CARPENTERS SOUTHERN CALIFORNIA ADMINISTRATIVE CORPORATION v. EL CAPITAN DEVELOPMENT COMPANY (1988)

OPINION

Appellant, Carpenters Southern California Administrative Corporation (CSCAC), filed a complaint in Kern County Superior Court against El Capitan Development Company (El Capitan) and numerous Does, to foreclose on mechanics' liens.   CSCAC had filed the mechanics' liens in order to collect fringe-benefit contributions allegedly due its members pursuant to its collective bargaining agreement with a subcontractor.   During the term of the agreement, CSCAC members, who were carpenters covered by the collective bargaining agreement, were employed by the subcontractor, who in turn performed work on El Capitan's property.   The subcontractor allegedly failed to pay fringe benefit contributions, in excess of $121,000, due under the terms of the collective bargaining agreement.

El Capitan demurred.   It argued the complaint failed to state a cause of action because the California statutory lien procedure upon which it was based (Civ.Code, § 3111) ¹ was preempted by the Employee Retirement Income Security Act of 1974, as amended (ERISA).  (See 29 U.S.C. § 1144.)   The demurrer was granted with leave to amend.   Plaintiffs declined to amend (purportedly upon agreement by the parties.)   Judgment was entered on August 8, 1985.   CSCAC timely appealed.

We reversed the judgment.   However, the California Supreme Court granted respondent's petition for review and transferred the matter to us for reconsideration in light of a subsequently decided case, Pilot Life Insurance Company v. Dedeaux (1987), 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (hereinafter Pilot Life ).   We do so, and conclude the recent decision requires us to affirm the judgment on the basis of federal preemption.

FACTS

CSCAC is the administrator and assignee of rights involving various multi-employer trust funds, including the carpenters' trust funds.   They are organized pursuant to section 302, subsection (c)(5) of the Labor Management Relations Act of 1947.  (See 29 U.S.C. § 186, subsec. (c)(5).)   As a result, CSCAC is a fiduciary, as defined by ERISA, and the trust funds in question are employee pension benefit plans or welfare plans within the meaning of ERISA.  (See 29 U.S.C. § 1002, subsecs. (1), (2)(A), and (21)(A).)

These trust funds are funded through employer contributions for covered employees.   In this case, those employees were members of unions affiliated with the United Brotherhood of Carpenters and Joiners of America (Union).   Due to its fiduciary relationship with the unions, and in its role as administrator of the trust, CSCAC is under a duty to collect contributions from employers who have failed to voluntarily make the required payments to the trust.

A condominium project was constructed on property in Bakersfield owned by El Capitan.   The general contractor on the project was Grupe Construction.   Grupe subcontracted with Pacific Southwestern Framing for part of the framing on the condominium project.

In the complaint, CSCAC alleged John Hall Enterprises, the subcontractor with whom the collective bargain agreement was made, was an entity related to Pacific Southwestern Framing.   As a result, Pacific Southwestern Framing was bound by the agreement with Hall, and therefore responsible for making the contributions to the trust.   However, neither El Capitan nor Pacific Southwestern Framing signed the collective bargaining agreement.

Since the unpaid contributions represent work performed on El Capitan property, CSCAC alleged mechanics' liens could be placed upon the real property pursuant to section 3111.   The section is part of California's statutory scheme which permits trust-fund liens on real property in amounts equal to the fringe benefit contributions owed under collective bargaining agreements.   (See, e.g., §§ 3111, 3111.5, 3114–3116, 3123, 3128–3140, 3143–3154.)   Mechanics' liens in this action were timely recorded by CSCAC on the El Capitan property, and foreclosure was sought in this action as a means of collecting the trust fund contributions still owed.

APPLICATION OF SECTION 3111 VERSUS PREEMPTION BY ERISA.

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.”

The pertinent portions of ERISA provide:

“[T]he provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan․”  (29 U.S.C. § 1144, subsec. (a);  ERISA § 514, subsec. (a).)

“The term ‘State law’ includes all laws, decisions, rules, regulations, or other State action having the effect of law, of any State.   A law of the United States applicable only to the District of Columbia shall be treated as a State law rather than a law of the United States.

