Amicus Curiae Brief — International Brotherhood of Electrical Workers, Local Union No. 46 v. Trig Electric Construction Co.

MOTION FILED (4)

MAR 2 3 one No. 00-1329. “

IN THE

Supreme Court of the Anited States

CARPENTERS HEALTH AND WELFARE TRUST FUND FOR

CALIFORNIA; CARPENTERS PENSION TRUST FUND FOR

NORTHERN CALIFORNIA, CARPENTERS VACATION AND

HOLIDAY TRUST FUND FOR NORTHERN CALIFORNIA,

(Additional Petitioners Listed on Inside Cover),

Petitioners,

va

TRIG ELECTRIC CONSTRUCTION CO., A WASHINGTON

CORPORATION; LYDIG CONSTRUCTION, INC.; FIDELITY AND

DEPOSIT COMPANY OF MARYLAND; AND DEPARTMENT OF

GENERAL ADMINISTRATION,

Respondents.

On Petition for a Writ of Certiorari to the

Supreme Court of the State of Washington

MOTION OF MULTI-EMPLOYER TRUST FUNDS TO

FILE BRIEF AS AMICI CURIAE; AND BRIEF OF

AMICI CURIAE IN SUPPORT OF THE PETITIONERS

JAMES P. WATSON MICHAEL B. ROGER

SUSAN J. OLSON Counsel of Record

STANTON, KAY & WATSON BARRY E. HINKLE

101 New Montgomery St., CHRISTIAN L. RAISNER

Suite 500 VAN BOURG, WEINBERG, ROGER

San Francisco, CA 94105 & ROSENFELD

(415) 512-3501 A PROFESSIONAL CORPORATION

180 Grand Avenue, Suite 1400

Oakland, CA 94612

(510) 839-6600

Counsel for Petitioners

RESALE LE OLED I EOL ORE! NEL NANI ENN SLY ILENE RENEE TE LIER GE PS DR AEE IEE NE RE NR

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 -— WASHINGTON, D.C. 20001

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Additional Petitioners:

CARPENTERS TRAINING TRUST FUND FOR NORTHERN

CALIFORNIA, CARPENTERS ANNUITY TRUST FUND FOR

NORTHERN CALIFORNIA, 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,

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, OPERATING ENGINEERS

HEALTH AND WELFARE TRUST FUND FOR NORTHERN

CALIFORNIA, 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.

MOTION OF MULTI-EMPLOYER TRUST FUNDS

FOR LEAVE TO FILE BRIEF AS AMICI CURIAE

To the Honorable Chief Justice and Associate Justices of

the Supreme Court of the United States:

The Various Trust Funds representing certain trade

workers in California (“the Trust Funds)” hereby move the

Court pursuant to Supreme Court rule 37.2 for leave to file

the accompanying brief as amici curiae in support of the

Petition for Writ of Certiorari filed on February 12, 2001 in

U.S.S.C. No. 00-1329.

The Amici Curiae are the following Trust Funds (‘Trust

Funds”); 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 Training Trust Fund for

Northern California, Carpenters Annuity Trust Fund for

Northern California, 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, 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, Operating Engineers Health and Welfare Trust

Fund for Northern California, 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, in support of this motion,

the Trust Funds state the following:

1. This motion is necessitated by the failure of Lydig

Construction, Inc., Fidelity and Deposit Company of

Maryland, and Department of General Administration,

Respondents, upon request, to give written consent to the

filing of a brief by the amici applicants herein. The

consent of Petitioner, International Brotherhood of

Electrical Workers, Local Union No. 46, and of

Respondent Trig Electric has been obtained.

2. The Trust Funds are multi-employer trust funds

established pursuant to the provision of Labor

Management Relations Act of 1974, as amended,

Section 302(c), 29 U.S.C. 186(c). All of the Trust Funds

are employee benefit funds within the meaning of the

Employee Retirement Income Security Act of 1974

(“ERISA”), 29 U.S.C. Section 1001, et seq., and are

subject to federal regulation pursuant to the provisions of

ERISA.

3. Each Trust Fund was established by a collective

bargaining agreement. Each Trust Fund administers

benefit plans (“Plan” or “Plans”) that are funded with

monies that otherwise would be paid to employees as

wages or salaries. These Plans are a result of collective

bargaining between employers and unions.

