversed its earlier opinion and
held that Pilot Life had “changed” the law, requiring preemption
of § 3111 (El Capitan II, Appendix D).
CSCAC timely filed a petiton for review in the California
Supreme Court, supported by briefs and letters from more than a
dozen counsel for prospective amici curiae. On April 21, 1988, the
California Supreme Court granted review. On June 20, 1991, the
California Supreme Court issued its decision (Carpenters South-
ern California Administrative Corporation v. El Capitan Develop-
ment Company, 53 Cal.3d 1041 (“El Capitan III’) Appendix A,
infra.) By a vote of 5-2, the California Supreme Court held that
Civil Code § 3111 is preempted because it “relates to” ERISA
regulated employee benefit plans “by creating an additional fund-
ing mechanism for ERISA plans not provided for by Con-
gress...” 53 Cal.3d at 1051. The court relied heavily upon the
recent decision of the U.S. Court of Appeals for the Fifth Circuit
in Ironworkers Pension Fund v. Terotechnology Corporation
(1990) 891 F.2d 548, cert. denied, (1991) __. U.S. ___., 110
6
S.Ct. 3272, and rejected the reasoning in other recent appellate
__court opinions upholding the use of state collection remedies to
enforce employers’ collection obligations to multi-employer fringe
benefit trust funds; see, e.g. Plumber's Local 458 v. H. Immel,
Inc. (1989) 151 Wis. 2d 233, 445 N.W.2d 43; Sheet Metal
Workers Pension Plan v. Columbia Savings & Loan Association
(1990) 221 Cal. App.3d Supp. 21; Sasso v. Vachris (1985) 484
N.E.2d 1359, 494 NYS 2d 856; Carpenters Health & Welfare
Trust Fund v. Parnas Corp., (1986) 176 Cal. App.3d 1196. The
lengthy and vigorous dissent filed by two justices argued that the
majority had ignored the standards for ERISA preemption set
forth by this Court in Mackey v. Lanier Collection Agency &
Service (1988) 486 U.S. 825, 108 S.Ct. 2182 and other cases and
concluded that the majority had misapplied ERISA’s preemption
clause.
Because the present case squarely presents an issue on which
there is a split of authority among lower appellate courts (and
between the members of the California Supreme Court itself)
CSCAC now petitions this court for a writ of certiorari.
V
REASONS THE WRIT SHOULD BE GRANTED
A. The Guidance of This Court is Needed to Resolve a Conflict
Among Lower Appellate Courts.
For many years, state and federal appellate and trial courts
have reached conflicting conclusions regarding the application of
§ 514(a) of ERISA to state collection remedies; see e.g., Sasso v.
Vachris (1985) 484 N.E.2d 1359, 494 NYS 2d 856 [state
collection remedies not preempted]; Carpenters Health & Wel-
fare Fund of Philadelphia v. Ambrose (3d Cir. 1983) 727 F.2d
279 [same]; Laborers Fringe Benefit Funds v. Northwest Concrete
& Construction, Inc. (6th Cir. 1981) 640 F.2d 1350, 1352 [state
injunctive remedies available to enforce collection of trust fund
contributions]; Trustees for the Alaska Hotel & Restaurant Em-
ployees Health & Welfare Fund v. Hansen, (Alaska 1984) 688
P.2d 587 [enactment of 1980 amendments to ERISA did not
displace state collection remedies]; Carpenters Health & Welfare
7
Trust Fund v. Parnas Corporation (1986) 176 Cal. App.3d 1196
[state lien laws not preempted by ERISA] (disapproved in E/
Capitan III); Sheet Metal Workers Pension Plan v. Columbia
Savings & Loan Association (1990) 221 Cal. App.3d Supp. 21
{same holding] (also disapproved in E/ Capitan III); Retirement
Fund of the Fur Manufacturing Industry v. Getto & Getto, Inc.,
(S.D.N.Y. 1989) 714 F.Supp. 651, 670 [state collection remedies
not preempted]; Planned Consumer Marketing, Inc. v. Coats &
Clark, Inc., (1988) 527 N.Y.S.2d 185, 190-191, 522 N.E.2d 3
[state corporate statute permitting judgment creditor to bring
action against a director or officer for contribution violations
relating to an ERISA trust not preempted by ERISA]; McMahon
v. McDowell, (3d Cir. 1986), 794 F.2d 100 (state collection
remedies preempted]; Jronworkers Pension Fund v. Tero-
technology (Sth Cir. 1990) 891 F.2d 548, cert. denied (1991),
—— US. — ~, 110 S.Ct. 3272. [ERISA preempts state lien
remedy for fringe benefit trusts]; Edwards v. Bethlehem Steel
Corp. (Ind. App. 1990), 554 N.E. 2d 43 [same].'
The issue of preemption of state lien laws is of critical impor-
tance to employee benefit trusts in the construction industry,
because such trusts depend heavily on the lien laws to enforce the
contribution obligations of employers. The construction industry
is a highly fragmented segment of the American economy; in
California, thousands of small contractors compete to perform
construction work. (See, John T. Dunlop, “The Industrial Rela-
tions System in Construction,” in Weber (Ed.) The Structure of
Collective Bargaining (New York; Free Press of Glencoe, 1961)
pp. 255-277, and Daniel Q. Mills, “Industrial Relations and
Manpower in Construction” (Cambridge; MIT Press, 1977) p.
‘In a just-published decision, a divided panel of the U.S. Court of
Appeals for the Ninth Circuit has held that California Civil Code § 3111
is preempted by ERISA; Sturgis v. Miller, _. F.2d —__ (US.C.A.
No. 90-15054 (September 3, 1991)). The panel majority held the
statute preempted because “Section 3111 contains a clear reference to
and connection with ERISA.” The dissent argued that Civil Code
§ 3111 is part of a comprehensive statutory scheme to protect California
employees’ entire wage and fringe benefit package and is beyond the
preemptive reach of ERISA.
8
385. Small construction companies often go bankrupt, dissolve or
simply “‘disappear.”* One federal appellate court has taken spe-
cific note of a contractor which reportedly changed the name of
its business eighteen times within a period of just nine months; see
NLRB v. Associated General Contractors of California, Inc., (9th
Cir. 1980) 633 F.2d 766, 769. Absent the availability of a lien or
other security device to compel payment, trust funds are often
unable to collect delinquent benefit contributions. Elimination of
the lien remedy may jeopardize the ability of the funds to provide
pension and health and welfare benefits at current levels.
As the dissenters in the California Supreme Court argued: “To
conclude that state lien laws are preempted when ERISA plans
are involved means that millions, perhaps billions, of dollars. . .
are jeopardized... To suggest that a Congress that adopted a
comprehensive law to protect the interests of participants in
employee benefit plans intended to preempt state lien laws strains
credulity.” 53 Cal.3d at 1064.
B. The California Supreme Court’s Decision Ignores the
Framework for Preemption Analysis Developed by This
Court.
While acknowledging and citing many of the cases from this
Court reviewing ERISA preemption issues, the California Su-
preme Court’s opinion ignores the framework for preemption
analysis set forth by this Court in Fort Halifax Packing Co., Inc.
v. Coyne (1987) 482 U.S. 1, 107 S.Ct. 2211 and Pilot Life Ins.
Co. v. Dedeaux, (1987) 481 U.S. 41 41-42, 107 S.Ct. 1549. Both
Fort Halifax and Pilot Life emphasize the principle that, under
ERISA, as in any preemption analysis, “ “The purpose of Con-
gress is the ultimate touchstone’” (Fort Halifax, 482 U.S. 1, 19,
107 S.Ct. 2211, 2216; citing Malone v. White Motor Corp.,
(1978) 435 U.S. 497, 504, 98 S.Ct. 1195, 1189 (1978).) In Pilot
Life, this Court stated that “[i]n expounding a statute we [are]
? The 1977 Census of Construction Industries found that there were
more than 288,000 “specially trained contractors”. On the average, each
firm employed just six construction workers. See, U.S. Bureau of
Census, Census of Construciton Industries (1977), cited in Statistical
Abstract of the United States (1979) Table 1365, p. 776.
, |
9
not... guided by a single sentence or member of a sentence, but
look to the provisions of the whole law and to its object and
policy.” Pilot Life, supra, 481 U.S. 41, 51, 107 S.Ct. 1549, 1555.
Ignoring these settled principles, the California Supreme Court’s
majority focused narrowly on two phrases in Section 514 of
ERISA, 29 U.S.C. § 1144.
Section 514(a) states that ERISA supersedes “any and all
state laws insofar as they may now or hereafter relate to any
employee benefit plan...” 29 U.S.C. § 1144(a). The California
Supreme Court has held that Civil Code § 3111 is preempted
because it “relates to” employee benefit plans “by creating a
mechanism for enforcing an employer’s contribution obligations
that Congress did not provide.” 53 Cal.3d at 1048.
The lower court reasoned that Civil Code § 1311 must be
within the preemptive reach of § 514(a) because “a law ‘relates
to’ an employee benefit plan in the normal sense of the phrase, if
it has a connection with or reference to such a plan.” (£/ Capitan
IIT) 53 Cal.3d at 1048, citing Pilot Life, supra, 481 U.S. 41, 47,
107 S.Ct. 1849 (1987). But this Court has never stated that
determination of whether a law “has a connection with or refer-
ence to” an ERISA-regulated plan is, by itself, dispositive of the
preemption question. Indeed, this Court’s decision in Shaw v.
Delta Airlines, (1983) 463 U.S. 85, 100, n. 21, 103 S.Ct. 2890
recognizes that “[s]jome state actions may affect employee bene-
fit plans in too tenuous, remote or peripheral a manner to warrant
a finding that the law ‘relates to’ the plan”. State collection
remedies were clearly a “peripheral” concern of Congress at the
time ERISA was enacted in 1974. Indeed, the subject of collec-
tion remedies is not addressed at all in the 1974 legislative history.
The California Supreme Court does not suggest any possible
reason why Congress would have wished to wipe out long-
standing collection remedies created by state law.
Many laws which have “a connection with or reference to...a
plan” have been held not to be preempted by ERISA; see e.g.,
American Telephone and Telegraph Co. v. Merry, (2d Cir. 1979)
592 F.2d 118, 121; Carpenters Pension Trust v. Kronschnabel,
(9th Cir. 1980) 632 F.2d 745, cert. denied (1981) 453 U.S. 922,
101 S.Ct. 3159; Stone v. Stone, (9th Cir. 1980) 632 F.2d 740,
10
cert. denied (1981) 453 U.S. 922, 101 S.Ct. 3159. See also,
Retirement Trust Fund of the Plumbing, Etc. v. Franchise Tax
Board, (9th Cir. 1990) 909 F.2d 1266, 1280-1281 [tax levy
procedure which permitted garnishment of benefits owed to
participants under a plan not to be preempted by ERISA because
the levy “only tenuously affects the vacation trust itself’);
Franchise Tax Board v. Construction Laborers Vacation Trust,
(1988) 204 Cal. App.3d 955.
Admittedly, the scope of ERISA’s preemption clause is broad;
see Pilot Life Insurance Co. v. Dedeaux (1987) 481 U.S. 41, 16,
107 S.Ct. 1549, 1552. This Court has previously held that the
preemption clause is as broad as its language suggests; see Shaw
v. Delta Air Lines, 463 U.S. 85, 98-100 and nn. 18-20, 103 S.Ct.
2890, 2900-01 and nn. 18-20. But In each of this court’s decisions
in which a state law has been held preempted by ERISA, the law
has trenched upon the regulatory scheme of ERISA in some
meaningful way. See Alessi v. Raybestos-Manhattan, Inc. (1981)
451 U.S. 504, 523, 101 S.Ct. 1985 [state statute limiting plans’
set-off rights preempted]; Pilot Life Insurance Co. v. Dedeaux
(1987) 481 U.S. 41, 107 S.Ct. 1549 [state law claims relating to
administration of plan preempted]; Mackey v. Lanier Collections
Agency and Service (1988) 486 U.S. 825, 108 S.Ct. 2181 [state
statute excluding ERISA plan benefits from garnishment pre-
empted]; FMC Corporation v. Holliday (1990) 498 U.S. ___.,
111 S.Ct. 403 [state statute denying subrogation rights to ER-
ISA-regulated plans preempted]; Ingersoll-Rand v. McClendon
(1990), 498 U.S. ___, 111 S.Ct. 478 [wrongful discharge action
alleging termination to avoid benefit plan liability preempted ].’
> In Shaw v. Delta Air Lines (1983) 463 U.S. 85, 103 S.Ct. 2890, this
court held certain provisions of the New York Human Rights Law to be
preempted by ERISA but “only insofar as it prohibits practices that are
lawful under federal law.” 463 U.S. at 108, 103 S.Ct. at 2906. California
Civil Code § 3111 does not purport to prohibit any practices which are
lawful under federal law; nor does it restrict the operation of multi-
employer trust funds in any way. Thus, under the Shaw test, the statute
survives preemption.
1]
In the present case, by contrast, use of the mechanic’s lien
remedy will have no appreciable effect on the ERISA regulatory
scheme, while preemption of California Civil Code § 3111 will
frustrate the state’s purpose in protecting entire wage and fringe
benefit package of workers. As this Court has stated: “We also
must presume that Congress did not intend to preempt areas of
traditional state regulation.” Metropolitan Life Ins. Co. v. Massa-
chusetts (1985) 471 U.S. 724, 740, 105 S.Ct. 2380, 2389 citing
Jones v. Rath Packing Co., (1977) 430 U.S. 519, 525, 97 S.Ct.
1305, 1309. Cf. Lingle v. Norge Division of Magic Chef, Inc.
(1988) 486 U.S. 399, 168 S.Ct. 1877.
The California Supreme Court further held that Civil Code
Section 3111 falls within the terms of Section 514(c) of ERISA,
29 U.S.C. § 1144(c), which provides that ERISA’s preemptive
reach includes any law which “purports to regulate, directly or
indirectly, the terms and conditions of employee benefit plans.”
According to the California Supreme Court, “Section 3111
regulates ERISA plans by creating a funding mechanism not
provided by Congress.” 53 Cal.3d at 1051.
The California Supreme Court’s holding that the provision of
an ancillary state collection rernedy somehow “regulates” fringe
benefit trust funds simply makes no sense. Permitting such funds
to have lien rights to secure tha portion of a workers total
compensation package which is paid as fringe benefits does not
“regulate” such funds in any meaningful way. In finding that Civil
Code § 3111 “regulates” employee benefit plans, the California
Supreme Court stretches the natural meaning of the term beyond
recognizable limits. Black’s Law Dictionary (Sth Ed., 1979)
defines “regulates” as “to fix, establish or control; to adjust by
rule, method or established mode; to direct byTule or restrictions;
to subject to governing principles or laws... Regulate means to
govern or direct according to rule or to bring under control of
constituted authority and prohibit, to arrange in proper order, and
to control that which already exists.” Permitting employee benefit
trusts to exercise a collection remedy does not “regulate” such
trusts since it does not limit, direct, prescribe or control their
conduct. Cf FMC Corp. v. Holliday (1990), 498 U.S. —_, 111
S.Ct. 403 [a state statute which precludes benefit plans from
12
exercising subrogation rights relates to and regulates such plan].
Not only does it not regulate the “terms and conditions” of
employee benefit plans; it does not direct, limit or control their
operation in any significant way. Like other portions of Califor-
nia’s mechanics’ lien law, it does regulate land rights, by making
landowners potentially liable for the full value of labor contributed
to works of improvement on their property.
This Court’s holding in Fort Halifax Packing Co., Inc. v.
Coyne, (1987) 482 U.S. 1, 107 S.Ct. 2211 contains a thorough
and detailed analysis of the purpose of the preemption clause of
§ 514(a) of ERISA. This Court held that the preemption clause
was designed “to establish a uniform administrative scheme,
which provides a set of standard procedures to guide processing of
claims and disbursement of benefits.” 482 U.S. at 9, 107 S.Ct. at
2216. Summarizing its analysis, this Court stated: “It is thus clear
that ERISA’s preemption provision was prompted by recognition
that employers establishing and maintaining employee benefit
plans are faced with the task of coordinating complex administra-
tive activities. A patchwork scheme of regulation would introduce
considerable inefficiencies in benefit program operation, which
might lead those employers with existing plans to reduce benefits,
and those without such plans to refrain from adopting them.