“The term ‘State’ includes a State, any political subdivisions thereof, or any agency or instrumentality of either, which purports to regulate, directly or indirectly, the terms and conditions of employee benefit plans covered by this subchapter.”  (29 U.S.C. § 1144, subsecs. (c)(1) & (2);  ERISA § 514, subsecs. (1) & (2).)

According to El Capitan, section 3111 is preempted by the above quoted provisions of ERISA.   The question of preemption was vigorously researched and briefed in the trial court.   Subsequent to the trial court's granting of the demurrer and entry of judgment, Division One of the First Appellate District filed its opinion in Carpenters Health & Welfare Trust Fund v. Parnas Corp. (1986) 176 Cal.App.3d 1196, 222 Cal.Rptr. 668.   The Parnas court reached the opposite result as that reached by the trial court in this case.   According to Parnas, section 3111 is not preempted by ERISA.

El Capitan took issue with the Parnas case and urged it not be followed by this court.   In reply, CSCAC argued Parnas was correctly decided and should be followed.   We agreed with CSCAC, applying Parnas and Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 20 Cal.Rptr. 321, 369 P.2d 937.

We studied El Capitan's criticisms of the Parnas rationale and concluded Parnas made the proper distinction between federal substantive law relating to covered plans and state remedies to enforce the rights arising from such plans.

In Pilot Life, the issue before the court was phrased by Justice O'Connor as follows:

“This case presents the question whether the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq., preempts state common law tort and contract actions asserting improper processing of a claim for benefits under an insured employee benefit plan.”   (Pilot Life, supra, 107 S.Ct. at pp. 1550–1551.)

The employee, Dedeaux, received a work-related injury.   His employer had an employee disability insurance plan through Pilot Life.   Dedeaux sought permanent disability status;  nevertheless, his benefits were terminated after two years.   Subsequently they were reinstated and terminated several times over another three-year period.  (Id. at p. 1551.)

Ultimately, Dedeaux filed a diversity action in federal court.   He alleged three causes of action based upon state law (tortious breach of contract;  breach of fiduciary duties;  fraud in the inducement), rather than any cause of action available to him under ERISA. (Id. at p. 1551.)

Pilot Life's motion for summary judgment was granted after the district court found all the state claims to be preempted.   The fifth circuit reversed, relying upon Metropolitan Life Ins. Co. v. Massachusetts (1985) 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728.   Eventually, the Supreme Court reversed, finding preemption.  (Pilot Life, supra, at pp. 1551–1558.)

Although the court in Pilot Life was concerned with state causes of action, it discussed remedies at some length.   The opinion cannot be read without concluding the high court was purposely broad in its view of preemption.   We quote a few such passages which combine to preclude us from looking for distinctions between substantive law and remedies.

“To summarize the pure mechanics of the provisions quoted above:  [29 U.S.C. § 1144, subsecs. (a) and (b)(2)(A) ]  If a state law ‘relate[s] to ․ employee benefit plan[s],’ it is pre-empted.   §  514(a)․

“ ‘[T]he question whether a certain state action is pre-empted by federal law is one of congressional intent.  “ ‘The purpose of Congress is the ultimate touchstone.’ ”  [Citations.]  We have observed in the past that the express pre-emption provisions of ERISA are deliberately expansive, and designed to “establish pension plan regulation as exclusively a federal concern.”   [Citations.]' ”  Pilot Life, supra, at p. 1552.)

In its discussion of Dedeaux's state law bad-faith-claim, the court continued:

“The Solicitor General, for the United States as amicus curiae, argues that Congress clearly expressed an intent that the civil enforcement provisions of ERISA § 502(a) be the exclusive vehicle for actions by ERISA-plan participants and beneficiaries asserting improper processing of a claim for benefits, and that varying state causes of action for claims within the scope of § 502(a) would pose an obstacle to the purposes and objectives of Congress.   Brief for United States as Amicus Curiae 18–19.   We agree.   The conclusion that § 502(a) was intended to be exclusive is supported, first, by the language and structure of the civil enforcement provisions, and second, by legislative history in which Congress declared that the pre-emptive force of § 502(a) was modeled on the exclusive remedy provided by § 301 of the Labor–Management Relations Act (LMRA), 61 Stat. 156, 29 U.S.C. § 185.