4. The Trust Funds seek leave to file the attached brief

in order to make this Court aware of the serious legal,

fiscal, and public policy implications of the Washington

State Supreme Court’s ruling in /nternational Brother-

hood of Electrical Workers, Local Union No. 46 v. Trig

Electric Construction Co.; Lydig Construction, Inc.;

Fidelity and Deposit Company of Maryland and Depart-

ment of General Administration No. 98-2-26652-0 SEA,

43 P.2d 622 (1999). The Washington State Supreme

Court’s holding that state third-party lien statutes fall

within ERISA’s preemptive reach has a potentially

devastating effect upon the welfare of millions of

workers. The decision thwarts the intent of Congress to

protect beneficiaries and compromises the Trustee’s

fiduciary duty to collect benefits on behalf of its

beneficiaries.

5. The financial integrity of the Plans is also in

jeopardy if it is found that ERISA prohibits the Trust

Funds from collecting delinquent contributions through

third-party lien statutes. Unscrupulous employers will

have a loophole to shirk their obligations while

participants and beneficiaries will lose hard-earned

benefits, which are equivalent to a loss of wages.

6. Because of the split among state courts and federal

circuits regarding this issue, only a clear decision by this

Court will resolve this problem.

7. These amici are in a unique position to advise the

Court with regard to the implications of the Trig Electric

decision because of their familiarity with the structure,

administration, and purposes of multi-employer trust

funds as well as their reliance upon state third-party lien

laws to collect delinquent contributions.

WHEREFORE, the Trust Funds respectfully request that

they be granted leave to file the accompanying brief as amici

curiae.

Respectfully submitted,

JAMES P. WATSON MICHAEL B. ROGER

SUSAN J. OLSON Counsel of Record

STANTON, KAY & WATSON BARRY E. HINKLE

101 New Montgomery St., CHRISTIAN L. RAISNER

Suite 500 VAN BOURG, WEINBERG, ROGER

San Francisco, CA 94105 & ROSENFELD

(415) 512-3501 A PROFESSIONAL CORPORATION

180 Grand Avenue, Suite 1400

Oakland, CA 94612

(510) 839-6600

Counsel for Petitioners

TABLE OF CONTENTS

I. The Washington Supreme Court’s Application

of ERISA preemption to State Lien Laws

would Impair the Protection of Employee

Benefits by Depriving the Trust Funds of

Important Collection Methods. ................sssceseee

II. Review Should Be Granted To Prevent Use Of

ERISA To Undermine ERISA-Favored Plans

And Collectively Bargained Benefits..................

COR TCLLARBIIIN siccssnasanisnsnsiinsiisnisinittnicenachasiansindtciaduassiiiidinvaie

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TABLE OF AUTHORITIES

CASES Page

Benson v. Brower’s Moving & Storage, Inc., 726

F. Supp. 31, 34 (E.D. N.Y. 1989) .......cccccccsccesese 3

California Division of Labor Standards

Enforcement v. Dillingham Constr., N.A., 519

US. 386 COG parccccscssisscsincsevsenatenensnaussiausnitesniin 5

Fort Halifax Packing Co., Inc. v. Coyne, 482

US. 1, 81-12 CUSIP cccctttianctacsccnsercccctutnsndstiniadense 4

Kwatcher v. Massachusetts Service Employees

Pension Fund, 879 F.2d 957, 961 (1st Cir.

SDGD) ncoccsnsncscsscevsdiniiuseniatanientiiaanimaaenieidanaant 4

Laborers’ Trust Fund v. Muni Prince Hotel, 487

( TOE ccrccnscvitecdintatntnssiasmanisamanateiidammaediemiiamanel 8

New York State Conference of Blue Cross & Blue

Shield Plans v. Travelers Inc. Co., 514 U.S.

GES CIGD) niserscsscsncnssaiacsisnindsicitansbiiintsansiammaiaiain 4

NLRB v. Amax Coal Co., A Div. of Amax, Inc.,

453 US. FEZ, TIO-SSt CUSSED sctaviscincistennomntin

STATUTES

Calif. Civil Code § 3110 ef S€q..........ccccssscccesseesees

Calif. Civil Code §§ 3083, 3103 ...........:ccsccssesseees

Employee Retirement Income Security Act of

1974 (“ERISA”), 29 U.S.C. Section 1001

sa

68 BOG. ecccccecccssecocsscevessesenscenenesssneosnnnsonaesonsaiasnanecss passim

Labor Management Relations Act of 1974, as .

amended, Section 302(c), 29 U.S.C. 186(c)....... 2

National Labor Relations Act, 29 U.S.C. Section

131, OF BUG. cccrscccsentisncisncssinnttiansebanssieunicnameainiie 8

BRIEF OF THE MULTI-EMPLOYER TRUST FUNDS

AS AMICI CURIAE IN SUPPORT OF THE PETITION

NOW COME the Amici Curiae,' Trust Funds representing

certain Trade Workers in California who submit this brief in

support of the Petition for A Writ of Certiorari in

No. 00-1329.