Preemption ensures that the administrative practices of a single
plan will be governed only by a single set of regulations.” 482 U.S.
at 11, 107 S.Ct. at 2217.‘
The issue in Fort Halifax was whether a Maine statute requir-
ing employers to provide a one-time severance payment to em-
ployees in the event of a plant closing was preempted by ERISA.
The Court held that the statute was not preempted by ERISA
because it did not create any “potential for the type of conflicting
regulation of benefit plans that ERISA preemption was intended
to prevent.” 482 U.S. at 14, 107 S.Ct. at 2219.
“ In a subsequent decision, this Court stated that “in enacting ERISA,
Congress’ primary concern was with the mismanagement of funds
accumulated to finance employee benefits and the failure to pay em-
ployee benefits from accumulated funds.” Massachusetts v. Morash
(1989), 490 U.S. 107, 109 S.Ct. 1668.
13
This Court’s holding in Fort Halifax compels the conclusion
that California Civil Code § 3111 is not preempted by ERISA.
Civil Code § 3111 has no impact whatsoever on the processing of
benefit claims and the disbursement of benefits. Its whole focus is
external to the benefit administration process. Nor is there
anything inconsistent in the holding of Pilot Life and Fort Hali-
fax, both cases focus on the issue of whether state regulation
intrudes on the process of providing employee benefits and ad-
ministering employee benefit claims.°
Fort Halifax further holds that where a state statute does nor
implicate the concerns of ERISA’s preemption provision—that is,
the statute does not address the plans’ internal administrative
functions—there is no preemption:
“If a state law creates no prospect of conflict with a federal
statute, there is no warrant for disabling it from attempting to
address uniquely local social and economic problems.” 482
US. at 19, 107 S.Ct. at 2221.
California has recognized the frequent problems that workers,
subcontractors and materialmen encounter in securing payment
for their services on construction projects. (See Part E, infra.)
The California mechanics’ lien statutes provide a comprehensive
framework for ensuring that all such parties get paid for labor and
materials contributed to works of improvement or real property.
See, generally, Connolly Development, Inc. v. Superior Court
(1976) 17 Cal.3d 803. Neither the California Supreme Court nor
E] Capitan has cited any language in the text of ERISA or in its
legislative history to indicate that Congress intended to upset the
carefully integrated California statutory scheme for protecting the
> In Pilot Life, supra, 481 U.S. at 51-52, 107 S.Ct. at 1555, this Court
held a state cause of action preempted “because, in this case, the state
cause of action seeks remedies for the improper processing of a claim for
benefits under an ERISA-regulated plan...” [Emphasis supplied ]
14
wages and fringe benefits of workers employed on construction
projects in California. °
Many courts have emphasized that, outside the benefit admin-
istration context, employee benefits trusts should be treated the
same as other business entities. For example, in Duffy v. King
Cavalier, (1989) 218 Cal.App.3d 1517, the court held that an
employee benefit trust should have the same rights as any other
investor to secure redress for stockbroker fraud. Similarly, in Lane
v. Goren, (9th Cir. 1083) 743 F.2d 1340, the court held that
employee benefit trusts that act as employers cannot assert the
shield of Section 514(a) of ERISA to exempt themselves from
the application of fair employment laws. See also, Franchise Tax
Board v. Construction Laborers Vacation Trust, (1988) 204 Cal.
App.3d 955. The California Supreme Court has suggested no
reason why employee benefit trust funds should not have the same
rights as other creditors entitled to utilize the lien remedy.
®As the dissent noted in Sturgis v. Miller,
No. 90-15054. September 3, 1991):
“California creates mechanic’s liens in favor of ‘mechanic’s, mate-
rialmen, contractors, subcontractors, lessors of equipment, artisans,
architects, registered engineers, licensed land surveyors, machinists,
builders, teamsters, and draymen, and all persons and laborers of
every class performing labor upon or bestowing skill or other
necessary services . . .’ Cal. Civil Code 3110. Section 3111 provides
the same lien to employee benefit trust funds for unpaid employer
contributions. California thus does not single out ERISA plans for
special treatment, but gives ERISA plans the same procedure to
recover unpaid employer contributions as California gives to em-
ployees who are not members of ERISA plans. Employee benefits
(which may include pension, health, welfare, and vacation benefits)
are an important part of an employee’s compensation. The result of
the majority’s opinion is that employees who are not members of an
ERISA plan may use mechanic’s liens to ensure that employers
fulfill their obligations to pay benefits—but members of ERISA
plans may not. This turns the logic of Mackey on its head. Mackey
precludes state laws that single out ERISA plans; it does not
prohibit evenhanded state law enforcement procedures.”
F.2d ..... (Sth Cir.
15
Because the California Supreme Court has applied ERISA’s
preemption clause without reference to the purpose of the clause,
and the purpose of ERISA itself, this court should grant certiorari
and reverse.
C. The Court Should Grant Certiorari to Clarify the Scope of
the Holding in Pilot Life Insurance Co. v. Dedeaux.
A central issue in this case, and other cases considering the
issue of ERISA preemption of state collection remedies, is the
applicability of this Court’s holding in Pilot Life Insurance Co. v.
Dedeaux (1987) 481 U.S. 41, 107 S.Ct. 1549. In Pilot Life, this
Court held that the remedies provided by § 502 of ERISA to
claimants seeking empioyee benefits from ERISA-regulated ben-
efit plans preempted all parallel state laws. This Court held that
“The detailed provisions of § 502(a) set forth a comprehensive
civil enforcement scheme... The policy choices reflected in the
inclusion of certain remedies and the exclusion of others under
the federal scheme would be completely undermined if ERISA-
plan participants and beneficiaries were free to obtain remedies
under state law that Congress had rejected in ERISA.”
Pilot Life focuses on provisions of ERISA which have been in
the statute since its inception. Pilot Life contains no discussion of
the collection remedies which were added to ERISA in 1980, nor
does it suggest that any collection remedy whatsoever was pro-
vided by ERISA pnor to 1980. The “carefully integrated statutory
scheme” described in Pilot Life did not, prior to 1980, contain any
remedy which could possibly displace existing state law collection
remedies.
Petitioner respectfully submits that the California Supreme
Court has read Pilot Life far too broadly.’ While all parties agree
"This Court succinctly stated the limits of its holding in Pilot Life in
its decision in Metropolitan Life Insurance Co. v. Taylor, (1987) 481
U.S. 58, 107 S.Ct. 1542 issued the same day: “In Pilot Life Insurance
Co. v. Dedeaux, ante [citation] the Court held that state common law
causes of action asserting improper processing of a claim for benefits
under an employee benefit plan regulated by the Employer Retirement
Income Security Act (ERISA) 88 Stat. 829, 29 U.S.C. § 1001, et seq.,
are preempted by the Act.”
16
that the reach of federal preemption under § 514(a) of ERISA is
wide, there is no hint in the legislative history or in any of the
terms of the statute that Congress believed it was canceling
literally dozens of state collection statutes across the country at a
single stroke. Indeed, the legislative history of the 1980 amend-
ments to ERISA compels the opposite conclusion. During hear-
ings on the Multi-employer Pension Plan Amendments Act of
1980, which added §§ 512(g) and 515 to ERISA, 29 U.S.C.
§§ 1132(g) and 1145, the validity of post-ERISA state collection
remedies was recognized. House Report No. 96-869(II) on H.R.
3609 of the House Committee on Ways and Means, 96th Cong.,
2d Sess., contains the following commentary on the new collec-
tion provisions:
“The Committee’s amendment provides that in the case of a
civil action by any person to collect delinquent multi-em-
ployer plan contributions, regardless of otherwise applicable
law, the court before which the action is brought may award
the plaintiff (1) reasonable attorneys’ fees, (2) court costs
and (5) liquidated damages not to exceed twenty percent of
the amount of delinquent contributions as determined by the
court. However, these items are to be awarded to a plaintiff
only to the extent that the multi-employer plan in question
provided for such an award. The bill preempts any state or
other law which would prevent the award of reasonable
attorneys’ fees, court costs or liquidated damages or which
would limit liquidated damages to an amount below the
twenty percent level. However, the bill does nor preclude the
award of liquidated damages in excess of the twenty percent
level if an award of such a higher level of liquidated damages
is permitted under state or other law. The Committee
amendment does not change any other type of remedy
permitted under state or federal law with respect to delin-
quent multi-employer contributions."’ [Emphasis supplied }
This legislative history demonstrates that Congress did not
intend to strip multi-employer trust funds of their existing collec-
tion remedies under state law. Instead, the intent was to provide
powerful new weapons, in the form of potential awards of attor-
neys’ fees, interest and liquidated damages, to discourage employ-
17
ers from engaging in protracted and expensive litigation over
simple collection claims.*
As the U.S. Court of Appeals for the Sixth Circuit noted in
Laborers Fringe Benefit Funds v. Northwest Concrete & Construc-
tion, Inc., (1981) 640 F.2d 1350, 1352:
“The legislative history underlying Section 502 indicates that
Congress intended that the enforcement provisons should
have teeth: the provisions should be liberally construed ‘to
provide both the Secretary and participants and beneficiaries
with broad remedies for redressing or preventing violations of
the Act.’ H. Rep. No.93-533, 93d Cong. & Ad. News p.
4639, 4655. This history further states that ‘the intent of the
Committee is to provide the full range of legal and equitable
remedies available in both state and federal courts and to
remove jurisdictional and procedural obstacles which in the
past appear to have hampered effective enforcement of
fiduciary responsibility under state law for recovery of bene-
fits due to participants.’”” [Emphasis supplied. ]
* In Sasso v. Vachris, (1985) 494 NYS 2d 856, 489 N.E. 2d 1359 the
New York State Court of Appeals rejected the argument that the
collection remedies added to ERISA ip 1980 dispiaced state law,
reasoning as follows:
“Nor do the 1980 amendments to ERISA indicate an intent on the
part of Congress to preempt state remedies such as § 630 [of the
New York Business Corporation Law]. They merely added a
statutory obligation upon employers to make contributions to multi-
employer plans as required by the terms of the employee benefit
plan or the collective bargaining agreement [citation omitted] and
provided a civil cause of action in favor of fiduciaries to enforce this
obligation [citation omitted]. Contrary to the positon taken by
defendants, the relevant legislative history of these amendments
evince a specific congressional intent that ERISA’s civil remedies
merely supplement, rather that supersede, existing state remedies
such as Business Corporation Law § 630, at least insofar as they
provide for the collection of delinquent employer contributions to
employee benefit plans.”
18
D. Preemption of State Lien Laws Leaves an Unexplained
“Gap” in the Collection Remedies Available to Multi-
Employer Benefit Trust Funds.
In support of its conclusion that ERISA preempts state collec-
tion remedies, the California Supreme Court notes that § 515 of
ERISA, 29 U.S.C. § 1145, permits employee benefit plans to
bring collection actions against delinquent employers. The court
reasoned that the presence of this collection remedy within
ERISA supports the inference that state lien remedies are pre-
empted. E/ Capitan III, 53 Cal.3d at 1052. The difficulty with this
reasoning is that § 515 was not added to ERISA until 1980,
though ERISA’s preemption clause was part of the original
Statute enacted in 1974. The amendment of ERISA in 1980 to
include a collection remedy simply cannot support the inference
that the preemption clause was intended to wipe out state collec-
tion remedies. If this were so, there would be a six year “gap”
during which employee benefit trust funds had neither remedies
under ERISA nor remedies under state lien laws.
The California Supreme Court avoids this anomaly by asserting
that § 502(a) (3) of ERISA, 29 U.S.C. § 1132(a) (3), which was
part of ERISA as initially enacted, created a collection remedy.
El Capitan III, 53 Cal.3d at 1052. But numerous federal courts
have held that no remedy for collection of delinquent employer
contributions was provided by ERISA prior to the addition of
§ 515 in 1980.
For example, in Carl Allen v. McWilliams Electric Co., (D.
Mo. 1980) 494 F. Supp. 53, a federal district court refused ‘to
permit employee benefit trusts to sue an allegedly delinquent
employer under § 502 of ERISA, stating “This suit for contribu-
tions of money allegedly due and owing qualifies only for the
future equitable relief prayed for... not for a money award for
past violations.” 494 F. Supp. at 56. The same conclusion was
reached by another federal trial court in American Benefit Plan
Administrators v. Foley, 2 EBC 1897 (CD Cal. 1981) where the
court stated “Prior to 1980, § 502(g) of ERISA (29 U.S.C.
§ 1132(g)) provided only for equitable relief and any action for
unpaid plan contributions could, therefore, only be brought under
§ 301 of the Labor Management Relations Act, 29 U.S.C. § 185.”
1
State courts reached the same conclusion. For example, in
Vermeer v. Tomken Construction, (1980) 49 Or App. 37, the
Court of Appeals held that the pre-1980 version of § 502(a) of
ERISA did not provide a cause of action to recover delinquent
trust fund contributions. The court stated: “ERISA provides no
remedy for trustees seeking to recover delinquent contributions to
a trust fund... therefore, though plaintiff's action is one to
enforce the terms of its agreement with defendant, it is not an
action under 29 U.S.C. § 1132(a) (3) (B) (ii) requiring exclusive
federal jurisdiction . . .” These cases belie the California Supreme
Court’s assertion that § 515 of ERISA was added to the statute
only to “streamline” an already-existing collection remedy. There
simply was no ERISA collection remedy prior to 1980.
Once it is established that ERISA did not, as originally
enacted, contain a remedy to compel payment of delinquent
employer trust fund contributions, the illogic of the California
Supreme Court’s decision is plain. If, as the California Supreme
Court held, § 514(a) of ERISA was intended to prempt all non-
federal collection remedies, why did ERISA, as originally en-
acted, contain no substitute remedy, and why does the 1974
legislative history contain no reference to collection issues? The
obvious answer is that Congress did not intend that ERISA’s
preemption clause would apply to such remedies.
The reasoning of this Court in Mackey v. Lanier Collection
Agency (1988) 486 U.S. 825, 108 S.Ct. 2182 is particularly
instructive in this regard. In Mackey, this Court concluded that
Georgia’s general garnishment statute was not preempted by
ERISA because (1) ERISA provides no means for execution of
judgments against employee benefit plans and (2) the federal
scheme for enforcement of judgments evidenced by FRCP 69(a)
contemplates the use of state procedures to enforce judgments.
Applying the same reasoning as in Mackey to this case, it can be
seen that (1) prior to 1980, ERISA provided no collection
remedy and (2) the only federal collection remedy then availabl.,
under § 301(a) of the Labor Management Relations Act, 29
U.S.C. § 185(a) did not purport to preempt ancillary state collec-
tion remedies. In fact, federal courts have explicitly recognized
that § 301 does not displace state lien laws; see CSCAC v.
20
Majestic Housing, (9th Cir. 1984), 743 F.2d 1341; CSCAC v.
D&L Camp Construction, (9th Cir. 1984), 738 F.2d 999.
E. Preemption of California Civil Code Section 3111 Disrupts
the California Statutory Scheme for Protecting the Wages
and Benefits of Workmen.
The statute at issue in this case is not an isolated piece of
legislative handiwork. It is part of an integrated network of
California laws designed to ensure that construction workmen
receive their full wages for labor contributed for works of im-
provement on California real property.
The mechanics’ lien remedy was spawned by the California
Constitution itself. The Constitution of 1879 required the Legisla-
ture to grant laborers and materialmen a lien upon property which
they had improved. (See California Constitution Article XIV,
Section 3; Martin v. Becker (1915) 169 Cal. 301, 316.) As the
California Supreme Court has noted, “This state, from the
earliest days, and consistently thereafter, has asserted its interest
in protecting the claims of laborers and material men.” Connolly
Development, Inc. v. Superior Court (1976) 17 Cal.3d 803, 826.