“The civil enforcement scheme of § 502(a) is one of the essential tools for accomplishing the stated purposes of ERISA․

“․

“In sum, the detailed provisions of § 502(a) set forth a comprehensive civil enforcement scheme that represents a careful balancing of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans.   The policy choices reflected in the inclusion of certain remedies and the exclusion of others under the federal scheme would be completely undermined if ERISA-plan participants and beneficiaries were free to obtain remedies under state law that Congress rejected in ERISA.  ‘The six carefully integrated civil enforcement provisions found in § 502(a) of the statute as finally enacted ․ provide strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly.’  ( [Massachusetts Mutual Life Ins. Co. v. Russell ] supra, [473 U.S. 143 at 146, 105 S.Ct. 3085 at 3093, 87 L.Ed.2d 96 (1985) ] (emphasis in original).”  (Pilot Life, supra, 107 S.Ct. at pp. 1555–1556, fn. omitted.”

Still later, the court stated:

“The expectations that a federal common law of rights and obligations under ERISA-regulated plans would develop, indeed, the entire comparison of ERISA's § 502(a) to § 301 of the LMRA, would make little sense if the remedies available to ERISA participants and beneficiaries under § 502(a) could be supplemented or supplanted by varying state laws.”  (Id. at p. 1558.)

Although a state law providing for mechanics' liens is a special statutory collection alternative, that remedy cannot be divorced from the substantive contractual rights which create the debt.   To be effective, the lien claim depends upon the validity and consequences of an agreement of some sort.   In this instance, a labor agreement is the subject matter.   Failure of one party to the plan to make contributions results in the denial of benefits to the others.   Federal remedies are provided.   Mechanics' lien rights are omitted.

Along this same line of thinking is the very recent appellate court decision in Cairy v. Superior Court (1987) 192 Cal.App.3d 840, 237 Cal.Rptr. 715.   In Cairy the defendant, Cairy, was charged with violation of Labor Code section 227:  willful, and with intent to defraud, failure to make payments to a pension fund as required by a collective bargaining agreement.  (Id. at p. 842, 237 Cal.Rptr. 715.)   The defendant's demurrer to the information on the grounds of preemption was overruled.   After concluding ERISA preempted Labor Code section 227, the Court of Appeal issued a peremptory writ of mandate directing the lower court to vacate its order overruling the demurrer, and instructed the court to make a new order sustaining the demurrer.  (Id. at pp. 845–846, 237 Cal.Rptr. 715.)

The Cairy court uses an expansive approach to preemption consistent with Pilot Life:

“Section 227 ‘regulates' the terms and conditions of employee benefit plans to the common sense meaning of that word.  ‘Regulate’ means ‘to control or direct according to a rule.’  (American Heritage Dict. (1976) p. 1096.)   It is axiomatic, therefore, the power to regulate includes the power to enforce.   (See, e.g., Pac. Legal Found. v. State Energy Resources, etc. (9th Cir.1981) 659 F.2d 903, 926.)   Here the state is attempting directly to regulate the terms and conditions of a pension plan by using its criminal law to obtain compliance with those terms and conditions (i.e., to ‘control or direct’ an employer's behavior in relation to terms and conditions of the pension plan).   Thus, section 227 is preempted by ERISA unless it falls within the exception for ‘generally applicable’ criminal laws of the state.”   (Cairy v. Superior Court, supra, 192 Cal.App.3d at p. 843, 237 Cal.Rptr. 715.)

We agree a similar interpretation is required in our case.   The state is attempting to “regulate” the terms and conditions of a pension plan through the use of its mechanics' lien laws.  (See also Lembo v. Texaco, Inc. (1987) 194 Cal.App.3d 531, 239 Cal.Rptr. 596.)   The state's mechanics' lien laws may not be used to supplement or supplant the civil enforcement scheme developed under ERISA.  (Pilot Life, supra, 107 S.Ct. at p. 1558.)

The judgment is affirmed.   Respondent to recover costs of appeal.

FOOTNOTES

1.   All statutory references are to the Civil Code unless otherwise indicated.

WOOLPERT, Acting Presiding Justice.

BALLANTYNE and VARTABEDIAN *, JJ., concur.