Petition for Writ of Certiorari — Carpenters Health & Welfare Trust Fund v. Developers Insurance

Supreme Court, U.S.

92-29933° FILED

NG. JUN 22 1993

OFFICE OF THE CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1992

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; and CARPENTERS

ANNUITY TRUST FUND FOR NORTHERN CALIFORNIA,

‘ Petitioners,

DEVELOPERS INSURANCE COMPANY, et ai.,

Respondent.

Petition for a Writ of Certiorari

to the California Court of Appeal

First Appellate District

PETITION FOR A WRIT OF CERTIORARI

VICTOR J. VAN BOURG*

MICHAEL B. ROGER

ROBERT M. HIRSCH

3LYTHE MICKELSON

SUSAN A. DovI

VAN BourG, WEINBERG, ROGER

& ROSENFELD

875 Battery Street

3rd Floor

San Francisco, California 94111

(415) 864-4000

Attorneys for Trust Funds

June, 1993 *Counsel of Record

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON. D.C. 20001

a ee nateo

QUESTION PRESENTED

Section 514(a) of the Employee Retirement Income

Security Act of 1974 (“ERISA”) as amended, 29 U.S.C.

§ 1144(a) provides that ERISA “shall supercede any and

all state laws insofar as they may now or hereafter relate

to any employee benefit plan. . . .” The California State

Appellate Court found that the California Stop Notice

Statutes related to an ERISA plan and were thus pre-

empted.

The question presented here is whether the state stop

notice statutes, California Civil Code Sections 3156 et seq.

and 3179 et seg. are preempted by ERISA because they

relate to an employee benefit plan or whether the state

statutes in question are statutes of general application

which do not single out employee benefit plans for special

treatment and are thus not preempted by ERISA.

(i)

5 WR INET

TABLE OF CONTENTS

Page

i se yy | ace i

TAB OF AUTHORITISS ............................ eames iv

Nee cc aiccaisniceniieckinsaxcsticechansibunna 2

Neen iar dsinitinipnennineenistanabvemeans 2

SE UWE TED vpscccesccciseneecsaccsesoassenensnccerecsvcoseee: 2

STATEMENT OF THE CASE ...................0..........+ ee 3

REASONS FOR GRANTING THE WRIT .................. 4

I. THE LEGISLATIVE HISTORY OF ERISA

CLEARLY DOES NOT SUGGEST NOR SUP-

PORT THE CALIFORNIA APPELLATE

COURT’S DECISION THAT THE CALIFOR-

NIA STOP NOTICE STATUTES ARE PRE-

ge * eer 5

Il. THE CALIFORNIA APPELLATE COURT

DECISION IS IN CONFLICT WITH DECI-

SIONS OF THIS COURT AND OTHER FED-

I oc ciisabiechsnntscaatvinnsiciansecnsnascnicsecere 11

Ill. THE APPELLATE COURT ERRED WHEN

IT FOUND THE STOP NOTICE PROVI-

SIONS OF THE CALIFORNIA CIVIL CODE

ANALOGOUS TO THE MECHANICS’ LIEN

a iiieliceieatannnetanenssnnecitcnnantiseanaene 17

IV. THE APPELLATE COURT ERRED IN FIND-

ING STOP NOTICE RIGHTS DERIVATIVE

OF CIVIL CODE § 3111 ...............- PL 20

ac ireaneeaningclignnanctamtinannencsatineeresmiceencns 21

(iii)

iv

TABLE OF AUTHORITIES

Cases

Aetna Life Ins. Co. v. Borges, 869 F.2d 142, 146

(2d Cir. 1989), cert. denied, 493 U.S. 811

IO ai nics.ncacicuniticcldicehinccnetnglisonsanujadaidagiekbalbatiddisubcialasemens

Allessi v. Raybestos-Manhattan, Inc., 451 U.S.

A as

Arkansas Blue Cross & Blue Shield v. St. Mary’s

Hospital, 947 F.2d 1341 (8th Cir. 1991), rehrg.

denied, en banc, 1992 U.S. App. Lexis 367 (8th

Cir. 1992), cert. denied, —— USS. , 119

L.Ed.2d 227, 112 S. Ct. 2305 (1992) ...... actions

Audit Services, Inc. v. Rolfson, 641 F.2d 757 (9th

ROE, SIGE Dr Uae hus bliss rato eatalad ie ceaihae sathcamickaoase

California Federal Savings and Loan Ass’n. v.

Guerre, STO UB. BIR CAOBT ) nn cnnnesercncocestecensss cess.

Carpenters Southern California Administrative

Corporation v. El Capitan Development Com-

pany, 53 Cal.3d 1041 cert. denied, 116 L.Ed.2d*

450, 112 S.Ct. 430 (1991) ....... POT ie 8 SRS SRS: 4,

Charles Dowd Box Co. v. Courtney, 368 U.S. 502

CIID: cisavacaccinscdaabelesbekoasscbadlecccackee eaaeheseenadnaes

Church of the Holy Trinity v. United States, 143

i Rn eee Dea A Oe ends ne

Firestone Tire & Rubber Co. v. Neusser, 810 F.2d

ee es ee ED eect eae

FMC Corp. v. Holliday, 498 U.S. 52 (1990) _...........

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

D. GOING DP siccessenansccakts ndesctenianenraataaanientiecateisionl 6, 11,

Ingersoll-Rand v. McClendon, 498 U.S. 133

ae sictscentecicccji tiene Sears 6,

Lane v. Goren, 743 F.2d 1337 (9th Cir. 1984) ae

Mackey v. Lanier Collections Agency & Services,

Fae. 4BG Ue. GHB CEDBB) nica renin seers. 12, 14,

Malone v. White Motor Corp., 435 U.S. 497

CU i eccisosssvececctencaeieaepdceutanaes mien

Martori Bros. Distributors v. James Massengale,

781 F.2d 1349, amended, 791 F.2d 799 (9th Cir.

1986), cert. denied, 479 U.S. 149 (1986) _..........

Massachusetts v. Morash, 490 U.S. 107 (1989)...

Page

12

12

19

14, 18

20

14, 15

11,12

11

16,17

12,14

5, 16

a ae

Vv

TABLE OF AUTHORITIES—Continued

Page

Metropolitan Life Ins. Co. v. Massachusetts, 471

ee Ie MI oinsiscsnsonrntcniosesadeieeimedemnaandeeanaideniain 11

Pacific Gas & Electric Co. v. State Energy Re-

sources Conservation & Development Commu-

nity, 461 U.S. 190 (1983) __...... ETERS ae 7

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41

a 12

Retail Clerks v. Schermerhorn, 875 US. 96

¢: | PNET TRL eT Ma SES OEE ORE DRL! Seo 6

Retirement Fund Trust v. Franchise Tax Board,

909 F.2d 1266 (9th Cir. 1990) -..............-20022222..... 16

Shaw v. Delta Airlines, 463 U.S. 85 (1983) _...... 5, 6, 7, 8,

9,10

Steelworkers v. Weber, 443 U.S. 193 (1979) .......... 6

Textile Workers Union v. Lincoln Mills, 353 U.S.

ER TA Ese RR ea ee oe ETO OTE 20

Train v. Colorado Public Interest Research Group,

Me OS a ie eee 7

United States v. American Trucking Assns., 310

U.S. 534 (1940) reh’g denied, 311 U.S. 724

TIE Ine rene EIRENE Set ee re Ce 7

Federal Statutes

Employee Retirement Income Security Act of

1974, as amended, 29 U.S.C. § 1001, et seq.

Section 502 (a) , 29 U.S.C. § 1182 (a)............... 9

Section 502 (g), 29 U.S.C. § 1182 (g) .......-... 9

Section 514(a), 29 U.S.C. § 1144(a) —...0.... 11, 15

Section 514(d), 29 U.S.C. § 1144(d) _...... satan 20

Section 515, 29 U.S.C. § 1145 _.......... eee nicaks 9

Labor Management Relations Action of 1947, as

amended, 29 U.S.C. § 141 et seq.

