Opposition Brief — American Bonding Co. v. Trustees of Carpenters for Southern Nevada Health & Welfare Trust

No. 93-1964

OFEICE OF THE CLERK

In The

Supreme Court of the United States

October Term, 1993

AMERICAN BONDING COMPANY

Petitioner,

v.

TRUSTEES OF THE CARPENTERS FOR

SOUTHERN NEVADA HEALTH AND

WELFARE TRUST; TRUSTEES OF THE

CONSTRUCTION INDUSTRY AND

CARPENTERS JOINT PENSION TRUST

FOR SOUTHERN NEVADA; TRUSTEES

OF THE VACATION TRUST CARPENTERS

UNION NO. 1780 AND TRUSTEES OF

THE SOUTHERN NEVADA CARPENTERS

AND MILLWRIGHTS APPRENTICESHIP

TRAINING TRUST,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE SUPREME COURT OF NEVADA

BRIEF IN OPPOSITION

KRISTINA PICKERING

MorRRIS BRIGNONE & PICKERING

1203 Bank of America Plaza

300 South Fourth Street

Las Vegas, Nevada 89101

(702) 474-9400

Attorneys for Respondents

SAE Kigng le ioe camcedenae ain nypilla elS Ahat APN a Cee ae 2

.

QUESTIONS PRESENTED

l. Nevada law requires contractors to post bonds

covering claims for unpaid labor and supplies. The bonds

issued in compliance with Nevada law include coverage for

fringe benefits as part of their coverage for labor. One of

the questions presented here is whether a compensated

surety that provided such a bond can avoid liability on the

fringe benefits component of its defunct principal’s labor

debts on the grounds that, because the entity seeking to

enforce the liability is an ERISA plan, recovery is

preempted by ERISA.

ya The other question presented is whether this Court

should review a state court case that (a) has no precedential

value because it is unpublished; (b) involves an issue that

will, in all likelihood, soon be resolved by the legislature;

and (c) contains unique facts limiting its precedential

impact.

i

TABLE OF CONTENTS

TABLE OF AU TERORII ee «4 .ca stun sues ewe oo ill

TABLE OF APPEND. 66 3 oi kw eS Naeeeaee Vii

SIATUES FW Vis We 4.5.0 44 eeea gs oe ee ee Vill

I]. REASONS FOR DENYING WRIT OF

CERIMORAME 6c a ckdh ea ee ees 3

A. This Court Should Deny American’s

Petition For Writ of Certiorari

Because This Case Involves Unique

Facts, Because This Case Will Have

Limited Precedential Impaci, and

Because Legislation That Will

Definitively Resolve the Very Issue

Raised in This Matter Will, In All

Likelihood, Soon Pass in Congress ... 3

Ill. THE NEVADA SUPREME COURT

CORRECTLY DECIDED THE MERITS OF

TRaees CARE si xu da ee eee 7

A. The Claim Asserted Does Not "Relate

To" An Employee Benefit Plan

Within The Meaning of 11 U.S.C. §

SEGRE 6 ie koe Cee enews 7

zs ee

il

B. American Cannot Escape Liability On

Its Bond Without Violating State

Laws Regulating Insurance, Which

Are Exempt From ERISA Preemption

ef 6 re ee a ee 14

IV. CRUUUUPEEINS Nits cwsdeces essen 2 a

ill

TABLE OF AUTHORITIES

Cases Page

Aetna Life Ins. Co. v. Borges,

869 F.2d 142 (2d Cir.) cert.

denied, 493 U.S. 811, 110

ey So ce ach aks awk ob ee 13

Anderson v. Harless, 459 U.S.

4, 103 S. Ct. 276 (1982)

byt gg RR re re re 6

Board of Education of Rogers,

Arkansas v. McCluskey, 458

U.S. 966, 102 S. Ct. 276 (1982)

eRe Fes i, ED ooo cb eo vv a ev eu bo bees 4

Genix Supply Co. v. Board

of Trustees, 84 Nev. 246,

Se ee a0 he oie a a 1, 14

Ingersoll-Rand Co. v. McClendon,

498 U.S. 133, 111 S. Ct. 478

Ste hie roms 6 og te su Na ee ad 10

Mackey v. Lanier Collection

Agency & Serv., Inc., 486

Si I Serie oh 65 ae eA ES 7-9, 11

iV

Marcoz v. Summa Corp.,

106 Nev. 737, 801 P.2d

aE ere ee re es 9

McCoy v. Massachusetts Inst.

of Technology, 950 F.2d 13

(5th Cir. 1991), cert. denied,

S0e ee EE edb pce e reece a vadawes 7

Metropolitan Life Ins. Co. v.

Massachusetts, 471 U.S. 724,

BO ENO) cee wa pee eces aes 14, 15

Shaw v. Delta Air Lines,

“ee Sis Sh. C) re Sere ran 7,8

Singleton v. Commission of

Internal Revenue, 439 U.S.

2 Be me Si. | re re 2 a a 7

State, Nevada Employment Sec.

