Bd. of Trs. of the Glazing Health & Welfare Trust v. Chambers

• Decision Date: 04 September 2018
• Docket Number: No. 16-15588,16-15588
• Citation: 903 F.3d 829
• Parties: The BOARD OF TRUSTEES OF the GLAZING HEALTH AND WELFARE TRUST; Board of Trustees of the Southern Nevada Glaziers and Fabricators Pension Trust Fund; Board of Trustees of the Plumbers and Pipefitters Union Local 525 Pension Plan; The Board of Trustees of the Painters, Glaziers and Floorcoverers Joint Apprenticeship and Journeyman Training Trust ; The Board of Trustees of the Painters, Glaziers and Floorcoverers Safety Training Trust Fund; The Board of Trustees of the Painters and Floorcoverers Joint Committee; The Board of Trustees of the Southern Nevada Painters and Decorators and Glaziers Labor-Management Cooperation Committee Trust; The Board of Trustees of the International Union of Painters and Allied Trades Industry Pension Fund; The Board of Trustees of the Employee Painters’ Trust; The Board of Trustees of the Construction Industry and Laborers Health and Welfare Trust; The Board of Trustees of the Construction Industry and Laborers Joint Pension Trust ; The Board of Trustees of the Construction Industry and Laborers Vacation Trust; The Board of Trustees of Southern Nevada Laborers Local 872Training Trust ; Board of Trustees of the Plumbers and Pipefitters Local 525 Health and Welfare Trust and Plan; Board of Trustees of the Plumbers and Pipefitters Union Local 525 Pension Plan; Board of Trustees of Plumbers and Pipefitters Local Union 525 Apprentice and Journeyman Training Trust for Southern Nevada, Plaintiffs-Appellees, v. Shannon CHAMBERS, Nevada Labor Commissioner, in her official capacity, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

903 F.3d 829

The BOARD OF TRUSTEES OF the GLAZING HEALTH AND WELFARE TRUST; Board of Trustees of the Southern Nevada Glaziers and Fabricators Pension Trust Fund; Board of Trustees of the Plumbers and Pipefitters Union Local 525 Pension Plan; The Board of Trustees of the Painters, Glaziers and Floorcoverers Joint Apprenticeship and Journeyman Training Trust ; The Board of Trustees of the Painters, Glaziers and Floorcoverers Safety Training Trust Fund; The Board of Trustees of the Painters and Floorcoverers Joint Committee; The Board of Trustees of the Southern Nevada Painters and Decorators and Glaziers Labor-Management Cooperation Committee Trust; The Board of Trustees of the International Union of Painters and Allied Trades Industry Pension Fund; The Board of Trustees of the Employee Painters’ Trust; The Board of Trustees of the Construction Industry and Laborers Health and Welfare Trust; The Board of Trustees of the Construction Industry and Laborers Joint Pension Trust ; The Board of Trustees of the Construction Industry and Laborers Vacation Trust; The Board of Trustees of Southern Nevada Laborers Local 872Training Trust ; Board of Trustees of the Plumbers and Pipefitters Local 525 Health and Welfare Trust and Plan; Board of Trustees of the Plumbers and Pipefitters Union Local 525 Pension Plan; Board of Trustees of Plumbers and Pipefitters Local Union 525 Apprentice and Journeyman Training Trust for Southern Nevada, Plaintiffs-Appellees,
v.
Shannon CHAMBERS, Nevada Labor Commissioner, in her official capacity, Defendant-Appellant.

No. 16-15588

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 12, 2018, San Francisco, California
Filed September 4, 2018

903 F.3d 833

Joseph F. Tartakovsky (argued), Deputy Solicitor General; Adam Paul Laxalt, Attorney General; Office of the Attorney General, Carson City, Nevada; for Defendant-Appellant.

Wesley J. Smith (argued) and Daryl E. Martin, Christensen James & Martin, Las Vegas, Nevada; Bryce C. Loveland and Adam P. Segal, Brownstein Hyatt Farber Schreck LLP, Las Vegas, Nevada; Sean W. McDonald and Michael A. Urban, The Urban Law Firm, Las Vegas, Nevada; for Plaintiffs-Appellees.

Sarah Bryan Fask, Littler Mendelson P.C., Philadelphia, Pennsylvania; Richard N. Hill, Littler Mendelson P.C., San Francisco, California; for Amicus Curiae Nevada Contractors Association.

Kevin C. Powers, Chief Litigation Counsel; Brenda J. Erdoes, Legislative Counsel; Nevada Legislative Counsel Bureau, Legal Division, Carson City, Nevada; for Amicus Curiae Nevada Legislature.

Laurie A. Traktman, Gilbert & Sackman, Los Angeles, California, for Amici Curiae Board of Trustees of the Sheet Metal Workers’ Pension Plan of Southern California, Arizona and Nevada, and Board of Trustees of the Sheet Metal Workers’ Health Plan of Southern California, Arizona and Nevada.

Before: J. Clifford Wallace and Consuelo M. Callahan, Circuit Judges, and James V. Selna,^* District Judge.