Section 801, 29 U.S.C. $ 186 ................................ 19

Section 301 (a), 29 U.S.C. § 185 (a) 0. 19, 20

Multiemployer Pension Plan Amendments Act of

1980, Pub. L. No. 96-364, 94 Stat. 1208

yp, ge eee eee eee eee 9

vi

TABLE OF AUTHORITIES—Continued

State Statutes Page

California Civil Code

Sah TE REEL EDS Ne 14, 20

ARG SNE RE RIOR SE So 14, 18, 20

eR ED es A BOIS pe AS CR eo 14, 20

Chapter 3 commencing with § 3156... 18, 17, 19

A ARTE SRA ED EL ene Bet UE 20

OR ARIS coi ANSON CREA ae eI A 13

§ 3162 _......... SE NAAN Me eI Ft Rete AMM is Dee Pol fhe 18

ESR aoe onenene NASER eRe Chee AF 13

Other Authorities

House Report No. 96-869(II) on H.R. 3609 of the

House Committee of Ways & Means, 96th Cong.

cnn tale as eclaaiies diainadansananidaiindidaaabasaciadia ania. 10

In THE

Supreme Court of the United States

OCTOBER TERM, 1992

No.

CARPENTERS HEALTH AND WELFARE TRUST FUND FOR

CALIFORNIA; CARPENTERS PENSION TRUST FUND FOR

NORTHERN CALIFORNIA; CARPENTERS VACATION AND

HoLipAY TRUST FUND FOR NORTHERN CALIFORNIA;

CARPENTERS APPRENTICESHIP AND TRAINING TRUST

FUND FOR NORTHERN CALIFORNIA; and CARPENTERS

ANNUITY TRUST FUND FOR NORTHERN CALIFORNIA,

Petitioners,

7.

DEVELOPERS INSURANCE COMPANY, et al.,

Respondent.

Petition for a Writ of Certiorari

to the California Court of Appeal

First Appellate District

PETITION FOR A WRIT OF CERTIORARI

The 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; and Car-

penters Annuity Trust Fund for Northern California,

a ”

2

(hereinafter collectively referred to as “Carpenters Trust

Funds” or “Trust Funds”) respectfully pray that a Writ

of Certiorari issue to review the California Supreme Court

denial of a petition for hearing dated March 25, 1993 and

the judgment and opinion of the California Court of

Appeal, First Appellate District dated December 30, 1992.

OPINIONS BELOW

The opinion of the California Court of Appeal, First

Appellate District (Appendix A la, infra) is reported at

11 Cal. App. 4th 1539, 15 Cal. Rptr. 2d 85 (1st Dist.

1992). That Court’s opinion was filed on December 30,

1992. The California Supreme Court denied the Trust

Funds’ Petition for Review on March 25, 1993. (Ap-

pendix C 16a, infra).-The order of the California Su-

perior Court was filed on March 5, 1992 and is not

reported (Appendix B 12a, infra).

JURISDICTION

The Trust Funds’ Petition for Review to the California

Supreme Court was denied on March 25, 1993. The Cali-

fornia Court of Appeal, First Appellate District, affirmed

the judgment on the Pleadings for Defendant granted by

the Trial Court in an opinion dated December 30, 1992.

The jurisdiction of this court is invoked pursuant to 28

U.S.C. § 1254(1). This petition is timely filed with this

court pursuant to 28 U.S.C. § 2101(c).

STATUTES INVOLVED

The relevant statutory provisions are:

1. The Employee Retirement Income Security Act of

1974, (“ERISA”), as amended, 29 U.S.C. § 1144(a),

(Section 514(a) of ERISA).

2. Sections 3156 et seq. and 3179 et seq. of the Cali-

fornia Civil Code.

eee

3

3. Sections 301 and 302 of the Labor Management

Relations Act (“LMRA”), 29 U.S.C. §§ 185 and 186.

STATEMENT OF THE CASE

The Trust Funds are multiemployer employee benefit

plans within the meaning of ERISA (29 U.S.C. § 1001

et seq.) and are express trusts created by written trust

agreements subject to and pursuant to Section 302 of the

Labor Management Relations Act (“LMRA”), 29 U.S.C.

§ 186. The underlying state court action arose under and

was brought pursuant to Section 301 of the Labor Man-

agement Relations Act, 29 U.S.C. § 185, which provides

for concurrent jurisdiction in the state and federal courts.

On August 31, 1987, Jack Raley Construction, Inc.

(hereinafter “Raley”) became obligated to make fringe

benefit contributions to the Trust Funds by virtue of a

written collective bargaining agreement with the United

Brotherhood of Carpenters and Joiners of America. These

fringe benefit contributions were to be paid to the Trust

Funds for each hour of covered carpentry work per-

formed by Raley’s employees.

Raley entered into a contract with the Housing Group,

owner of the subject property described in the Stop Notice

as Hidden Hills (hereinafter “Hidden Hills Project”).

From June through September 1989, Raley’s employees

performed carpentry work at the Hidden Hills Project

and Raley failed to pay fringe benefit contributions due

and owing as a result of this work.

On October 30, 1989, the Trust Funds served Central

Bank, the construction lender, with a bonded Stop Notice

(Private Works), demanding that the Bank withhold suf-

ficient money from the amounts the Bank owed pursuant

to the loan agreement, but had not paid, in order to sat-

isfy the claim of the Trust Funds against Raley. The

Housing Group, as agent for the Bank, subsequently ob-

tained a Stop Notice Release Bond. The Trust Funds

4

thereafter filed a complaint in Case Number C-90-02439

alleging a cause of action against the Housing Group’s

bonding company, Developers Insurance Company (here-

inafter “Developers”). This action was consolidated and

stayed with Action No. C-90-01652 to foreclose on a

mechanics’ lien for the same fringe benefits pending the

decision of the California Supreme Court in Carpenters

Southern California Administrative Corporation v. El

Capitan Development Company, 53 Cal.3d 104 cert.

denied, 116 L.Ed 2d 450, 112 S.Ct. 430 (1991). (See

Court of Appeal Decision, Appendix A 3a-5a).

Developers brought a Motion for Judgment on the

Pleadings below on the grounds that the Stop Notice Re- |

lease Bond cause of action was preempted by § 514(a)

of ERISA.

The trial court below granted Developers’ Motion,

citing the El Capitan case. The First District Court of

Appeal affirmed the Trial Court’s Decision. The Califor-

nia Supreme Court denied review of the Appellate Court’s

opinion.

REASONS FOR GRANTING THE WRIT

The Trust Funds contend that the California Appellate

Court erred in finding that the California stop notice stat-

utes are preempted by ERISA. Section 514(a) of ERISA

states that ERISA “shall supersede any and all State laws

insofar as they may now or hereafter relate to any em-

ployee benefit plan . . .” 29 U.S.C. § 1144(a). The

Appellate Court found that § 514(a) prohibits trust funds

from using the state stop notice remedy because the stop

notice provisions incorporate § 3111, the mechanics lien

statute that specifically singled out Trust Funds for special

treatment. (See Court of Appeal Decision Appendix A

8a). Petitioners respectfully contend that however broad

the sweep of preemption, it does not preempt the Trust

Funds’ use of the stop notice statutes because those stat-

utes are statutes of general application which do not

5

single out ERISA Trust Funds for special treatment.

Therefore, the Court of Appeal erred when it extended

El Capitan’s holding to include the preemption of the

State stop notice remedy. For the reasons set forth below,

the Trust Funds will show that Congress never intended

§ 514 to go that far. Furthermore, the opinions of this

Court have not held that statutes of general application

are preempted by ERISA nor have the opinions of this

Court created such a wooden and inflexible basis for pre-

emption of state laws by § 514(a) of ERISA. The courts

below unjustifiably relied on the E/ Capitan decision as

a basis for automatically nullifying the State stop notice

provisions of the Civil Code under the mistaken theory

that all State statutes that merely make reference to ERISA

Trust Funds are preempted. Furthermore, the California

Appellate Court decision conflicts with decisions of this

Court which have made a distinction between State stat-

utes which single out ERISA plans for special treatment

and thus relate to them versus State statutes of general

application which function irrespective of a mere reference

to an ERISA plan and are thus not permitted under

5i4(a) of ERISA. This is an important question of fed-

eral law which has been decided by the State Appellate

Court in a way that conflicts with the applicable decisions

of this Court.

I. THE LEGISLATIVE HISTORY OF ERISA CLEARLY

DOES NOT SUGGEST NOR SUPPORT THE CALI-

FORNIA APPELLATE COURT’S DECISION THAT

THE CALIFORNIA STOP NOTICE STATUTES ARE

PREEMPTED BY ERISA.