Dep't v. Weber, 676 P.2d 1318,

100 Nev. 121 (Nev. 1984) ....... 0.2 cccceences 3

Teamsters v. United States,

ee te, TE, osteo k.3.d ad es Soe ae 11

Trustees of Elec. Wkrs. H.

& W. Trust v. Marjo Corp.,

ee be, Be Ae. 7) ere ae ee 12

101 S. Ct

J., concurring)

Statutes

29 U.S.C. §

29 U

».C. §

29 U.S.C

LF

29 U.S.C. §

NRS 624.270

NRS 624.273

NRS 691.030

» 691A.010

5 691B.010

5 691B.030

Watt v. Alaska, 451 (

1673 (1981) (STEVENS.

1145

1] U.S.C. § 1144

1144

1S. 259,

vi

Other

Georgia Code section 18-4-22.] K

H.R. Rep. No. 96-889(II) (Ways

and Means Committee), 96

Cong. Ist Sess., reprinted

in 1980 USCCAN 2993-3066

at 3037-3038 , ; 1]

H.R. Rep. No. 533, 1974

USCCAN at 4655 1]

Kennedy Gives Strong Endorsement

of Bill that Would Pre-Empt

ERISA, BNA Daily Labor Report,

March 14, 1994

Wr

oe]

Nevada Supreme Court Rule 123

S. Rep. No. 127, 1974

USCCAN at 4871 1]

Senate Panel Clears Bill to

Bar State Prevailing Wage

Laws from ERISA, vol. 21,

no. 16, BNA Pension &

Benefits Reporter, p. 77!

(April 18, 1994) 5

Vil

TABLE OF APPENDICES

APPENDIX

A. Senate Bill 1580

B. The Bureau of National Affairs, Inc., DAILY

LABOR REPORT, MARCH 14, 1994, 1994 DLR

48 d18

al The Bureau of National Affairs, Inc., BNA Pension

& Benefits Reporter, Vol. 21, No. 16; Pg. 771, April

18, 1994

Vill

STATUTES INVOLVED

This case involves the following statutes:

l. 29 USC § 1132(d)(1) which provides as follows:

An employee benefit plan may sue or be

sued under this subchapter as an entity.

Service of summons, subpena, or other legal

process of a court upon a trustee or an

administrator of an employee benefit plan in

his capacity as such shall constitute service

upon the employee benefit plan. In a case

where a plan has not designated in the

summary plan description of the plan an

individual agent for the service of legal

process, service upon the Secretary shall

constitute such service. The Secretary, not

later than 15 days after receipt of service

under the preceding sentence, shall notify the

administrator or any trustee of the plan of

receipt of such service.

y 3 29 USC § 1144(a), which provides as follows:

Except as provided in subsection (b) of this

section, the 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 described in section 1003(a) of

this title and not exempt under section

1003(b) of this title. This section shall take

effect on January 1, 1975.

iX

29 USC § 1144(b)(2)(A), which provides as follows:

Except as provided in subparagraph (B),

nothing in this subchapter shall be construed

to exempt or relieve any person from any

law of any State which regulates insurance,

banking, or securities.

NRS § 691 B.010, which provides as follows:

All contracts of surety insurance covering

subjects located or to be performed in this

state are subiect to the applicable provisions

of chapter 687B of NRS (the insurance

contract), and to other applicable provisions

of this code. (1971, p. 1779.)

NRS § 691B.030, which provides as follows:

Any insurer which executes any surety

contract as surety shall be estopped, in any

proceeding to enforce the liability which it

has assumed to incur, to deny its power to

execute such contract or assume such

liability. (1971, p. 1780.)

]

I.

STATEMENT OF THE CASE

The Nevada legislature has recognized that small

contractors often underbid construction jobs in the hope of

getting work and then find themselves unable to pay their

workers. Many contractors declare bankruptcy. In response

to this recurring problem, the Nevada legislature enacted the

statutes here at issue. NRS 624.270 and 624.273 require

contractors to post bonds covering claims for unpaid labor

and supplies.’ Bonds issued in compliance with these

statutes include coverage for fringe benefits as part of their

coverage for labor. Genix Supply Co. v. Board of Trustees,

84 Nev. 246, 438 P.2d 816 (1968).

Respondents are the Trustees of multi-employer

Southern Nevada Carpenters Trust Funds ("Trustees"). 7

The funds provide health, welfare, and pension benefits to

individuals employed in the Southern Nevada construction

industry. The plans the Trustees administer are qualified

under the Employment Retirement Income Security Act, 29

U.S.C. § 1001 et seg. ("ERISA").

'NRS 624.270 and 624.273 are set out in the appendix to the

petition for writ of certiorari, at Appendix C, pages 1-6. All references

to the petition for writ of certiorari in this case will be abbreviated

"Petition" followed by the pages(s) cited.

Pursuant to Rule 29.1, respondents Trustees of the Carpenters for

Southem Nevada Health and Welfare Trust; Trustees of the

Construction Industry and Carpenters Joint Pension Trust for Southern

Nevada; Trustees of the Vacation Trust Carpenters Union No. 1780;

and Trustees of the Southern Nevada Carpenters and Millwrights

Apprenticeship Training Trust (together Trustees"), state as follows:

the Trustees are not a corporation.

