Amicus Curiae Brief — Carpenters Southern California Administrative Corp. v. El Capitan Development Co.

2)

No.9

In THE

Supreme Court of the Wuitrd States

oy OcTOBER TERM, 1991

CARPENTERS SOUTHERN CALIFORNIA

ADMINISTRATIVE CORPORATION,

. Petitioner,

EL CAPITAN DEVELOPMENT COMPANY,

Respondent.

On Petition for Writ of Certiorari to the

California Supreme Court

MOTION FOR LEAVE TO FILE BRIEF AMICI CURIAE

AND BRIEF AMICI CURIAE OF THE

LABORERS HEALTH AND WELFARE TRUST FUND

FOR NORTHERN CALIFORNIA;

LABORERS VACATION-HOLIDAY TRUST FUND

FOR NORTHERN CALIFORNIA;

LABORERS PENSION TRUST FUND

FOR NORTHERN CALIFORNIA;

LABORERS TRAINING AND RETRAINING TRUST

FUND FOR NORTHERN CALIFORNIA;

(Additional Amici Listed on Inside Cover)

Victor J. VAN Bours *

MICHAEL B. ROGER

ROBERT M. HirRscu

BLYTHE MICKELSON

BARRY E. HINKLE

JAMES J. WESSER

VAN Bourc, WEINBERG, ROGER

& ROSENFELD

875 Battery Street, 3rd Floor

San Francisco, California 94111

(415) 864-4000

Attorneys for Trust Funds

* Counsel of Record

WILSON - Evrae Painting Co.. Inc. - 789-0096 - Wasnincton. D.C. 20001

® AED 00

CARPENTERS HEALTH AND WELFARE TRUST FUND

FOR CALIFORNIA;

CARPENTERS PENSION TRUST FUND

FOR NORTHERN CALIFORNIA;

CARPENTERS VACATION AND HOLIDAY TRUST FUND

FOR NORTHERN CALIFORNIA;

CARPENTERS APPRENTICESHIP AND TRAINING

TRUST FUND FOR NORTHERN CALIFORNIA;

CARPENTERS ANNUITY TRUST FUND

FOR NORTHERN CALIFORNIA;

CEMENT MASONS HEALTH AND WELFARE TRUST

FUND FOR NORTHERN CALIFORNIA;

CEMENT MASONS PENSION TRUST FUND

FOR NORTHERN CALIFORNIA;

CEMENT MASONS VACATION TRUST FUND

FOR NORTHERN CALIFORNIA;

CEMENT MASONS APPRENTICESHIP AND TRAINING

TRUST FUND FOR NORTHERN CALIFORNIA; AND

OPERATING ENGINEERS HEALTH AND WELFARE

TRUST FUND;

PENSION TRUST FUND FOR OPERATING ENGINEERS;

PENSIONED OPERATING ENGINEERS HEALTH

AND WELFARE FUND;

OPERATING ENGINEERS AND PARTICIPATING

EMPLOYERS PRE-APPRENTICESEIP,

APPRENTICE AND JOURNEYMEN

AFFIRMATIVE ACTION TRAINING FUND;

OPERATING ENGINEERS VACATION AND

HOLIDAY PLAN;

OPERATING ENGINEERS CONTRACT

ADMINISTRATION TRUST FUND;

OPERATING ENGINEERS MARKET PRESERVATION

TRUST FUND;

OPERATING ENGINEERS INDUSTRY STABILIZATION

TRUST FUND

IN SUPPORT OF PETITIONER

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

No. 91-480

CARPENTERS SOUTHERN CALIFORNIA

ADMINISTRATIVE CORPORATION,

- Petitioner,

EL CAPITAN DEVELOPMENT COMPANY,

Respondent.

On Petition for Writ of Certiorari to the

California Supreme Court

MOTION FOR LEAVE TO FILE BRIEF AMICI CURIAE

IN SUPPORT OF PETITIONER

To the Honorable Chief Justices and Associate Jus-

tices of the Supreme Court of the United States:

Pursuant to Rule 36 of the Rules of this Court, the

Laborers Health and Welfare Trust Fund for Northern

California; Laborers Vacation-Holiday Trust Fund for

Northern California; Laborers Pension Trust Fund for

Northern California; Laborers Training and Retraining

Trust Fund for Northern California; Carpenters Health

and Welfare Trust Fund for California; Carpenters Pen-

sion Trust Fund for Northern California; Carpenters

Vacation and Holiday Trust Fund for Northern Califor-

nia; Carpenters Apprenticeship and Training Trust Fund

for Northern California; Carpenters Annuity Trust

Fund for Northern California; Cement Masons Health

and Welfare Trust Fund for Northern California; Ce-

ment Masons Pension Trust Fund for Northern Cali-

fornia; Cement Masons Vacation Trust Fund for North-

ern California; Cement Masons Apprenticeship and Train-

ing Trust Fund for Northern California; and Operating

Engineers Health and Welfare Trust Fund; Pension Trust

Fund for Operating Engineers; Pensioned Operating En-

gineers Health and Welfare Fund; Operating Engineers

and Participating Employers Pre-Apprenticeship, Appren-

tice and Journeymen Affirmative Action Training Fund;

Operating Engineers Vacation and Holiday Plan; Op-

erating Engineers Contract Administration Trust Fund;

Operating Engineers Market Preservation Trust Fund;

Operating Engineers Industry Stabilization Trust Fund

(collectively hereinafter referred to as “Trust Funds’)

respectfully move for leave to file the accompanying brief

as amicus curiae in support of the petition for Writ of

Certiorari. Petitioners have consented to the filing of this

brief ; respondents have not.