“ERISA is a comprehensive statute designed to promote

the interests of employees and their beneficiaries in em-

ployee benefit plans.” Shaw v. Delta Airlines, 463 U-S.

85, 90 (1983). ERISA was enacted “to safeguard em-

ployees from the abuse and mismanagement of funds that

had been accumulated to finance various types of em-

ployee benefits.” Massachusetts v. Morash, 490 USS.

6

107, 112, (1989); citing Fort Halifax Packing Co., Inc. v.

Coyne, 482 U.S. 1, 15, (1987).

To further its stated purposes of promoting the interest

of employees and beneficiaries of ERISA plans, ERISA

contains a preemption clause which is “conspicuous for its

breadth,” “deliberately expansive,” and is intended “to

establish pension plan regulation as exclusively a federal

concern.” Ingersoll-Rand v. McClendon, 498 U.S. 133,

138 (1990) (citations omitted). The preemption clause

provides that ERISA “shall supercede any and all State

laws in so far as they may now or hereafter relate to

any employee benefit plan... .” 29 U.S.C. § 1144(a).

The purpose of the preemption clause is to eliminate the

threat of conflicting or inconsistent state and local regu-

lation of employee benefit plans. Fort Halifax Packing

Co., Inc. v. Coyne, 482 U.S. at 9. This court has man-

dated lower courts to consider whether preemption of a

state’s statutes would “further the [stated] purpose[s] of

ERISA preemption.” /d. at 8.

In determining whether a state statute is preempted by

federal law and therefore invalid under the Supremacy

Clause of the Constitution, this Court’s sole task is to

ascertain the intent of Congress. See Shaw v. Delta Air-

lines, Inc., 463 U.S. 85, 95 (1983), Malone v. White

Motor Corp., 435 U.S. 497, 504 (1978). It is “the pur-

pose of Congress that is the ultimate touchstone” of the

preemption inquiry, Malone v. White Motor Corp., 435

U.S. at 504 (quoting Retail Clerks v. Schermerhorn, 375

U.S. 96, 103 (1963)). Crucial to this analysis is to

examine a Statute against the backdrop of its legislative

history and historical context. “[I]t is a familiar rule, that

a thing may be within the letter of the statute and yet not

within the statute, because not within its spirit, nor within

the intention of its makers.” Steelworkers v. Weber, 443

U.S. 193, 201 (1979), (quoting Church of the Holy

TD

7

Trinity v. United States, 143 U.S. 457, 459 (1892). See

Train v. Colorado Public Interest Research Group, Inc.,

426 U.S. 1 (1976); United States v. American Trucking

Assns., 310 U.S. 534, 543-544 (1940) rehz. denied, 311

U.S. 724 (1940). California Federal Savings and Loan

Ass'n. v. Guerra, 479 U.S. 272, 284 (1987).

It is noteworthy that Congress knew at the time that it

enacted ERISA that multi employer employee benefit

plans were using state collection remedies such as the

State stop notice statute at issue here. It is unreasonable

therefore to conclude that Congress intended to supercede

State collection remedies of general application in the

absence of a direct reference to do so in the Congressional

Record. When Congress has knowledge of and indeed

cites a law it must “evince the requisite ‘clear and mani-

fest purpose’ to supercede it. See Pacific Gas & Electric

Co. v. State Energy Resources Conservation & Develop-

ment Community 461 U.S. 190, 206 (1983).” Guerra

479 US. at 288.

Indeed, Congress expressed an intent that not all laws

which simply mention an ERISA plan were meant to be

preempted.

This court has previously cited and discussed Congress’

intent regarding preemption in Shaw v. Delta Airlines,

Inc., 463 U.S. at 99. This Court found that the legislative

history on its face is aimed at preempting only state laws

that “regulate” ERISA plans. Preemption of such a law

would then further the stated congressional purpose of

“eliminating the threat of conflicting and _ inconsistent

State and local regulation. 120 Cong. Rec. 29197

(1974). Quotations from the Congressional Record as

cited by this Court in Shaw are crucial to the preemption

analysis and will be quoted here at length.

“Statements by the bill’s sponsors during the subse-

quent debates stressed the breadth of federal pre-

emption. Representative Dent, for example, stated:

8

“Finally, I wish to make note of what is to many

the crowning achievement of this legislation, the

reservation to Federal authority the sole power to

regulate the field of employee benefit plans. With

the preemption of the field, we round out the protec-

tion afforded participants by eliminating the threat

of conflicting and inconsistent State and local regu-

lation.” 120 Cong. Rec. 29197 (1974).

Senator Williams echoed these sentiments:

“It should be stressed that with the narrow excep-

tions specified in the bill, the substantive and en-

forcement provisions of the conference substitute are

intended to preempt the field for Federal regulations,

thus eliminating the threat of conflicting or incon-

sistent State and local regulation of employee benefit

plans. This principle is intended to apply in its

broadest sense to all actions of State or local gov-

ernments, or any instrumentality thereof, which have

the force or effect of law.” Jd. at 29933.20

“20. See also 120 Cong Rec. 29942 (1974) (re-

marks of Sen. Javits):

“Both [original] House and Senate bills provided for

preemption of State law, but—one major exception

appearing in the House bill—defined the perimeters

of preemption in relation to the areas regulated by

the bill. Such a formulation raised the possibility of

endless litigation over the validity of State action

that might impinge on Federal regulation, as well as

opening the door to multiple and potentially con-

flicting States laws hastily contrived to deal with

some particular aspect of private welfare or pension

benefit plans not clearly connected to the Federal

regulatory scheme.”

“Although the desirability of further regulation—at

either the State or Federal level—undoubtedly war-

rants further attention, on balance, the emergence

of a comprehensive and pervasive Federal interest

and the interests of uniformity with respect to inter-

9

state plans required—but for certain exceptions—the

displacement of State action in the field of private

employee benefit programs.”

Senator Javits noted that the conferees had assigned

the Congressional Pension Task Force the responsi-

bility of studying and evaluating ERISA preemption

in order to determine whether modifications in the

preemption policy would be necessary. /bid. See

ERISA §§ 3021, 3022(a)(4), 88 State 999 (for-

merly codified at 29 USC §§ 1221, 1222(a)(5) [29

USCS §§ 1221, 1222(a)(5)]. After a period of

monitoring by the Task Force, and hearings by the

Subcommittee on Labor Standards of the House

Committee on Education and Labor, a Report was

issued evaluating ERISA’s preemption provisions.

The Report expressed approval of ERISA’s broad

preemption of state law, explaining that “the Fed-

eral interest and the need for national uniformity

are so great that enforcement of state regulation

should be precluded.” H.R. Rep. No. 94-1785, p.47

(1977). The Report recommended only that the

exceptions described in § 514(b) be narrowed still

further. /bid.

Shaw 463 U.S. at 99-100. [emphasis supplied].

Congress, by its comments clearly intended to preempt

only state laws that conflicted with ERISA in order to

create a uniform system of regulation for ERISA plans.

The legislative history and this courts prior decisions in

no way endorse the interpretation of the California Appel-

late Court. Indeed this court has made the distinction that

not all state laws and certainly not state laws of general

application are preempted by § 502(a) of ERISA.

Moreover, when Congress added §§ 502(g) and 515

of ERISA, 29 U.S.C. §§ 1132(g) and 1145, pertinent

legislative history from the hearings on the Multiemployer

Pension Plan Amendments Act of 1980, Pub. L. No. 96-

364, 94 State. 1208 (“MPPAA”), clearly shows that

10

Congress thought it was not preempting state collection

remedies since Congress recognized the validity of post-

ERISA state collection remedies. House Report No. 96-

869(II) on H.R. 3609 of the House Committee of Ways

& Means, 96th Cong. 2d., contains the following com-

mentary on the then new collection provisions:

The Committee’s amendment provides that in the

case of a civil action by any person to collect de-

linquent multiemployer plan contributions, regardless

of otherwise applicable law, the court before which

the action is brought may award the plaintiff (1)

reasonable attorney’s fees, (2) court costs and (3)

liquidated damages not to exceed 20 percent of the

amount of delinquent contributions as determined by

the court. However, these items are to be awarded

to a plaintiff only to the extent that the multiem-

ployer plan in question provided for such an award.