California Code of Civil Procedure § 1182, the predecessor to
California Civil Code § 3111, was amended in 1965 to eliminate
an ambiguity in the lien law. Though laborers were clearly
entitled to record and foreclose mechanics’ liens to protect their
claims to direct wages, an issue had arisen as to whether they
could assert lien rights with regard to fringe benefit payments
made, in the first instance, to third parties. Since the intent of.the
lien law was to protect the workers’ entire wage package, the law
was amended to grant lien rights to protect the workers’ fringe
benefits. Assemblyman James R. Mills, Chairman of the State
Assembly Committee on Rules, stated the purpose of the legisla-
tion as follows:
“This bill provided that those trust funds established in
accordance with collective bargaining agreements between
labor and management, and to which management payments
are made to provide fringe benefits to the wage agreement,
shall be entitled to a lien on particular real property in the
amount of the supplemental fringe benefit payments owing to
21
it... These contributions are sometimes deducted from the
wage checks of the workers, and, in all cases, they are part of
the total wage package of the worker . .. The ambiguousness
of the present law prohibits the trust funds from asserting the
worker’s lien rights. Although they have a sole fiduciary
obligation to collect the money, this ambiguousness has
resulted in loss of monies of substantial amounts to the
workers and to the trust funds. This bill would permit a
limited clarification to permit lawful trust funds the right to
assert the workers’ lien rights as they already exist, and
would not expand or enlarge the rights which the worker now
has.” {Emphasis supplied}?
The interest of the State of California in providing a compre-
hensive remedy to protect the wage package, including fringe
benefits, of workers who perform construction services would be
gravely eroded if Civil Code § 3111 is nullified by the preemptive
force of federal law. The importance of the statute is equivalent to
the state law provisions considered in Stone v. Stone, (9th Cir.
1980) 632 F.2d 740, cert. denied (1981) 453 U.S. 922, 101 S.Ct.
3159. In Stone, a federal appellate court affirmed a trial court
decision which held that ERISA did not preempt California state
courts from ordering an ERISA-regulated pension plan to pay a
portion of a plan participant’s pension benefits directly to his or
her ex-spouse. The lower court cited the state’s critical interest in
*The California Supreme Court holds that the mechanic’s lien
remedy is preempted because it creates new substantive rights against
parties not involved in the employer-trust fund relationship. As the
dissent notes, however, “The lien does not create personal liability of the
owner. It has long been recognized that the lien of the mechanic, artisan
and supplier is equitable because those parties have created the very
property upon which the lien attaches. Cf Tustle v. Montford (1857) 7
Cal. 358, 360, Connolly Development, Inc. v. Superior Court, (1976) 17
Cal.3d 803, 825-827. Obviously, return of the materials or labor to the
unpaid supplier or laborer is not a viable option, and the law’s recogni-
tion of the unpaid suppliers’ and laborers’ contribution to the improve-
ment does not create a debt or personal liability on the part of the owner,
but only an interest in the property they helped create.” E/ Capitan III
53 Ca.3d at 1065 (Broussard, J., dissenting).
22
regulating the sensitive area of family law, stating that “both
Congress and the courts recognize that the whole subject of
domestic relations of husband and wife, and parent and child,
belongs to the laws of the states and not to the laws of the United
States.” See also, American Telephone and Telegraph Co. v.
Merry, (2d Cir. 1979) 592 F.2d 118, 121; Carpenters Pension
Trust v. Kronschnabel, (9th Cir. 1980) 632 F.2d 745, cert. denied
(1981) 453 U.S. 922, 101 S.Ct. 3159.
Preemption of California Civil Code § 3111 would create an
anomaly in California law. Those workers whose payments for
fringe benefit contributions are deducted from their cash wages
would have a lien right for the full amount of their compensa-
tion.'° By contrast, those workers who receive fringe benefits from
employee benefit plans to which their employers directly contrib-
ute would be deprived of lien rights for a substantial portion of
their total compensation package. (For many workers, the fringe
benefit payments now constitute as much as thirty-five percent of
their total compensation. )
This Court has long recognized that fringe benefits are an
integral part of the workman’s total compensation. In United
States v. Carter (1956) 353 U.S. 210 77. S.Ct. 793, this court
held that a surety to fringe benefits funds on a payment bond
furnished by a contractor pursuant to the Miller Act (40 U.S.C.
§ 269a et seq.) was subject to suit by fringe benefit funds seeking
to recover delinquent employer contributions. This Court rea-
soned in part that the “contributions were a part of the compensa-
'° The California Supreme Court asserts that employee benefit plans
are different from the other entities entitled to assert mechanic’s lien
rights, because the other entities directly perform labor and provide
material for construction projects, which the plans do not. 53 Cal.3d at
1049. While this may be true, it is scarcely a basis for invalidating the
lien rights of the benefit plans. The benefit plans act as a repository and
funding source for benefits provided to workmen who do contribute to
works of improvement on real property. Permitting the workmen to
pursue lien claims for the cash portion-ef their wages, while denying lien
protection for the portion of their wages paid into employee benefit plans
eviscerates the California Legislature’s intent to protect the entire wage
package of the workman.
23
tion for the work to be done by [the] employees” and that
trustees “stand in the shoes of the employees and are entitled to
enforce their rights.” 353 U.S. at 217-218, 220. See, also, Morri-
son-Knudsen Construction Co. v. OWCP (1982) 461 U.S. 624,
631, 102 S.Ct. 2045. .
it is simply incomprehensible that Congress intended that
workmen who derive fringe benefits from ERISA-regulated em-
ployee benefits plans would become second class citizens, without
the full protection of lien rights enjoyed by their coworkers.'' Yet
that is the result of the California Suprerne Court’s reasoning in
the El Capitan case.
'! As the dissent below noted: “ERISA plans and others who have
unpaid claims based on construction projects are usually unpaid because
there are not enough funds to go around. To permit architects, engineers,
surveyors, mechanics, laborers and others enumerated in Civil Code
§ 3110 to obtain liens while denying liens to ERISA plans is to make
ERISA plans second-class creditors. The effect of the preference will
ordinarily mean that Section 3110 creditors will have a preference and
will receive all or part of their claims while ERISA plans will have none.
Making the plans second-ciass creditors flies in the face of ERISA’s
express policy to protect the interest of participants of the plan (29
U.S.C. § 1001(b), (c)) and, more particularly, ERISA’s express policy
“to provide reasonable protection for the interests of participants and
beneficiaries of financially distressed multi-employer pension plans” and
“to provide a financially self-sufficient program for the guarantee
of employer benefits under multi-employer plans.” (29 U.S.C.
§ 100la(c)(3), (4).)” 53 Cal.3d at 1062.
24
VI
CONCLUSION
For the reasons set forth herein, petitioner prays that the writ of
certiorari be granted.
DATED: September 16, 1991
STANTON, Kay & WATSON
JAMES P. WATSON*
DECARLO, CONNOR & SELVO
JOHN T. DECARLO
PATRICK CONNOR
KINDEL & ANDERSON
DONALD T. MEADERS
* COUNSEL OF RECORD
Appendix A
[ No. $000772. June 20, 1991.]
Carpenters Southern California Administrative Corporation,
Plaintiff and Appeliant,
Vv.
El Capitan Development Company,
Defendant and Respondent.
Counse!
Cox, Castle & Nicholson, Stanton, Kay & Watson, James P.
Watson, Charles P. Scully, Donald C. Carroll, DeCarlo & Con-
nor, John T. DeCarlo, Patrick Connor, Richard A. Brownstein
and Karen L. Holliday for Plaintiff and Appellant.
Lionel Richman, Pappy & Davis, George A. Pappy, Jett &
Laquer, Wayne Jett, Hill, Farrer & Burrill, Stuart H. Young, Jr.,
McCarthy, Johnson & Miller, Raphael Shannon, Lori A. Nord,
Gilbert & Sackman, Steven J. Kaplan, Kenneth J. Sackman,
Gerald M. Feder, David R. Levin, Van Bourg, Weinberg, Roger
& Rosenfeld, Victor J. Van Bourg, Michael B. Roger, Blythe
Mickelson and Michael W. Schnake as Amici Curiae on behalf of
Plaintiff and Appellant.
Littler, Mendelson, Fastiff & Tichy, Karen E. Ford, Major
Williams, Jr., Dorothy J. Stephens and Gregory R. Meyer for
Defendant and Respondent.
Musick, Peeler & Garrett, Lynn K. Thompson and Roberta J.
Burnette as Amici Curiae on behalf of Defendant and
Respondent.
Opinion
PANELLI, J.—The issue presented is whether Civil Code sec-
tion 3111,’ which creates liens on real property in favor of trust
' Civil Code section 3111 provides: “For the purposes of this chapter,
an express trust fund established pursuant to a collective bargaining
agreement to which payments are required to be made on account of
A-2
funds established pursuant to collective bargaining agreements, is
preempted by the Employee Retirement Income Security Act of
1974 (ERISA). (29 U.S.C. § 1001 et seq.) We conclude that
ERISA does preempt section 3111.
Facts
Carpenters Southern California Administrative Corporation
(CSCAC) is the administrator and the assignee of rights of
various multiemployer trust funds established under collective
bargaining agreements, including the Carpenters’ Trust Funds.
The Carpenters’ Trust Funds are employee pension benefit plans
or employee welfare benefit plans within the meaning of ERISA.
(See 29 U.S.C. § 1002(1), (2)(A), & (21)(A).) CSCAC is a
“fiduciary” as defined in ERISA. (29 U.S.C. § 1002(21)(A).)
Collective bargaining agreements often require employers to
make contributions to trust funds for the benefit of covered
employees. In the present case, the covered employees are mem-
bers of unions affiliated with the United Brotherhood of
Carpenters and Joiners of America (Unions). CSCAC, due to its
fiduciary relationship with the Unions and in its role as adminis-
trator of the trust, has a duty to collect contributions from
employers who fail to make the required payments to the trust.
E] Capitan Development Company (El Capitan) developed a
condominium project on its property in Bakersfield. The general
contractor was Grupe Construction (Grupe). Grupe subcon-
tracted with Pacific Southwest Framing for part of the framing
work. In its complaint, CSCAC alleges that John Hall Enter-
prises (John Hall), with whom CSCAC made a collective bar-
gaining agreement, and Pacific Southwest Framing are a single
entity. John Hall failed to inake fringe benefit contributions to the
trust funds in excess of $121,000.
fringe denefits supplemental to a wage agreement for the benefit of a
claimant on particular real property shall have a lien on such property in
the amount of the supplemental fringe benefit payments owing to it
pursuant to the collective bargaining agreement.”
All further statutory references are to the Civil Code unless otherwise
indicated.
A-3
Pursuant to section 3111, CSCAC recorded trust fund liens
against E! Capitan’s real property in order to collect the delin-
quent contributions to the trust funds. CSCAC later sued El
Capitan in Kern County Superior Court to foreclose the liens.
CSCAC alleged that, because John Hall and Pacific Southwest
Framing are a single entity, Pacific Southwest Framing was
bound by CSCAC’s agreement with John Hall and was therefore
obligated to make the contributions to the trust. CSCAC further
alleged that because the unpaid contributions were due on ac-
count of work performed on El Capitan’s property, section 3111
created liens on that property.
Ej Capitan, which has not signed a collective bargaining agree-
ment with CSCAC, demurred to CSCAC’s complaint, arguing
that ERISA preempted section 3111. (See 29 U.S.C. § 1144.)
The trial court granted El] Capitan’s demurrer with leave to
amend. When CSCAC declined to amend, the court entered a
judgment of dismissal.
The Court of Appeal reversed the judgment. We granted E]
Capitan’s petition for review anc retransferred the matter to the
Court of Appeal for reconsideration in light of Pilot Life Ins. Co.
v. Dedeaux (1987) 481 U.S. 41 [95 L.Ed.2d 39, 107 S.Ct. 1549]
(hereafter Pilot Life). On remand, the Court of Appeal con-
cluded that ERISA preempted section 3111 and affirmed the
judgment of dismissal. We affirm.
Discussion
Introduction
(la) Section 3111 creates liens on real property in favor of
trust funds established pursuant to collective bargaining agree-
ments in amounts equal to the fringe benefit contributions which
are due under those collective bargaining agreements. Under
section 3111, if an employer fails to make contributions, the trust
fund can record a lien on the property where the work was
performed and foreclose the lien to compel payment of the debt.
? Pacific Southwest Framing has not signed a collective bargaining
agreement with CSCAC.
A-4
(2a) ERISA is a comprehensive federal statutory scheme
designed to promote the interests of employees and their benefi-
Ciaries in employee benefit plans. (Shaw v. Delta Airlines, Inc.
(1983) 463 U.S. 85, 90 [77 L.Ed.2d 490, 497, 103 S.Ct. 2890].)
“[ERISA] imposes participation, funding, and vesting require-
ments on pension plans....As part of this closely integrated
regulatory system Congress included various safeguards to pre-
clude abuse and ‘to completely secure the rights and expectations
brought into being by this landmark reform legislation.’ S. Rep.
No. 93-127, p.36 (1973). Prominent among these safeguards [is]
...§514(a), 29 U.S.C. § 1144, ERISA’S broad pre-emption
provision. ...” (Ingersoll-Rand Co. v. McClendon (1990) 498
At [112 L.Ed.2d 474, 482-483, 111 S.Ct. 478, 482]
(hereafter Jngersoll-Rand).)
(1b) We must decide whether ERISA’s broad preemption
provision encompasses section 3111. We conclude that it does.
(2b) “ *[T]he question whether a certain state action is pre-
empted by federal law is one of congressional intent. “The
purpose of Congress is the ultimate touchstone.” ’ [ Citations. ] To
discern Congress’ intent we examine the explicit statutory lan-
guage and the structure and purpose of the statute. [ Citations. }
... [1] Where, as here, Congress has expressly included a broadly
worded pre-emption provision in a comprehensive statute such as
ERISA, our task of discerning Congressional intent is considera-
bly simplified.” (Jngersoll-Rand, supra, 498 U.S. at p. — [112
L.Ed.2d at p. 483, 111 S.Ct. at p. 482).)
Section 514(a) of ERISA expressly preempts “any and all
State laws insofar as they may now or hereafter relate to any
employee benefit plan... .” (29 U.S.C. § 1144(a), italics added.)
Section 514(c) of ERISA defines the terms used in section
514(a): “(1) The term ‘State Law’ includes all laws, decisions,
rules, regulations, or other State action having the effect of law, of
any State....[{]] (2) The term ‘State’ includes a State, any
political subdivisions thereof, or any agency or instrumentality of
either, which purports to regulate, directly or indirectly, the terms
and conditions of employee benefit plans covered by this sub-
chapter.” (29 U.S.C. § 1144(c).)
A-5
CSCAC argues that ERISA preempts only those siate laws
that regulate the terms and conditions of ERISA plans. This
argument derives from the phrase “purports to regulate,” which
appears in the definition of “State” in section 514(c)(2) of
ERISA. (29 U.S.C. § 1144(c)(2).) The case law, however, does
not support CSCAC’s argument. All that is necessary to invoke
ERISA’s statutory preemption provision is that the state law in
question “relate to” an ERISA plan. As will be shown, section
3111 “relates to” such plans by creating a mechanism for enforc-
ing an employer’s contribution obligations that Congress did not
provide.
Furthermore, even if we were to accept for the sake of argu-
ment CSCAC’s proposition that a state law, to be preempted,
must regulate an ERISA plan, section 3111 still would be
preempted. Although section 3111 does not specifically require
that certain terms be included in a plan, it does purport to
regulate the conditions under which the terms of a plan can be
enforced. The section does so by creating an additional cause of
action for enforcing contribution obligations and by making an
additional entity liable for such contributions. (See Jron Workers
Pension Fund v. Terotechnology (Sth Cir. 1990) 891 F.2d 548,
553 (hereafter Jron Workers).)
The Breadth of Federal Preemption Under ERISA
(2c) The United States Supreme Court in a series of opinions
has emphasized the unusual breadth of ERISA’s express preemp-
tion provision, describing section 514(a) of ERISA as a “virtually
unique pre-emption provision” (Franchise Tax Bd. v. Laborers
Vacation Trust (1988) 463 U.S. 1, 24, fn. 26 [77 L.Ed.2d 420,
440, 103 S.Ct. 2841]), and as a clause “conspicuous for its
breadth.” (FMC Corp. v. Holliday (1990) 498 U.S.
[112 L.Ed.2d 356, 364, 111 S.Ct. 403, 407].) The court has also
characterized the provision as “deliberately expansive” (Pilot
Life, supra, 481 U.S. at p. 46 [95 L.Ed.2d at p. 46], citing Alessi
v. Raybestos-Manhattan, Inc. (1981) 451 U.S. 504, 523 [68
L.Ed.2d 402, 416, 101 S.Ct. 1895]), and as “establish[ing} as an
area of exclusive federal concern the subject of every state law
that ‘relate[s] to’ an employee benefit plan governed by ERISA.”
