SOUTHERN CALIFORNIA IBEW-NECA TRUST FUNDS; BARRY MEYER; DAN SELLERS;RICHARD RIZOTTO, Plaintiffs-Appellees,
v.
STANDARD INDUSTRIAL ELECTRIC COMPANY; PHYLLIS M. STROUT, Defendants,
and
RELIANCE INSURANCE COMPANY, Defendant-Appellant.
SOUTHERN CALIFORNIA IBEW-NECA TRUST FUNDS; BARRY MEYER; DAN SELLERS; RICHARD RIZOTTO, Plaintiffs-Appellees,
v.
STANDARD INDUSTRIAL ELECTRIC COMPANY; PHYLLIS M. STROUT; RELIANCE INSURANCE COMPANY, Defendants,
FIDELITY AND DEPOSIT COMPANY OF MARYLAND;UNITED STATES FIDELITY & GUARANTY COMPANY, Defendants-Appellants.
SOUTHERN CALIFORNIA IBEW-NECA TRUST FUNDS; BARRY MEYER; DAN SELLERS; RICHARD RIZOTTO, Plaintiffs-Appellees-Cross-Appellants,
v.
STANDARD INDUSTRIAL ELECTRICAL COMPANY; PHYLLIS M. STROUT, Defendants,
RELIANCE INSURANCE COMPANY; FIDELITY AND DEPOSIT COMPANY OF MARYLAND; UNITED STATES FIDELITY & GUARANTY COMPANY; KING/DREW HIGH SCHOOL BUILDERS, a California Joint Venture, Defendants-Appellants-Cross-Appellees.
Nos. 99-55805, 99-55835, 99-55954
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
Argued and Submitted Oct. 4, 2000
Filed April 18, 2001
Benjamin A. Johnson, San Mateo, California, and Cyrus K. Ipkatchi, San Mateo, for the appellants.
J. David Sachman, Los Angeles, California, for the appellees/cross-appellants.
Appeal from the United States District Court for the Central District оf California; Mariana R. Pfaelzer, District Judge,Presiding. D.C. Nos. CV-97-09131-MRP, CV-97-09131-MRP-JG, CV-97-09131-MRP-03.
Before: Diarmuid F. O'Scannlain, Ferdinand F. Fernandez and Johnnie B. Rawlinson, Circuit Judges. Opinion by Judge Rawlinson.
RAWLINSON, Circuit Judge:
Barry Meyer, Dan Sellers, Richard Rizotto ("Employees"), and Southern California IBEW-NECA Trust Funds ("Trusts"), the administrators of several employee benefit plans associated with unions which represent employees,1 are seeking to collect money owed for work performed on a public construction prоject using California's stop notice and payment bond remedies. The district court found ERISA preempted the stop notice claim but not the payment bond claim. Both parties appeal. Because neither remedy is preempted by ERISA, we reverse the judgment below as to the stop notice claim, affirm the judgment as to the payment bond remedy, and remand.
BACKGROUND
In July 1996, the Los Angeles Unified School District ("LAUSD") hired King/Drew High School Builders ("KDB") as the general contractor for a public construction project (hereafter referred to as "the project"). KDB subcontracted with SSI Joint Venture ("SSI"), which is composed of Standard Industrial Electric Co. ("Standard") and SASCO Electric ("SASCO"), to perform the electrical work. For labor, Standard signed a collective bargaining agreement ("CBA") with Local Union No. 11 of the International Brotherhood of Electrical Workers. That agreement sets the rates of compensation for employees covered by the CBA, with a portion of the employee's compensation to be paid in the form of contributions to benefit plan Trusts.
As required by California law,2 KDB, the general contractor, posted a payment bond to guarantee payment of all labor and materials on the project. This bond (hereafter" Fidelity Bond") was issued by Fidelity and Deposit Company of Maryland and Fidelity and Guarantee Company ("Fidelity"). As the general contractor, KDB then required SSI, a subcontractor, to post a bond to indemnify the general contractor in the event of any default by the subcontractors on the project. The bond posted by SSI (hereafter "Reliance Bond") was issued by Reliance Insurance Company.3
During the course of construction, Standard became delinquent in its contributions to the Trusts in the amount of $221,603.98. After Standard defaulted on an agreement and confession of judgment whereby it agreed to pay its delinquent contributions over time, Trusts, as assignee of the employees,4 served a stop notice on LAUSD for the amount of the delinquent contributions, plus legal fees and costs pursuant to Cal. Civ. Code 3181 (West 1993). At the same time, Trusts made a claim on the Fidelity and Reliance Bonds for the same amount. Both Sureties denied the bond claims.