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 per-

cent level. However, the bill does not preclude the

award of liquidated damages in excess of the 20 per-

cent level if an award of such a higher level of

liquidated damages is permitted under state or other

law. The Committee amendment does not change

any other type of remedy permitted under state or

federal law with respect to delinquent multiemployer

contributions. [Emphasis supplied. ]

This legislative history demonstrates that Congress

knew that state law remedies were being used to effect

collection of trust fund contributions after ERISA was

enacted, that Congress did not intend to deprive trust

funds of their existing collection remedies under state law,

and that Congress wished to strengthen the trust funds’

ability to make such collections by giving the trust funds

an opportunity to collect double interest, liquidated dam-

ages, and attorney’s fees,

1]

Thus, preemption of the state’s stop notice statutes

would undermine the very purpose of ERISA, by depriv-

ing ERISA-regulated trust funds of state law remedies

they possessed before ERISA was enacted. Nothing in the

legislative history of ERISA supports such an absurd

result, a result that is in fact directly contrary to the

stated Congressional purpose of Section 514(a) of

ERISA.

II. THE CALIFORNIA APPELLATE COURT DECI-

SION IS IN CONFLICT WITH DECISIONS OF

THIS COURT AND OTHER FEDERAL COURTS.

While this court has found ERISA’s preemptive scope

to be broad, it is not all-encompassing. For example,

ERISA preempts only laws relating to employee benefit

plans, it does not preempt laws relating to employee

benefits. Fort Halifax, 482 U.S. 1, 11 (emphasis in origi-

nal). ERISA does not preempt laws which regulate em-

ployers in their role as employers. Lane v. Goren, 743

F.2d 1337 (9th Cir. 1984). Nor does ERISA preempt

areas of traditional state regulation, Metropolitan Life Ins.

Co. v. Massachusetts, 471 U.S. 724, 740 (1985). Most im-

portantly, ERISA does not preempt laws of general ap-

plicability which “function irrespective of the existence of

an ERISA plan.” Ingersoll-Rand, 498 U.S. at 139. Fur-

thermore, [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.

Shaw, 463 U.S. at 100, n.1.

It is instructive to note here that there are 10 decisions

of this court dealing with ERISA preemption. All of

these cases involve a finding of preemption only where

the state law: (1) regulates the types of benefits provided

by the terms of the benefit plans;* (2) creates reporting,

1 See, e.g., Shaw, 463 U.S. 85, 100.

12

disclosure, funding, or vesting requirements for benefit

plans; (3) provides rules for or interferes with the calcula-

tion of the amount of benefits to be provided under an

ERISA plan” or (4) provides remedies for misconduct

growing out of the administration of the ERISA plan.*

Martori Bros. Distributors v. James Massengale, 781 F.2d

1349, 1356-57 Amended, 791 F.2d 799 (9th Cir.), cert.

denied, 479 U.S. 149 (1986).

One additional category of laws that ERISA preempts

are laws that specifically single out ERISA plans for spe-

cial treatment and apply solely to ERISA plans. Aetna

Life Ins. Co. v. Borges, 869 F.2d 142, 146 (2d Cir.

1989), cert. denied 493 U.S. 811 (1989). See also

Mackey v. Lanier Collections Agency & Services, Inc.,

486 U.S. 825 (1988); Arkansas Blue Cross & Blue Shield

v. St. Mary’s Hospital, 947 F.2d 1341, 1344 (8th Cir.

1991), reh’g denied en banc, 1992 U.S. App. Lexis 367

(8th Cir. 1992), cert. denied, —— USS. . 229 &..

Ed. 2d 227, 112 S. Ct. 2305 (1992). Therefore, ERISA

does not preempt state laws of general application that do

not single out benefit plans for special treatment; that do

not fall into one of the categories described in Martori;

and that function “irrespective of the existence of an

ERISA plan.” Ingersoll-Rand Co. v. McClendon, 498

U.S. at 139 (1990). ERISA preemption does not extend

to laws that have an incidental effect on or relationship

to benefits or benefit plans. Statutes like the stop notice

statutes at issue here may then make incidental reference

to plans without coming within one of the categories of

laws that are preempted by ERISA. The State Stop

Notice Statutes at issue here are statutes of general appli-

2 See, e.g., Allessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 524

(1981).

3 See, e.g., Pilot Life Insurance Co. v. Dedeauz, 481 U.S. 41

(1987) ; Ingersoll-Rand Co. v. McClendon, 498 U.S. 183 (1990).

13

cation which do not single out ERISA regulated trust

funds for special treatment. The California State Appel-

late Court erred when it found that the Stop Notice

Statutes were preempted by ERISA.’

California Civil Code Section 3159 provides in pert-

nent part:

“Any of the persons named in Sections 3110, 3111,

and 3112 may, prior to the expiration of the period

within which his or her claim of lien must be re-

corded under Chapter 2 . . ., give to a construction

lender a stop notice or a bonded stop notice. If a

payment bond has previously been recorded in the

office of the County recorder where the site is lo-

cated in accordance with Section 3235 or in ac-

cordance with Section 3162, then the construction

lender shall withhold funds pursuant to a bonded stop

notice filed by an original contractor and may, at its

option, withhold funds pursuant to a stop notice or

bonded stop notice given by anyone other than an

original contractor. The construction lender may

elect not to withhold pursuant to a bonded stop

notice by reason of a payment bond having previ-

ously been recorded in the office of the County re-

corder of the County where the site is located in

accordance with Section 3235.”

Those individuals eligible under 3159 to serve a stop

notice are “[m]Jechanics, materialmen, contractors, sub-

contractors, lessors of equipment, artisans, architects, regis-

tered engineers, licensed land surveyors, machinists, build-

ers, teamsters, and draymen, and all persons and laborers

of every class performing labor upon . . . or furnishing

materials or leasing equipment to be used or consumed

4The Trust Funds action below was brought pursuant to Cali-

fornia Civil Code Sections 3156 et seq. which apply to stop notices

on private works. The California Court of Appeal held that both

the private works stop notice provisions of the Civil Code (Sections

3156 et seq.) and the public works provisions (Sections 3179 et

seq.) are preempted by ERISA.

14

in or furnishing appliances, teams, or power contributing

to a work of improvement .. .” (§ 3110); or Section

3111 trust funds; or “[a]ny claimant who, at the instance

or request of the owner . . . of any lot or tract of land,

has made any site improvement. . . .” (§ 3112). ( See

California Court of Appeals Opinion Appendix A 9a).

The California Court of Appeals found that because

the above constituted the same class of persons who

could file a mechanics lien, that under El Capitan, the

stop notice remedy was preempted. However, the Cali-

fornia Appellate Court failed to note that the statute

found preempted in El Capitan singled out and only

applied to trust funds. Here, the statute is general in

nature, does not single out trust funds for special treat-

ment nor relate to trust funds in any manner articulated

in Martori. In fact, this case falls squarely into the situa-

tion this Court addressed in Mackey v. Lanier Collections

Agency, 486 U.S. 825 (1988).

In Mackey this Court held that a state antigarnishment

statute which specifically prohibited garnishment of

ERISA funds or benefits was preempted by ERISA. How-

ever, this Court also held that the state’s general garnish-

ment statute, which “does not single out or specially

mention ERISA plans of any kind” (486 U.S. at 831)

was not preempted by ERISA. This Court held that state

statutes of general application are not preempted by

ERISA. It is therefore clear that not all state remedies

automatically single out ERISA plans for special treat-

ment and not all state remedies are preempted.

Furthermore, the State stop notice statutes do not con-

flict or regulate the administration of benefits, a concern

this court addresses in Fort Halifax.

The issue in Fort Halifax was whether a Maine statute

requiring employers to provide a one-time severance pay-

ment to employees in the event of a plant closing was

preempted by ERISA. This Court held that the statute

15

was not preempted by ERISA because it did not create

any “potential for the type of conflicting regulation of

benefit plans that ERISA preemption was intended to

prevent.” 482 U.S. at 14.

Fort Halifax contains a thorough and detailed analysis

of the purpose of the preemption clause of Section 514(a)

of ERISA. According to this Court, the preemption

clause was designed “to establish a uniform administrative

scheme which provides a set of standard procedures to

guide processing of claims and disbursement of benefits.”