A-6
(FMC Corp. v. Holliday, supra, 498 US. > eee
L.Ed.2d at p. 364, 111 S.Ct. at p.407].)
(3) Consistent with the foregoing, the high court has also
interpreted broadly the statutory term “relate to.” (29 U.S.C.
§ 1144(a).) Most recently, in Ingersoll-Rand, supra, the court
explained that “[t]he key to §514(a) is found in the words
‘relate to.” Congress used those words in their broad sense,
rejecting more limited pre-emption language that would have
made the clause ‘applicable only to state laws relating to the
specific subjects covered by ERISA.’” (Ingersoll-Rand, supra,
498 US. at p. [112 L.Ed.2d at p. 483, 111 S.Ct. at p. 482],
citations omitted.) This is consistent with the court’s previous
instruction in Pilot Life that “ ‘a state law “relate[s] to” a benefit
plan, “in the normal sense of the phrase, if it has a connection
with or reference to such a plan.” ’” (Pilot Life, supra, 481 U.S.
at p. 47 [95 L.Ed.2d at p. 48], citations omitted.) “Because of the
breadth of the preemption clause and the broad remedial purpose
of ERISA, ‘state laws found to be beyond the scope of [section
514(a) of ERISA] are few.’ ”(Cefalu v. B. F. Goodrich Co. (Sth
Cir. 1989) 871 F.2d 1290, 1294, fn. omitted.)
In determining whether section 3111 “relates to” a benefit plan,
we take note that the United States Supreme Court has on several
occasions stated that “state laws which make ‘reference to’
ERISA plans are laws that ‘relate to’ those plans within the
meaning of § 514(a) [of ERISA].” (Mackey v. Lanier Collection
Agency & Serv. (1988) 486 U.S. 825, 829 [100 L.Ed.2d 836, 843,
108 S.Ct. 2182], citing Pilot Life, supra, 481 U.S. at pp.47-48 [95
L.Ed.2d at pp. 47-48]; Metropolitan Life Ins. Co. v. Massachu-
setts (1985) 471 U.S. 724, 739 [85 L.Ed.2d 728, 740, 105 S.Ct.
2380].) Indeed, the court has “virtually taken it for granted that
state laws which are ‘specifically designed to affect employce
benefit plans’ are pre-empted under § 514(a).” (Mackey v.
Lanier Collection Agency & Serv., supra, 486 U.S. at p. 829 [100
L.Ed.2d at p. 844].)
A-7
Section 3111 Is Specifically Designed to Affect Employee
Benefit Plans
(1c) Section 3111 is specifically designed to affect employee
benefit plans. The section expressly refers to “trust fund[s]
established pursuant to a collective bargaining agreement” and
provides to such funds a mechanics’ lien remedy not provided by
Congress. Thus, section 3111 singles out ERISA plans for special
treatment.
CSCAC argues that “ERISA trust funds receive no greater
benefits under [section 3111] than any other party entitled to
invoke the mechanics’ lien remedy.” To be sure, section 3111
does treat ERISA plans the same as other parties whose claims
are based on having furnished labor or materials for a construction
project. The significant difference, however, is that ERISA plans
do not furnish labor or materials for construction projects. Ac-
cordingly, to treat them as persons who do furnish labor or
materials is to single them out for special treatment.’ Because
section 3111 singles out ERISA plans for special treatment and
is, in fact, designed to affect them specifically, we conclude the
statute “relates to” ERISA plans.‘
> Another significant difference between ERISA plans and other
persons whose claims are based on furnishing labor or materials is that
the latter assert their claims under section 3110. Section 3111 is
specifically for the use of express trust funds established pursuant to
collective bargaining agreements.
*CSCAC contends that because section 514(a) of ERISA refers to
“plans” and section 3111 refers to “trust funds,” section 3111 is not
preempted by ERISA. However, other statements and arguments made
by CSCAC belie the contention that section 3111 does not affect
ERISA plans. For example, CSCAC states that the “Carpenters Trust
Funds are employee pension benefit plan or employee welfare benefit
plans within the meaning of ERISA; see 29 U.S.C. §§ 1002(1) and
1002(2)(a).” (Italics added.) Also, CSCAC argues that the mechan-
ics’ lien action codified in section 3111 provides an effective and
necessary remedy for employee benefit plans to enforce an employer's
promise to pay fringe benefit contributions and that preemption of
section 3111 may affect the p/ans’ ability to maintain benefit levels for
their participants.
A-8
Preemption Does Not Require Regulation of the Terms and
Conditions of an ERISA Plan
(4) Contrary to CSCAC’s argument, it is well settled that a
state law need not regulate the terms and conditions of an ERISA
plan for preemption to apply. The United States Supreme Court
has rejected the similar argument that the statutory term “pur-
ports to regulate” in section 514(c)(2) of ERISA causes section
514(a) of ERISA to preempt only those state laws that affect a
plan’s terms, conditions, or administration. (Jngersoll-Rand,
supra, 498 US. at p. [112 L.Ed.2d at p. 485, 111 S.Ct. at p.
484].) In rejecting this argument, the court stated that, “[the
argument] misreads § 514(c)(2) [of ERISA] and consequently
misapprehends its purpose....Section 514(c)(2) expands,
rather than restricts, [the] definition [of State] for pre-emption
purposes in order to ‘include’ state agencies and instrumentalities
whose actions might not otherwise be considered state law. Had
Congress intended to restrict ERISA’s pre-emptive effect to state
laws purporting to regulate plan terms and conditions, it surely
would not have done so by placing the restriction in an adjunct
definition section while using the broad phrase ‘relate to’ in the
pre-emption section itself. Moreover, if §514(a) [of ERISA]
were construed as [defendant] urges, the ‘relate to’ language
would be superfluous—Congress need only have said that ‘all’
state laws would be pre-empted. Moreover, our precedents fore-
close this argument. In Mackey, the Court held that ERISA pre-
empted a Georgia garnishment statute that excluded from gar-
nishment ERISA plan benefits. [Mackey v. Lanier Collections
Agency & Serv., supra, 486 U.S. at pp. 828, fn. 2, 830 (100
L.Ed.2d at pp. 843, 844).] Such a law clearly did not regulate the
terms or conditions of ERISA-covered plans, and yet we found
preemption. Mackey demonstrates that § 514(a) cannot be read
so restrictively.” (Ingersoll-Rand, supra, 498 U.S. at p.
[112 L.Ed.2d at p. 485, 111 S.Ct. at p. 484].)°
*The Court of appeal originally decided this case by relying on
Carpenters Health & Welfare Trust Fund v. Parnas Corp. (1986) 176
Cal.App.3d 1196 [222 Cal.Rptr. 668]. the Parnas case was decided
before, and is inconsistent with, Pilot Life. Rather than using the “relate
to” test, the Parnas decision used the much narrower preemption
A-9
Section 3111 Also Regulates ERISA Plans
(1d) Even though a state law need not regulate ERISA plans
to be preempted, a finding that a state law does regulate ERISA
plans necessarily includes a finding that the law “relates to” such
a plan. (Local Union 598 Etc. v. J.A. Jones Const. Co. (9th Cir.
1988) 846 F.2d 1213, 1218, affd. (1988) 488 U.S. 881 [102
L.Ed.2d 202, 109 S.Ct. 210] (hereafter Jones).)°® Section 3111
regulates ERISA plans by creating a funding mechanism not
provided by Congress. Hence, the fact that section 3111 regulates
ERISA plans provides further support for the conclusion that
section 3111 “relates to” ERISA plans and is preempted.
Federal case law directly on point supports our view that
section 3111, by creating an additional funding mechanism for
ERISA plans not provided for by Congress, “regulates,” and
hence “relates to,” ERISA plans and is for that reason pre-
empted. In Iron Workers, supra, 891 F.2d 548, the Fifth Circuit
considered a Louisiana mechanics’ lien law that was functionally
identical to section 3111. Borden Chemical had entered into a
contract for maintenance services with Terotechnology Corpora-
tion. A trade council, on behalf of several unions, executed a
collective bargaining agreement with Terotechnology for work to
be performed at the Borden plant. The agreement required
Terotechnology to contribute to employee benefit funds for the
work by its employees at the Borden plant. After a period of
standard discussed above: “ERISA’s preemption of ‘State law’ is only of
such laws as regulate the ‘terms and conditions’ of employer benefit
plans.” (Parnas, supra, 176 Cal.App.3d at p. 1201, italics in original.)
As the Parnas decision conflicts with Pilot Life and our decision in this
case, it is disapproved. Similarly, Sheet Metal Workers Pension Plan v.
Columbia Savings & Loan Assn. (1990) 221 Cal.App.3d Supp. 21 [270
Cal.Rptr. 608], which relies on Parnas in concluding that section 3111 is
not preempted, is disapproved.
* In discussing the interrelationship of the “purports to regulate” and
“relate to” language, the Ninth Circuit Court of Appeals stated, “[t]he
narrower ‘purports to regulate’ test is included within the broader ‘relates
to’ test. [Citations.] Thus a finding that a statute ‘purports to regulate’
an employee benefit plan necessarily includes a finding that it ‘relates to’
such a plan.” (Fn. omitted. Jones, supra, 846 F.2d at p. 1218.)
A-10
compliance, Terotechnology stopped contributing. The unions
and funds filed liens pursuant to Louisiana’s Private Works Act
against Borden’s real property. The Fifth Circuit held that the
Louisiana law, because it created an additional method of enforc-
ing the funding requirements of employee benefit plans, was
preempted under section 514(a) of ERISA.
(5) In reaching its conclusion, the Jron Workers court dis-
cussed the kinds of state laws that have been found to “relate to”
employee benefit plans: “The state laws that have previously been
found to be preempted by section 514(a) [of ERISA] because
they ‘relate’ to ERISA plans fall into four categories[: (1) ] laws
that regulate the type of benefits or terms of ERISA plans[; (2) ]
laws that create reporting, disclosure, funding or vesting require-
ments for ERISA plans[; (3)] laws that provide rules for the
calculation of the amount of benefits to be paid under ERISA
plans[; and (4)] laws and common law rules that provide
remedies for misconduct growing out of the administration of the
ERISA plan. The principle underlying all of these decisions
[ preempting state laws] would appear to be that the state law is
preempted by section 514(a) if the conduct sought to be regu-
lated by the state law is ‘part of the administration of an employee
benefit plan’: that is, the state law is preempted if it regulates the
matters regulated by ERISA: disclosure, funding, reporting, vest-
ing, and enforcement of benefit plans.”’ (Iron Workers, supra, 891
F.2d at p. 553, italics added.)
(le) Section 3111 specifically purports to regulate employee
benefit plans by providing an additional method of funding, a lien
against real property, which is not provided by, and therefore is
not allowed under, ERISA. In essence, section 3111 creates a
new state cause of action for the collection of contributions owed
to benefit plans and makes an additional entity liable for such
contributions. Lien actions under section 3111, which are gov-
erned by state law, are not subject to the jurisdiction of the federal
courts under ERISA. (Carpenters Southern Cal. Admin. v. Ma-
jestic Housing(9th Cir. 1984) 743 F.2d 1341, 1346.)’
"In Majestic Housing, supra, the Ninth Circuit Court of Appeals
considered the connection between section 3111 and ERISA. The court
A-11
ERISA preempts new state-law causes of action for the collec-
tion of contributions because, consistent with its goal of providing
“appropriate sanctions and ready access to federal courts” (29
U.S.C. § 1001(b)), ERISA itself provides the remedies for the
collection of contributions. Section 502(a) of ERISA (29 U.S.C.
§ SC 1132(a)) provides in part that “[a] civil action may be
brought—...{{]] (3) by a participant, beneficiary, or fiduciary
(A) to enjoin any act or practice which violates any provision of
this title or the terms of the plan or (B) to obtain other
appropriate equitable relief (i) to redress such violations or (ii) to
enforce any provisions of this title or the terms of the plan.” (29
U.S.C. § 1132(a) (3), italics added.)
Additionally, section 515 of ERISA (29 U.S.C. § 1145) pro-
vides: “Every employer who is obligated to make contributions to
a multiemployer plan under the terms of the plan or under the
terms of a collectively bargained agreement shall, to the extent
not inconsistent with law, make such contributions in accordance
with the terms and conditions of such plan or such an agree-
ment.” Hence, a participant, beneficiary or a fiduciary can bring
an action under section 502(a) of ERISA (29 U.S.C. § 1132(a))
to enforce an employer’s obligation under section 515 of ERISA
(29 U.S.C. § 1145).
held that “[an] action to enforce [a] lien against Majestic’s property
[was] one under state, and not federal law. Consequently, the district
court was without jurisdiction to rule on the motion for summary
judgment.” (Jd. at p. 1346.)
* CSCAC argues that ERISA, as originally enacted in 1974, did not
include a cause of action for the collection of benefit contributions and,
hence, Congress could not have intended to preempt state law causes of
action. The dissent adopts CSCAC’s position, arguing further that we
must determine the scope of ERISA’s preemption provision as of 1974,
without regard to subsequent amendments. (Dis. opn., post, pp. 1059-
1060.)
The premise of these arguments is incorrect. Even in 1974 ERISA
contained a cause of action to enforce its terms, section 502 (29 U.S.C.
§ 1132), and the remedies provided in section 502 are exclusive. With
the addition of section 515 of ERISA (29 U.S.C. § 1145) in 1980,
Congress sought only to streamline the process of collecting delinquent
A-12
(6) As the Court of Appeal in this case and the federal court in
Iron Workers, supra, noted, Pilot Life, supra, establishes that the
remedies in section 502 of ERISA are exclusive and displace
state laws which purport to create parallel remedies. “[T]he
detailed provisions of § 502(a) set forth a comprehensive civil
enforcement scheme.... The policy choices reflected in the in-
clusion of certain remedies and the exclusion of others under the
federal scheme would be completely undermined if ERISA-plan
participants and beneficiaries were free to obtain remedies under
state law that Congress rejected in ERISA. ‘The... carefully
integrated civil enforcement provisions found in § 502(a) of the
statute as finally enacted... provide strong evidence that Con-
gress did not intend to authorize other remedies that it simply
forgot to incorporate expressly.’ (Jron Workers, supra, 891 F.2d
at p. 555, quoting Pilot Life, supra, 481 U.S. at 54 [95 L.Ed.2d at
pp. 52], italics in original.) “The expectations that a federal
common law of rights and obligations under ERISA-regulated
plans would develop, ... would make little sense if the remedies
available to ERISA participants and beneficiaries under § 502(a)
{of ERISA] could be supplemented or supplanted by varying
state laws.” (Pilot Life, supra, 481 U.S. at p. 56 [95 L.Ed.2d at p.
53].)
contributions exclusively under federal law. (See 126 Cong. Rec. 23029
(1980): “Recourse available under current law for collecting delinquent
contributions is insufficient and unnecessarily cumbersome. . . . Federal
pension law must permit trustees of plans to recover delinquent contri-
butions efficaciously, and without regard to issues which might arise
under labor-management relations law—other than 29 U.S.C. § 186.”)
* Various amici curiae have asserted that section 3111 is saved from
preemption by a statement in the legislative history of the Multi-
Employer Pension Plan Amendments Act of 1980 (Pub.L. No. 96-364,
94 Stat. 1208 [hereafter Amendments]). We disagree. The Amend-
ments, among other things, added section_515 of ERISA (29 U.S.C.
§ 1145) and revised section 502(g) of ERISA (29 U.S.C. § 1132(g))
pertaining to awards of attorney fees, costs, and liquidated damages in
actions for delinquent contributions.
Commenting on the statutory provisions of section 502(g) of ERISA
(29 U.S.C. § 1132(g)), the relevant House committee stated: “the Bill
preempts any state or other law which would prevent the award of
A-13
(1f) In essence, CSCAC’s action under section 3111 is a civil
action by a fiduciary to enforce the provisions of ERISA with
regard to employer contributions (i.e., § 502(a) of ERISA, 29
U.S.C. § 1132(a) & § 515 of ERISA, 29 U.S.C. § 1145) and to
enforce the terms of the plan (i.e., the funding contributions
required by the collective bargaining agreement). Like the Loui-
siana law in Jron Workers, supra, 891 F.2d 548, the state is
attempting to “regulate” the terms and conditions of a pension
plan through the use of a new cause of action, its lien laws. State
laws, however, may not be used to supplement or supplant the
civil enforcement scheme developed by ERISA. (See Pilot Life,
supra, 481 U.S. at p. 56 [95 L.Ed.2d at p. 53].)
in summary, by providing an additional cause of action to those
already provided by ERISA, section 3111, like the Louisiana law
in Iron Workers (supra, 891 F.2d 548), “regulates” ERISA
plans. This recognition further supports the conclusion that the
section “relates to” ERISA plans and is, thus, preempted.
reasonable attorney’s fees, court costs or liquidated damages, or which
would limit liquidated damages to an amount below the twenty percent
level. However, the Bili does not preclude the award of liquidated
damages in excess of the twenty percent level if an award of such a
higher level of liquidated damages is permitted under state or other law.