Trusts and Employees brought an action in the United States District Court for the Central District of California to collect the delinquent contributions pursuant to Section 515 of the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. 1145 (1999). In addition to the ERISA claim, Trusts and Employees' First Amended Complaint also included state law causes of action to enforce the stop notice and payment bonds.5 LAUSD, KDB, and the Sureties all brought motions to dismiss the stop notice and payment bond causes of action on the ground that California's stop notice and payment bond remedies were preempted by ERISA.
The district court found that the stop notice claim was preempted by ERISA, following Carpenters Health and Welfare Trust for California v. Tri-Capital Corp.,
DISCUSSION
We review the district court's interpretation of ERISA preemption de novo. Stewart v. Thorpe Holding Co. Profit Sharing Plan,
I. The Payment Bond
Once again, we must determine whether or not ERISA preempts a state law. Our first decision on the issue rejected a claim that ERISA preempted Califоrnia's payment bond remedy, under the assumption that Congress never intended to supplant certain obligations "fixed by contract and regulated by state law." See Carpenters S. Cal. Admin. Corp. v. D & L Camp Constr. Co.,
ERISA preempts and supersedes any and all State laws insofar as they may now or hereafter "relate to "any employee benefit plan. See 29 U.S.C. 1144 (a). Since the Supreme Court narrowed the scope of ERISA preemption in Travelers, the "relates to" criterion has been analyzed by determining whether a state law (1) has a "connection with "or (2) a "reference to" employee benefit plans. See Geweke v. Ford,
For example, in JWJ, we found that Arizona's payment bond remedy was not preempted by ERISA because it did not have a connection with, nor was it related to, an employee benefit plan.
California's payment bond remedy, Cal. Civ. Code 3249 (West 1993), is no more of an intrusion on ERISA benefit plans than Arizona's payment bond remedy. Similar to Arizona's law, California's statute does not require the establishment of a separate benefit plan, and imposes no new reporting, disclosure, funding, or vesting requirements for ERISA plans. California's statute similarly does not tell employers how to write ERISA benefit plans or how to determine ERISA beneficiary status, and does not condition requirements on how ERISA benefit plans are written.
Moreover, California's payment bond statute does not impermissibly "refer" to an employee benefit plan within the meaning of ERISA because it functions irrespective of an ERISA plan. The California legislature could not have intended in 1971 to refer specifically to an ERISA plan; therefore, Cal. Civil Code 3249 will only constitute an impermissible reference if the statute necessarily refers only to ERISA plans, which it fails to do on its face. See California Division of Labor Standards Enforcement, et al. v. Dillingham Construction, N.A., Inc., et al.,
The Sureties and KDB attempt to distinguish California's payment bond remedy from Arizona's on the asserted basis that an еmployee benefit trust's use of the payment bond remedy is pursuant to judicial construction while California's statute explicitly includes employee benefit trusts as claimants.10 One thing about ERISA is clear: if it preempts the inclusion of an employee benefit trust from the class of parties who can enforce a payment bond, it is inconsequential whether that inclusion is by statutory reference or judicial decision. Congress defined a state lаw subject to ERISA preemption as "all laws, decisions, rules, regulations, or other State action having the effect of law." 29 U.S.C. 1144 (1) (West 1999). If Arizona's statute fell within the cross hairs of ERISA's preemption clause, the fact that it did so by way of a judicial decision instead of a statute would not have saved it.
The Sureties and KDB also contend that the reasoning of JWJ is inapplicable to this case because" unlike the general contractor in JWJ, the genеral contractor in this matter, KDB, did not have a direct relationship with the employee trust funds."11 As the subcontractor's (SSI's) surety, Reliance is in an analogous position to Continental's surety in JWJ. Reliance's contractual agreement to issue payment bonds merely transferred the obligation from the subcontractor to its underwriter. Similarly, by issuing the payment bond, Fidelity explicitly agreed to act as KDB's surety if KDB or its subcontractors "fail to pay any person or persons named in California Civil Code Section 3110 and 3181." Contrary to the Sureties' and KDB's assertions, Trusts are the intended beneficiaries of both bonds. In sum, the payment bond remedy currently before this Court and the payment bond remedy examined in JWJ do not have any legally cognizable differences.
The Sureties and KDB further assert that our opinion in Sturgis v. Herman Miller, Inc.,
In Sturgis, we held that Section 3111 was preempted by ERISA because it speсifically accorded ERISA plans a right to use California's mechanic's lien statute for collecting delinquent contributions. See
In additiоn to examining whether an employee benefit plan has a "connection with" or "reference to" an ERISA benefit plan, a core inquiry in determining whether a state law claim is preempted is the effect on an ERISA governed relationship.12 See Rutledge
II. The Stop Notice
Sometimes, we must try to resolve disputes in a manner which аvoids internal inconsistency. Such is the present case. Under the district court's ruling, enforcement of the payment bond remedy is not preempted by ERISA, but these same claimants' stop notice remedy is preempted. A finding that one remedy does, and the other remedy does not, survive preemption by ERISA would result in irreconcilable differences in the law applicable to remarkably similar legislation.