INTEREST OF THE TRUST FUNDS

Each of the above-named Trust Funds is an employee

benefit plan organized and existing under the laws of the

United States. Each Trust Fund is an express trust

created by a written trust agreement subject to and pur-

suant to § 302 of the Labor Management Relations Act,

29 U.S.C. § 186, and a multi-employer employee benefit

plan within the meaning of §§3 and 4 of the Employee

Retirement Income Security Act (ERISA), 29 U.S.C.

§§ 1002-03. The Boards of Trustees of each Trust Fund

has the responsibility to collect the contributions owed to

the respective plans by construction employers pursuant

to collective bargaining agreements covering workers in

the building and construction trades.

In discharge of their fiduciary duty under ERISA to

“make systematic, reasonable and deliberate efforts to

collect delinquent contributions,” the Board of Trustees

of each Trust Fund uses all available collection remedies

provided under California law, including the recordation,

and, if necessary, the foreclosure of mechanics’ liens un-

der Civil Code § 3111.

Mechanics’ liens provide a primary remedial tool to

the Trust Funds which is especially important in today’s

economic climate. The Board of Trustees of these Funds

are understandably concerned with the holding of the

California Supreme Court in this case that this remedy

—the foreclosure of mechanics’ liens—is preempted by

ERISA. Therefore, the Trust Funds urge this Court to

issue a Writ of Certiorari. Refusal of this Court to re-

view the judgment below will have a broad and adverse

impact upon the fiscal soundness of construction employee

benefit plans and consequently upon the plans’ ability to

provide benefits to the workers.

ISSUES DEVELOPED BY THE TRUST FUNDS

The Trust Funds’ brief focuses on issues which it

considers not adequately presented to this Court, in-

cluding:

(a) the particularly adverse impact that the decision

below will have on the ability of the Boards of Trustees

of multi-employer plans to adequately satisfy their obli-

gation to protect fund assets, and as a result, distribute

plan benefits;

(b) the fundamental conflict between the decision of

the court below and the decisions of this Court, and

(ec) the fundamental conflict between the decision of

the court below and the legislative history and purposes

of ERISA.

The Trust Funds, therefore, move for leave to file the

accompanying brief amici curiae.

Dated: October 1991

Respectfully submitted,

VICTOR J. VAN BOURG *

MICHAEL B. ROGER

ROBERT M. HIRSCH

BLYTHE MICKELSON

BARRY E. HINKLE

JAMES J. WESSER

VAN BourG, WEINBERG, ROGER

& ROSENFELD

875 Battery Street, 3rd Floor

San Francisco, California 94111

(415) 864-4000

Attorneys for Trust Funds

* Counsel of Record

TABLE OF CONTENTS

py OF Bs og Vip y |! | yy |. Reena E NET Enen

INTEREST OF THE TRUST FUNDS ...........................

RMU GO FRDIRSIIIBETE foiisccninensscisicscnenszensvenisonnumnss

II.

Ill.

IE esas eteninssicnsisassiepsipencindibaionsiihinnbiin seat Niehilldbesadteone

I. THE DECISION BELOW IMPERMISSIBLY

SINGLES OUT EMPLOYEE BENEFIT

PLANS FOR DIFFERENT TREATMENT UN-

DER CALIFORNIA MECHANICS’ LIEN PRO-

WIE oleticigsedccseen coca elibdiciinh naib eceaaeianthaaiaiaiibis

THE CALIFORNIA SUPREME COURT ER-

RONEOUSLY APPLIED THE PRECEDENTS

OF THIS COURT IN DETERMINING

WHETHER CALIFORNIA CIVIL CODE § 3111

IS PREEMPTED BY ERISA .............

THE CALIFORNIA SUPREME COURT’S

HOLDING THAT CIVIL CODE § 3111 IS PRE-

EMPTED BY ERISA IS INCONSISTENT

WITH LEGISLATIVE INTENT _

CONCLUSION ................ steed tiiandacseipeectaietees iia aedaMaieniie

14

ii

TABLE OF AUTHORITIES

Cases Page

Carpenters Southern California Administrative

Corporation v. El Capitan Development Com-

pany, 63 Cal.8d 1041 (1901) ................................. passim

Central States Pension Fund v. Central Transport,

ig Se a IT I arenas eccescnvenebiesnnenson 8

FMC Corp. v. Holliday, 498 U.S. ——, 112 L.Ed.2d

356, 111 S.Ct. TSE RTREE Soh evant 16, 17

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1

a aia tale ease hicciceiidaaiiok 15, 18

Ingersoll-Rand v. McClendon, 498 U.S. ——, 112

L.Ed.2d 474, 111 S.Ct. 478 (1990) 2.00000. 14, 15, 17

Laborers Fringe Benefit Funds v. Northwest Con-

crete and Construction, Inc., 640 F.2d 1350 (6th

I a ai ar 19

Mackey v. Lanier Collections Agency, 486 U.S. 825

ARETE Roe RP a ers eT ERT OT passim

Pilot Life Insurance Company v. Dedeaux, 481

a I ccaesiinllinacioenioaaiivanions 16, 17

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) ..passim

United States v. Carter, 353 U.S. 210 (1956) ........ ll

Federal Statutes

Employee Retirement Income Security Act

(ERISA) 29 U.S.C. §§ 1001 et seq.