The Committee Amendment does not change any other type of remedy
permitted under state or federal law with respect to delinquent multiem-
ployer contributions.” (H.R. No. 96-868, pt. 2, on H.R. No. 3909 of the
House Com. on Ways and Means, 96th Cong., 2d Sess., pp. 3037-3038
(1980).)
Amici curiae argue that this section of the legislative history indicates
that Congress did not intend to preempt state laws granting mechanics’
lien rights to employee benefit plans. This reading of the House report is
too broad. This single comment, pertaining to specific collateral reme-
dies such as liquidated damages and attorney fees against delinquent
employers, does not evidence a legislative intent to allow for remedies
against delinquent employers that are not provided for in ERISA. Such
an interpretation of this comment would vitiate the extensive legislative
history of ERISA and the numerous United States Supreme Court
statements regarding Congress’s choice of certain enforcement provi-
sions and the exclusion of all others.
A-14
Other Arguments
Invoking Mackey v. Lanier Collections Agency & Serv., supra,
486 U.S. 825 [100 L.Ed.2d 836, 108 S.Ct. 2182] (Mackey),
CSCAC argues that section 3111 is not preempted because it is
an “ancillary state collection remed[y].” In Mackey, a creditor
sought to garnish money that an ERISA plan owed to its
beneficiaries, who were the creditor’s debtors. The Mackey court
analyzed a Georgia antigarnishment statute and Georgia’s general
garnishment procedures. The court concluded that a Georgia
Statute that barred the garnishment of funds or benefits of an
employee benefit plan subject to ERISA was preempted by
ERISA. The court held that this antigarnishment statute ex-
pressly referred to, and solely applied to, ERISA plans, and that
state laws which make reference to ERISA plans are laws that
“relate to” those plans within the meaning of section 514(a) of
ERISA (29 U.S.C. § 1144(a)). (Mackey, supra, 486 U.S. at p.
829 [100 L.Ed.2d at p. 843].) The ERISA plan beneficiaries in
Mackey further argued that the entire Georgia garnishment
procedure is preempted by ERISA. The United States Supreme
Court held that Georgia’s garnishment statute, as a generally
applicable mechanism for the enforcement of judgments, was not
preempted by ERISA. (Jd. at p. 841 [100 L.Ed.2d at p. 851].)
Mackey’s analysis of Georgia’s general garnishment procedures
does not save section 3111 from preemption. The decision con-
cerned a third party action for enforcement of judgments against
beneficiaries of an ERISA plan. ERISA does not contain reme-
dial provisions for such actions. Largely for this reason, the
United States Supreme Court concluded that “state-law methods
for collecting money judgments must, as a general matter, remain
undisturbed by ERISA; otherwise, there would be no way to
enforce such a judgment won against an ERISA plan.” (Mackey,
supra, 486 US. at p. 834 [100 L.Ed.2d at p. 846].) The present
case is not similar because ERISA expressly provides remedies
for recovery of delinquent contributions to employee benefit plans.
Furthermore, in holding that the Georgia garnishment statute
was not preempted, the high court noted that the statute “cre-
ate[d] no substantive causes of action, nor new bases for relief, or
any grounds for recovery; [it] does not create the rule of decision
A-15
in any case affixing liability.” (Mackey, supra, 486 U.S. at p. 834,
fn. 10 [100 L.Ed.2d at p. 847].) In contrast, California’s trust
fund lien statute does more than provide a new enforcement
mechanism for collecting judgments; it creates new substantive
rights. (Cf. Jron Workers, supra, 891 F.2d at p. 555.) Section
3111 permits the creditor (the trust fund) to enforce a debt (for
outstanding fringe benefit contributions) not against the debtor
(the defaulting employer), but against the property of a third
party that is not a party to the collective bargaining agreement.
Section 3111 gives a trust fund a right to a lien against the
property of third parties, such as El] Capitan, that the fund would
not, and does not, have under ERISA. In the absence of section
3111, El Capitan would have no liability to the funds for the
fringe benefit contributions. Therefore, section 3111 cannot be
upheld under Mackey as it creates a new substantive right against
the property of a third party that is not created by ERISA and,
thus, goes beyond being a mere means of enforcing a judgment.
(See Iron Workers, supra, 891 F.2d at p. 556.)
CSCAC next argues that section 3111 is not preempted be-
cause “[i]t regulates land nghts, historically a power reserved to
the state.” (7) However, “[i]n order to avoid preemption, it is not
sufficient that a state statute represent the exercise of traditional
state power. [Citation.] A purported fundamental state interest is
relevant only when there is an element of uncertainty as to
whether the challenged state law falls within the scope of the
ERISA preemption clause... . [|] However, the strength of the
state interest is of no consequence where the state law clearly
‘purports to regulate’ an employee benefit plan. ‘In order to avoid
being preempted, a state law in addition to being an exercise of
traditional police powers must also affect the plan ‘‘in too tenuous,
remote, or peripheral a manner to warrant a finding that the law
‘relates to’ the plan.""’"’ (Jones, supra, 846 F.2d at pp. 1220-
1221, citations omitted, italics added.) Section 3111 does not
affect ERISA plans merely in a “tenuous, remote, or peripheral”
manner, instead, it has a substantive effect. The section makes an
additional entity liable to plans for contributions. (See J/ron
Workers, supra, 891 F.2d at p. 556.)
A-16
Lastly, CSCAC argues that section 3111 “provides an effective
and necessary remedy for employee benefit plans.” That this may
be so is irrelevant. The United States Supreme Court has specifi-
cally held that even state laws which may help to effectuate
ERISA’S underlying purposes are still preempted. (Mackey,
supra, 486 U.S. at pp. 829-830 [100 L.Ed.2d at p. 844].) In
Mackey, the United States Supreme Court explained that
““*(t]he pre-emption provision [of § 514(a)}....displace[s] all
state laws that fall within its sphere, even including state laws that
are consistent with ERISA’s substantive requirements.’ Metropol-
itan Life Ins. Co. v. Massachusetts, [471 U.S. 724, 739]....
Legislative ‘good intentions’ do not save a state law within the
broad pre-emptive scope of § 514(a).” (Mackey, supra, 486 U.S.
at pp. 829-830 [100 L.Ed.2d at p. 844], italics added.) Thus, the
fact that the trust fund lien procedure may provide a remedy
useful to CSCAC is irrelevant.
Disposition
For the foregoing reasons, we conclude that Civil Code section
3111 is preempted by ERISA. The judgment of the Court of
Appeal is affirmed.
Lucas, C. J., Kennard, J., Arabian, J., and Baxter, J.,
concurred.
BROUSSARD, J.—I dissent. In Mackey v. Lanier Collection
Agency & Service (1988) 486 U.S. 825 [100 L.Ed.2d 836, 108
S.Ct. 2182] (hereafter Mackey), the United States Supreme
Court adopted two fundamental rules for the construction and
application of the express preemption provision (29 U.S.C.
§ 1144(a)) of the Employee Retirement Income Security Act of
1974 (ERISA) (29 U.S.C. § 1001 et seq.). The majority violate
both of them. Mackey also sets out three areas of state law which
are not preempted. All three are applicable in the instant case.
The majority ignore two areas and unduly limit the third. The
majority opinion attempts to dispose of Mackeyas a case which
merely deals with garnishment. However, it is clear that the
express statements and the reasoning of the high court are not
A-17
limited to garnishment but provide broad instruction as to the
state laws which are not preempted.
While it is, of course, proper to emphasize the broad language
used by the United States Supreme Court in describing the
preemption clause of ERISA, we may not stop there, but must
also recognize the limitations on preemption. And when we
recognize the correct function of a mechanics lien and the
relationship of the lien provided by Civil Code section 3111 to
employee compensation, it is clear under Mackey that we may not
discriminate against ERISA plans by denying them liens given to
others similarly situated, that we may not discriminate against
ERISA plan members in providing remedies for recovery of
compensation, that Congress did not intend to preempt state law
liens, including mechanics liens, and that, although probably not
essential to the decision in the instant case, Congress intended to
permit certain state law actions by ERISA plans to recover
delinquent employer contributions.
I. The Preemption Clause and Its Expansive Nature
The preemption clause of ERISA is very broad and encom-
passing, and although it could be read as preempting the applica-
tion of state law in any case in which an ERISA plan is a party, it
is settled that state law can be applied to some cases involving
ERISA plans and that we look to congressional intent in deter-
mining which state laws may be applied. The clause preempts
“any and all State laws insofar as they may now or hereafter relate
io any employee benefit plan... .” (29 U.S.C. § 1144(a), italics
added.) “The term ‘State law’ includes all laws, decisions, rules,
regulations, or other State action having the effect of law, of any
State.” (29 U.S.C. § 1144(c) (1).)
The United States Supreme Court has characterized the provi-
sion as “deliberately expansive” (Pilot Life Ins. Co. v. Dedeaux
(1986) 481 U.S. 41, 46 [95 L.Ed.2d 39, 46, 107 S.Ct. 1549]),
and as establishing “‘as an area of exclusive federal concern the
subject of every state law that ‘relate[s] to’ an employee benefit
plan governed by ERISA.” (FMC Corp. v. Holliday (1990) 498
US. . [112 L.Ed.2d 356, 364, 111 S.Ct. 403, 407].) A
state law relates to a benefit plan, in the normal sense of the
A-18
“6 >»
phrase, “ ‘if it has a connection with or reference to such a plan.
(Pilot Life Ins. Co. .. Dedeaux, supra, 481 U.S. 41, 47 [95
L.Ed.2d 39, 48].)
The language of the preemption provision and of the United
States Supreme Court cases is so broad that it could be under-
stood as meaning that state law could never be applied in
litigation involving an ERISA plan, except in cases coming within
the express exemption of the preemption clause for cases involv-
ing state laws regulating insurance, banking or securities. How-
ever, such a broad interpretation of the provision and the cases
would be improper.
[T]he question whether a certain state action is pre-empted
by federal law is one of congressional intent. “The purpose of
Congress is the ultimate touchstone.”’ [Citations.] To discern
Congress’ intent we examine the explicit statutory language and
the structure and purpose of the statute. (See FMC Corp. v.
Holliday, 498 U.S. : , 111 S.Ct. 403, 407, 112 L.Ed.2d
356 (1990), citing Shaw y. Delta Air Lines, Inc., supra, 463 U.S.,
at 95, 103 S.Ct., at 2898-99).” (Ingersoll-Rand Co. v. McCienaon
(1990) ___ US. [112 L.Ed.2d 474, 483, 111 S.Ct.
478, 482].)
In the recent case of Ingersoll-Rand, the high court addressed
the purpose of the preemption clause. In that case a fired
employee claimed that he was wrongfully terminated for the
principal reason that his pension was about to vest after nearly 10
years of employment and that the employer sought to avoid the
expense of the pension. The court explained the purpose of the
preemption provision as follows: The preemption provision “was
intended to ensure that plans and plan sponsors would be subject
to a uniform body of benefit law; the goal was to minimize the
administrative and financial burden of complying with conflicting
directives among States or between States and the Federal
Government. Otherwise, the inefficiencies created could work to
the detriment of plan beneficiaries. FMC Corp., 498 U.S. at ___.,
111 S. Ct., at 408 (citing Fort Halifax, 482 U.S., at 10-11, 107
S.Ct., at 2216-17); Shaw, 463 U.S. at 105, and n. 25, 103 S.Ct.,
at 2904, and n. 25.) Allowing state based actions like the one at
issue here would subject plans and plan sponsors to burdens not
1
| ne
A-19
unlike those that Congress sought to foreclose through [the
preemption provision]. Particularly disruptive is the potential for
conflict in substantive law. It is foreseeable that state courts,
exercising their common law powers, might develop different
substantive standards applicable to the same employer conduct,
requiring the tailoring of plans and employer conduct to the
peculiarities of the law of each jurisdiction.” (Ingersoll-Rand Co.
v. McClendon, supra, 498 U.S. ' [112 L.Ed.2d 474,
486, 111 S.Ct. 478, 484).)
II. Congressional Intent and the Preemption Clause
The majority, in applying ERISA’s express preemption clause,
rely upon 29 United States Code section 1145, which requires
that employers who have agreed to make contributions to a
multiemployer plan shall make those contributions to the extent
not inconsistent with law. This provision provides federal causes
of action to recover employer delinquencies. However, the section
was not part of ERISA as originally enacted and for this reason it
furnishes no support for the view that the preemption clause in
ERISA preempted such causes of action. In Mackey, the United
States Supreme Court made clear that in interpreting the pre-
emption clause of ERISA, the congressional intent to be deter-
mined is the intent of the Congress that enacted the preemption
clause and not the intent of subsequent Congresses. [W]e must
look at the language of ERISA and its structure, to determine the
intent of the Congress that originally enacted the provision in
question. ‘It is the intent of the Congress that enacted [the
section]... that controls.” Teamsters v. United Staies, 431 U.S.
324, 354, n. 39 (1977).” (Mackey, supra, 486 U.S. at p. 840 [100
L.Ed.2d 851, 108 S.Ct. at p.2191.)
The provisions of 29 United States Code section 1145 were
| added to ERISA in 1980 as part of the Multiemployer Pension
| Plan Amendments Act. Since it was not part of ERISA as
| originally enacted, it is improper for the majority to rely upon it in
construing the express preemption provision.
Moreover, even if it were proper to consider the Multiemployer
Pension Plan Amendments Act of 1980 in construing the express
A-20
preemption provision, the entire 1980 act and its legislative
history must be considered, and when this is done it must be
concluded that Congress sought to retain state law actions to
recover delinquencies and only intended a limited preemption of
state law governing actions to recover delinquencies. As will be
pointed out later in this opinion in connection with implied
preemption, it is clear that Congress, when it enacted the Mul-
tiemployer Pension Plan Amendments Act of 1980, expressly
provided for the application of state law to actions for recovery of
delinquencies in certain circumstances (29 U.S.C.; § 1132(g)),
and that the legislative history of the act shows that Congress
intended the preemption of state law only where it limited
recovery against the employer to an amount less than federal law
provided. The majority ignore 29 United States Code section
1132(g) and the legislative history dealing with preemption.
Accordingly, at the outset, we must conclude that the provi-
sions of 29 United States Code section 1145 may not be consid-
ered in construing the preemption clause or to show an intent on
the part of the Congress to preempt state laws permitting recovery
for employer delinquencies equal to or greater than that permitted
by federal law.
II]. Laws Specifically Designed to Affect ERISA Plans
In Mackey, the high court stated that it has “virtually taken it
for granted that state laws which are ‘specifically designed to
affect employee benefit plans’ are pre-empted” under the preemp-
tion clause. (Mackey, supra, 486 U.S. at p. 829 [100 L.Ed.2d at
p. 844, 108 S.Ct. at p. 2185.]) On the basis of this rule the high
court invalidated a Georgia statute that exempted ERISA plans
from the state’s garnishment law. (/bid.) The majority in their
bottom line—by exempting ERISA plans from mechanics lien
laws—violate the rule against special treatment of ERISA plans.
As pointed out above, the express preemption provision applies
to “any and all State laws.” That term applies not merely to
Statutes but also to “decisions .. . having the effect of law of any
State.” (29 U.S.C. § 1144(c)(1).) Accordingly, just as it is
ordinarily improper for the Legislature to adopt statutes specifi-
—_—
A-21
cally designed to affect ERISA plans, it is improper for this court
through its decisions to establish laws specifically designed to
affect ERISA plans.