Dissent by Judge Wallace

CALLAHAN, Circuit Judge:

903 F.3d 834

Nevada law holds general contractors vicariously liable for the labor debts owed by subcontractors to subcontractors’ employees on construction projects. In recent years, the Nevada legislature became concerned that its vicarious liability law was unfairly burdening general contractors with substantial liabilities. The legislature found that certain entities, in particular trusts that manage health and welfare benefit plans and which represent aggrieved employees in labor debt recovery actions, were suing general contractors years after labor debts accrued. Since a 2009 decision of our court, those suits could seek money damages not just for uncollected debts, but also for the trusts’ legal fees and other costs incurred attempting to collect on those debts from subcontractors. The upshot was that unsuspecting general contractors were discovering years later that they owed the subcontractors’ debts—and then some.

In an effort to remedy this perceived problem, in 2015 the Nevada legislature unanimously approved SB 223. The law limits the damages that may be collected from general contractors. It also imposes notification requirements on contractors and welfare benefit plans regulated under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq ., before an action may be brought under Nevada law against general contractors.

Plaintiffs-Appellees are ERISA trusts that manage ERISA plans. They claim SB 223 is preempted by ERISA because, they argue, it impermissibly "relates to" ERISA plans. They reason that the law intrudes on ERISA’s uniform regulatory scheme by imposing additional administrative burdens on ERISA trusts like themselves, and by infringing ERISA trusts’ fiduciary duty to manage plan funds. The district court agreed and granted Appellees’ motion for summary judgment. We conclude, however, that SB 223 does not intrude on any federally-regulated field, conflict with ERISA’s objectives, or otherwise impermissibly "relate to" ERISA plans. Instead, it targets an area of traditional state concern—debt collection—and pared back a state-conferred entitlement to collect unpaid debts from third-party general contractors. Accordingly, we hold that SB 223 is a legitimate exercise of Nevada’s traditional state authority and VACATE the district court’s judgment.¹

I.

A.

Nevada law provides that employees on construction projects who cannot collect on labor debts from their employers (i.e., subcontractors² ) may compel payment from general contractors. Nev. Rev. Stat. Ann. § 608.150 et seq. Such debts may include wages that subcontractors owe their employees and benefit contributions those subcontractors are required to make to health and welfare benefit plans—i.e.,

903 F.3d 835

"ERISA plans"—on behalf of their employees.

Appellees are trusts ("ERISA trusts" or "Taft-Hartley trusts") that administer a particular type of ERISA plan: plans covering multiple employers, oftentimes across several States. "A multiemployer plan is a collectively bargained [ERISA] plan maintained by more than one employer, usually within the same or related industries, and a labor union." Pension Benefit Guaranty Corp., Introduction to Multiemployer Plans , available at http://goo.gl/6RJgoS (last accessed July 12, 2018). Multiemployer plans are typically administered and managed by a board of trustees, represented equally by labor and management. Id . Through their administration of multiemployer plans, Appellees provide welfare and pension benefits to employees that perform work in the construction industry. Those benefits, as well as employers’ (i.e., subcontractors’) contribution obligations to the plans, are negotiated by employees—oftentimes through a union representative—and employers, and are set forth in the plans themselves. Id .

As is pertinent here, ERISA empowers ERISA trusts to bring actions against subcontractors for subcontractors’ labor debts. 29 U.S.C. §§ 1132(g)(2), 1145. Those debts can include subcontractors’ delinquent contributions to the ERISA plans, as well as wages owed employees. Id. § 1132(g)(2). ERISA does not, however, establish a cause of action for collecting debts from non-parties to an ERISA plan, like general contractors. That right exists, if at all, as a matter of state vicarious liability law. See Trs . of the Constr. Indus. and Laborers Health and Welfare Trust v. Hartford Fire Ins. Co. , 578 F.3d 1126, 1127–28 (9th Cir. 2009).

B.

The Nevada legislature became concerned in recent years that its vicarious liability law was unfairly saddling general contractors—i.e., non-parties to ERISA plans—with the debts of subcontractors. General contractors found themselves threatened with lawsuits by, among other entities, ERISA trusts, who sought to hold them vicariously liable for debts owed their members by subcontractors, sometimes several years later. Those debts consisted of delinquent wage and benefit contributions, as well as attorneys’ fees and other costs resulting from protracted legal action between ERISA trusts and subcontractors. A 2009 per curiam opinion of this court contributed to this trend by interpreting "labor indebtedness" under Nevada’s vicarious liability statute to include "liquidated damages and attorneys’ fees arising from a collective bargaining agreement [CBA]." Hartford Fire Ins. , 578 F.3d at 1129. Thus, after Hartford Fire Insurance , ERISA trusts like Appellees could litigate against potentially insolvent subcontractors for years, knowing that, should the litigation fail to make them whole, they could recover their legal expenses from general contractors later.

In 2015, the Nevada legislature unanimously approved SB 223 to address the situation. The law had two main goals. First, it sought to reduce the liability faced by unsuspecting general contractors years after they had closed the books on a project. It did so by shortening the statute of limitations period to one year (SB 223 § 2) and limiting general contractors’ vicarious liability to debts owed employees under a CBA (SB 223 §§ 1(2) & 3(2) ).

Second, the law sought to increase general contractors’ ability to address subcontractor debts...