A ARERR Cc AE AR ee eR 3

EE CRETE cK te Ne ee Re ee ee 3

aa AE ae ee OTTERS 10, 19

EI Aa ae Ree Ne FIT passim

§ 514(b) (2) (B) .............. isch daieiheetedsemeidaesinnthiai 16

a a 8,13

adie a RRS ce OS RL” A 20

Labor Management Relations Act, 29 U.S.C. § 186,

SRA SSE EAS a Saree RECN RNY eS nN 2

Multi-Employer Pension Plan Amendments Act

“EGA ARR REND IE A EP, SO Ee re OO OEE 20

iil

TABLE OF AUTHORITIES—Continued

State Statutes Page

Business and Professions Code, § 7071.6 et seq. ...... 4

California Civil Code

UI es EOE Fel GR See FINE SE oH passim

| ESR RT Ae SR PAB AO et ar ET OS passim

ORE Nr ete RD Ne SAN, 4

(eee PRSTTAVERR PARAS OP aap pe Pe LOS 4

a emincetans 4

Other Authorities

Department of Labor Advisory Op. No. 76-89

SUES IE SSR AM ee OD ce lke be a ae 8

Department of Labor Advisory Op. No. 78-28A

EE aa Retr PER ren ae 8

H.R. Rep. No. 96-869 (II), 96th Cong., 2d Sess... 20

S. Rep. No. 98-127, p. 96 (1973) ................................ 14

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

No. 91-480

CARPENTERS SOUTHERN CALIFORNIA

ADMINISTRATIVE CORPORATION,

. Petitioner,

EL CAPITAN DEVELOPMENT COMPANY,

Respondent.

On Petition for Writ of Certiorari to the

California Supreme Court

BRIEF AMICI CURIAE OF THE

LABORERS HEALTH AND WELFARE TRUST FUND

FOR NORTHERN CALIFORNIA;

LABORERS VACATION-HOLIDAY TRUST FUND

FOR NORTHERN CALIFORNIA;

LABORERS PENSION TRUST FUND

FOR NORTHERN CALIFORNIA;

LABORERS TRAINING AND RETRAINING TRUST

FUND FOR NORTHERN CALIFORNIA;

CARPENTERS HEALTH AND WELFARE TRUST FUND

FOR CALIFORNIA;

CARPENTERS PENSION TRUST FUND

FOR NORTHERN CALIFORNIA;

CARPENTERS VACATION AND HOLIDAY TRUST FUND

FOR NORTHERN CALIFORNIA;

CARPENTERS APPRENTICESHIP AND TRAINING

TRUST FUND FOR NORTHERN CALIFORNIA;

CARPENTERS ANNUITY TRUST FUND

FOR NORTHERN CALIFORNIA;

2

CEMENT MASONS HEALTH AND WELFARE TRUST

FUND FOR NORTHERN CALIFORNIA;

CEMENT MASONS PENSION TRUST FUND

FOR NORTHERN CALIFORNIA;

CEMENT MASONS VACATION TRUST FUND

FOR NORTHERN CALIFORNIA;

CEMENT MASONS APPRENTICESHIP AND TRAINING

TRUST FUND FOR NORTHERN CALIFORNIA; AND

OPERATING ENGINEERS HEALTH AND WELFARE

TRUST FUND;

PENSION TRUST FUND FOR OPERATING ENGINEERS;

PENSIONED OPERATING ENGINEERS HEALTH

AND WELFARE FUND;

OPERATING ENGINEERS AND PARTICIPATING

EMPLOYERS PRE-APPRENTICESHIP,

APPRENTICE AND JOURNEYMEN

AFFIRMATIVE ACTION TRAINING FUND;

OPERATING ENGINEERS VACATION AND

_ HOLIDAY PLAN;

OPERATING ENGINEERS CONTRACT

ADMINISTRATION TRUST FUND;

OPERATING ENGINEERS MARKET PRESERVATION

TRUST FUND;

OPERATING ENGINEERS INDUSTRY STABILIZATION

TRUST FUND

IN SUPPORT OF PETITIONER

The Trust Funds submit this brief as amici curiae to

urge the Court to review the holding below that the me-

chanics’ lien provisions contained in the California Civil

Code are preempted by §514(a) of the Employee Re-

tirement Income Security Act (ERISA), 29 U.S.C. § 1144.

INTEREST OF THE TRUST FUNDS

Each of the above-named Trust Funds is an employee

benefit plan organized and existing under the laws of the

United States. Each Trust Fund is an express trust

created by a written trust agreement subject to and pur-

suant to § 302 of the Labor Management Relations Act,

3

29 U.S.C. § 186, and a multi-employer employee benefit

plan within the meaning of §§ 3 and 4 of the Employee

Retirement Income Security Act (ERISA), 29 U.S.C.

$§ 1002-03. The Boards of Trustees of each Trust Fund

has the responsibility to collect the contributions owed to

the respective plans by construction employers pursuant

to collective bargaining agreements covering workers in

the building and construction trades.

During the three-year period ending August, 1991,

the Carpenters Trust Funds collectively received over

$596,000,000 in contributions from approximately 1,800

employers. During the five-year period ending Septem-

ber, 1991, the Laborers Trust Funds collectively received

over $574,100,000 in contributions from approximately

1,546 employers. During the five-year period ending

September, 1991, the Cement Masons Trust Funds collec-

tively received over $91,300,000 in contributions from

approximately 500 employers. During the five-year pe-

riod ending December, 1990, the Operating Engineers

Trust Funds collectively received over $87,190,000 in con-

tributions from approximately 2,200 employers.

Each Trust Fund is confronted with employers who are

delinquent in meeting their contractual obligations. The

Carpenters Trust Funds list approximately 350 delin-

quent employers with shortages aggregating more than

$24,000,000 during the most recent three-year period.

The Laborers Trust Funds list approximately 237 de-

linquent employers with shortages aggregating more than

$959,500 during the most recent five-year period. The

Cement Masons Trust Funds list approximately 64 de-

linquent employers with shortages aggregating more than

$218,000 during the most recent five-year period. The

Operating Engineers Trust Funds list approximately 785

delinquent employers with shortages aggregating more

than $4,077,000 during the most recent five-year period.

In discharge of their fiduciary duty under ERISA to

“make systematic, reasonable and deliberate efforts to

4

collect delinquent contributions,” the Board of Trustees

of each Trust Fund uses all available collection remedies

provided under California law, including the recordation,

and, if necessary, the foreclosure of mechanics’ liens.