2

On May 4, 1990, American issued a $20,000.00

standard form Nevada contractor’s surety bond to secure

labor, materialmen’s, and suppliers’ debts incurred by

National Forest Products, Inc. ("Forest"), a Nevada

contractor. Forest executed a collective bargaining

agreement, requiring it to make contributions to Trustees

based on the hours its employees worked. Pursuant to the

collective bargaining agreement, Forest submitted remittance

reports to Trustees for the months of January through July

1991, but it failed to make any payment for the time on

those reports. Forest filed for Chapter 11 protection under

the United States Bankruptcy Code on November 26, 1991.

Trustees brought a claim against American for the amount

of the surety bond.

American moved for summary judgment, asserting

that ERISA preemption defeated the Trustees’ claims

against it. Trustees responded and countermoved for

summary judgment in their own right. On November 6,

1992, the lower state court issued an Order and Judgment

granting Trustee’s countermotion for summary judgment

against American. The order declared American’s $20,000

bond forfeit.

American appealed the decision to the Nevada

Supreme Court. On January 20, 1994, the Nevada Supreme

Court entered an order dismissing American’s appeal. The

Nevada Supreme Court concluded that the Nevada statutes

at issue were "only remotely related to ERISA and are

therefore not preempted by ERISA in cases such as the one

at bar." The Nevada Supreme Court order remains

unpublished. By order dated March 7, 1994, the Nevada

Supreme Court denied rehearing.

CASS OM Ee

3

Ii.

REASONS FOR DENYING WRIT OF

CERTIORARI

A. This Court Should Deny American’s

Petition For Writ of Certicrari Because

This Case Involves Unique Facts, Because

This Case Wi!' Have Limited Precedential

Impact, and Because Legislation That Will

Definitively Resolve the Very Issue Raised

in This Matter Will, In Ali Likelihood,

Soon Pass in Congress.

The Nevada Supreme Court order of which

American Bonding complains remains unpublished.

Because the order is unpublished, the case has no

preceden‘ial impact whatsoever within the Nevada state

court system. Nevada Supreme Court Rule 123 provides:

An unpublished opinion or order of the

Nevada Supreme Court shall not be regarded

as precedent and shall not be cited as legal

authority except when the opinion or order is

(1) relevant under the doctrines of law of the

case, res judicata or collateral estoppel; or (2)

relevant to a criminal or disciplinary

proceeding because it affects the same

defendant or respondent in another such

proceeding.

Moreover, the Nevada Supreme Court takes the prohibition

on citing unpublished orders seriously. In State, Nevada

Employment Sec. Dep't v. Weber, 100 Nev. 121, 124, 676

4

P.2d 1318, 1320 (Nev. 1984), the Court chastised an

attorney who cited unpublished orders and warned:

... In the future, when this court perceives a

lack of regard for its rules or decisions, we

may well impose sanctions such as striking a

brief, dismissing an appeal, or finding a

confession of error. Additionally, the

attorneys involved may be referred to the bar

for discipline.

Because this case is unpublished, no other party can

rely on its holding, and the case can create no future

conflict with any other decision, whether state or federal.

Therefore, review of the Nevada Supreme Court’s order

would be of immediate importance only to the parties

involved. And "[t]o remain effective, the Supreme Court

must continue to decide only those cases which present

questions whose resolution will have immediate importance

far beyond the particular facts and-parties involved." Board

of Education of Rogers, Arkansas v. McCluskey, 458 U.S.

966, 971, 102 S. Ct. 276, 280 (1982) (STEVENS, J.,

dissenting).

A second factor militating against a grant of

certiorari is that legislation which will directly address the

very question that American here presents is now making

its way through Congress. Senate Bill 1580, introduced by

Senator Arlen Specter, would definitively resolve this issue

in favor of the Trustees by exempting from ERISA

preemption "any provision of State law to the extent that

such provision provides for a mechanics’ lien or other lien,

bonding, or other security for the collection of delinquent

BNE PIS a iad Sa hae

he A agape AiR RD Ne Mae” NON TR NC RE A aR a OP

Ne tea te MARI” eng fil NE

5

contributions to a multi-employer plan."* The House of

Representatives has already passed a similar bill by a vote

of 276 to 150. See Kennedy Gives Strong Endorsement of

Bill that Would Pre-Empt ERISA, BNA Daily Labor Report,

March 14, 1994.4

Senate Bill 1580 has every indication of passing

within the next few months. During committee hearings,

Senator Edward Kennedy, chairman of the Labor and

Human Resources Committee, "stressed the importance of

expediting the passage of the bill by the Senate because

recent court decisions in many states ‘have gone far beyond

the original intent of ERISA, and vastly extended the reach

of the preemption provision.’" See Senate Panel Clears Bill

to Bar State Prevailing Wage Laws from ERISA, vol. 21,

no. 16, BNA Pension & Benefits Reporter, p. 771 (April 18,

1994).° Supported by the Clinton Administration, the bill

was favorably reported out of the Senate Committee on

Labor and Human Resources.