Id. at 9. Summarizing its discussions, this Court stated

(/d. at 11):

It is thus clear that ERISA’s preemption provision

was prompted by recognition that employers estab-

lishing and maintaining employee benefit plans are

faced with the task of coordinating complex admin-

istrative activities. A patchwork scheme of regula-

tion would introduce considerable inefficiencies in

benefit program operation, which might lead those

employers with existing plans to reduce benefits, and

those without such plans to refrain from adopting

them. Preemption ensures that the administrative

practices of a benefit plan will be governed by only

a single set of regulations.

The Fort Halifax holding compels the conclusion that

not all state statutes are preempted. State statutes which

have no impact whatsoever on the processing of benefit

claims and the disbursement of benefits are not pre-

empted.

The Fort Halifax opinion goes on to hold that where a

State statute does not implicate the concerns of ERISA’s

preemption provision—that is, the statute does not ad-

dress the plan’s internal administrative functions—there is

no preemption: “If a State law creates no prospect of

conflict with a Federal statute, there is no warrant for

disabling it from attempting to address uniquely local

social and economic problems.” 482 U.S. at 19.

16

In a recent decision of the Federal Ninth Circuit Court

of Appeals, a general State tax levy statute was held not

to be preempted by ERISA. The lower Federal Court

noted that the State statute “does not single out ERISA

trusts” and “is a neutral law of general application au-

thorizing the attachment of funds of delinquent taxpay-

ers’’ regardless of where the funds come from. Retirement

Fund Trust v. Franchise Tax Board, 909 F.2d 1266, 1281

(9th Cir. 1990). See also Firestone Tire & Rubber Co.

v. Neusser, 810 F.2d 500 (6th Cir. 1987). Therefore,

like the general garnishment statute in Mackey, the gen-

eral State tax levy statute did not single out ERISA Trust

Funds for special treatment and was therefore not pre-

empted. The State law, like the general stop notice stat-

ute at issue here functioned irrespective of ERISA plans.

This ‘Court has held that a general statute must do

more than merely refer to an ERISA Plan. For example,

in FMC Corp. v. Holliday, 498 U.S. 52 (1990), Penn-

sylvania’s Statute was preempted because it not only re-

ferred to benefit plans but also imposed substantive re-

quirements on the plans themselves (prohibiting them

from requiring subrogation of rights against third parties).

Furthermore, this Court has recognized that some reg-

ulations which have traditionally been left to the states

are not preempted. For example, in Morash, 490 U.S.

at 115 this Court held that payment of wages was not

preempted.

“Absent any indication that Congress intended such

far-reaching consequences, we are reluctant to so

significantly interfere with ‘the separate spheres of

governmental authority preserved in our federalist sys-

tem.’ ”’ Morash, 490 U.S. at 120, (citations omitted).

This Court in Mackey found that

“any state law which singles out ERISA plans, by ex-

press reference, for Special Treatment is preempted.

17

... It is this ‘singling out’ that preempts the Georgia

Antigarnishment exception.”

Mackey, 486 USS. at 838.

The State stop notice statutes at issue here neither in-

terfere with nor conflict with the congressional intent to

establish uniformity in regulating a plan’s claims-handling

procedures. Furthermore, the State statutes neither fall

within any of the Martori categories nor any other carved

out categories of statutes that would be preempted under

ERISA. The stop notice statutes clearly fall into the cate-

gory of generally applicable State statutes that this court

has previously found not to be preempted in Mackey,

Fort Halifax, Shaw, and Morash. Furthermore, the stat-

ute, a general statute that provides a remedy to those

who bestow their labor to the benefit of real property is

a statute in an area of the law traditionally left to the

States to regulate. Therefore, it would be an intrusion

into the province of State regulation to find that such a

Statute was preempted by a Federal law such as ERISA

without even coming within a stated Congressional pur-

pose for doing so. This result must not be allowed.

Ill. THE APPELLATE COURT ERRED WHEN IT

FOUND THE STOP NOTICE PROVISIONS OF THE

CALIFORNIA CIVIL CODE ANALOGOUS TO THE

MECHANICS’ LIEN STATUTES.

The right to serve a stop notice against a private work

differs from the right to record a mechanics’ lien on a

private project. The stop notice statutes, unlike the me-

chanics lien statutes are statutes of general applicabiltiy.

The Civil Code Sections applicable to stop notices for

private works are found at Chapter 3 of the Civil Code

commencing with § 3156.

It is important here, and critical to the analysis, to

distinguish between mechanics’ liens on the one hand and

stop notices on the other. The former is completely dif-

ferent from the latter, as the following analysis of the

aasasereneneieesearsasiaaisiaaraiiiiamanimaiiiiiaias

18

statutory framework makes clear. The structure set out

in the stop notice provisions of the Civil Code does not

“relate to” or “regulate” any ERISA plan since they do

not create any additional funding mechanisms nor do they

single out ERISA plans for special treatment.

After receipt of a stop notice, a construction lender is

not permitted to distribute any construction funds until

the underlying dispute between the contractor or sub-

contractor and the stop notice claimant is resolved (un-

less a stop notice release bond is obtained (see Civil

Code § 3162). Specifically, Civil Code § 3162 imposes

on the construction lender the duty “to withhold from

the borrower . . . sufficient money . . . to answer the

claim .. .”. The bonded stop notice procedure creates

no new rights but merely puts a stop to the distribution

of construction funds pending resolution of the underlying

dispute.

El Capitan’s holding that the mechanics’ lien remedy

provided for by § 3111 is preempted by ERISA is based

on the California State Supreme Court’s finding that

§ 3111 “purports to regulate employee benefit plans by

providing an additional method of funding, namely a lien

against real property, which is not provided by ERISA

... (El Capitan at p. 1052). The California State Su-

preme Court found in El Captain that mechanics’ liens

create new substantive rights against third party prop-

erty owners, who otherwise would not have been liable

for the delinquencies. By providing this “additional cause

of action,” this Court found that § 3111 “regulates”

ERISA plans (E/ Capitan at p. 1051).

Unlike the mechanics’ lien provision struck down in El

Capitan, stop notices create no new rights to collect

money against persons or property and, therefore, create

no new funding mechanisms. The private work’s stop

notice merely puts a hold on the distribution of construc-

tion funds. In the instant case, the property owner, the

Housing Group, created its own liability when it chose

a ae a

19

to obtain a stop notice release bond from Developers and

thus invoke the statutory framework of Civil Code § 3156

et seq. It is clear that under these facts the Trust Funds

did not create any “liability” on the part of any additional

parties and it was those parties’ own voluntary acts which

brought them into the litigation. The Trust Funds must

not be penalized because of actions undertaken by the

Housing Group and/or Developers.

The Housing Group could have protected its interests

in other ways which would have obviated the need for

the Trust Funds to make a claim on the construction

funds. Upon learning of the financial difficulties of its

contractor, the Housing Group could have issued joint

checks payable to both Raley and the Trust Funds

which would have insured payment of the fringe benefit

contributions owed to the Trust Funds. Had the joint

checks been issued, the entire stop notice procedure would

have been unnecessary. Instead, The Housing Group

chose to ignore the financial condition of its contractor,

Raley, and issued checks payable only to Raley, ignoring

the Trust Funds. As a result, the Trust Funds were forced

to serve a private works stop notice in an attempt to pro-

tect the fringe benefit rights of the carpenters employed

on the Hidden Hills Project.

The stop notices provisions at issue here treat ERISA

plans no differently than any other claimant. The stop

notice provisions do not expressly make reference only to

Trust Funds. Accordingly, these state law provisions

cannot be held to be preempted by ERISA.

This action is brought pursuant to § 301 of the Labor

Management Relations Act, 1947, 29 U.S.C. § 185

(“LMRA”). The courts have repeatedly held that actions

to compel payment of trust fund contributions may be

maintained, both before and after the enactment of

ERISA in 1974, under Section 301(a) of the LMRA.

See e.g., Audit Services, Inc. v. Rolfson, 641 F.2d 757,

20

~ 761 (9th Cir. 1981).° Therefore, the Trust Funds must

not be penalized for actions undertaken by the Housing

Group and must be allowed to utilize the general statute

at issue here.

IV. THE APPELLATE COURT ERRED IN FINDING

STOP NOTICE RIGHTS DERIVATIVE OF CIVIL

CODE § 3111.

