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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1993
- **Citation:** 510 U.S. 827

## Text

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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386019_1052%3A1. Public record. Not legal advice.