This Court should not devote its scarce resources to

resolving an issue that Congress is close to addressing in a

definitive manner. As was recognized in Watt v. Alaska,

451 U.S. 259, 274, 101 S. Ct. 1673, 1682 (1981)

(STEVENS, J., concurring), this Court should take into

consideration the likelihood that Congressional action is

forthcoming in deciding whether to grant a petition of

certiorari. In his concurrence in the Watt decision, Justice

Stevens noted that certain issues are "clearly a matter for

Senate bill 1580 is set out in the appendix.

‘This Daily Labor Report article is set forth in the appendix.

*This article is set out in the appendix.

6

Congress to decide," and he added, "If Congress is

displeased with the decisions of this Court and the Court of

Appeals, it may promptly reverse them by revising the

relevant statutes. If that is its view, it no doubt would have

acted more promptly if we had simply denied certiorari." /d.

Further, once passed, the proposed legislation would

render any decision the Court made in this matter

meaningless by robbing the decision of all precedential

value. This Court must not spend its limited time and

energy issuing an opinion that "in no way promotes the

development of the law." Anderson v. Harless, 459 U.S. 4,

12, 103 S. Ct. 276, 280 (1982) (STEVENS, J., dissenting).

Finally, if this Court were inclined to hear a case

involving ERISA preemption, certain factors of this case

minimize its precedential value. This case, which, in part,

involves the issue of whether the two Nevada statutes fall

under the ERISA insurance exception, is uncharacteristic of

most cases involving ERISA preemption.

The issue of ERISA’s insurance exception is more

fully discussed below. Briefly, surety bonds are a form of

insurance contracts under Nevada law, NRS 4591B.010,

whose validity Nevada insurers are estopped to deny. NRS

691B.030. American’s duty to honor its assurances

represents state "law which regulates insurance." Trustees’

right to make claim against American based on its bond and

the law applicable to its undertaking thus fall within

ERISA’s insurance exempiion.

Justice Stevens, in a rare opinion supporting the

denial of a petition for certiorari, stated that he

"consider[ed] it entirely appropriate to disfavor complicated

cases which turn largely on unique facts. A series of

7

decisions by the courts of appeals may well provide more

meaningful guidance to the bar than an isolated or

premature opinion of this Court." Singleton v. Commission

of Internal Revenue, 439 U.S. 940, 945, 99 S. Ct. 335, 339

(1978).

Il.

THE NEVADA SUPREME COURT

CORRECTLY DECIDED THE MERITS

OF THIS CASE

A. The Claim Asserted Does Not "Relate To"

An Employee Benefit Plan Within The

Meaning of 11 U.S.C. § 1144(a).

If this Court grants the petition for certiorari, then it

should affirm the order of the Nevada Supreme Court. The

order does not conflict with any "decision of another state

court of last resort or of a United States court of appeal."

Rule 10. In fact, the order of the Nevada Supreme Court

comports with the principles established by other courts and

by Congress itself in enacting ERISA.

While ERISA broadly preempts state laws that

"relate to any employee benefit plan" covered by it (29

U.S.C. § 1144(a)), this preemption is "not limitless."

McCoy v. Massachusetts Inst. of Technology, 950 F.2d 13,

17 (Sth Cir. 1991), cert. denied, 112 S. Ct. 1939 (1992).

"Some state actions may affect employee benefit plans in

too tenuous, remote, or peripheral a manner to warrant a

finding that the law ‘relates to’ the plan." Shaw v. Delta

Air Lines, Inc., 463 U.S. 85, 100 n.21 (1983).

The central case in this area of ERISA preemption

is Mackey v. Lanier Collection Agency & Serv., Inc., 486

8

U.S. 825 (1988). At issue in Mackey were two Georgia

garnishment _ statutes. The first specifically barred

garnishment of "[fJunds or benefits of a pension, retirement,

or employee benefit plan or program subject to [ERISA]."

The second was Georgia’s general garnishment statute,

silent with respect to ERISA, which Georgia’s courts

applied to allow creditors to reach benefits due employees

under ERISA-protected plans. This Court invalidated the

specific, protective statute as preempted by ERISA, but

upheld Georgia’s general garnishment law, minus the

exemption, as applicable to employee benefit plans and not

preempted.

Mackey quoted Shaw in striking down the specific,

protective statute: "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." Mackey, 486

U.S. at 829 (quoting Shaw, 463 U.S. at 96-97; Mackey

Court’s emphasis). Georgia Code section 18-4-22.1 by its

terms "single[d] out ERISA employee welfare benefit

plans." (/d.), and under Shaw, this "singling out" was fatal.

Mackey, 486 U.S. at 838 n.12.

As noted, this Court, in Mackey, upheld Georgia’s

general garnishment laws, though applied by Georgia’s

courts to reach benefits due under ERISA benefit plans. It

did so based on its determination of the intent of the

Congress that enacted the original Employment Retirement

Income Security Act of 1974. Mackey, 486 U.S. at 840.