Each Trust Fund utilizes other remedies provided by

California law, such as actions on bonds filed by contrac-

tors pursuant to § 7071.6, et seg. of the Business and

Professions Code to pursue, among other things, the

payment of fringe benefits for the contractors’ employ-

ees; actions under § 3172 of the Civil Code to enforce

rights arising from stop notices and bonded stop notices

for private works of improvement; actions under Civil

Code § 3210 to enforce rights arising from stop notices

for public works; and actions under Civil Code § 3249

against sureties on payment bonds on public works.

The use of these state law remedies is essential to the

proper and effective performance of the collection duties

of the Trust Funds. The Board of Trustees of these

Funds are understandably concerned with the holding of

the California Supreme Court in this case that one of

the remedies, the foreclosure of mechanics’ liens, is pre-

empted by ERISA. The rationale of the California Su-

preme Court in arriving at its decision applies to most,

if not all, of the remedies enumerated above. If this

holding were affirmed, the Trust Funds would be denied

essential remedies necessary to the exercise of the Trus-

tees’ fiduciary duties required by ERISA.

Mechanics’ liens provide a primary remedial tool to

the Trust Funds which is especially important in today’s

economic climate. Therefore, the Trust Funds urge this

Court to issue a Writ of Certiorari. Refusal of this

Court to review the judgment below will have a broad

and adverse impact upon the fiscal soundness of construc-

tion employee benefit plans and consequently upon the

plans’ ability to provide benefits to the workers.

5

SUMMARY OF ARGUMENT

A. California law provides a comprehensive statutory

system intended to ensure that those persons who provide

labor or materials to the improvement of real property

are properly compensated for their contribution. Cali-

fornia Civil Code § 3111 was designed to assure that con-

struction workers’ employee benefit plans, which are em-

powered to preserve and protect the fringe benefit por-

tion of the workers’ total compensation package, have

equal access to the mechanics’ lien remedial scheme. It is

apparent that § 3111, by its terms, seeks to treat em-

ployee benefit plans in a manner similar to other me-

chanics’ lien claimants.

The California Supreme Court held that § 3111 is pre-

empted because it “relates to” ERISA regulated employee

benefit plans “by creating an additional funding mecha-

nism for ERISA plans not provided for by Congress.”

Carpenters Southern California Administrative Corpora-

tion v. El Capitan Development Co., 52 Cal.3d 1041, 1051

(1991). The Trust Funds submit that it is the state

law established by the decision below, striking down

§ 3111, which controverts ERISA rather than § 3111

itself.

In Mackey v. Lanier Collections Agency, 486 U.S. 825

(1988), this Court held that a state law which singles

out ERISA employee benefit plans for different treat-

ment is preempted under ERISA §514(a). The effect

of the decision below is to deny mechanics’ lien remedies

to employee benefit plans, while permitting such remedies

to non-ERISA plans and other lien claimants. This de-

cision constitutes the “different treatment” rejected in

Mackey, and therefore the decision itself is preempted

by ERISA.

B. The decision below has held § 3111 preempted by

ERISA because, it is asserted, this statute “relates to”

ERISA plans. El Capitan, at 1048. The primary ra-

6

tionale offered for this conclusion states that § 3111 “re-

lates to” ERISA because it creates an additional cause

of action for enforcing contribution obligations, as well

as making an additional entity liable for such sums. /d.

The Trust Funds contend that this analysis disregards

the nature of § 3111 and relevant precedents of this

Court. Rather than creating a new substantive cause of

action, § 3111 creates a security interest in the real

property which is benefited by the labor contributed.

California Civil Code § 3110. Section 3111 simply pro-

vides a collection remedy against the property, and rights

arising thereunder, only when the employer fails to per-

form its obligation.

Section 3111, by its terms and impact, does not “re-

late to” employee benefit plans in a manner which has

been considered a basis for preemption under the de-

cisions of this Court. This statute has no perceptible im-

pact on plan administration, operations, funding, or dis-

tributions of benefits and fails to raise concerns between

plan compliance and conflicting law. In essence, § 3111

does not implicate the legal relationships with which

ERISA is concerned, which are the relationships between

the plan, fiduciaries, employers, and participants. For

these reasons, the Court below has erred by holding

§ 3111 preempted by ERISA.

C. The legislative history of ERISA and its amend-

ments provide clear support that state remedies for the

collection of delinquent benefit plan contributions were

both contemplated and encouraged by Congress. Relying

on its sweeping interpretation of ERISA’s preemption

provision, the Court below failed to consider the signifi-

cance of these authorities.

7

ARGUMENT

I. THE DECISION BELOW IMPERMISSIBLY SIN-

GLES OUT EMPLOYEE BENEFIT PLANS FOR

DIFFERENT TREATMENT UNDER CALIFORNIA

MECHANICS’ LIEN PROVISIONS.

California provides a comprehensive statutory scheme

designed to ensure that those who provide labor or ma-

terials to the improvement of real property are compen-

sated for their contribution. The following statutes iden-

tify persons protected under California mechanics’ lien

law.

Mechanics, materialmen, contractors, subcontractors,

lessors of equipment, artisans, architects, registered

engineers ... and all persons and laborers of every

class performing labor upon or bestowing skill or

other necessary services .. . to a work of improve-

ment shall have a lien upon the property upon which

they have bestowed labor or furnished materials or

appliances or leased equipment for the value of such

labor done or materials furnished. . . .

California Civil Code § 3110.

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 lien on such property in the

amount of the supplemental] fringe benefit payments

owing to it pursuant to the collective bargaining

agreement.

California Civil Code § 3111.