The ultimate effect of the majority opinion is to subject ERISA
plans and members of ERISA plans to special treatment. Civil
Code section 3110 grants mechanics liens to numerous specifi-
cally identified persons for services rendered when such persons
have been unpaid and have contributed to an improvement. Civil
Code section 3111 provides the same mechanics lien for ERISA
plans which administer fringe benefits like health insurance and
pension benefits. By permitting those enumerated in section 3110
to obtain liens but denying liens to ERISA plans, the majority
single out ERISA plans for special treatment. The payments to
the ERISA plan sought to be recovered are part of the compensa-
tion of those who furnish labor for the improvement. The net
effect of the state law established by the majority is that employ-
ees who are not members of ERISA plans obtain liens for their
entire unpaid compensation, whereas those who are members and
receive part of their compensation through ERISA plans obtain a
lien for only part of their compensation.
The majority seek to justify the special treatment of ERISA
plans by asserting that, unlike those mentioned in Civil Code
section 3110, ERISA plans do not furnish labor or materials to
the construction project. (Maj. opn., ante, p. 1049.) However, as
I demonstrate, the ERISA claim is part of the compensation for
the worker and must be treated the same as the other
compensation.
The cases have recognized that the claims of the ERISA plans
are part of the employee’s compensation and must be treated the
same as the compensation. In Plumber's Local 458 v. H. Immel,
Inc. (1989) 151 Wis.2d 233, [445 N.W.2d 43, 44-45], the
mechanics lien statute provided for a lien for “any person furnish-
ing labor,” and the court concluded that the lien statute could not
be restricted to hourly wages but included claims by ERISA plans
for funds for fringe benefits.
Similarly, in the closely analogous situation presented in United
States v. Carter (1956) 353 U.S. 210 [1 L.Ed.2d 776, 77 S.Ct.
A-22
793], the issue was the liability of a surety to fringe benefit funds
on a payment bond furnished by a contractor, as required by the
Miller Act (40 U.S.C. § 269a et seq.), for the protection of
persons furnishing labor or materials for the construction of
federal buildings. The statute provided that every “person who
has furnished labor or material in the work provided for in such
contract... shall have the right to sue on such payment bond. . .
for the sum justly due him.” (40 U.S.C. § 270b(a). The court
stated: “The Miller Act represents a congressional effort to
protect persons supplying labor and material for the construction
of federal public buildings in lieu of the protection they might
receive under state statutes with respect to the construction of
nonfederal buildings.” (353 U.S. at p. 216 [1 L.Ed.2d at p.
782].) Among the protection under state statutes, obviously, is
the mechanics lien statute applying to private buildings; thus, the
issue is clearly analogous. Notwithstanding that the statute was
phrased in terms “furnished labor,” the court concluded that the
fringe benefit funds could maintain an action on the bond. The
court reasoned in part that the “contributions were a part of the
compensation for the work to be done by [the] employees” and
that trustees “stand in the shoes of the employees and are entitled
to enforce their rights.” (Jd., at pp. 217-218, 220 [1 L.Ed.2d at
pp. 783-784]; see Morrison-Knudsen Constr. Co. v. Director,
OWCP (1982) 461 U.S. 624, 631 [76 L.Ed.2d 194, 200, 103
S.Ct. 2045].)
A similar view is found in our code sections dealing with stop
notices and state payment bonds (the state Miller Act counter-
part), which treat claims by laborers and ERISA plans as being
the same thing. (See Civ. Code, §§ 3181, 3247.)
Our court has long recognized the basic principle that claims
for fringe benefits are part of the compensation and must be
treated accordingly as to creditors’ rights. Thus in Dunlop v.
Tremayne (1965) 62 Cal.2d 427 [42 Cal.Rptr. 438, 398 P.2d 774,
17 A.L.R.3d 368], we held that under the preference statute
applicable to assignments for the benefit of creditors, Code of
Civil Procedure section 1204, health, welfare, and pension contri-
butions would be included under the term “wages.” The court
reasoned: “The terms and conditions of the payments were
A-23
ascertained by the employers and representatives of the employ-
ees in wage negotiations, as part of a total wage package. Pay-
ments are made by the employer not as a gift but in consideration
of the services of the employees. In an economic sense they are
wages.” (62 Cal.2d at p. 431.)
We cannot ignore the practical effect of our decisions. ERISA
plans and others who have unpaid claims based on construction
projects are usually unpaid because there are not enough funds to
go around. To permit architects, engineers, surveyors, mechanics,
laborers and others enumerated in Civil Code Section 3110 to
obtain liens while denying liens to ERISA plans is to make
LRISA plans second-class creditors. The effect of the preference
will ordinarily mean that section 3110 creditors will have a
preference and will receive all or part of their claims while
ERISA plans will receive none. Making the plans second-class
creditors flies in the face of ERISA’s express policy to protect the
interest of participants in the plans (29 U.S.C. § 1001(b), (c))
and, more particularly, ERISA’s express policy “to provide rea-
sonable protection for the interests of participants and benefi-
ciaries of financially distressed multiemployer pension plans” and
“to provide a financially self-sufficient program for the guarantee
of employer benefits under multiemployer plans.” (29 U.S.C.
§ 100la(c) (3), (4).)
The express preemption clause in ERISA is directed at state
law generally, including both statutory and decisional law.
Whether special treatment of ERISA plans is accomplished by a
statutory exemption from general law requirements as in Mackey,
or by a decision of the court permitting application of a specific
provision to everyone by enumerating them individually but
leaving out ERISA plans, the effect is the same. The special
treatment is preempted and, because the majority .. the bottom
line provide for special treatment, the law enunciated in their
decision is contrary to federal law and is thus preempted. More-
over, the decision discriminates against union employees belong-
ing to multiemployer ERISA plans by denying them lien rights
for the full amount of their compensation—while allowing non-
ERISA employees liens for all of their compensation.
A-24
IV. State Laws Not Preempted
Congress has not preempted state lien laws.
Mackey establishes three classes of state laws that are not
preempted.
The first class is those cases where Congress has provided for
the application of state law. (Mackey, supra, 486 U.S. at p. 832
[100 L.Ed.2d at pp. 845-846, 108 S.Ct. at pp. 2186-2187].) As
will appear in part VI of this opinion, Congress has expressly
provided for the use of state law to enforce the duty to make
payments to ERISA plans. “ERISA plans may be sued in a
second type of civil action, as well. These cases—lawsuits against
ERISA plans for run-of-the-mill claims such as unpaid rent,
failure to pay creditors, or even torts committed by an ERISA
plan —are relatively commonplace.” (486 U.S. at p. 833 [100
L.Ed.2d at p. 846, 108 S.Ct. at p. 2187], fn. omitted.) As will also
appear, mechanics liens are such run-of-the-mill claims.
The third class was the one before the high court, garnishment.
Because it was directly involved in Mackey it is treated first. The
reasoning of the high court is much broader than garnishment
used to collect a judgment, and it is improper to treat this part of
the Mackey opinion, as the majority do (maj. opn., ante, at pp.
1054-1055), as merely establishing a garnishment exception to
the preemption clause. The reasoning is applicable not merely to
garnishment but to all enforcement mechanisms for collecting
money judgments and also prejudgment mechanisms to secure
the collection of debts, including liens such as the mechanics lien
before us. And, while Mackey obviously involved a suit against an
ERISA plan, it is apparent the same view should apply when the
plan sues.
In Mackey, the court reasoned: “ERISA does not provide an
enforcement mechanism for collecting judgments won in cither of
these two types of actions. Thus, while section [1132(d)], the
‘sue and be sued’ provision, contemplates execution of judgments
won against plans in civil actions, it does not provide mechanisms
to do so. Moreover, Federal Rule of Civil Procedure 69(a), which
would apply when either type of civil suit discussed above is
brought against an ERISA plan in federal court, defers to state
ieee
A-25
law to provide methods for collecting judgments. [ Citation. ]
Consequently, state-law methods for collecting money judgments
must, as a general matter, remain undisturbed by ERISA; other-
wise, there would be no way to enforce such a judgment won
against an ERISA plan. If attachment of ERISA plan funds does
not ‘relate to’ an ERISA plan in any of these circumstances, we
do not see how respondent’s proposed garnishment order would
do so.” (486 U.S. at pp. 833-834 [100 L.Ed.2d at p. 846, 108
S.Ct. at p. 2187], fn. omitted.)
Federal Rules of Civil Procedure, rule 69(a) provides that
proceedings “supplementary to and in aid of a judgment, and in
proceedings on and in aid of execution shall be in accordance with
the practice and procedure of the state in which the district court
is held.” It follows that parties seeking to obtain a judgment lien
must do so on the basis of state law. Since ERISA does not
provide for judgment liens and, so far as I am aware, the federal
government has not adopted a recording act for federal real
property judgment liens, the proceedings to obtain and enforce
judgment liens thus are entirely matters of state law even where
the judgment is a federal judgment.
Generally, proceedings to establish and enforce liens are run-
of-the-mill state law proceedings. The preliminary 20-day notice
of intent to file a mechanics lien (Civ. Code, §§ 3097, 3114) is
probably the most often served legal document in our state.
Similarly, mortgages and deeds of trust are probably among the
most frequently recorded documents in this state, and, of course,
the purpose of the recording is to establish the lien. The reconvey-
ance to cancel the mortgage or deed of trust lien is recorded with
equal frequency.
Furthermore, to conclude that state lien laws are preempted
when ERISA plans are involved means that millions, perhaps
billions, of dollars invested by ERISA pension plans in notes
secured by mortgages and deeds of trust are jeopardized. Those
liens, like mechanics liens, provide an “additional cause of action”
in the property of a fourth party, a party other than the employer,
employee or the plan, and ERISA does not provide a method to
enforce mortgages. To suggest that a Congress which adopted a
comprehensive law to protect the interests of participants in
A-26
employee benefit plans (29 U.S.C. § 1001(b)) intended to pre-
empt state lien laws strains credulity.
Generally, state law prejudgment mechanisms for securing the
ultimate payment of debts are utilized by the federal courts.
While Federal Rules of Civil Procedure, rule 69(a) provides for
the adoption of state law methods to obtain collection after.
judgment, rule 64 provides for the adoption of prejudgment state
law methods to secure payment of debts. The rule provides that
the remedies thus available “include arrest, attachment, garnish-
ment, replevin, sequestration, and other corresponding or
equivalent remedies, however designated and regardless of
whether by state procedure the remedy is ancillary to an action or
must be obtained by an independent action.” Under this provision
it is clear that the builders of a building for an ERISA plan and
their workers should be able to secure and enforce in federal court
(when jurisdiction is proper) a mechanics lien arising against the
property under state law. Likewise, ERISA plans under this
provision should be entitled to enforce state law liens, including
mechanics liens.
No distinction may be made as to liens arising from the
provisions of ERISA plans and other liens in favor or against
ERISA plans. In Mackey, the Solicitor General argued that while
other types of garnishment may be permitted with respect to
ERISA plans, the court should not permit garnishment when it
will affect whether benefits will be paid to a plan participant.
ERISA expressly provides that a participant or beneficiary may
bring an action to recover benefits due, to enforce rights under the
plan, to clarify rights under the plan and to obtain equitable relief
(29 U.S.C. § 1132(a)(1)(B), (a)(3)), and Pilot Life Ins. Co. v.
Dedeaux, supra, 481 U.S. 41 (hereafter Pilot Life), held that
ERISA preempted state law causes of action by a participant or
beneficiary to enforce his or her rights.
The Mackey court rejected the Solicitor General’s argument on
the ground that the preemption clause did not permit the distinc-
tion—it could not be held that the garnishment did not “relate to”
the plan when fourth parties were involved but did “relate to” the
plan when the rights of plan participants were involved. (486 U.S.
at p. 836 [100 L.Ed.2d at p. 848, 108 S.Ct. at pp. 2188-2189.) |
A-27
Similarly, here, it may not be concluded that mechanics liens do
not “relate to” the plan when laborers or suppliers seek to
establish liens against an office building built by a plan, but
“relate to” the plan when it seeks to recover employer
contributions.
The majority argue that Civil Code section 3111 creates new
substantive rights permitting the plan to enforce a debt against
property of a fourth party who is not a party to the collective
bargaining agreement. (Maj. opn., ante, p. 1055) However, the
lien does not create personal liability of the owner. It has long
been recognized that the lien of the mechanic, artisan and
supplier is equitable because those parties have created the very
property upon which the lien attaches. (Tuttle v. Montford
(1857) 7 Cal. 358, 360; Connolly Development, Inc. v. Superior
Court (1976) 17 Cal.3d 803, 825-827 [132 Cal.Rptr. 477, 553
P.2d 637].) Obviously, return of the materials or labor to the
unpaid supplier or laborer is not a viable option, and the law’s
recognition of the unpaid supplier’s and laborer’s contributions to
the improvement does not create a debt or personal liability on
the part of the owner, but only an interest in the property they
helped create.
The fact that the mechanics lien may provide a priority against
fourth parties, so that if the debt is unpaid the lienor may proceed
to the detriment of fourth parties, does not mean that a personal
cause of action is created. The effect of a lien against property is
to give the lienor priority against some other claimants to the
property, such as owners, subsequent mortgagees, judgment lien-
ors or purchasers. In other words, the fact that a lien may
prejudice fourth party claimants is not unique to mechanics liens
but is common to all liens, and the effect in all cases is to give the
lienor an actionable claim against the property affecting fourth
parties with lesser priority. Only when the employer and the
owner are the same, such as a specification builder, will the owner
be individually liable, and then his liability exists even though the
plan does not seek to enforce the lien. As we have seen, the
ERISA plan merely stands in the shoes of the workers and seeks
recovery of their compensation, so its lien also is based upon the
creation of the very property upon which the lien attaches.
A-28
The fact that California has created a cause of action limited to
property rights of a fourth party does not mean there is preemp-
tion. The Georgia garnishment statute upheld in Mackey created
a cause of action in favor of a fourth party against ERISA plans.
ERISA is fundamentally concerned with the relationship between
the members of the plan, employers, and the plan and its
fiduciary, and hardly any of its provisions are concerned with the
rights and duties of fourth parties.
I conclude that ERISA, which does not preempt state laws
providing mechanisms to collect judgments, also does not pre-
empt state laws providing prejudgment mechanisms to secure the
payment of debts such as liens, and that this is true even if
Congress has preempted causes of action to collect the debt.
V. The Cause of Action to Recover Employer Payments
Since the instant case involves a state law lien which is not
preempted whether or not the related cause of action to collect
the debt is preempted, it does not seem necessary to reach the
issue whether ERISA’s preemption ciause preempts actions to
enforce the agreed payment. Nevertheless, I will deal with the
issue because the majority address it. My conclusion is that
ERISA, as originally enacted, did not provide a federal cause of
action for plans to recover a money judgment against delinquent
employers and that, if state law causes of action were found
preempted, the fundamental congressional purpose of protecting
employee benefits would be defeated.
As pointed out above, in interpreting the preemption clause we
look to the intent of the Congress that enacted the clause and
consider the structure of ERISA. In a comprehensive statute to
regulate ERISA plans there are obviously three areas requiring
regulation, namely, the relationship between the employer and the
ERISA plan, the operation of the plan in using the assets, and the
relationship between the plan and its members and beneficiaries.
The civil enforcement section of ERISA, as originally enacted,
provided for a federal cause of action by a participant or benefici-
ary to recover benefits due from an ERISA plan, to enforce rights
under the plan terms, and to clarify future nights. (29 U.S.C.
§ 1132(a)(1)(B).) A federal cause of action was also provided
A-29
for actions by the Secretary of Labor, participant, beneficiary, or
fiduciary against fiduciaries for breach of duty by a fiduciary. (29
U.S.C. § 1132(a)(2).) There was a general provision to enforce
the terms of the plan, but that provision was limited to equitable
relief. Subparagraph (3) of 29 United States Code section
1132(a) provided for an action “by a participant, beneficiary or
fiduciary (A) to enjoin any act or practice which violates any
provision of this subchapter or the terms of the plan, or (B) to
obtain other appropriate equitable relief (i) to redress such
violations or (ii) to enforce any provisions of this subchapter or
the terms of the plan.” (Italics added.)
It is apparent that subparagraph (3) of 29 United States Code
section 1132(a) only provides for equitable proceedings. Because
subparagraph (1) expressly provides for causes of action to
recover benefits due to participants and beneficiaries, and because
they are mentioned along with fiduciaries in subparagraph (3), it
is Clear that the latter subparagraph does not authorize an action
at law to recover a money judgment against delinquent employers,
and that as originally enacted Congress did not provide for such a
federal cause of action. The fact that in 1980 Congress found it
necessary to add provisions for a money judgment against a
delinquent employer (29 U.S.C. §§ 1145, 1132(g)) lends support
to the conclusion that, as originally enacted, ERISA did not
provide for such an action.