Elsewhere in that statute, the 1974 Congress gave ERISA

plans the power to "sue or be sued," 29 U.S.C. §

1132(d)(1). Georgia’s general garnishment laws, though

burdensome to plan fiduciaries, merely provide a means of

collecting judgments applicable to all creditors and all

assets generally and are a necessary procedural incident to

AVN coil nat eI An Ne, AK

9

the plans’ power to sue and be sued. Mackey, 486 USS. at

834, n.10. While garnishing benefits due under an ERISA

plan brings Georgia’s garnishment statutes into contact with

Georgia-based ERISA plans, such contact is too general in

application and remote in effect to be said to "relate to" an

ERISA plan. This Court therefore rejected preemption as

to Georgia’s general garnishment laws.

In this case, American voluntarily undertook to issue

Forest a contractor’s bond. The bond, by its terms, protects

creditors of American’s principal, Forest, and the Trustees

are such creditors. None of the statutes involved "single

out" ERISA plans; nor do they impose a liability beyond

that which American affirmatively undertook. Instead, the

statutes refer to "labor" generically. Automatic preemption,

like that found to exist in Mackey with respect to Georgia’s

specific garnishment statute, thus does not arise. The

Trustees’ right to make demand on and to enforce

American’s obligations under its bond are not preempted by

ERISA, 29 U.S.C. § 1144(a).

In fact, if the Nevada Supreme Court had ruled in

favor of American, it would have, in essence, exempted

ERISA plans from the benefits of Nevada's contractor

licensing statutes. Such an exemption would have

impermissibly "singled out" ERISA plans. As American

recognizes, "Under ERISA, the term ‘state law’ is defined

broadly enough to encompass ‘almost any imaginable

legislative, judicial, or administrative action a state might

take.’" Petition, p. 8, quoting Marcoz v. Summa Corp., 106

Nev. 737, 743, 801 P.2d 1346, 1350 (1990). A decision by

the Nevada Supreme Court to exclude only ERISA plans

from the class of beneficiaries of NRS 624.270 and 624.273

would have unlawfully "related to" an ERISA plan. Under

such a ruling, individual workers could pursue American for

10

the compensation Forest promised them, but ERISA plans

would be precluded from bringing a similar action. Under

ERISA’s preemption provision, which prohibits state courts

from issuing decisions that single out ERISA plans for

special treatment, the Nevada Supreme Court could not

have ruled in American’s favor.

"[T]he question of whether a certain state statute is

preempted by federal law is one of congressional intent,"

making "[t}he purpose of Congress ... the ultimate

touchstone." IJngersoll-Rand Co. v. McClendon, 498 U.S.

133, 137, 138, 111 S. Ct. 478, 482 (1990). An inquiry into

legislative intent demonstrates that Congress did not intend

that surety obligations such as American’s would be

preempted by ERISA.

As originally enacted, the civil enforcement section

of ERISA only provided for equitable proceedings. No

federal cause of action to recover money judgments from

delinquent employers existed. Because the absence of any

ation to collect money judgments would destroy ERISA’s

fundamental purpose to protect employee benefit rights,

Congress could not have intended to preclude such causes

of action under state law.

In 1980, Congress added provisions establishing a

federal cause of action to recover delinquencies. 29 U.S.C.

§§ 1145, 1132(g). However, this Court has emphasized that

in interpreting the preemption clause of ERISA, the relevant

congressional intent is the intent of the Congress that

enacted the preemption clause. "We 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

Lien ar il ale ove

Re Sid Oy, iin sk aD ll, tal lM, Su ile: Si ta Cat at Nc ils i AO ty Lace

1]

section] ... that controls."" Mackey, 486 U.S. at 840, citing

Teamsters v. United States, 431 U.S. 324, 354 n.39 (1977).

The Senate and House committees considering the

original Act both stated:

The enforcement provisions have been

designed specifically to provide both the

Secretary [of Labor] and participants and

beneficiaries with broad remedies for

redressing or preventing violations of the

Act. 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 responsibilities under state law for

recovery of benefits due to participants....

H.R. Rep. No. 533, 1974 USCCAN at 4655; S. Rep. No.

127, 1974 USCCAN at 4871 (emphasis added). The

reference to "the full range of legal and equitable remedies

available in both state and federal courts" would be

meaningless, given ERISA’s original limitation of ERISA-

based remedies to equitable enforcement, had Congress

intended collection suits like that at issue here to be barred.

The legislative history underlying the 1980

amendments to ERISA again clearly expresses Congress’s

desire to retain state law remedies in appropriate

circumstances. In fact, the 1980 amendment was only

intended to preclude state law remedies that provided for

lesser damages than those provided for by Congress. Thus,

H.R. Rep. No. 96-889(I1) (Ways and Means Committee), 96

12

Cong. Ist Sess., reprinted in 1980 USCCAN 2993-3066 at

3037-3038, states:

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

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 multi-employer plan contributions.

(Emphasis added.)

American cites Trustees of Elec. Wkrs. H. & W.

Trust v. Marjo Corp., 988 F.2d 865 (9th Cir. 1992), and

claims that the Nevada Supreme Court’s order in this case

conflicts with certain statements made by the Marjo court.