Civil Code §§ 3110, 3111 and 3112 describe at length

the class of persons entitled to file mechanics’ liens, in-

cluding Trust Funds. (See Section II pages 15-16 infra).

However, mere reference to the mechanics lien sections

does not make stop notice rights derivative of mechanics’

liens.

The Civil Code could have just as easily been organized

in a manner in which the provisions dealing with private

works stop notices came before the mechanics’ lien chap-

ter. The legislature’s decision to enact § 3158 as a short-

hand method of incorporating previous sections where the

entities had already been clearly described does not evi-

dence any intent on the legislature’s part to render the

private work stop notice provisions derivative of the me-

chanics’ lien provisions. Here, we are not even faced with

a general statute that makes a reference to an ERISA

Trust Fund. Here, we are faced with a general statute

which refers to another statute (namely 3111) which has

been found to single out ERISA regulated Trust Funds.

Therefore, the statute at issue here does not even directly

reference ERISA regulated Trust Funds but merely men-

tions another statute which mentions them. Given these

5 Federal and state courts have concurrent jurisdiction over ac-

tions brought pursuant to Section 301(a) of the LMRA. See, e.g.,

Charles Dowd Box Co. v. Courtney, 368 U.S. 502 (1962); Textile

Workers Union v. Lincoln Mills, 353 U.S. 448 (1957). Section

514(d) of ERISA, 29 U.S.C. § 514(d), specifically exempts other

federal laws from ERISA’s preemptive reach. See Shaw, supra,

463 U.S. at 105.

21

attenuated circumstances it would be violating the letter

and spirit of the preemption clause of ERISA to hold that

the stop notice statutes are preempted.

CONCLUSION

For the reasons stated herein, it is respectfully requested

that the Petition for a Writ of Certiorari should be granted.

June, 1993

Respectfully submitted,

VICTOR J. VAN BOURG*

MICHAEL B. ROGER

ROBERT M. HIRSCH

BLYTHE MICKELSON

SUSAN A. DOVI

VAN BourG, WEINBERG, ROGER

& ROSENFELD

875 Battery Street

3rd Floor

San Francisco, California 94111

(415) 864-4000

Attorneys for Trust Funds

*Counsel of Record

APPENDICES

la

APPENDIX A

IN THE COURT OF APPEAL

OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

(Super. Ct. No. C90 01652

Contra Costa County)

CARPENTERS HEALTH AND WELFARE TRUST FUND

FOR CALIFORNIA, et al.,

Plaintiffs and Appellants,

V.

DEVELOPERS INSURANCE COMPANY, et al.,

Defendants and_Respondents.

[Filed Dec. 30, 1992]

In Carpenters So. Cal. Admin. Corp. v. El Capitan

Development Co. (1991) 53 Cal.3d 1041 (cert. den.

Nov. 12, 1991, 112 S.Ct. 430), our Supreme Court held

that Civil Code section 3111 ', which creates liens on real

1 Civil Code section 3111 provides: “For the purposes of this

chapter, an express trust fund established pursuant to a collective

bargaining agreement to which payments are required to be made

on account of 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.”

All further statutory references are to the Civil Code unless

otherwise indicated.

2a

property in favor of trust funds established pursuant to

collective bargaining agreements, is preempted by the

Employment Retirement Income Security Act of 1974

(ERISA). (29 U.S.C. § 1001 et seq.) The question be-

fore us is whether the same thing is true relative to stop

notice statutes, as pertains to these same trust funds.

(§ 3156 et seq. & § 3179 et seq.) We hold that it is.

I

The named plaintiffs in this suit are: Carpenters

Health and Welfare Trust Fund for California, Carpen-

ters Vacation and Holiday Fund for Northern California,

Carpenters Apprenticeship and Training Trust Fund for

Northern California, and Carpenters Annuity Trust Fund

for Northern California (Carpenters’ Trust Funds). These

are multi-employer trust funds established under collective

bargaining agreements and employee pension benefit plans

or employee welfare benefit plans within the meaning of

ERISA. (See 29 U.S.C. § 1002(1), (2)(A), & (21)

(A).) These trust funds are funded through employer

contributions for covered employees. In this case, the

covered employees are members of unions affiliated with

the United Brotherhood of Carpenters and Joiners of

America (Union).

In September 1988, The Housing Group—Northern

California (Housing Group), as owner of certain real

property in Danville, executed plans to develop its prop-

erty into a residential subdivision known as the “Hidden

Hills Development.” It contracted with Jack Raley Con-

struction, Inc. (Raley Construction), to do the rough

carpentry work and framing for the 43-unit development.

Raley Construction performed this work between Septem-

ber 1988 and September 1989 using employees covered

by the Carpenters’ Trust Funds.

2 The stop notice procedures outlined in section 3156 et seq. apply

to private works while those outlined in section 3179 et seq. apply

to public works,

3a

In their complaint, plaintiffs allege that prior to its

involvement in the development, Raley Construction en-

tered into a collective bargaining agreement with the

Union which incorporates “the Carpenters’ Master Agree-

ment for Northern California and the various trust agree-

ments establishing each of Plaintiffs’ trusts. By these

agreements [Raley Construction] promised that it would

pay to the Carpenters’ Trust Funds fringe benefit con-

tribution[s] at [specified] rates . . . for each hour of

covered carpentry work ... .” However, according to

the complaint, during the months of June, July, August

and September 1989, the company failed to make the

agreed contributions. As a consequence, plaintiffs allege

that Raley Construction owes the Carpenters’ Trust Fund

$82,154.67 plus interest.

To secure their claim, plaintiffs, on October 16, 1989,

recorded mechanics’ liens with the county recorder’s of-

fice against certain lots in the Hidden Hills Development,

pursuant to section 3111. Thereafter, in order to release

the real property from these liens, the Housing Group

obtained a release bond from defendant Developers In-

surance Company (Developers). Developers assumed the

role of a surety by way of the transaction. The release

bond was recorded with the county on or about Novem-

ber 30, 1989. Then on April 18, 1990, plaintiffs filed a

complaint for enforcement of the mechanics’ liens release

bond against Developers. Developers answered the com-

plaint. Additionally, Developers and the Housing Group

filed a cross-complaint against Raley Construction for

indemnity and alleged breach of contract.®

Plaintiffs took additional action as well. On October

27, 1989, plaintiffs served Central Bank, the construction

lender on the Hidden Hills Development, with a bonded

8 Based on the cross-complaint and Raley Construction’s answer

to the cross-complaint, it appears that Raley Construction did not

compete the work on the Hidden Hills project but ceased participa-

tion in the project sometime around September 1989 and, there-

after, filed Chapter 11 bankruptcy proceedings.

4a

stop notice, pursuant to section 3159.* The notice re-

quired Central Bank to withhold sufficient money from

the construction loan to cover plaintiffs’ claim. On or

about April 11, 1990, the Housing Group secured a re-

lease of the stop notice bond from Developers. The ef-

fect of the release was to prevent plaintiffs from enforc-

ing the stop notice and to substitute the bond as a basis

for payment of all unpaid fringe benefit contributions.

In response, plaintiffs, on June 4, 1990, filed a complaint

against Developers for enforcement of the stop notice re-

lease bond.

Subsequently, both complaints filed by plaintiffs were

consolidated and stayed pending the Supreme Court’s

decision in Carpenters So. Cal. Admin. Corp. v. El Capi-

tan Development Co., supra, 53 Cal.3d 1041, pursuant

to the parties’ stipulation. Part of that stipulation states:

“The undersigned parties further agree that the issue pre-

sened in the El Capitan Development Case is dispositive

of the question of ERISA preemption of the lien and/or

stop notice in this action.” The El Capitan decision was

handed down in June 1990. Based on that decision and

the parties’ stipulation, Developers filed a motion for

judgment on the pleadings. Following a hearing, the trial

court granted the motion as to both the stop notice claims

4 Section 3159 provides in pertinent part: “Any of the persons

named in Sections 3110, 3111, and 3112 may, prior to the expira-

tion of the period within which his or her claim of lien must be

recorded under Chapter 2..., give to a construction lender a stop

notice or a bonded stop notice. If a payment bond has previously

been recorded in the office of the county recorder where the site

is located in accordance with Section 3235 or in accordance with

Section 3162, then the construction lender shall withhold funds

pursuant to a bonded stop notice filed by an original contractor and

may, at its option, withhold funds pursuant to a stop notice or

bonded stop notice given by anyone other than an original con-

tractor. The construction lender may elect not to withhold pursuant

to a bonded stop notice by reason of a payment bond having pre-

viously been recorded in the office of the county recorder of the

county where the site is located in accordance with Section 3235.”