The Amici Curiae are the following Trust Funds:

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 Training Trust Fund for Northern

California, Carpenters Annuity Trust Fund for Northern

California, 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, 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, Operating Engineers Health and Welfare Trust

Fund for Northern California, 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.

' No counsel for any party to this dispute authorized this brief in whole

or in part and no person or entity, other than amici curiae and their

members, made a monetary contribution to the preparation or submission

of this brief. Petitioner has consented to the filing of this brief.

2

INTEREST OF THE AMICI CURIAE

The Trust Funds are multi-employer trust funds established

pursuant to the provisions of the Labor Management

Relations Act of 1974 (““LMRA”), as amended, Section 302

(c), 29 U.S.C. § 186 (c). All of the Trust Funds are employee

benefit funds within the meaning of the Employee Retirement

Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001,

et. seq., and are subject to federal regulation pursuant to the

provisions of ERISA and the LMRA. Each of these Trust

Funds owes the fiduciary duty to collect delinquent trust fund

contributions and to that end, where applicable, relies on the

use of California’s mechanics lien laws to facilitate

collection. Wholesale ERISA preemption of state lien laws,

as suggested by the Trig Electric decision, would seriously

jeopardize the Trust Funds’ ability to collect delinquent

contributions and, in turn, hamper their ability to fulfill their

statutorily-mandated fiduciary duties.

The Trust Funds are in a unique position to advise the court

with regard to the implications of the Trig Electric decision

because of their familiarity with the structure, administration,

and purposes of multi-employer trust funds and the practical

difficulties encountered in the collection process.

SUMMARY OF ARGUMENT

This Petition presents an issue of critical nationwide

importance that should be resolved by this Court. This case

affects the means by which a vast. number of workers

throughout the country receive their medical, vacation,

pension and other benefits. At issue here is the ability of

multi-employer trust funds, such as the Amici, to use routine

state-created mechanisms for the collection of monies owed

by employers for those benefits. Congress’s objectives in

enacting ERISA and its preemption clause were to affirm the

paramount duty of trust funds to protect and secure these

benefits for employees. Yet, the Washington Supreme

3

Court’s decision in Trig Electric defies these Congressional

purposes by its holding that the Washington lien statute

regulates how ERISA plans are funded and is therefore not

“outside the preemptive scope of ERISA.” This decision is

plainly wrong as a matter of law, and violates the principles

of federalism underlying this Court’s preemption juris-

prudence. Allowed to proliferate, the reasoning of Trig

Electric would result in the preemption of an enormous array

of state laws that are of assistance to ERISA-governed plans

in the collection of monies owed to them. Review should be

granted to prevent that disaster. This case affects Trust Funds

throughout the United States, including California, that utilize

state mechanics lien laws to collect delinquent contributions.

In light of the conflict between the decision below and those

of other courts as well as those of this Court, the writ should

issue.

REASONS FOR GRANTING THE WRIT

I. The Washington Supreme Court’s Application of

ERISA preemption to State Lien Laws would

Impair the Protection of Employee Benefits by

Depriving the Trust Funds of Important Collection

Methods.

“Multi-employer employee benefit plans are something of

the darlings of Congress.” Benson v. Brower’s Moving &

Storage, Inc., 726 F. Supp. 31, 34 (E.D. N.Y. 1989).

ERISA’s essential purpose is to protect the rights of

employees, not the rights of employers. ERISA Section 2(b),

29 U.S.C. § 1001(b). The fiduciary mandate is clear:

“trustees have an obligation to enforce the terms of the

collective bargaining agreement regarding employee fund

contributions against the employer for the sole benefit of the

beneficiaries of the fund.”” NLRB v. Amax Coal Co., A Div. of

Amax, Inc., 453 U.S. 322, 336-337 (1981)) (emphasis in

original).

4

ERISA’s preemption provision, 29 U.S.C. § 1144(a), was

not intended to limit the means by which trust funds could

protect these interests. Rather, the intent of ERISA

preemption was to simplify the “administrative procedures”

to avoid “the burden that would be imposed by a patchwork

scheme of regulation.” Fort Halifax Packing Co., Inc. v.