However, Marjo involved facts entirely different from those

present in this case. In Marjo, the court held that ERISA

preempts application of a statute that holds general

contractors responsible for the ERISA plan contributions

that subcontractors fail to make on behalf of their

employees. The court emphasized that under the statute

"Grant [the general contractor] has had to defend itself

against the suit for contributions as if if and not Desert

Valley [the subcontractor] were the employer contractually

bound to the Plans." Marjo, 988 F.2d at 866 (emphasis in

Marjo).

13

In contrast, sureties such as American who, for a

premium, voluntarily undertake to insure _ specific

obligations of a contractor, are not "employers" or

"fiduciaries" within ERISA’s coverage but ordinary

promissors, whose voluntarily assumed obligations are fully

enforceable under applicable state law. State law does not

require American to "defend itself against the suit for

contributions as if it ... were the employer...." Instead,

American is liable to Trustees because, as a surety, it

voluntarily assumed Forest’s obligations. The mere fact

that Trustees administers an ERISA plan does not preclude

its claim. American is liable to Trustees the same way that

American would be liable to any other creditor of Forest.

The Nevada contractor licensing statutes at issue

here do not attempt to affect the primary administrative

functions of ERISA benefit plans. NRS 624.270 and NRS

624.273 merely permit recovery of wage claims from a

compensated surety who agreed to pay them on its

principal’s default; they do not try to determine employer

eligibility for fringe benefits, to increase fringe benefits, or

to impose liability on one who does not undertake it

voluntarily. The amount, terms, conditions and every other

aspect of the pre-existing obligation to pay contributions to

the plan remain exactly as the employer and the union

agreed. The statutes in question only put employee benefit

plans on an equal footing with all other wage claimants,

who are entitled to recover their full wage. See Aetna Life

Ins. Co. v. Borges, 869 F.2d 142 (2d Cir.) cert. denied, 493

U.S. 811, 110 S. Ct. 57 (1989) (a state statute changing the

payee but not affecting the calculation of benefits is not

preempted).

14

B. American Cannot Escape Liability On Its

Bond Without Violating State Laws

Regulating Insurance, Which Are Exempt

From ERISA Preemption In Any Event.

There exists an even simpler answer to the

preemption question American has raised. The insurance

exemption stated in 29 U.S.C. § 1144(b) leaves the States

free to enforce 'aws regulating insurance whether the laws

"relate to" an E®iSA plan or not.

Metropolitan Life Ins. Co. v. Massachusetts, 471

U.S. 724, 105 S. Ct. 2380 (1985), is very nearly on point.

At issue in Metropolitan Life was a statute mandating

minimum mental-health-care benefits in all group health

policies, including ERISA plan policies. The insurers in

Metropolitan Life objected to the statute mandating the

objectionable coverages and _ declaratory judgment

proceedings were brought to decide the question. This

Court found the law mandating the additional cov rage

"related to" the administration of ERISA plans and so was

preempted under 29 U.S.C. § 1144(a). However, it went on

to find the state statute mandating the coverage to be a law

regulating insurance within the meaning of 29 U.S.C. §

1144(b)(2)(A), and upheld the Massachusetts statute on that

basis.

American posits NRS 624.270 and NRS 624.273, as

interpreted in Genix Supply, as in effect mandating coverage

for Nevada contractors’ ERISA plan _ contributions.

Accepting this characterization, arguendo, as accurate,

American’s ERISA preemption argument fails under

Metropolitan Life. By statute, Nevada makes contracts of

surety insurance no different from any other contract of

insurance and fully subject to its insurance code. NRS

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15

691B.010. If Nevada’s contractors’ bond statutes "relate to"

ERISA plans, it is only by reason of the coverages they

mandate. Laws mandating certain coverages comprise the

"business of insurance" under Metropolitan Life and are

exempt from the preemption debate.

Nevada’s Insurance Code provided a proper basis for

the Nevada Supreme Court’s order:

Any insurer which executes any surety

contract as surety shall be estopped, in any

proceeding to enforce the liability which it

has assumed to incur, to deny its power to

execute such contract or assume _ such

liability.

NRS 691B.030. American has taken Forest’s money, issued

the bond, and let creditors, including Trustees, rely on the

bond. It cannot now complain that the coverages it

mandatorily includes under NRS 624.273 are preempted by

ERISA and therefore not available.

IV.

CONCLUSION

This Court should not devote its limited resources to

reviewing this matter. The Nevada Supreme Court order at

issue remains unpublished and will create no future conflict

with any case, whether state or federal. Any conflict that

may exist will be limited to the parties involved. This

Court has expressed its desire to review only thuse cases

that will have an impact far beyond the parties involved.

Moreover, Congress will soon take definitive action on the

very issue present in this matter. Once Congress passes

Senate Bill 1580, any decision in this case will lose all

16

precedential value. Also, the insurance exception issue

present in this case makes it a bad vehicle for this Court to

clarify the scope of ERISA preemption. The unique facts

present in this case will limit whatever precedential impact

a decision by this Court may have.