. In recognition of the fact that fringe benefit payments

represent an important and substantial portion of con-

struction workers’ total wage package, the predecessor of

Civil Code § 3111 was amended in 196.4. The purpose

of this amendment was to assure that Trust Funds would

be guaranteed an efficient mechanism to enforce the rights

8

of their beneficiaries, i.e., the workers’ lien rights for

amounts owing as fringe benefit contributions. Section

3111 did not create a new right; it simply broadened the

category of those persons eligible to assert the lien rights

already established by § 3110—rights which have been

guaranteed under California law since 1872. The Trust

Funds, on behalf of their beneficiaries, rely on the me-

chanics’ lien remedy as an important tool in securing the

contributions which fund the benefits due.’ As a result

of the decision below, ERISA trust funds are prevented

from asserting workers’ lien rights arising from unpaid

contributions due and owing to the funds. The Trust

Funds submit that the decision below singles out ERISA-

employee benefit plans for disparate treatm:cnt under the

State’s mechanics’ lien provisions and, therefore, the de-

cision itself and the ruling created thereby is preempted

under ERISA § 514(a) and § 514(c).

In Mackey v. Lanier Collections Agency, 486 U.S. 825

(1988), this Court considered the impact of ERISA’s

preemption provision on Georgia’s garnishment statute.

In Mackey, this Court considered whether ERISA pre-

empted a related Georgia statute which barred the

garnishment of funds or benefits of ERISA-regulated em-

ployee benefit plans. In Mackey, a collection agency ob-

tained money judgments against participants of a vaca-

tion and holiday benefits plan for money owed to clients

of the collection agency. The agency brought an action

1 Notably, ERISA, as interpreted by this Court, requires that

benefits must be provided by the trust funds to the beneficiaries

even if the contributions cannot be collected by the trust fund.

See, Central States Pension Fund v. Central Transport, Inc., 472

U.S. 559, 567 n.7, 579 n.20 (1985); see also, Department of Labor

Advisory Op. No. 76-89 (Aug. 31, 1976) and Department of Labor

Advisory Op. No. 78-28A (Dec. 5, 1978). The decision of the court

below, on the other hand, prevents the collection of the monies

necessary to provide the very benefits mandated by this Court,

thereby placing the financial integrity of these employee benefit

trust funds in jeopardy, a result which is the very antithesis of

the ERISA statutory scheme developed by Congress.

9

in Georgia state court to collect these money judgments

by garnishing the debtors’ plan benefits. The trial court

granted the collection agency’s request for garnishment.

The Georgia Court of Appeals reversed, holding that

the Georgia statute exempting ERISA plans from gar-

nishment precludes the garnishment of funds or benefits

of ERISA-regulated employee benefit plans. Mackey, 486

U.S. at 825, 828. On appeal, the Georgia Supreme Court

reversed. That court found that the statute in question

barred the garnishment action, but held that such pro-

vision was preempted by ERISA because it purported to

regulate ERISA plans. As a result of the Georgia Su-

preme Court’s decision, ERISA plans became subject to

garnishment under Georgia’s general garnishment laws.

On certiorari, this Court held that the state anti-garnish-

ment law was preempted by ERISA. Z/d. at 830. The

Court stated that the Georgia statute’s express reference

to ERISA and its sole application to employee benefit

plans subjected it to preemption by the federal scheme.

Id. at 829. The Court declared “. . . we hold that [the

Georgia statute], which singles out ERISA employee wel-

fare benefit plans for different treatment under state

garnishment procedures, is preempted under § 514(a).”

Id. at 830 (emphasis added).

The Court explained that this “different treatment”’

was apparent on the face of the Georgia statute by its

express reference to ERISA plans. As a result of this

provision, ERISA welfare benefit plans were protected

from garnishment while non-ERISA plans were not so

protected. Jd. at 830 n.4.

The Court next considered whether § 514(a) preempts

Georgia’s general garnishment law because it “relates to”

ERISA welfare benefit plans. The preemption argument

was premised on the assertion that the Georgia garnish-

ment law “relates to” ERISA welfare benefits plans be-

cause of the substantial administrative burdens and costs

incurred by benefit plan trustees when they are forced to

10

respond to garnishment actions. 7d. at 831. The Court

rejected this argument and held that ERISA does not

preclude the garnishment of ERISA-regulated welfare

benefit plans pursuant to state judgment collection mecha-

nisms. /d. at 841.

In reaching its decision, this Court analyzed the lan-

guage and structure of the ERISA scheme and found that

Congress did not intend to forbid the use of state-law

mechanisms of executing judgments against ERISA wel-

fare benefit plans. This conclusion was based on three

factors: (1) ERISA § 502, which provides that ERISA

plans may sue or be sued as an entity, clearly contem-

plates the enforcement of money judgments against bene-

fit plans; (2) ERISA plans may be sued in “run-of-the

mill” state law contract or tort claims; and (3) ERISA

provides no enforcement mechanism for collecting judg-

ments in numbers 1 and 2 above. /d. at 832-33. Because

ERISA contemplates the execution of such judgments

against plans in civil actions without providing any col-

lection mechanisms, this Court concluded that state law

methods for collecting money judgment were not pre-

empted. Jd. at 834.

Finally, the Court addressed the seeming incongruity of

upholding the statute permitting the garnishment of

ERISA welfare benefit plans, while striking down the

benefit plans. /d. at 838, n.12. The Court clarified this

distinction by stating: “. . . any state law which singles

out ERISA plans, by express reference, for special treat-

ment is preempted. [citation] It is this ‘singling out’

that pre-empts the Georgia anti-garnishment exception.”

Id. (Emphasis in original).

The analysis in Mackey is instructive with respect to

the issues in the present case. Mackey illustrates the

manner in which the present case challenges the primary

concerns of California’s mechanics’ lien law scheme. As

we have seen, California Civil Code § 3110 is part of a

broad framework of statutory protection designed to in-

11

sure that workers who contribute time, labor and mater-

ials to the improvement of real property obtain the

wages and benefits to which they are entitled. Civil Code

§ 3111 provides the same mechanics’ lien rights to em-

ployee benefit trusts as those provided to persons identi-

fied in $3110. ERISA trust funds receive no greater

benefit under this law than any other party entitled to

invoke the mechanics’ lien remedy. No “special treatment”

of employee benefit plans arises as a result of § 3111.

