Betancourt v. Storke Housing Investors

• Decision Date: 15 December 2003
• Docket Number: No. S103942.,S103942.
• Citation: 82 P.3d 286,8 Cal.Rptr.3d 259,31 Cal.4th 1157
• Parties: R. BETANCOURT et al., Plaintiffs and Appellants, v. STORKE HOUSING INVESTORS et al., Defendants and Respondents.
• Court: California Supreme Court

8 Cal.Rptr.3d 259

82 P.3d 286

31 Cal.4th 1157

R. BETANCOURT et al., Plaintiffs and Appellants, v. STORKE HOUSING INVESTORS et al., Defendants and Respondents.

No. S103942.

Supreme Court of California.

December 15, 2003.

Gilbert & Sackman, Laurie A. Traktman, Kenneth J. Sackman and Steven M. Rehaut, Los Angeles, for Plaintiffs and Appellants.

Reich, Adell, Crost & Cvitan and J. David Sackman, Los Angeles, for Trustees of the Southern California IBEW-NECA Pension Trust Fund and the Construction Laborers Trust Fund for Southern California Administrative Company, LLC, as Amici Curiae on behalf or Plaintiffs and Appellants.

DeCarlo, Connor & Selvo and Desmond C. Lee, Los Angeles, for Carpenters Southern California Administrative Corporation as Amicus Curiae on behalf of Plaintiffs and Appellants.

Mullen & Henzell, Derek B. Lipscombe, Santa Barbara, and Rafael Gonzalez for Defendants and Respondents.

CHIN, J.

We granted review to determine whether the federal Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. § 1001 et seq.) preempts a mechanic's lien action (Civ.Code, § 3110)¹ brought by laborers to recover unpaid contributions to their employee benefit plans. ERISA preempts state laws that "relate to" employee benefit plans. (29 U.S.C. § 1144(a).) In 1991, we held that ERISA preempted a similar mechanic's lien statute (§ 3111) that "single[d] out ERISA plans for special treatment" and, thus, related to employee benefit plans. (Carpenters So. Cal. Admin. Corp. v. El Capitan Development Co. (1991) 53 Cal.3d 1041, 1049, 282 Cal.Rptr. 277, 811 P.2d 296 (El Capitan).) Because section 3110 is a law of general applicability and does not "relate to" ERISA plans (29 U.S.C. § 1144(a)), we conclude that ERISA does not preempt plaintiffs' action.

FACTUAL AND PROCEDURAL BACKGROUND

The facts are largely taken from the Court of Appeal's opinion.

R. Betancourt and other employees (laborers) are union members who worked for R.P. Richards, a subcontractor of Trabucco & Associates. R.P. Richards employed laborers pursuant to a collective bargaining agreement (Agreement) between Trabucco and laborers' union, District Council No. 16 of the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada (Union).

Laborers worked on a residential construction project, which Storke Housing Investors and BDC Storke Development (collectively, Storke) owned. According to the Agreement, laborers were entitled to an hourly compensation package, including wages and benefits. Laborers received their cash wages, but R.P. Richards failed to make contributions to the Union's trust funds for the benefit of laborers. Pursuant to section 3110, laborers recorded a mechanic's lien for unpaid contributions in the amount of $33,236.56 against Storke's real property. In May 2000, laborers, as individuals and as members of Union, and Union, as a party to the Agreement but not as a trust fund (collectively, plaintiffs) filed the instant action to foreclose on the section 3110 lien.

Storke demurred, contending that the amounts due were fringe benefit contributions owing to Union's employee benefit plan, and, as such, ERISA preempted plaintiffs' action. (29 U.S.C. § 1144(a).) Relying on our decision in El Capitan, supra, 53 Cal.3d 1041, 282 Cal.Rptr. 277, 811 P.2d 296, the trial court concluded that ERISA preempted plaintiffs' action. The court sustained Storke's demurrer without leave to amend and dismissed the action.

Plaintiffs appealed. The Court of Appeal reversed the trial court's judgment. It concluded that "[b]ecause decisions of the United States Supreme Court subsequent to El Capitan have dramatically narrowed the preemptive scope of ERISA, we hold that ERISA does not bar this action. We conclude that we are not bound by El Capitan." The Court of Appeal reasoned, "Section 3110 is a state law of general applicability which creates no rights or restrictions concerning the administration or funding of ERISA plans. Therefore, it matters not that the remedy provided by section 3110—foreclosure on the landowner's property—is not a remedy provided to redress violations of ERISA. (See 29 U.S.C. § 1132(d)(2).)" Our review follows.