If this Court decides to grant certiorari, it should

affirm the Nevada Supreme Court’s order because the order

comports with other federal case law in this area and with

Congressional intent. American is a compensated surety

who voluntarily undertook the obligation it now seeks to

avoid. No provision of ERISA prohibits an ERISA plan

from collecting sums contractually due on a voluntarily

issued surety bond. An attempt to collect such a sum does

not raise a legitimate preemption claim. In fact, any state

court decision that exempted ERISA plans from benefitting

under the contractor licensing statutes would violate the

ERISA preemption provision by "singling out" ERISA plans

for special (and detrimental) treatment. ERISA’s legislative

history demonstrates that Congress intended to retain, for

ERISA plans, state remedies that facilitate recovery of

delinquent contributions. Further, if NRS 624.270 and

624.273 are seen as "related to" ERISA plans because of

the coverages they mandate, they and the related provisions

of Nevada’s insurance code, NRS 691A.010 and 691.030,

are triggered, and with them, ERISA’s exemption of state

17

laws regulating insurance from its broad preemption

provision.

DATED this 22nd day of June, 1994.

Respectfully submitted,

MORRIS BRIGNONE & PICKERING

1203 Bank of America Plaza

300 South Fourth Street

Las Vegas, Nevada 89101

Attorneys for Respondents

Trustees of the Carpenters for Southern

Nevada Health and Welfare Trust; Trustees

of the Construction Industry and Carpenters

Joint Pension Trvst for Southern Nevada;

Trustees of the Vacation Trust Carpenters

} Union No. 1780; and Trustees of the

Southern Nevada Carpenters and Millwrights

. Apprenticeship Training Trust

APPENDIX A

103d Congress

Ist Session

S. 1580

To provide that the Employee Retirement Income

Security Act of 1974 does not preempt certain

State laws, and for other purposes.

IN THE SENATE OF THE UNITED STATES

October 21 (legislative day, October 13), 1993

Mr. Specter introduced the following bill; which was

read twice and referred to the Committee on Labor

and Human Resources

A BILL

To provide that the Employee Retirement Income Security

Act of 1974 does not preempt certain State laws,

and for other purposes.

Be it enacted by the Senate and House of

Representatives of the United States of America in Congress

assembled,

SECTION 1. ERISA PREEMPTION RULES NOT TO

APPLY TO CERTAIN ADDITIONAL STATE LAWS.

2

Section 514(B) of the Employee Retirement Income

Security Act of 1974 (29 U.S.C. 1144(b)) is amended by

adding at the end the following new paragraph:

"(9) Subsection (a) shall not apply to--

"(A) any provision of State law to the extent

that such provision requires the payment of

prevailing wages, including employee benefits, on

public projects and permits any prevailing employee

benefit plan contribution or cost requirement of such

law to be met by crediting--

"(i) the payment of employee benefit

plan contributions or costs,

"(ii) the payment of wages in lieu of

such contributions or costs, or

_ "(ii) the payment of a combination of

wages and such contributions or costs;

except th‘ this subparagraph shall not be construed

to exempt from subsection (a) any such provision to

the extent it otherwise mandates the maintenance of,

or otherwise regulates the benefits or operations of,

any employee benefit plan;

"(B) any provision of State law to the extent

that such provision--

"(i) establishes minimum standards for

the certification or registration of

apprenticeship or other training programs,

3

"(iil) concerns the establishment,

maintenance, or operation of a certified or

registered apprenticeship or other training

program, or

"(iii) makes certified or registered

apprenticeship or other training an

occupational qualification,

and does not conflict with any right, requirement, or

duty established under this title; or

"(C) any provision of State law to the extent

that such provision provides for a mechanics’ lien or

other lien, bonding, or other security for the

collection of delinquent contributions to a

multiemployer plan.".

SEC. 2. EFFECTIVE DATE.

The amendment made by section | shall take effect

on the date of the enactment of this Act and shall apply to

matters with respect to which actions are pending on or

after such date.

APPENDIX B

IST REFERENCE of Level 1 printed in FULL format.

Copyright 1994 The Bureau of National

Affairs, Inc..DAILY LABOR REPORT

MARCH 14, 1994

1994 DLR 48 d18

LENGTH: 585 words

SECTION: CURRENT DEVELOPMENTS.

TITLE: KENNEDY GIVES STRONG ENDORSEMENT

OF BILL THAT WOULD PRE-EMPT ERISA.

TEXT:

Senate Labor and Human Resources Committee

Chairman Sen. Edward Kennedy (D-Mass) March 10 said

his panel will move quickly to approve a bill that would

give states authority to set prevailing wages and certain

apprenticeship training standards on publicly funded

projects without being subject to pre-emption by the

Employee Retirement Income Security Act.

The measure (S 1580) picked up the endorsements

of Sen. Harris Wofford (D-Pa) and Kennedy, who said

ERISA’s pre-emption of such authority "is like an axe held

over the necks of working men and women." The bill (HR

1036) passed the House Nov. 9 by a vote of 276 to 150

(216 DLR A-8, 11/10/93).