Once it is recognized that Congress did not provide a federal
cause of action to recover delinquencies in ERISA as originally
enacted, we must conclude that Congress did not intend to
preempt such causes of action under state law. A conclusion that
there was no action to collect employer delinquencies under either
federal or state law would simply defeat the fundamental purpose
of ERISA to protect employee benefit rights. (29 U.S.C. § 1001.)
We cannot attribute such an intent to Congress.
VI. Implied Preemption of Causes of Action for
Delinquencies
Even though the express preemption clause of ERISA did not
preempt state law causes of action to recover money judgments
A-30
for employer delinquencies, the question remains whether the
1980 amendments to ERISA in themselves established an intent
to preempt the state law causes of action. Although the existence
of a detailed regulatory scheme does not by itself imply preemp-
tion, special features of a law may do so, including that the state
law provides a parallel scheme of federal rights. (See /ngersoll-
Rand Co. v. McClendon, supra, 498 U.S. : [112
L.Ed.2d 474, 486-487, 111 S.Ct. 478, 484-486].)
The 1980 amendments included 29 United States Code section
1145, which imposed a federal duty upon employers to make their
contributions to a multiemployer plan, and 29 United States Code
section 1132(g), which provided the damages to be awarded in
actions to enforce section 1145. However, section 1132(g) (2) (C)
expressly provides for application of state law in certain circum-
stances, and the legislative history of the 1980 enactment makes
clear that the 1980 amendments were intended to retain state law
causes of action and to preempt state law only insofar as it
provided for lesser damages than those provided by Congress.
The fact that Congress has provided for damages to be fixed in
part under state law contemplates state law causes of action to
determine what are state law damages. The legislative history of
the amendments makes clear that this is exactly what Congress
contemplated.
The staff report of the Senate Committee of Labor and Human
Relations states that the Multiemployer Pension Plan Amend-
ments Act Of 1980 was intended “to promote the prompt pay-
ment of contributions and assist plans in recovering the ‘cost
incurred in connection with delinquencies.” (Staff Rep. of the
Sen. Com. on Labor and Human Relations, Sen. No. 1076:
Multiemployer Pension Plan Amendments Act of 1980, 96th
Cong., 2d Sess., p. 44 (1980) Sen. Labor Com. Print.) Congress
recognized that the instability of the construction industry caused
funds to accrue benefit obligations without collecting sufficient
contribution to fund those benefits. (H.R.Rep. No. 96-869(I), 2d
Sess., p. 51 (1980), reprinted in 1980 U.S. Code Cong. & Admin.
News, pp. 2918, 2921.) “The Bill preempts any state or other law
which would prevent the award of reasonable attorney’s fees,
court costs or liquidated damages, or which would limit liquidated
A-31
damages to an amount below the 20 percent level. However, the
Bill does not preclude the award of liquidated damages in excess
of the 20 percent level where an award of such a higher level of
liquidated damages is permitted under applicable State or other
law. The Committee amendment does not change any other type
of remedy permitted under State or Federal law with respect to
delinquent multiemployer plan contributions.” (1980 U.S. Code
Cong. & Admin. News, supra, at pp. 3037-3038, italics added.)
It is thus clear that in 1980 Congress intended to retain state
causes of action and did not intend to preempt state causes of
action to recover delinquencies except to the extent that such
causes of action precluded an award of damages provided by the
1980 amendments.
VII. No Additional Remedies Language
In Pilot Life, the high court stated: “In sum, the detailed
provisions of [29 United States Code § 1132(a)]} set forth a
comprehensive civil enforcement scheme that represents a careful
balancing of the need for prompt and fair claims settlement
procedures against the public interest in encouraging the forma-
tion of employee benefit plans. The policy choices refiected in the
inclusion of certain remedies and the exclusion of others under
the federal scheme would be completely undermined if ERISA-
plan participants and beneficiaries were free to obtain remedies
under state law that Congress rejected in ERISA. ‘The six
carefully integrated civil enforcement provisions found in [29
United States Code § 1132(a)] as finally enacted... provide
strong evidence that Congress did not intend to authorize other
remedies that it simply forgot to incorporate expressly.” (481
US. at p. 54 [95 L.Ed.2d at p. 52], first and second italics added,
third italics in original.)
In Pilot Life, it was held that a state law action for breach of
the covenant of good faith and fair dealing brought by a plan
participant for delay in paying benefits was preempted.
The majority rely upon the above quoted language in arguing
that a state law cause of action to enforce claims for employer
delinquencies is preempted. However, the language must be read
A-32
in context, and within its own limitations. To read the quoted
language broadly as meaning that states may not provide any
remedies in cases involving ERISA plans would be directly
contrary to the subsequent Mackey case, decided shortly after
Pilot Life. Mackey held that state law garnishment and run-of-
the-mill causes of action were not preempted. It is apparent that
the high court is not reading the language so broadly as to
generally preempt state law remedies involving fourth parties
since neither the majority nor the dissent in Mackey saw fit to
even discuss the language. By its own terms Pilot Life’s language
is limited to cases involving claims by participants and benefi-
Cciaries, and as pointed out above, 29 United States Code section
1132(a) provides both a federal cause of action for damages and
equitable relief in such cases. By. contrast, the section as origi-
nally enacted provided only equitable relief where a plan sued to
enforce the employer’s promise to pay. There were not six
carefully crafted remedies to sustain the rights of the plans.
Additionally, the predicate for preemption is that Congress has
provided remedies, but as pointed out above, Congress has not
provided mechanisms, like liens, for collection of debts whether
before or after judgment. I conclude that the broad language is
inapplicable here because it is limited to actions by participants
and beneficiaries, and to situations where Congress has provided
remedies. .
Iron Workers Pension Fund v. Terotechnology (Sth Cir. 1990)
891 F.2d 548, 553, also relied upon by the majority (maj. opn.,
ante, p. 1053) is largely based on a broad reading of the no-
additional-remedy language of Pilot Life. The court did-not
recognize that, as so read, Pilot Life would be in direct conflict
with the later Mackey decision or that, even assuming that
Congress provided a cause of action t» collect delinquencies, it
did not provide mechanisms to collect the amounts found due.
There also is no merit in the claim that Civil Code section 3111
is preempted because it imposes funding requirements. It does not
establish the level of funding. It is no more a funding statute than
statutes providing for attachment, garnishment, judgment liens, or
mortgage liens are funding statutes.
A-33
VIII. Conclusion
I conclude that Civil Code section 3111 is not preempted by
ERISA. California law, whether due to statute or judicial deci-
sion, is preempted by ERISA if it singles out ERISA plans for
special treatmeat. ERISA plans, in seeking the agreed payments,
stand in the shoes of their members furnishing labor for improve-
ments, and by treating the plans differently than other compensa-
tion claims, including those of nonmembers, the majority opinion,
not the Legislature, provides special treatment for ERISA plans
and their members.
Although the sweep of the preemption clause in ERISA is
broad, it does not preempt state lien laws or other pretrial
mechanisms for securing payment of debts. In addition, although
the point probably need not be decided, the absence of any federal
cause of action at law to recover a money judgment for employer
delinquencies precludes finding that Congress intended, when the
preemption clause was adopted, to preempt such state causes of
action because such preemption would mean that there was no
cause of action, state or federal, to recover payments promised to
ERISA plans. Given the fundamental, expressed purpose of
Congress to protect employee benefits, an intent to preclude all
such actions cannot be attributed to Congress. In the Multiem-
ployer Pension Plan Amendments Act of 1980, Congress sought
to add new remedies to permit collection of employer delinquen-
cies and sought to preempt state law remedies only insofar as they
precluded the full recovery provided by federal law. The congres-
sional history shows that Congress believed there were state
remedies to recover delinquencies and intended to preserve them.
Civil Code section 3111 has not been preempted, and the
judgment of the Court of Appeal should be reversed.
Mosk, J., concurred.
A-34
Appendix B
Not To Be Published In Official Reports
In the Court of Appeal
of the State of California
Fifth Appellate District
Carpenters Southern California Administrative Corporation,
Plaintiff and Appellant,
Vv.
El] Capitan Development Company,
Defendant and Respondent.
5 Civil No. F006233
(Super. Ct. No. 185215)
[Filed Mar 20 1987]
OPINION
APPEAL from a judgment of the Superior Court of Kern
County. Henry E. Bianchi, Judge.
Cox, Castle & Nicholson, James P. Watson, Law Offices of
Charles P. Scuily, Inc., Donald C. Carroll, De Carlo & Connor,
John T. De Carlo, Law Offices of Richard A. Brownstein, Karen
L. Holliday, for Plaintiff and Appellant.
Littler, Mendelson, Fastiff & Tichy, Karen E. Ford and Major
Williams, Jr., for Defendant and Respondent.
Appellants, Carpenters Southern California Administrative
Corporation (hereafter CSCAC) filed a complaint in Kern
County Superior Court against E] Capitan Development Com-
pany (hereafter E] Capitan) and numerous Does, with the pur-
pose of foreclosing on mechanics’ liens. CSCAC had filed the
mechanics’ liens in order to collect fringe benefit contributions
allegedly due its members pursuant to a collective bargaining
agreement entered into with a subcontractor. During the term of
the agreement, CSCAC members who were carpenters coming
A-35
under the collective bargaining agreement were employed by the
subcontractor, who in turn worked on E] Capitan’s property. The
subcontractor allegedly failed to pay fringe benefit contributions
in excess of $121,000 under the terms of the collective bargaining
agreement.
El] Capitan demurred. In the demurrer, it was argued the
complaint failed to state a cause of action because the California
statutory lien procedure upon which it was based (Civ. Code,
§ 3111)’ was preempted by the Employee Retirement Income
Security Act of 1974, as amended (hereafter ERISA). (See 29
U.S.C. 1144.) The demurrer was granted with leave to amend.
Plaintiffs declined to amend (purportedly upon agreement by the
parties. Judgment was entered on August 8, 1985. CSCAC timely
appeals.
FACTS
Both parties have attempted to abbreviate the facts since the
issue presented is ultimately one of law and many of the facts are
undisputed.
CSCAC is the administrator and assignee of rights involving
various multi-employer trust funds. The carpenters’ trust funds
are such multi-employer benefit trusts. They are organized pursu-
ant to section 302, subsection (c)(5) of the Labor Management
Relations Act of 1947. (See 29 U.S.C. § 18, subsec. (c) (5).) As
a result, CSCAC is a fiduciary, as defined by ERISA, and the
trust funds in question are employee pension benefit plans or
welfare plans within the meaning of ERISA. (See 29 U.S.C.
§ 1002, subsecs. (1), (2)(A), and (21)(A).)
The trust funds in question are funded through employer
contributions for covered employees. In this case, those employ-
ees were members of unions affiliated with the United Brother-
hood of Carpenters and Joiners of America (hereafter Union).
Due to its fiduciary relationship with the unions, and in its role as
administrator of the trust, CSCAC is under a duty to collect
' All statutory references are to the Civil Code unless otherwise
indicated.
A-36
contributions from employers who have failed to voluntarily make
the required payments to the trust.
A condominium project was constructed on property in Bakers-
field owned by El Capitan. The general contractor on the project
was Grupe Construction. Grupe subcontracted with Pacific
Southwestern Framing for part of the framing on the condomin-
ium project.
In the complaint, CSCAC alleged John Hall Enterprises, the
subcontractor with whom the collective bargain agreement in
question was made, was an entity related to Pacific Southwestern
Framing. As a result, Pacific Southwestern Framing was bound
by the agreement with Hall, and therefore responsible for making
the contributions to the trust. However, neither El Capitan nor
Pacific Southwestern Framing were signatories to the collective
bargaining agreement.
Since the unpaid contributions represent work performed on E]
Capitan property, CSCAC asserted the position in its complaint
that mechanics’ liens could be placed upon the real property
pursuant to section 3111. The section is part of the statutory
scheme in California for allowing trust funds such as those in the
present case to place liens on real property in an amount equal to
the unpaid fringe benefit contributions under collective bargaining
agreements. (See, ¢.g., §§ 3111, 3111.5, 304, 3114-3116, 3123,
3128-3140, 3143-3154.) Mechanics’ liens in this action were
timely recorded by CSCAC on the El Capitan property, and
foreclosure was sought in this action as a means of collecting the
trust fund contributions still owed.
IS APPLICATION OF SECTION 3111 IN THE INSTANT
CASE PREEMPTED BY ERISA?
DISCUSSION
Section 3111 provides:
“For the purposes of this chapter, an express trust fund
established pursuant to a collective bargaining agreement to
which payments are required to be made on account of fringe
benefits supplemental to a wage agreement for the benefit of
A-37
a claimant on particular real property shall have a lien on
such property in the amount of the supplemental fringe
benefit payments owing to it pursuant to the collective
bargaining agreement.”
The pertinent portions of ERISA Provide:
“[ T]he provisions of this subchapter and subchapter III of
this chapter shal] supersede any and all State laws insofar as
they may now or hereafter relate to any employee benefit
plan....” (29 U.S.C. § 1144, subsec. (a); ERISA § 514,
subsec. (a).)
“The term ‘State law’ includes all laws, decisions, rules,
regulations, or other State action having the effect of law, of
any State. A law of the United States applicable only to the
District of Columbia shall be treated as a State law rather
than a law of the United States.
“The term ‘State’ includes a State, any political subdivi-
sions thereof, or any agency or instrumentality of either,
which purports to regulate, directly or indirectly, the terms
and conditions of employee benefit plans covered by this
subchapter.” (29 U.S.C. § 1144, subsecs. (c)(1) & (2);
ERISA § 514, subsecs. (1) & (2).)
According to El Capitan, section 3111 is preempted by the
above provisions of ERISA. The two-prong test for preemption in
this area was recently expressed by the United States Court of
Appeals for the Ninth Circuit:
“The U.S. Supreme Court cases addressing the issue of
preemption of state statutes by § 514 have begun with the
question of whether the challenged state statute ‘related to’
employee benefit plans within the meaning of § 514(a). E.g.
Metropolitan Life Ins. Co. v. Massachusetts, 105 S.Ct. at
2389; Shaw v. Delta Airlines, Inc., 468 U.S. at 98-101, 103
S.Ct. AT 2900-2902. The Supreme Court in Shaw v. Delta
Air Lines discussed the ‘relates to’ provision of ERISA, in
holding that the New York Human Rights and Disability
Benefits Law ‘related to’ an ERISA plan. The Court stated
that ‘[a] law “relates to” an employee benefit plan, in the
A-38
normal sense of the phrase, if it has a connection with or
reference to such a plan.’ Shaw v. Delta Air Lines, Inc. 463
U.S. at 96-97, 103 S.Ct. at 2899-2900. The Court applied
this definition to the laws in question in Shaw, and held that
the laws ‘prohibit{ed] employers from structuring their em-
ployee benefit plans in a manner that discriminates on the
basis of pregnancy,’ and required employers to pay employ-
ees specific benefits. These requirements ‘related to’ plans
and, thus, called into play the preemption clause. Shaw v.
Delta Air Lines, Inc., 463 U.S. at 96-97, 103 S.Ct. at 2899-
2900. The Court stated that Congress meant to use the
statutory words in their broadest sense. Jd. at 97, 103 S.Ct. at
2900.
“In this Circuit, there is also a requirement that the state
law be a rule which ‘purports to regulate’ ERISA plans.
Martori Bros. Distributor v. James-Massengale, 78) F.2d
1349 (9th Cir.1986). Martori founder this second prong in
Lane v. Goren, 743 F.2d 1337 (9th Cir. 1984), which held
that the California Fair Employment and Housing Act, as
applied to employees of a Trust which administered ar
ERISA plan, did not regulate the Plan as a plan, but only as
any other employer would be regulated.” (United Food &
Commercial Workers v. Pacyga (9th Cir. 1986) 801 F.2d
1157, 1160.)
The state law in Pacyga was found to be one which “purports to
regulate the Plan as a plan, inasmuch as it disallows a specific
provision of the Plan, rather than regulating the activities of the
Plan that are common to other groups.” (/bid.)
The question of preemption was vigorously researched and
briefed, both in the trial court and in the briefs before us.
However, in fairness to the court below, subsequent to its granting
of the demurrer and entry of judgment, Division One of the First
Appellate District handed down its opinion in Carpenters Health
& Welfare Trust Fund v. Parnas Corp. (1986) 176 Cal.App.3d
1196.