Coyne, 482 U.S. 1, 11-12 (1987). The fact that Congress

favors multi-employer employee benefit plans is nothing new.

For example, the anti-inurement provision of ERISA, 29

U.S.C. § 1103(c)(1), has the “intentionally one-sided purpose

of protecting employees and protecting the financial integrity

of pension plans.” Kwatcher v. Massachusetts Service

Employees Pension Fund, 879 F.2d 957, 961 (1st Cir. 1989).

Under the Trig Electric decision, ERISA preemption,

meant as an aid to the employee benefit plan, is transformed

from a benefit to a curse. Still, the Washington Supreme

Court attempted to justify its conclusion by claiming that lien

laws “interfere” with the “administration of ERISA plans.”

This cannot be so when ERISA plans, such as those of the

Trust Funds, depend on the use of lien statutes, and other

state law collection mechanisms, to collect delinquencies. No

“interference” was detailed by the Trig Electric court and

none in fact exists.

Moreover, nowhere in Trig Electric did the Washington

Supreme Court address how its conclusion could be squared

with the statements made by the Congressional Committee

when ERISA Section 515 was enacted: “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.” H.R. Rep.

No. 869, 96th Cong., 2d Sess, reprinted in 1980 U.S.C.C.A.N.

2993, 3038.

Not only did the Trig Electric court disregard this

Congressional intent, it departed from the recent instructions

of this Court in New York State Conference of Blue Cross &

5

Blue Shield Plans v. Travelers Inc. Co., 514 U.S. 645 (1995)

and California Division of Labor Standards Enforcement v.

Dillingham Constr., N.A., 519 U.S. 316 (1997). Travelers

and Dillingham explain exactly how a court is to conduct the

preemption analysis—with the “starting presumption” that

ERISA does not intend to supplant state law. Travelers, 514

U.S. at 653, Dillingham, 519 U.S. at 330. The Trig Electric

court neither started nor ended with this presumption.

In short, the Trig Electric decision was rendered in

disregard of the Congressional purpose of ERISA and

ERISA’s preemption clause, and the Petition for Certiorari

should be granted.

II. Review Should Be Granted To Prevent Use Of

ERISA To Undermine ERISA-Favored Plans And

Collectively Bargained Benefits.

Employee fringe benefits are a negotiated part of the

collective bargaining agreements supporting multi-employer

benefit plans such as those of the Trust Funds here. They are

part of the employees’ total “wage packet.” During

negotiations, the employers and unions make trade-offs

respecting where the dollars will go, allocating them between

hourly pay and contributions to various employee benefit

funds. These contributions are not only for retirement

benefits; they also fund many other pressing non-wage needs

of employees, including health and welfare, vacation,

apprenticeship and training. Yet, despite the importance of

these benefits, the trust fund contribution process is self-

reporting, i.e., on a monthly basis the employer sends in a

report of the hours worked for each employee and a check for

the fringe benefit contributions owed. Unlike “wages”,

contributions are held by the employer until the monthly due

date. The employer receives the bonus of “floating” the

contribution sums for the additional time. But it should never

be forgotten that while this money is paid after ‘wages” and

bypasses the employees’ pockets, it is money earned by and

6

held for the benefit of the employees. Thus, when an

employer refuses to pay employee fringe benefit

contributions it commits nothing short of thievery of sums

held in trust to provide benefits. Unintentional non-payment

of contributions poses an equal threat to benefits. In any

case, the Trust Funds’ fiduciaries retain their duty to collect

the money to provide promised benefits.

The Trig Electric decision drastically limits a trust fund’s

ability to rectify thievery and other non-payment of

contributions. It would sanction only collection actions and

collection methods directly authorized by ERISA Section

502, 29 U.S.C. § 1132. Under the logic of Trig Electric, any

time a trust fund utilizes a “mechanism” of state law to

collect contributions the “mechanism” would “regulate how

ERISA plans are funded.” A trust fund in possession of a

mortgage given for delinquent contributions would “regulate

how ERISA plans are funded.” A trust fund in possession of

a mortgage given for delinquent contributions would not be

able to use state law to foreclosure on the property. This is

clearly the kind of faulty reasoning with regard to the “relate

to” clause which the Travelers court cautioned against.

If ‘relate to’ were taken to extend to the furthest stretch

of its indeterminacy, then for all practical purposes pre-

emption would never run its course, for ‘really,

universally, relations stop nowhere.’ Travelers, 514

U.S. at 655.