During a committee hearing on the Senate measure

March 10, proponents of the bill said ERISA’s pre-emptive

authority has taken away the states’ right to mandate a

26 | aoc ha

2

minimum wage for public works projects or to govern

apprenticeship and education programs.

Sen. Arlen Specter (R-Pa), who sponsored the bill

with Sen. Alfonse D’Amato (R-NY), testified that

prevailing wage laws, which are in effect in 31 states

"protect local wage standards, promote fair competition

among bidders, and maintain quality work standards for

public works projects."

Kennedy and Specter also contended that prevailing

wage laws existed long before the enactment of ERISA.

"Recent court decisions that have upheld ERISA’s

preemptive authority over state prevailing wage laws defy

logic and are unwarranted and unjustified," according to

Kennedy.

Bill Would Exempt Mechanics’ Lien Laws

The bill also proposes to exempt state mechanics’

lien laws, which grant individuals who perform services a

lien on the property to secure payment for their work. The

mechanics’ liens and other similar remedies are a means for

collecting delinquent contributions to multiemployer plans.

Supporters of the bill include the AFL-CIO, the

Labor Department, and the National Association of State

Apprenticeship Directors.

State prevailing wage laws guarantee that workers

performing public work do not have to accept wages below

the rate paid to workers on private worksites in the same

locality, according to John Hudacs, commissioner of the

New York State Department of Labor, who testified on

3

behalf of the National Association of Government Labor

Officials.

Those who testified against the bill said ERISA’s

pre-emptive authority allows employers to provide a

uniform set of benefit plans for their workers without being

subject to varying and often conflicting state laws.

Mark Thierman, of Thierman Law Partnership of

San Francisco, Calif., who testified on behalf of the

Associated Builders and Contractors, said "Construction

industry employers, both union and nonunion, offer a wide

variety of benefits to their employees. The successful

administration of these benefits would be severely

handicapped if construction employers were subjected to

divergent state and local regulations of these benefit plans."

Other critics of the bill say the proposal would allow

States to establish discriminatory restrictions on competing

nonunion training programs. - Theirman said union-

controlled state apprenticeship councils would have

complete authority to refuse to certify qualified open shop

programs.

Leo Garcia, who spoke on behalf of The Associated

General Contractors of America, said removing ERISA’s

pre-emption mandate would further "exacerbate the

competitive disadvantage of the open shop sector of the

construction industry on prevailing wage projects."

LANGUAGE: ENGLISH

APPENDIX C

3RD REFERENCE of Level | printed in FULL format.

Copyright 1994 The Bureau of National Affairs, Inc.

BNA Pension & Benefits Reporter

Vol. 21, No. 16; Pg. 771

April 18, 1994.

LENGTH: 422 words

SECTION: NEWS QUALIFICATION: Preemption.

TITLE: SENATE PANEL CLEARS BILL TO BAR

STATE PREVAILING WAGE LAWS FROM ERISA.

TEXT:

The Senate Labor and Human Resources Committee

approved a bill April 13 that would give states authority to

set prevailing wages and certain apprenticeship training

standards on publicly funded projects without being subject

to preemption by the Employee Retirement Income Security

Act.

The committee cleared the bill ( S 1580, HR 1036)

by a vote of 10 to 7. In a statement released at the hearing,

committee Chairman Edward Kennedy (D-Mass) stressed

the importance of expediting the passage of the bill by the

Senate because recent court decisions in many states "have

gone far beyond the original intent of ERISA, and vastly

extended the reach of the preemption provisions."

ERISA was enacted in 1974 to apply a national

standard to protect workers’ health and welfare benefits.

2

The law preempts state laws relating to employee benefit

plans.

During a committee hearing on the measure March

10, Kennedy said court decisions that have upheld ERISA’s

preemptive authority over state prevailing wage laws "defy

logic and are unwarranted and unjustified" (20 BPR 552).

State prevailing wage laws, in effect in 31 states,

have been successfully chalienged and overturned in New

York and Washington, Kennedy said in his statement. In

Pennsylvania, Oklahoma, California, and Montana, they

have been overturned in lower courts, and decisions in

higher courts are pending, he added.

The bill also would allow states to set standards for

apprenticeship training programs, which have _ been

preempted by ERISA in recent court decisions in California,

Minnesota, and Oklahoma, Kennedy said.

Congress intended ERISA to-regulate the disclosure

and reporting requirements of their programs, "but we did

not intend to interfere with the long-established federal-state

joint partnership regulating state apprenticeship programs,"

according to Kennedy.

The bill also would exempt from ERISA preemption

state mechanics’ lien laws, which grant individuals who

perform services a lien on property to secure payment for

their work. The meclianics’ liens and other similar

remedies are a method of collecting delinquent contributions

to multiemployer plans.

Supporters of the ERISA bill include the AFL-CIO,

the Labor Department, and the National Association of State

Apprenticeship Directors.

3

Opponents of the bill, including the National

Association of Manufacturers, say ERISA’s preemptive

authority allows employers to provide a uniform set of

benefits for their workers without being subject to varying

and often conflicting state laws.

LANGUAGE: ENGLISH