DISCUSSION

"On review of the judgment of the Court of Appeal reversing the superior court's orders sustaining defendants' demurrers, we examine the complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory, such facts being assumed true for this purpose. [Citations.]" (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415, 106 Cal.Rptr.2d 271, 21 P.3d 1189.) As relevant here, plaintiffs' complaint alleged that (1) laborers worked on Storke's real property for an hourly compensation pursuant to the Agreement; (2) laborers' Union was a party to the Agreement; (3) laborers were due $33,236.56 for their unpaid labor on the project; and (4) plaintiffs recorded a mechanic's lien on the Storke property pursuant to section 3110.

The parties do not seriously dispute that plaintiffs' section 3110 action seeks to recover unpaid contributions to their benefit plans. Though section 3110 is not limited to an express trust fund (see § 3111), Storke maintains that plaintiffs' "action is a backdoor attempt to do something that this court in El Capitan has already ruled against." Because El Capitan held that ERISA preempts an action under section 3111, Storke contends an action under section 3110 is similarly preempted. In contrast, plaintiffs urge this court to declare that El Capitan is no longer good law in light of subsequent federal high court decisions on ERISA preemption, but also claim that El Capitan is simply not applicable to cases arising under section 3110. In order to address these claims, we begin with a discussion of ERISA and its preemption clause.

A. ERISA

"ERISA is a comprehensive federal statutory scheme designed to promote the interests of employees and their beneficiaries in employee benefit plans." (El Capitan, supra, 53 Cal.3d at p. 1047,282 Cal.Rptr. 277,811 P.2d 296, citing Shaw v. Delta Air Lines, Inc. (1983) 463 U.S. 85, 90, 103 S.Ct. 2890, 77 L.Ed.2d 490 (Shaw).) It "sets various uniform standards, including rules concerning reporting, disclosure, and fiduciary responsibility, for both pension and welfare plans. [Citations.]" (Shaw, supra, 463 U.S. at p. 91,103 S.Ct. 2890.) ERISA's preemption clause states, in pertinent part: "[T]he provisions of this subchapter ... shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a)[²] of this title...." (29 U.S.C. § 1144(a), italics added.) "The basic thrust of the pre-emption clause ... was to avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans." (New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co. (1995) 514 U.S. 645, 657, 115 S.Ct. 1671, 131 L.Ed.2d 695 (Travelers).)

In its 1983 decision in Shaw, the high court pronounced that "[a] law `relates to' an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan." (Shaw, supra, 463 U.S. at pp. 96-97, 103 S.Ct. 2890, fn. omitted.) In a later case, the high court explained that "to determine whether a state law has the forbidden connection, we look both to `the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive,' [Travelers, supra, 514 u.s. at p. 656, 115 s.ct. 1671], as well as to the nature of the effect of the state law on ERISA plans, id., at 658-659 ." (California Div. of Labor Standards Enforcement v. Dillingham Constr., N. A., Inc. (1997) 519 U.S. 316, 325, 117 S.Ct. 832, 136 L.Ed.2d 791 (Dillingham) [holding California's prevailing wage statute is not preempted by ERISA].) As to an impermissible reference, the high court concluded that "[w]here a State's law acts immediately and exclusively upon ERISA plans, ..., or where the existence of ERISA plans is essential to the law's operation, ..., that `reference' will result in pre-emption." (Dillingham, supra, 519 U.S. at p. 325, 117 S.Ct. 832.)

The high court has also held that "state laws providing alternative enforcement mechanisms also relate to ERISA plans, triggering pre-emption. See Ingersoll-Rand [Co. v. McClendon (1990) 498 U.S. 133, 111 S.Ct. 478, 112 L.Ed.2d 474]." (Travelers, supra, 514 U.S. at p. 658,115 S.Ct. 1671; see also Rush Prudential HMO, Inc. v. Moran (2002) 536 U.S. 355, 377-379, 122 S.Ct. 2151, 153 L.Ed.2d 375 (Rush Prudential);³Pilot Life, supra, 481 U.S. at p. 56, 107 S.Ct. 1549.) "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 deliberate care with which ERISA's civil enforcement remedies [in 29 United States Code section 1132 (a)] were drafted and the balancing of policies embodied in its choice of remedies argue strongly for the conclusion that ERISA's civil enforcement remedies were intended to be exclusive." (Pilot Life, supra, 481 U.S. at p. 54, 107 S.Ct. 1549.) For example, the high court has held that a state law wrongful discharge action based on an employer's motivation to avoid paying pension benefits (Ingersoll-Rand, supra, 498 U.S. at p. 145,111 S.Ct. 478), and a state common law action based on improper processing of an ERISA benefits claim (Pilot Life, supra, 481 U.S. at p. 57, 107 S.Ct. 1549), both impermissibly conflicted with ERISA's enforcement scheme.

Beginning with Travelers, the United States Supreme Court has narrowed the scope of ERISA preemption. (Travelers, supra, 514 U.S. at p. 656, 115 S.Ct. 1671 [court must look "beyond the unhelpful text"...