5a

and the mechanic’s lien claims. Plaintiffs appeal only

from that portion of the judgment pertaining to the stop

notice claims.

Il

In El Capitan, supra, Carpenters Southern California

Administrative Corporation (CSCAC), the administrator

of various multi-employer trust funds established under

collective bargaining agrements (including the Carpen-

ters’ Trust Funds), brought suit to foreclose certain me-

chanics’ liens it had filed against certain real property

owned by the El Capitan Development Company (El

Capitan). The liens were filed pursuant to section 3111.

El] Capitan was in the process of building a condominium

project on the property. The general contractor of the

project had subcontracted with Pacific Southwest Fram-

ing (Pacific) to do part of the framing work. In its

complaint, CSCAC alleged that Pacific and John Hall

Enterprises were one and the same entity and that the

latter company was delinquent in making fringe benefit

contributions to CSCAC pursuant to a collective bar-

gaining agreement. El Capitan demurred to CSCAC’s

complaint, arguing that ERISA preempted section 3111.

The trial court granted the demurrer with leave to amend.

When CSCAC declined to amend the complaint, the

trial court entered a judgment of dismissal. The Court

of Appeal concluded that ERISA preempted section 3111

and affirmed the judgment of dismissal. The Supreme

Court affirmed the Court of Appeal decision.

In reaching its decision, the El Capitan court looked

initially at ERISA’s broad preemption provision which

expressly covers “ ‘any and all state laws insofar as they

may now or hereafter relate to any employee benefit

plan... .’ [Citation.]” (Carpenters So. Cal. Admin.

Corp. V. El Capitan Development Co., supra, 53 Cal.3d

at p. 1047.) Nothing that the term “relate to” had been

broadly interpreted by the United States Supreme Court,

it said, “Most recently, in [Ingersoll-Rand Co. v. Mc-

6a

Clendon (1990) 498 USS. ], [that] court explained

that ‘. . . Congress used those words in their broad sense,

rejecting more limited pre-emption language that would

have made the clause “applicable only to state laws re-

lating to the specific subjects covered by ERISA.” ’

[Citation.] This is consistent with the court’s previous

instruction in [Pilot Life Ins. Co. v. Dedeaux (1987)

481 U.S. 41] that ‘ “a state law ‘relate[s] to’ a benefit

plan, ‘in the normal sense of the phrase, if it has a con-

nection with or reference to such a plan.’”’ {[Citation.]

. . » [G] In determining whether section 3111 ‘relates to’

a benefit plan, we take note that the United States Su-

preme Court has on several occasions stated that ‘state

laws which make “reference to” ERISA plans are laws

that “relate to” those plans within the meaning of § 514

(a) [of ERISA].’ [Citations.] Indeed, the court has

‘virtually taken it for granted that state laws which are

“specifically designed to affect employee benefit plans”

are pre-empted ....’ [Citation.]” (Carpenters So. Cal.

Admin. Corp. v. El Capitan Development Co., supra, 53

Cal.3d at pp. 1048-1049, emphasis added. )

Focusing directly on section 3111, the El Capitan court

found that the statute is specifically designed to affect em-

ployee benefit plans. It said, “The section expressly re-

fers to ‘trust fund[s] established pursuant to a collective

bargaining agreement’ and provides to such funds a me-

chanic’s lien remedy not provided by Congress. Thus,

[it] singles out ERISA plans for special treatment.” (Car-

penters So. Cal. Admin. Corp. v. El Capitan Develop-

ment Co., supra, 53 Cal.3d at p. 1049.) The court fur-

ther reasoned, “ERISA plans do not furnish labor or ma-

terials for construction projects. Accordingly, to treat

them as persons who do furnish labor or materials is to

single them out for special treatment. Because section

3111 singles out ERISA plans for special treatment and

is, in fact, designed to affect them specifically, we con-

clude the statute ‘relates to’? ERISA plans. ([Fns.

omitted.]” (bid. )

Ta

The El Capitan court rejected any notion that the pre-

emption question turns on a finding that the law at issue

actually regulates an ERISA plan. Nevertheless, it noted

that when it can be said that a state law regulates the

terms and conditions of an ERISA plan, this necessarily

includes a finding that the law “relates to” the plan as

well. It said it found that section 3111 regulates ERISA

plans by creating a funding mechanism not provided by

Congress [i.e., a lien against real property]. ‘Hence, the

fact that section 3111 regulates ERISA plans provides

further support for the conclusion that section 3111 ‘re-

lates to’ ERISA plans and is preempted.” (Jd., at p.

1051.)

“In essence, section 3111 creates a new state cause of

atcion for the collection of contributions owed to benefit

plans and makes an additional entity liable for such

contributions. . . . [§] [However,] ERISA preempts new

state-law causes of action for the collection of contribu-

tions because, consistent with its goal of providing ‘ap-

propriate sanctions and ready access to federal courts’

[citation], ERISA itself provides the remedies for the col-

lection of contributions.” ° (/d., at p. 1052.)

Finally, differentiating section 3111 from a Georgia

general garnishment statute which the United States Su-

preme Court held was not federally preempted in Mackey

v. Lanier Collections Agency & Serv. (1988) 486 U.S.

825, the El Capitan court said, “Mackey’s analysis of

Georgia’s general garnishment procedures does not save

section 3111 from preemption. The decision concerned a

third party action for enforcement of judgments against

beneficiaries of an ERISA plan. ERISA does not con-

tain remedial provisions for such actions. Largely for

this reason, the United States Supreme Court concluded

that ‘state-law methods for collecting money pecgents

5 Under section 502(a) of ERISA (29 U.S.C. § 1132(a)), a par-

ticipant, beneficiary or fiduciary can bring a civil action against a

delinquent contributor,

8a

must, as a general matter, remain undisturbed by ERISA;

otherwise, there would be no way to enforce such a judg-

ment won against an ERISA plan.’ [Citation.] The pres-

ent case is not similar because ERISA expressly provides

remedies for recovery of delinquent contributions to em-

ployee benefit plans.” (/d., at p. 1055.)

“California’s trust fund lien statute does more than

provide a new enforcement mechanism for collecting

judgments; it creates new substantive rights. [Citation. ]

Section 3111 permits the creditor (the trust fund) to

enforce a debt (for outstanding fringe benefit Contribu-

tions) not against the debtor (the defaulting employer),

but against the property of a third party that is not a

party to the collective bargaining agreement. Section

3111 gives a trust fund a right to a lien against the prop-

erty of third parties, such as El Capitan, that the fund

would not, and does not, have under ERISA. In the

absence of section 3111, El Capitan would have no li-

ability to the funds for the fringe benefit contributions.

Therefore, section 3111 cannot be upheld under Mackey

as it creates a new substantive right against the property

of a third party that is not created by ERISA and, thus,

goes beyond being a mere means of enforcing a judg-

ment. [Citation.]” (Carpenters So. Cal. Admin. Corp.

v. El Capitan Development Co., supra, 53 Cal.3d at p.

1055.)°

III

In the same way the mechanic’s lien procedure out-

lined in El Capitan was found to be preempted by

ERISA, the stop notice procedure at issue in the instant

case is preempted as well. By their terms, the stop no-

tice provisions (§ 3156 et seq. & § 3179 et seq.) incor-

porate section 3111 by reference, thereby making express

reference to the entities covered by section 3111—i.e.,

* Subsequent to the El Capitan decision, the United States Court

of Appeals, Ninth Circuit, also found that section 8111 is pre-

empted by ERISA. (Sturgis v. Herman Miller, Inc. (9th Cir. 1991)

948 F.2d 1127.)

9a

“trust fund[s] established pursuant to a collective bar-

gaining agreement.”’ As was found in the case of section

3111, this part of the stop notice provisions “relates to”

ERISA plans by virtue of the fact that it is specifically

designed to affect them. It provides such funds a stop

notice remedy not provided by Congress, thus singling

out ERISA plans for special treatment.

Section 3159 states, “Any of the persons named in

Sections 3110, 3111, and 3112 may ... give to a con-

struction lender a stop notice or a bonded stop notice.”

