Bd of Trustees Glazing Health v. Shannon Chambers
903 F.3d 829
9th Cir.2018Background
- Nevada law made general contractors vicariously liable for subcontractors’ labor debts (wages and benefit contributions); ERISA trusts often sued general contractors to recover such debts when subcontractors defaulted.
- After a 2009 Ninth Circuit decision (Hartford Fire Ins.) broadened recoverable items to include liquidated damages and attorneys’ fees, Nevada legislators concluded general contractors were unfairly exposed to large, delayed liabilities.
- Nevada enacted SB 223 (2015) to: shorten the limitations period to one year, limit recoverable damages against general contractors, and impose notice/notification duties on contractors and ERISA trusts before suing general contractors.
- ERISA trusts (plaintiffs) sued Nevada’s Labor Commissioner seeking a declaration that SB 223 is preempted by ERISA; the district court granted summary judgment for plaintiffs, invalidating SB 223.
- While the appeal was pending, Nevada repealed SB 223 and enacted SB 338 (2017), which removed several challenged provisions, made repeal retroactive, but retained a shortened (two-year) limitations period and notice requirements similar in effect.
- The Ninth Circuit panel (majority) held the appeal was not moot (because the legislature repealed SB 223 in response to the adverse ruling and SB 338 preserved some challenged features) and, on the merits, concluded SB 223 is not preempted by ERISA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Mootness of appeal after legislative repeal and replacement | Repeal + replacement moots appeal; no live controversy except narrow SOL issue | Repeal was prompted by district court ruling and replacement (SB 338) preserves some challenged features, so appeal is not moot | Majority: Not moot — repeal was responsive to ruling and legislature kept features; dissent: moot because repeal/remedy removed the challenged law |
| Whether SB 223 is preempted under ERISA §514 ("relate to") — connection prong | SB 223 imposes notice duties and administrative burdens on ERISA plans/trusts and interferes with fiduciary duties and uniform national administration | SB 223 regulates traditional state debt-collection/vicarious-liability law, trimming a state-conferred remedy rather than regulating ERISA plan administration | SB 223 is not preempted on connection theory — it regulates state debt-collection, not core ERISA plan administration |
| Whether SB 223 is preempted under ERISA §514 — reference prong | Literal references to ERISA plans and duties make SB 223 an impermissible reference to ERISA plans | References are incidental; provisions operate on non-ERISA state mechanics (contractors, notice requirements) and would function without ERISA plans | SB 223 is not preempted on reference theory — mentions ERISA plans but does not act immediately and exclusively upon them |
| Scope of federal protection for recovery from third parties (general contractors) | ERISA creates protections/rights that should preempt state limits on remedies used to collect plan-related debts | ERISA provides remedies against employers/plan parties but does not create a federal cause of action to collect from non-parties; state vicarious-liability law supplies that remedy | State may limit its own vicarious-liability remedy; SB 223 trims a state entitlement and does not conflict with ERISA’s remedies against plan parties |
Key Cases Cited
- Trs. of the Constr. Indus. & Labors Health & Welfare Trust v. Hartford Fire Ins. Co., 578 F.3d 1126 (9th Cir. 2009) (interpreting Nevada labor- indebtedness statute to include certain post-contract damages and fees)
- City of Mesquite v. Aladdin’s Castle, Inc., 455 U.S. 283 (1982) (repeal of statute after adverse ruling may not moot appeal when government could reenact the law)
- Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936 (2016) (state law that intrudes on ERISA plan reporting/recordkeeping is preempted)
- N.Y. State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995) (presumption against preemption in areas of traditional state regulation; ERISA preemption cannot be uncritically literal)
- Mackey v. Lanier Collection Agency & Servs., Inc., 486 U.S. 825 (1988) (generally applicable state garnishment law not preempted though it affects ERISA plans; laws that act immediately/exclusively on ERISA plans can be preempted)
- John Hancock Mut. Life Ins. Co. v. Harris Trust & Sav. Bank, 510 U.S. 86 (1993) (ERISA preemption analysis should align with ordinary field and conflict preemption principles)