Section 3111 simply treats employee benefit plans in the

Same manner as any other mechanics’ lien claimant.

However, as a result of the California Supreme Court’s

decision, these benefits plans are singled out for special

treatment which is not permitted under the rationale of

Mackey.

By enacting § 3111, California legislators recognized the

fundamental relationship between employee ~benefit trusts

and their participant’s total compensation package. In

other words, § 3111 implicit!y acknowledges that the func-

tion of ERISA trust funds is to safeguard in trust, that

portion of a worker’s compensation paid as fringe bene-

fits, and to ensure the proper distribution of such benefits.

Furthermore, it is well settled that fringe benefit claims

are part of the employee’s compensation, and must re-

ceive similar treatment. United States v. Carter, 353

U.S. 210 (1956). In sustaining a cause of action for

fringe benefits against a payment bond surety, this Court

stated that “. . . contributions were a part of the compen-

sation for the work done . . .” and that the “trustees

“. . Stand in the shoes of the employees and are entitled

to enforce their rights.” Jd. at 217-18.

The majority opinion below held that Civil Code § 3111

is preempted because it “relates to” ERISA regulated

employee benefit plans “by creating an additional funding

mechanism for ERISA plans not provided for by Con-

gress... .” Carpenters Southern California Administra-

tive Corporation v. El Capitan Development Company, 53

~ 12

Cal.3d 1041, 1051 (1991). As a result of this decision,

ERISA trust funds, in their role as repository for the

fringe benefit payments of their participants, are ex-

cluded from California’s mechanics’ lien collection mech-

anism. Therefore, § 3110 claimants are permitted access

to mechanics’ lien remedies while ERISA trust fund

claimants are denied, making recovery of contributions

owed less likely. This disparate treatment of ERISA reg-

ulated trust fund is illogical, discriminatory, and imper-

missible under this Court’s precedents.

By precluding ERISA regulated trusts from utilizing

mechanics’ lien collection remedies, under this Court’s

holding in Mackey, the decision below constitutes an im-

permissible “singling-out” of ERISA employee benefit

plans for different treatment under state mechanics’ lien

provisions. The actual effect of the California Supreme

Court decision is to establish “different treatment” of

ERISA employee benefit plans under state mechanics’ lien

provisions which is preempted under Mackey.

In Mackey, the “different treatment” arose as a result

of the express provisions of the Georgia statute exempt-

ing ERISA benefit plans from the operation of the state’s

general garnishment laws. Mackey at 828-30. “Different

treatment” there was further supported by the disparate

treatment accorded to non-ERISA benefit plans as a re-

sult of the application of the garnishment exemption law.

Td. at 830, n.4.

In the immediate case, by Civil Code § 3111, California

sought to ensure that the portion of construction workers’

compensation paid to employee benefit plans was protected

to the same extent available to others under mechanics’

lien remedies. In concluding that § 3111 is preempted by

ERISA, the majority demonstrate a shallow comprehen-

sion of the relationship of employee benefit funds to labor

policies and show a lack of understanding of the policy

and purposes behind ERISA. For example, the majority’s

13

rationale that ERISA plans do not furnish labor or mate-

rials to real property completely disregards the legal rela-

tionship between the ERISA plans and their participants,

who do provide the labor.

The decision below asserts Civil Code § 3111 is pre-

empted because it creates an additional cause of action

for enforcing contribution obligations, as well as making

additional entities liable for such amounts. El Capitan,

at 1048. This rationale confuses the nature of the

mechanics’ lien remedy. Mechanics’ liens do not create

substantive personal rights against the owner of the real

property. Such liens simply create a security interest in

the property to which labor or services were contributed.

Therefore, pursuant to § 3111, if appropriate payments

are not made by the employer, a claimant may file a lien

against the property and avail itself of the mechanics’

lien remedy to collect an existing obligation. California

Civil Code § 3110, see, El Capitan, at 1065 (Broussard,

J., dissenting). This is precisely the enforcement tool

provided to each individual construction laborer who per-

forms work on a particular work of improvement. Civil

Code § 3110. It is inaccurate to characterize such a col-

lection mechanism as an additional substantive cause of

action. Furthermore, the property owner should not be

viewed as a stranger to this transaction, since its property

has been enriched by the value of the labor provided.

ERISA § 514(a) preempts “any and all State laws

insofar as they may now or hereafter relate to any

employee benefit plan” covered by the statute. 29 U.S.C.

§1144(a). “The term ‘State law’ includes all laws, deci-

sions, rules, regulations, or other State action having the

effect of law, of any state... .” ERISA §514(c), 29

U.S.C. §1144(¢e). “[Wle have virtually taken it for

granted that state laws which are specifically designed to

affect employee benefit plans are pre-empted under

$ 514/(a).” Mackey, at 829 (emphasis added). Because

the California Supreme Court’s decision itself impermis-

14

sibly “singles-out’”” ERISA employee benefit plans for dif-

ferent treatment under California’s state mechanics’ lien

provisions, the Trust Funds respectfully request this

Court to grant certiorari and reverse.

II. THE CALIFORNIA SUPREME COURT ERRONE-

OUSLY APPLIED THE PRECEDENTS OF THIS

COURT IN DETERMINING WHETHER CALIFOR-

NIA CIVIL CODE § 3111 IS PREEMPTED BY ERISA.