Diidiniiineeimmiaieeenal
A-39
The Parnas court reached the opposite result as that reached by
the trial court in the instant case: section 3111 is not preempted
by ERISA.
CSCAC did not discuss Parnas in its opening brief since, again,
the case was filed after the opening brief. E] Capitan, on the other
hand, takes issue with the case and urges us not to follow it. In
their reply brief, CSCAC argues that Parnas was correctly
decided and should be followed. We agree.
E] Capitan launches a long multi-pronged attack for preemp-
tion. However, we conclude the Parnas decision was correctly
decided and that we should follow it. (Auto Equity Sales, Inc. v.
Superior Court (1962) 57 Cal.2d 450.)
Although we have differed with other appellate courts when
convinced they are wrong (e.g., Price v. Superior Court (1986)
186 Cal.App.3d 156), we do so only when a strong showing is
made that the case is wrong and deserves a different appellate
opinion and possible attention from a higher court. In this case we
have studied E] Capitan’s criticisms of the Parnas rationale and
conclude Parnas made the proper distinction between federal
substantive law relating to covered plans and state remedies to
enforce the nights arising from such plans.
The judgment is reversed. Respondent to recover costs of
appeal.
WOOLPERT
Acting P.J.
WE CONCUR:
BALLANTYNE
J.
VARTABEDIAN
tg
* Assigned by the Chairperson of the Judicial Council.
A-40
Appendix C
Order Granting Review
After Judgment by the Court of Appeal
Fifth District, Division One, No. F006233-S000772
In the Supreme Court of the State of California
In Bank
Carpenters Southern California Administrative Corporation,
Appellant
v.
E] Capitan Development Company,
Respondent
[Filed Jun 18 1987]
Respondent’s petition for review GRANTED. The cause is
transferred to the Court of Appeal, Fifth Appellate District, for
reconsideration in light of Pilot Life Insurance Company v.
Dedeaux (1987) 107 S. Ct. 1549.
The request for an order directing publication of the opinion is
denied.
Lucas
Chief Justice
Panelli
Associate Justice
Arguelles
Associate Justice
Eagleson
Associate Justice
Kaufman
Associate Justice
Associate Justice
Associate Justice
A-41
Appendix D
Certified for Publication
In the Court of Appeal of the State of California
Fifth Appellate District
Carpenters Southern California Administrative Corporation,
Plaintiff and Appellant,
¥,
El Capitan Development Company,
Defendant and Respondent.
5 Civil No. F008840
(Super. Ct. No. 185215)
OPINION
[Filed Jan 11 1988]
APPEAL from a judgment of the Superior Court of Kern
County. Henry E. Bianchi, Judge.
Cox, Castle & Nicholson, James P. Watson, Law Offices of
Charles P. Scully, Inc., Donald C. Carroll, De Carlo & Connor,
John T. De Carlo, Law Offices of Richard A. Brownstein, Karen
L. Holliday, for Plaintiff and Appellant.
Littler, Mendelson, Fastiff & Tichy, Karen E. Ford and Major
Williams, Jr., for Defendant and Respondent.
Appellant, Carpenters Southern California Administrative Cor-
poration (CSCAC), filed a complaint in Kern County Superior
Court against El Capitan Development Company (E] Capitan)
and numerous Does, to foreclose on mechanics’ liens. CSCAC
had filed the mechanics’ liens in order to collect fringe-benefit
contributions allegedly due its members pursuant to its collective
bargaining agreement with a subcontractor. During the term of
the agreement, CSCAC members, wi.u were carpenters covered
by the collective bargaining agreement, were employed by the
subcontractor, who in turn performed work on El Capitan’s
A-42
Property. The subcontractor allegedly failed to pay fringe benefit
contributions, in excess of $121,000, due under the terms of the
collective bargaining agreement.
E] Capitan demurred. It argued the complaint failed to state a
cause of action because the California statutory lien procedure
upon which it was based (Civ. Code, § 3111)' was Preempted by
the Employee Retirement Income Security Act of 1974, as
amended (ERISA). (See 29 U.S.C. 1144.) The demurrer was
granted with leave to amend. Plaintiffs declined to amend (pur-
portedly upon agreement by the parties.) Judgment was entered
on August 8, 1985. CSCAC timely appealed.
We reversed the judgment. However, the California Supreme
Court granted respondent’s petition for review and transferred the
matter to us for reconsideration in light of a subsequently decided
case, Pilot Life Insurance Company v. Dedeaux (1987) 107 S.Ct.
1549 (hereinafter Pilot Life). We do so, and conclude the recent
decision requires us to affirm the judgment on the basis of federal
preemption.
FACTS
CSCAC is the administrator and assignee of rights involving
various multi-employer trust funds, including the carpenters’ trust
funds. They are organized pursuant to section 302. subsection
(c)(5) of the Labor Management Relations Act of 1947. (See 29
U.S.C. § 18, subsec. (c)(5).) As a result, CSCAC is a fiduciary,
as defined by ERISA, and the trust funds in question are
employee pension benefit plans or welfare Plans within the
meaning of ERISA. (See 29 U.S.C. § 1002, subsecs. (1),
(2)(A), and (21)(A).)
These trust funds are funded through employer contributions
for covered employees. In this case, those employees were mem-
bers of unions affiliated with the United Brotherhood of
Carpenters and Joiners of America (Union). Due to its fiduciary
relationship with the unions, and in its role as administrator of the
' All statutory references are to the Civil Code unless otherwise
indicated.
A-43
trust, CSCAC is under a duty to collect contributions from
employers who have failed to voluntarily make the required
Payments to the trust.
A condominium project was constructed on property in Bakers-
field owned by E] Capitan. The general contractor on the Project
was Grupe Construction. Grupe subcontracted with Pacific
Southwestern Framing for part of the framing on the condomin-
ium project.
In the complaint, CSCAC alleged John Hall Enterprises, the
subcontractor with whom the collective bargain agreement was
made, was an entity related to Pacific Southwestern Framing. As
a result, Pacific Southwestern Framing was bound by the agree-
ment with Hall, and therefore responsible for making the contri-
butions to the trust. However, neither El Capitan nor Pacific
Southwestern Framing signed the collective bargaining
agreement.
Since the unpaid contributions represent work performed on E]
Capitan property, CSCAC alleged mechanics’ liens could be
placed upon the rea! property pursuant to section 3111. The
section is part of California’s statutory scheme which permits
trust-fund liens on real property in amounts equal to the fringe
benefit contributions owed under collective bargaining agree-
ments. (See, e.g., §§ 3111, 3111.5, 304, 3114-3116, 3123, 3128-
3140, 3143-3154.) Mechanics’ liens in this action were timely
recorded by CSCAC on the E] Capitan property, and foreclosure
was sought in this action as a means of collecting the trust fund
contributions still owed.
APPLICATION OF SECTION 3111
VERSUS PREEMPTION BY ERISA.
Section 3111 provides:
“For the purposes of this chapter, an express trust fund
established pursuant to a collective bargaining agreement to
which Payments are required to be made on account of
fringe benefits supplemental to a wage agreement for the
benefit of a claimant on Particular real property shall have a
A-44
lien on such property in the amount of the supplemental
fringe benefit payments owing to it pursuant to the collective
bargaining agreement.”
The pertinent portions of ERISA Provide: F
“[ T Jhe provisions of this subchapter and subchapter ITI of
this chapter shall supersede any and all State laws insofar as
they may now or hereafter relate to any employee benefit
plan....” (29 U.S.C. § 1144, subsec. (a); ERISA § 514,
subsec. (a).)
“The term ‘State law’ includes all laws, decisions, rules,
regulations, or other State action having the effect of law, of
any State. A law of the United States applicable only to the
District of Columbia shall be treated as a State law rather
than a law of the United States.
“The term ‘State’ includes a State, any political subdivi-
sions thereof, or any agency or instrumentality of either,
which purports to regulate, directly or indirectly, the terms
and conditions of employee benefit plans covered by this
subchapter.” (29 U.S.C. § 1144, subsecs. (c)(1) & (2);
ERISA § 514, subsecs. (1) & (2).)
According to El Capitan, section 3111 is preempted by the
above quoted provisions of ERISA. The question of preemption
was vigorously researched and briefed in the trial court. Subse-
quent to the trial court’s granting of the demurrer and entry of
judgment, Division One of the First Appellate District filed its
opinion in Carpenters Health & Welfare Trust Fund v. Parnas
Corp. (1986) 176 Cal. App.3d 1196. The Parnas court reached
the opposite result as that reached by the trial court in this case.
According te Parnas, section 3111 is not preempted by ERISA.
El] Capitan took issue with the Parnas case and urged it not be
followed by this court. In reply, CSCAC argued Parnas was
correctly decided and should be followed. We agreed with
CSCAC, applying Parnas and Auto Equity Sales, Inc. v. Superior
Court (1962) 57 Cal.2d 450.
We studied El Capitan’s criticisms of the Parnas rationale and
concluded Parnas made the proper distinction between federal
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substantive law relating to covered plans and state remedies to
enforce the rights arising from such plans.
In Pilot Life, the issue before the court was phrased by Justice
O’Connor as follows:
“This case presents the question whether the Employee
Retirement Income Security Act of 1974 (ERISA), 88 Stat.
829, as amended, 29 U.S.C. § 1001 ef seq., preempts state
common law tort and contract actions asserting improper
processing of a claim for benefits under an insured employee
benefit plan.” (Pilot Life, supra, 107 S.Ct. at pp. 1550-
1551.)
The employee, Dedeaux, received a work-related injury. His
employer had an employee disability insurance plan through Pilot
Life. Dedeaux sought permanent disability status; nevertheless,
his benefits were terminated after two years. Subsequently they
were reinstated and terminated several times over another three-
year period. (/d. at p. 1551.)
Ultimately, Dedeaux filed a diversity action in federal court. He
alleged three causes of action based upon state law (tortious
breach of contract; breach of fiduciary duties; fraud in the
inducement), rather than any cause of action available to him
under ERISA. (Jd. at p. 1551.)
Pilot Life’s motion for summary judgment was granted after
the district court found all the state claims to be preempted. The
fifth circuit reversed, relying upon Metropolitan Life Ins. Co. v.
Massachusetts (1985) 471 U.S. 1724. Eventually, the Supreme
Court reversed, finding preemption. (Pilot Life, supra, at pp.
1551-1558.)
Although the court in Pilot Life was concerned with state
causes of action, it discussed remedies at some length. The
opinion cannot be read without concluding the high court was
purposely broad in its view of preemption. We quote a few such
passages which combine to preclude us from looking for distinc-
tions between substantive law and remedies.
“To summarize the pure mechanics of the ,Provisions
quoted above: [29 U.S.C. § 1144, subsecs. (a) and
A-46
(b) (2) (A) ] If a state law ‘relate[s] to... employee benefit
plan[s],’ it is pre-empted. § 514(a)....
“*(T]he question whether a certain state action is pre-
empted by federal law is one of congressional intent. “ ‘The
Purpose of Congress is the ultimate touchstone.”’’ [Cita-
tions.] We have observed in the past that the express pre-
emption provisions of ERISA are deliberately expansive, and
designed to ‘establish pension plan regulation as exclusively a
federal concern.’ [Citations.]” Pilot Life, supra, at p. 1552.)
In its discussion of Dedeaux’s state law bad-faith-claim, the
court continued:
“The Solicitor General, for the United States as amicus
curiae, argues that Congress clearly expressed an intent that
the civil enforcement provisions of ERISA § 502(a) be the
exclusive vehicle for actions by ERISA-plan participants and
beneficiaries asserting improper processing of a claim for
benefits, and that varying state causes of action for claims
within the scope of § 502(a) would pose an obstacle to the
purposes and objectives of Congress. Brief for United States
as Amicus Curiae 18-19. We agree. The conclusion that
§ 502(a) was intended to be exclusive is supported, first, by
the language and structure of the civil enforcement provi-
sions, and second, by legislative history in which Congress
declared that the pre-emptive force of § 502(a) was modeled
on the exclusive remedy provided by § 301 of the Labor-
Management Relations Act (LMRA), 61 Stat. 156, 29
U.S.C. § 185.
“The civil enforcement scheme of § 502(a) is one of the
essential tools for accomplishing the stated purposes of
ERISA....
“In sum, the detailed provisions of § 502(a) set forth a
comprehensive civil enforcement scheme that represents a
careful balancing of the need for prompt and fair claims
settlement procedures against the public interest in encour-
aging the formation of employee benefit plans. The policy
A-47
choices reflected in the inclusion of certain remedies and the
exclusion of others under the federal scheme would be
completely undermined if ERISA-plan participants and ben-
eficiaries were free to obtain remedies under state law that
Congress rejected in ERISA. ‘The six carefully integrated
civil enforcement provisions found in § 502(a) of the statute
as finally enacted... provide strong evidence that Congress
did not intend to authorize other remedies that it simply
forgot to incorporate expressly.’ (Russell, supra, at 146, 105
S.Ct., at 3093 (emphasis in original).” (Pilot Life, supra,
107 S.Ct. at pp. 1555-1556, fn. omitted.”
Still later, the court stated:
“The expectations that a federal common law of rights and
obligations under ERISA-regulated plans would develop,
indeed the entire comparison of ERISA's § 502(a) to § 301
of the LMRA, would make little sense if the remedies
available to ERISA participants and beneficiaries under
§ 502(a) could 5e supplemented or supplanted by varying
state laws.” (Id. at p. 1558.)
Although a state law providing for mechanics’ liens is a special
statutory collection alternative, that remedy cannot be divorced
from the substantive contractual rights which create the debt. To
be effective, the lien claim depends upon the validity and conse-
quences of an agreement of some sort. In this instance, a labor
agreement is the subject matter. Failure of one party to the Plan
to make contributions results in the denial of benefits to the
others. Federal remedies are provided. Mechanics’ lien rights are
omitted.
Along this same line of thinking is the very recent appellate
court decision in Cairy v. Superior Court (1987) 192 Cal.App.3d
840. In Cairy the defendant, Cairy, was charged with violation of
Labor Code section 227: willful, and with intent to defraud,
failure to make payment to a pension fund as required by a
collective bargaining agreement. (Id. at p. 842.) The defendant’s
demurrer to the information on the grounds of preemption was
overruled. After concluding ERISA preempted Labor Code sec-
tion 227, the Court of Appeal issued a peremptory writ of
A-48
mandate directing the lower court to vacate its order overruling
the demurrer, and instructed the court to make a new order
sustaining the demurrer. (Jd. at pp. 845-846.)
The Cairy court uses an expansive approach to preemption
consistent with Pilot Life:
“Section 227 ‘regulates’ the terms end conditions of em-
ployee benefit plans to the common sense meaning of that
word. ‘Regulate’ means ‘to control or direct according to a
rule.’ (American Heritage Dict. (1976) p. 1096.) It is
axiomatic, therefore, the power to regulate includes the
power to enforce. (See, e.g., Pac. Legal Found. v. State
Energy Resources, etc. (9th Cir. 1981) 659 F.2d 903, 926.)
Here the state is attempting directly to regulate the terms
arid conditions of a peasion plan by using its criminal law to
obf4in compliance with those terms end conditions (i.¢., to
‘control or direct’ an employer’s behavior in relation to terms
and conditions of the pension plan). Thus, section 227 is
preempted by ERISA unless it falls within the exception for
‘generally applicable’ criminal laws of the state.” (Cairy v.
Superior Court, supra, 192 Cal.App.3d at p. 843.)
We agree a similar interpretation is required in our case. The
state is attempting to “regulate” the terms and conditions of a
pension plan through the use of its mechanics’ lien laws. (See also
Lembo v. Texaco, Inc. (1987) 194 Cal.App.3d 531.) The state’s
mechanics’ lien laws may not be used to supplement or supplant
the civil enforcement scheme developed under ERISA. naed
Life, supra, 107 S.Ct. at p. 1558.)
A-49
The judgment is affirmed. Respondent to recover costs of
appeal. ;
WOOLPERT
Acting P.J.
WE CONCUR:
BALLANTYNE
J.
VARTABEDIAN
3.”
* Assigned by the Chairperson of the Judicial Council.
A-50
Appendix E
Relevant Statutory Provisions
Civil Code § 3111. Trust fund lien under labor agreement
For the purposes of this chapter, an express trust fu
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