The logic of Trig Electric would deprive the Trust Funds of

use of mechanics liens, payment bonds and related remedies

under the laws of every state. For example, in the California

construction industry mechanics liens may be used to collect

from the property owner monies owed for wages or materials

that were supplied to a construction project. Calif. Civil Code

§ 3110 et seq. Stop notice procedures provide for recovery of

such monies from lenders, developers, public entities and

A A CR se a st

7

others holding construction funds. Calif. Civil Code §§ 3083,

3103. Wages and materials claims can also be recovered

from payment bonds, id at § 3096 and bonds issued for

release of liens and stop notices. /d. at §§ 3143, 3196.

These remedies, necessary to obtain monies from third

parties in the construction industry, would be denied uniquely

where employee benefit contributions were at issue, under the

approach of the Washington Supreme Court.

This flawed approach, by forbidding ERISA-favored

interests from using construction remedies available to all

others, turns ERISA preemption on its head. Rather than

favoring collection of benefit contributions, Trig Electric

would make their collection impossible in the frequent cases

where the contributing construction employer is dissolved,

insolvent, or cannot be found. It would also make collection

less expeditious in all cases, by necessitating litigation where

funds or lien rights are not attached. Congress intended the

opposite result, in which payment of contributions would be

required and collection facilitated.

The practical effect of limiting the trust funds to those

means of collection mentioned expressly provided in ERISA

§ 502 is that there will be fewer and fewer recoveries of

delinquent contributions. This will lead inexorably to

weakening of the benefit plans, which depend upon strong

collection practices. If Trig Electric stands and its erroneous

principle is applied in other jurisdictions, the benefits

promised under collectively bargained ERISA plans will be

placed at risk. Loss of benefits and inferior benefits will

result. Who will end up carrying the residual cost of the

underinsured, the cost of the retired but destitute? Instead of

promoting independence and self-reliance for the American

worker, the law will provide disincentives for careful

planning and foresight. Social welfare programs will be over-

burdened. The only beneficiary of this changed system will

be certain unscrupulous employers, to whom the Trig Electric

8

decision is a windfall. Under Trig Electric a delinquent

contractor will be able to insulate its general contractor from

liability under state lien laws and use this loophole to

negotiate an advantage in its own subcontract. Only the

participant employees lose.

In addition, limiting the methods by which ERISA

employee benefit plans can collect delinquent fringe benefits

not only discourages unionization in the workplace,

abrogating the freedom to choose or not choose union

representation codified in the National Labor Relations Act,

29 U.S.C. Section 151, et seqg., but blatantly discriminates

against the union worker. As observed by the Hawaii

Supreme Court in Laborers’ Trust Fund v. Muni Prince

Hotel, 81 Haw. 487, 499 (1996), such an “application of

ERISA preemption inequitably distinguishes between two

groups of persons” and is contrary to Congressional intent in

enacting ERISA. The Trig Electric’s flawed interpretation of

the “relate to” clause effectively and improperly regulates

ERISA plans to the status of “second-class creditors.” “ This

broad and wrong ruling should be reviewed now.

In sum, ERISA preemption was meant to help multi-

employer trust funds meet their duties to administer the plans

for the sole and exclusive benefit of the employees, their

families and dependents. The Trig Electric decision negates

this purpose and commits “grave violence,” Travelers, supra,

519 U.S. at 332, to the presumption against preemption. The

Petition should be granted to ensure that the very essence of

ERISA is not swept away by a distorted view on how state

law “regulates” ERISA and by a blind-eye to Congress’s

repeatedly stated objectives.

? Sackman, Lien On: The Story of the Elimination and Return of

Mechanic Lien, Stop Notice and Bond Remedies for Collection of

Contributions to Employee Benefit Funds, 20 Berkeley Journal of

Employment and Labor Law 254, 282 (1999).

CONCLUSION

For the reasons set forth herein, the Petition for Writ of

Certiorari should be granted.

JAMES P. WATSON

SUSAN J. OLSON

STANTON, KAY & WATSON

101 New Montgomery St.,

Suite 500

San Francisco, CA 94105

(415) 512-3501

Counsel for Petitioners

9

Respectfully submitted,

Michael B. Roger

Counsel of Record

Barry E. Hinkle

Christian L. Raisner

Van Bourg, Weinberg, Roger

& Rosenfeld

A Professional Corporation

180 Grand Avenue, Suite 1400

Oakland, CA 94612

(510) 839-6600