“ERISA is a comprehensive statute designed to pro-

mote the interests of employees and their beneficiaries in

employee benefit plans.” Shaw v. Delta Air Lines, Inc.,

463 U.S. 85, 90 (1983). “The statute imposes participa-

tion, funding, and vesting requirements on pension plans.

It also sets various uniform standards, including rules

concerning reporting, disclosure, and fiduciary responsi-

bility, for both pension and welfare plans.” Jd. at 91.

As part of this regulatory system, Congress sought to

provide various safeguards to prevent abuse and “to com-

pletely secure the rights and expectations” created by

ERISA. S.Rep. No. 93-127, p. 36 (1973). A crucial ele-

ment among these safeguards is §514(a), 29 U.S.C.

$ 1144({a), ERISA’s broad preemption provision. Inger-

soll-Rand Co. v. McClendon, 498 U.S. , 112 L.Ed.2d

474, 482-83 (1990). ERISA § 514(a) preempts “any and

all State laws insofar as they may now or hereafter re-

late to any employee benefit plan” covered by the statute.

29 U.S.C. § 1144(a).

“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.” Shaw, supra, at 96-97.

However, “[s]ome 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.”

Id. at 100.

“(T)he question whether a certain state action is pre-

empted by federal law is one of congressional intent.

15

‘The purpose of Congress is the ultimate touchstone.’ ”

Ingersoll-Rand, 112 L.Ed.2d at 483 (citing Allis Chalmers

Corp. v. Lueck, 471 U.S. 202, 208 (1985) ).

The preemptive power of § 514 is indeed broad. How-

ever, a reviewing court must provide more than lip

service to sweeping statutory statements. A review of

the Court’s decisions in this area provides valuable guide-

lines for the instant case.

In Fort Halifax Packing Co. v. Coyne, 482 U.S. 1

(1987), the Court considered whether a Maine law re-

quiring severance payments to employees laid off as a

result of a plant closing was preempted by ERISA. This

Court held that this statute was not preempted since it

neither established nor required an employer to maintain

an employee benefit “plan” within the meaning of

ERISA. /d. at 6. Since the statute dealt with employee

“benefits”, rather than “employee benefit plans,” it was

not preempted. Id. at 7-8.

The Court further explained that preemption of the

statute did not serve ERISA’s purposes since it did not

raise concerns regarding the imposition of contradictory

regulations on employee benefit plans by different jurisdic-

tions, nor did it implicate regulatory concerns regarding

the administration of such plans. Jd. at 8, 14. The Court

held that where a state law created no danger of a con-

flect with a Federal statute, there is no basis for pre-

emption. /d. at 19.

In Mackey v. Lanier Collections, this Court rejected the

preemption challenge to Georgia’s general garnishment

laws as applied to ERISA-regulated employee benefit

plans. Mackey, 486 U.S. at 841. Based upon an analysis

of the express language and structure of ERISA, this

Court concluded that no Congressional intent existed to

bar the state law collection methods there at issue. Jd.

at 834. Furthermore, the Court rejected petitioner’s

contentions that the administrative and economic impact

of the state garnishment laws necessarily “related to”

16

ERISA welfare benefit plans so as to require preemption

under § 514. Id. at 831.

In Shaw v. Delta Airlines, 463 U.S. 85 (1983), this

Court considered ERISA preemption challenges to New

York state human rights and disability benefit statutes.

The New York human rights law prohibited discrimina-

tory treatment by employee benefit plans for pregnant

employees as compared to other non-occupational disabili-

ties. The law at issue required employers to pay dis-

ability benefits to pregnant employees, therefore treating

them in a similar manner as employees otherwise dis-

abled. Striking down the state law, the Court held the

provision preempted by ERISA but “only insofar as it

prohibits practites that are lawful under federal law.”

Id. at 108. The Court explained that by this provision,

New York prohibited discrimination involving employee

benefit plans otherwise permitted by federal law (at that

time). The New York state disability law was held not

preempted by ERISA. 7d. at 108.

In Pilot Life Insurance Company v. Dedeaux, 481 U.S.

41 (1987), this Court addressed a preemption challenge

to a plan participant’s state law action involving improper

processing and bad-faith failure to pay benefits under an

ERISA regulated insurance plan. Much of this decision

involved an interpretation of the “deemer clause” of

ERISA § 514(b) (2) (B). However, this Court held that

ERISA’s civil enforcement scheme preempts state-law ac-

tions asserting improper processing and payment of

ERISA plan benefits.

In FMC Corp. v. Holliday, 498 U.S. ——, 112 L.Ed.2d

356, 111 S.Ct. (1990), this Court held that ERISA

preempted a Pennsylvania state subrogation law which

regulated employee benefit plans. This statute was pre-

empted since it controlled the subrogation and reimburse-

ment rights arising in state tort claims thereby directly

regulating the funding and benefits of ERISA regulated

employee benefit plans. Jd. at 362-63.

17

In Ingersoll-Rand v. McClendon, 498 U.S. ——, 112

L.Ed.2d 474, 111 S.Ct. 478, this Court considered a pre-

emption challenge to a state wrongful discharge action

based on an employee’s allegation that his employer termi-

nated his position to avoid pension plan liability. The

Texas Supreme Court upheld the employee’s wrongful

discharge action because it found that the principal rea-

son for the termination was the employer’s desire to evade

its pension obligations. Jd. 112 L.Ed.2d at 482. However,

this Court reversed the decision of the Texas Court, hold-

ing that state laws which provide a remedy for the vio-

lation of rights expressly guaranteed by ERISA and ex-

clusively enforced under its civil enforcement provisions

are preempted. /d. at 488. The Court explained that the

basis of the state causes of action focused on the very

existence of the plan as well as the participant’s rights

therein. Because ERISA itself provides for the exclusive

enforcement of such rights, the state law is preempted. Jd.

at 484, 486.