The district court held that ERISA preempted the Trusts' and Employees' stop notice claim, relying on our decision in Tri-Capital. We reverse this portion of the district court's ruling. California's payment bond and stop notice statutes, Cal. Civ. Code 3249 and 3181 respectively, are part of the same integrated statutory scheme.13 The payment bond remedy, which is based on 3248 (b) refers to the stop notice section, 3181, to define the persons and claims protected by the bond. The stop notiсe statute which defines those persons and claims, in turn refers to the mechanic's lien sections, 3110 and 3111. Both statutes serve the same purpose; they were added by the California legislature to provide remedies for collection of amounts due persons furnishing labor or supplies on public property. Sunlight Elec. Supply Co. v. McKee,
In Trustees of the Electrical Workers Health & Welfare Trust v. Marjo Corp.,
In Carpenters Health v. Tri-Capital, we admittedly rеad ERISA's preemption clause very broadly, noting that the Supreme Court has recognized that ERISA preemption is "conspicuous for its breadth." See
While in JWJ we distinguished Tri Capital, we also stated, "Perhaps more importantly, however, this court decided Marjo and Tri Capital before Trаvelers. If the breadth of federal preemption described in Marjo and Tri Capital were still good law, Continental would probably prevail." Id. at 679. In JWJ we did not make our position clear; let us do so today: the breadth of federal preemption which governed our decisions prior to Travelers is no longer applicable. The previously expansive preemption language prior to Travelers has been "tailored tо better fit Congress's policy intentions." See id. To the extent Tri Capital, Marjo, Sturgis, and their progeny decided before Travelers are inconsistent with this holding, they are hereby expressly overruled. See, e.g., Nghiem v. NEC Electronic, Inc.,
CONCLUSION
We find California's payment bond and stop notice remedies are not preempted by ERISA. They do not have аn impermissible connection with, nor do they impermissibly relate to, an ERISA benefit plan. Although the remedies could be interpreted as regulating relationships between an ERISA plan and a third party, the relationships are too tenuous, remote, or peripheral to be preempted by ERISA.
Accordingly, the district court decision is AFFIRMED as to the payment bond claim and REVERSED as to the stop notice claim. This matter is REMANDED to the district court for further prоceedings consistent with this opinion. Each party is to bear its own fees and costs on appeal.
Notes:
Notes
These plans include Southern California IBEW-NECA Health Trust Fund, Southern California IBEW-NECA Pension Trust Fund, IBEW Local 11 Joint Apprenticeship and Educational Training Trust Fund, National Electric Benefit Fund, and National Electric Industry Fund.
See Cal. Civ. Code 3247 (West 1993).
Reliance Insurance Company, Fidelity and Deposit Company of Maryland and Fidelity and Guarantee Company shall hereafter be referred to as "Sureties."
In addition to the assignment of compensation in the form of benefit contributions contained in the CBA, the employees executed separate written assignments of their stop notice and bond claims to the Trusts.
A separate judgment in favor of Trusts on the ERISA claim and dismissal of Trusts' sixth cause of action for deprivation of federal rights under color of state law, was not appealed.
See
See Elec. Workers Health & Welfare Trust v. Marjo Corp.,
The pre Travelers inquiry asked, "Is the state telling employees how to write their plans, or conditioning some requirement on how they write their plans? Or is it telling them that regardless of how they write their ERISA plans, they must do something else outside and independently of the ERISA plans? If the latter ... there is no preemption." Id. at 679.
The Arizona payment bond statute required "public-work project employers to issue payment bonds through sureties, regardless of the existence or nature of the ERISA benefit plans." Id.
Cal. Civ. Code 3249 permits "any stop notice claimant" to bring an action against the surety on a payment bond. (West 1993). Cal. Civ. Code 3181 defines a "stop notice claimant" as "any person mentioned in Civil Code 3110, 3111 or 3112." (West 1993). Cal. Civil Code 3111 defines an express trust for the purposes of the chapter. (West 1993).
In JWJ, we found that by allowing the trust fund to enforce the payment bond against the surety of the employer, Arizona's law merely substituted obligors which, theoretically, did not expand the remedies provided to the trusts by ERISA. See JWJ,
This Court has identified no fewer than six different tests used since Travelers to determine whether a state statute was preempted by ERISA. All six tests, however, contained a central element of determining whether the state law claim bears on an ERISA governed relationship. Rutledge,
The mechanic's lien sections, Cal. Civil Code 3110 and 3111 are also part of California's integrated statutory scheme. Section 3111, which allows employee benefit trusts to avail themselves of the mechanic's lien, is by incorporation also the section which allows them to avail themselves of the stop notice and payment bond remedies.