As so defined, “‘persons”’ eligible to file a stop notice or

a bonded stop notice are “[m]echanics, materialmen, con-

tractors, subcontractors, lessors of equipment, artisans,

architects, registered engineers, licensed land surveyors,

machinists, builders, teamsters, and draymen, and all

persons and laborers of every class performing labor

upon . . . on, or furnishing materials or leasing equip-

ment to be used or consumed in or furnishing appliances,

teams, or power contributing to a work of improvement

. .” ($3110); or section 3111 trust funds; or “[a]ny

claimant who, at the instance of request of the owner

. of any lot or tract of land, has made any site im-

provement ... .” (§ 3112). This is the same category

of entities eligible to file mechanics’ liens under section

3109 et seq. As was noted in El Capitan in relation to

the latter provisions, “ERISA plans do not furnish labor

or materials for construction projects. Accordingly, to

treat them as persons who do furnish labor or materials

is to single them out for special treatment.” (Carpenters

So. Cal. Admin. Corp. v. El Capitan Development Co.,

supra, 53 Cal.3d at p. 1049, fn. omitted.)

Because the stop notice statutes single out ERISA

plans for special treatment and are, in fact, designed to

affect them specifically, we conclude that they “relate to”

these plans and are preempted. (/bid.)

10a

Moreover, while not a prerequisite to a preemption

finding, the stop notice procedure like the lien procedure,

regulates ERISA plans by creating a funding mechanism

not provided by Congress [i.e., a hold on construction

loan monies]. It creates a new state cause of action for

the collection of contributions owed to benefit plans and

makes an additional entity liable for such contributions.

Plaintiffs here attempt to distinguish the stop notice

provisions from the lien provisions. They argue that the

stop notice procedure does not create any additional

funding mechanism or any new substantive rights but

merely mandates that the construction lender set aside

funds it would normally pay the contractor until the

dispute is settled. We find appellants’ argument unper-

suasive.

As pertains to section 3111 trust funds, the stop notice

procedure functions similarly to the lien procedure. It

permits the creditor (the trust fund) to enforce a debt

(for outstanding fringe benefit contributions) not against

the debtor (the defaulting employer), but against the

property of a third party that is not a party to the col-

lective bargaining agreement. The only difference is that

whereas the lien procedure involves liens, the stop notice

procedure involves stop notices. Both, however, operate

as encumbrances on property—one encumbering real

property, the other encumbering construction loan money.

Both give the trust fund a right to an encumbrance

against the property of third parties that the fund would

not, and does not, have under ERISA.’ In the absence

of the stop notice procedure, neither the Housing Group

nor Developers would have any liability to the Carpen-

ters’ Trust Funds for the fringe benefit contributions.

7 Here, the third party was originally the Housing Group as the

named debtor on the construction loan from Central Bank. How-

ever, this position was assumed by Developers as the surety.

TT

lla

Judgment is affirmed.*®

MERRILL, J.

We concur:

WHITE, P. J.

WERDEGAR, J.

8 Developers also contend that plaintiffs cannot prevail on appeal

because the parties stipulated that the El Capitan decision would

be determinative of the ERISA preemption issue in respect to me-

chanics’ liens and stop notices. Plaintiffs respond that the stipula-

tion does not preclude the appeal as the Supreme Court in El

Capitan did not reach the premeption question as to stop notices.

In view of our decision on the merits, we find it unnecessary to

determine the effect of the stipulation.

|

12a

APPENDIX B

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF CONTRA COSTA

Case No. C 90 01652

CARPENTERS HEALTH AND WELFARE TRUST FUND

FOR CALIFORNIA, et al.,

Plaintiffs,

Vv.

DEVELOPERS INSURANCE COMPANY, et al.,

Defendants.

THE HouSING GRrouP, THE HOUSING GRoUP—

NORTHERN CALIFORNIA,

Cross-Complainants,

V.

JACK RALEY and JACK RALEY CONSTRUCTION, INC.,

Cross-Defendants.

ORDER GRANTING MOTION FOR JUDGMENT

ON THE PLEADINGS

[Filed Mar. 5, 1992]

The matter having come on for hearing on November

26, 1991 upon noticed Motion by Defendant Developers

Insurance Company and the court having considered

the papers and arguments presented by the parties,

13a

IT IS HEREBY ORDERED that Defendant’s Motion

for Judgment on the Pleadings is granted as to both the

Stop notice claims and mechanic’s lien claims by Plain-

tiffs Carpenters Health and Welfare Trust Fund for Cal-

ifornia, Carpenters Vacation and Holiday Fund for

Northern California, Carpenters Apprenticeship and

Training Trust Fund for Northern California, and Car-

penters Annuity Trust Fund for Northern California, in

both Case Nos. C-90-02439 and C-90-01652.

SO ORDERED.

Dated: March 5, 1992.

’ /s/ David A. Dolgin

THE HONORABLE DAvip A. DOLGIN

Judge of the Superior Court

APPROVED AS TO ForM:

Dated: Feb. 27, 1992.

VAN BourG, WEINBERG, ROGER

& ROSENFELD

By: /s/ Susan A. Dovi

SUSAN A. Dovli

Attorneys for Plaintiffs

Carpenters Health and Welfare

Trust Fund of California, et al.

Dated: Feb. 28, 1992

LITTLER, MENDELSON, FASTIFF

& TICHY

A Professional Corporation

By: /s/ Karen E. Ford

KAREN E, Forp

l4a

PROOF OF SERVICE BY MAIL

I, MICHAEL VICKERY, declare that:

I am employed in the County of San Francisco, Cali-

fornia. I am over the age of eighteen years and not a

party to the within entitled cause; my business address

is 650 California Street, San Francisco, California.

On March 2, 1992, I served the attached ORDER

GRANTING MOTION FOR JUDGMENT ON THE

PLEADINGS [approved as to form] on the parties in

said cause by a placing true copies thereof enclosed in

sealed envelopes with postage thereon fully prepaid in

the United States Mail at San Francisco, California, ad-

dressed as foliows:

Ms. Susan A. Dovi

VAN BourG, WEINBERG, ROGER &

ROSENFELD

875 Battery Street, Third Floor

San Francisco, CA 94111

Michael P. Quinlivan

KOUNS, QUINLIVAN & SEVERSON

2107 N. First Street, Suite 320

San Jose, Ca 95131

I declare under penalty of perjury that the foregoing

is true and correct, and that this declaration was ex-

ecuted on March 2, 1992, at San Francisco, California.

/s/ Michael Vickery

MICHAEL VICKERY

l5a

PROOF OF SERVICE BY MAIL

I, Rosie T. Yee, hereby declare and state:

[ am over the age of eighteen years, employed in the

City and County of San Francisco, California, and not a

party to the within action. My business address is 650

California Street, 20th Floor, San Francisco, California

94108-2693.

On April 15, 1992, I served the within ORDER FOR

RELEASE OF MECHANICS LIEN on the parties in

Said cause by placing a true copy thereof enclosed in a

Sealed envelope with postage prepaid thereon in the

United States Post Office mail at 650 California Street,

20th Floor, San Francisco, California 94108 addressed

as follows:

Ms. Susan A. Dovi

VAN BourG, WEINBERG, ROGER &

ROSENFELD

875 Battery Street, Third Floor

San Francisco, CA 94111

I am readily familiar with the Firm’s practice for col-

lection and processing of correspondence for mailing with

the United States Postal Service.

The envelope addresesd to the above party was sealed

and placed for collection by the Firm’s messengers and

will be deposited today with the United States Postal

Service in the ordinary course of business.

I declare under penalty of perjury that the foregoing

is true and correct. Executed on April 15, 1992, at San

Francisco, California.

/s/ Rosie T. Yee

RosIE T. YEE

l6a

APPENDIX C

First Appellate District, Division Three, No. A057162

5031077

IN THE SUPREME COURT

OF THE STATE OF CALIFORNIA

IN BANK

CARPENTERS HEALTH AND WELFARE TRUST FUND,

ETC., et al.,

Appellants

V.

DEVELOPERS INSURANCE COMPANY, et al.,

Respondents

[Filed Mar. 25, 1993]

Petition for review DENIED.

Mosk, J. is of the opinion the petition should be

granted.

/s/ [Illegible]

Chief Justice