Based on these Supreme Court decisions, state laws are

preempted pursuant to § 514(a) in the following circum-

stances: (1) where the law specifically targets employee

benefit plans for special treatment, Mackey, (2) where

the state law prohibits practices permitted under federal

law, Shaw; (3) where the law provides a state remedy

for actions related to claims processing and the distribu-

tion of benefits by employee benefit plans, Pilot Life:

(4) where the law cKrectly controls the subrogation and

reimbursement rights of employee benefit plans thereby

regulating the funding of such plans, FMC; (5) where the

law provides a state remedy based on rights directly con-

cerning the existence of the plan and the rights of its

participants. Ingersoll-Rand.

Where preemption has been found, the state laws in-

volved have directly affected aspects of the substantive

legal relationships between employee benefit funds, their

participants and employers. Rather than merely “relate

18

to” employee benefit plans, these state laws substantially

impact employee benefit plans in crucial areas governed

by ERISA including plan administration, funding, and

the distribution of benefits.

In contrast, state laws have not been determined pre-

empted by ERISA in the following circumstances: (1)

laws affecting employee benefit plans in too tenuous or

remote a manner upon which to warrant preemption,

Shaw; (2) where the law provides ancillary collection

remedies in civil cases against employee benefit plans,

Mackey; (3) where the law creates no danger of conflict

with ERISA purposes and policies, Fort Halifaz.

Based upon these principles, California Civil Code § 3111,

by its terms, does not fall into the category of state laws

preempted § 514(a). As has been demonstrated, § 3111

seeks to treat employee benefit plans similarly to all other

claimants under California’s mechanics’ lien remedies.

Section 3111 has no impact on any phase of employee

benefit plan administration which conflicts with ERISA’s

purposes or policies. Section 3111 raises no danger re-

garding the compliance by employer benefit funds with

conflicting laws of various jurisdictions. Section 3111 has

no impact on the terms and conditions of employee bene-

fit plans, and it has no affect on funding, vesting, or bene-

fit provisions established pursuant to ERISA.

As in the statute at issue in Mackey, § 3111 simply pro-

vides an alternate mechanism permitting employee bene-

fit plans (like all mechanics’ lien claimants) to collect

previously existing obligations. Furthermore, as_ in

Mackey, no basis exists which would support the argu-

ment that the area of collection procedures is exclusively

enforced under ERISA.

es

19

Ill. THE CALIFORNIA SUPREME COURT’S HOLDING

THAT CIVIL CODE §3111 IS PREEMPTED BY

ERISA IS INCONSISTENT WITH LEGISLATIVE

INTENT.

As originally enacted, ERISA did not provide a federal

cause of action for the recovery by employee benefit plans

of unpaid contributions. Mackey, 486 U.S. at 832. Fur-

thermore, ERISA § 502 provides that employee benefit

plans may sue or be sued as an entity in § 502 actions.

29 U.S.C. § 1182(d) (1). ERISA plans may also be sued

in state tort and contract actions. Despite these provi-

sions, ERISA does not provide an enforcement mechanism

for collecting judgments awarded in these types of actions.

Mackey, at 833. Based on these provisions, this Court

concluded that the collection of judgments pursuant to

state law collection remedies was contemplated within the

ERISA scheme in cases where an ERISA benefit plan is

a party. Mackey, at 834.

This conclusion is supported by the legislative history

of ERISA. In Laborers Fringe Benefit Funds v. North-

west Concrete and Construction, Inc., 640 F.2d 1350,

1352 (6th Cir. 1981), the 6th Circuit declared:

The legislative history underlying Section 502 indi-

cates that Congress intended that the enforcement

provisions should have teeth: the provisions should

be liberally construed ‘to provide both the Secretary

and participants and beneficiaries with broad reme-

dies for redressing or preventing violations of the

Act.’ H.Rep. No. 93-533, 93d Cong. & Ad. Newsp.

4639, 4655. This history further states that ‘the in-

tent of the Committee is to provide the full range

of legal and equitable remedies available in both state

an@® federal courts and to remove jurisdictional and

procedural obstacles which in the past appear to have

hampered effective enforcement of fiduciary respon-

sibility under state law for recovery of benefits due

to participants.’ (Emphasis added).

20

Further evidence of a congressional intent not to pre-

empt state collection remedies is found in the legisla-

tive history of the Multi-Employer Pension Plan Amend-

ments Act of 1980, wherein, inter alia, Congress enacted

ERISA § 1145 providing employee benefit trusts with a

federal cause of action for unpaid contributions.

Pertinent provisions of this history provide:

The Committee’s amendment provides that in the case

of a civil action by any person to collect delinquent

multi-employer plan contributions, regardless of other-

wise applicable law, the court before which the action

is brought may award the plaintiff (1) reasonable at-

torneys’ fees, (2) court costs and (3) liquidated dam-

ages not to exceed 20% 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 20% level. However, the bill

does not preclude the award of liquidated damages

in excess of the 20% level if an award of such 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 multi-

employer contributions. (Emphasis added).

H.R. Rep. No. 96-869 (II), 96th Cong., 2d Sess.

Based on these excerpts of legislative history, it is

apparent that utilization of state remedies for the collec-

tion of delinquent contributions by employee benefit plans

was contemplated, indeed encouraged by Congress.

CONCLUSION

For the foregoing reasons, the Trust Funds respect-

fully urge this Court to issue a Writ of Certiorari.

mio wetne ae

Dated: October 1991

21

Respectfully submitted,

VICTOR J. VAN BOURG *

MICHAEL B. ROGER

ROBERT M. HIRSCH

BLYTHE MICKELSON

BARRY E. HINKLE

JAMES J. WESSER

VAN Bourc, WEINBERG, ROGER

& ROSENFELD

875 Battery Street, 3rd Floor

San Francisco, California 94111

(415) 864-4000

Attorneys for Trust Funds

* Counsel of Record