Carpenters Local No. 26 v. U.S. Fid. & Guar., PLAINTIFFS-APPELLANTS

• Citation: 215 F.3d 136
• Decision Date: 03 April 2000
• Docket Number: DEFENDANT-APPELLEE,PLAINTIFFS-APPELLANTS,No. 99-1786,99-1786
• Parties: (1st Cir. 2000) CARPENTERS LOCAL UNION NO. 26, UNITED BROTHERHOOD OF CARPENTERS & JOINERS OF AMERICA, ET AL.,, v. UNITED STATES FIDELITY & GUARANTY COMPANY, . Heard
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 136

215 F.3d 136 (1st Cir. 2000)

CARPENTERS LOCAL UNION NO. 26, UNITED BROTHERHOOD OF CARPENTERS & JOINERS OF AMERICA, ET AL., PLAINTIFFS-APPELLANTS, v. UNITED STATES FIDELITY & GUARANTY COMPANY, DEFENDANT-APPELLEE.

No. 99-1786.

United States Court of Appeals, For the First Circuit.

Heard April 3, 2000.

Decided June 16, 2000.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS. Hon. Reginald C. Lindsay, U.S. District Judge. [Copyrighted Material Omitted] Christopher N. Souris, with whom Krakow & Souris, Llc was on brief, for appellants.

Richard D. Wayne, with whom Charles E. Schaub, Jr., Willard Krasnow, and Hinckley, Allen & Snyder Llp were on brief, for appellee.

Before Selya, Boudin and Lynch, Circuit Judges.

Selya, Circuit Judge.

In this matter, the district court, understandably deeming itself bound by our holding in Williams v. Ashland Eng'g Co., 45 F.3d 588 (1st Cir. 1995), ruled that the plaintiffs' action - brought to enforce claims under a labor and materials bond for wages and fringe benefit contributions allegedly due in respect to construction of a public works project in Peabody, Massachusetts - was preempted by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461, and in particular, 29 U.S.C. § 1144(a). Accordingly, the court terminated the action by entering judgment on the pleadings.

We have considerably greater freedom than the district courts to evaluate the impact of recent Supreme Court precedent on our previous decisions. Having reexamined Williams against the changed legal landscape that now confronts us, we are persuaded that subsequent developments have overtaken our decision. Consequently, we abrogate the central holding of Williams,¹ reverse the judgment below, and remand for further proceedings consistent with this opinion.

I. BACKGROUND

The individual plaintiffs performed carpentry work on a public works project in Peabody, Massachusetts. All of them belonged to Carpenters Local No. 26 (the union). At the times relevant hereto, their employer, Henry Construction, Inc. (Henry), was a party to a collective bargaining agreement with the union that required contributions to various fringe benefit funds on the individual plaintiffs' behalf. Henry defaulted on this obligation before completing the Peabody job.

In Massachusetts, a so-called bond statute, Mass. Gen. Laws ch. 149, § 29, the pertinent text of which is set forth in the margin,² requires the general contractor on a public works project to post a bond covering labor and materials (including indebtedness incurred by subcontractors and suppliers for wages and fringe benefits). The general contractor on the Peabody project obtained such a bond from defendant-appellee United States Fidelity & Guaranty Company (USF&G). When Henry, a subcontractor, failed to make contributions in respect to fringe benefits, the union's collection agent, Massachusetts Carpenters Central Collection Agency (MCCCA), acting for the aggrieved employees, staked a claim on the bond.

Resolution of the controversy eluded the parties. The individual plaintiffs, the union, and MCCCA (hereinafter collectively the appellants) then sued USF&G in the state superior court. The surety removed the action, see 28 U.S.C. § 1441, and immediately sought judgment on the pleadings. The appellants opposed this initiative and moved to remand the action to the state court. On November 3, 1998, the federal district court denied the motion to remand. Some seven months later, it granted USF&G's motion for judgment on the pleadings. Relying on Williams, the court anchored both orders in ERISA preemption. This appeal followed.

II. DISCUSSION

We review the district court's preemption ruling de novo. See Demars v. Cigna Corp., 173 F.3d 443, 445 (1st Cir. 1999); Graham v. Balcor Co., 146 F.3d 1052, 1054 (9th Cir. 1998).

ERISA is a comprehensive statutory scheme that governs employee benefit plans. It was enacted in response to growing concerns about "the mismanagement of funds accumulated to finance employee benefits and the failure to pay employees benefits from accumulated funds." Massachusetts v. Morash, 490 U.S. 107, 115 (1989). The statute brooks no interference; it contains an express preemption clause providing that it shall "supersede any and all State laws insofar as they may now or hereafter relate to any [covered] employee benefit plan." 29 U.S.C. § 1144(a). Thus, when state-law claims "relate to" ERISA plans, those claims are transmuted into ERISA claims. See Whitt v. Sherman Int'l Corp., 147 F.3d 1325, 1329 (11th Cir. 1998); Parrino v. FHP, Inc., 146 F.3d 699, 703 (9th Cir.), cert. denied, 525 U.S. 1001 (1998). In that situation, "any civil complaint raising [such] a state law claim... is of necessity so federal in character that it arises under federal law for purposes of 28 U.S.C. § 1331 and permits removal to federal court." Plumbing Indus. Bd. v. E.W. Howell Co., 126 F.3d 61, 66 (2d Cir. 1997).

Despite this prophylaxis, ERISA preemption is not inexorable. As the language of section 1144(a) makes plain, the incidence of ERISA preemption turns on the parameters of the phrase "relate to." See California Div. of Labor Standards Enforcement v. Dillingham Constr., 519 U.S. 316, 324 (1997). That locution is not self-defining, and the Justices have been at least mildly schizophrenic in mapping its contours. The Court initially glossed the phrase by portraying the scope of ERISA preemption as "deliberately expansive." Pilot Life Ins. Co. v. Derdeaux, 481 U.S. 41, 46 (1987). As time passed, it grew more guarded, emphasizing the "starting presumption that Congress does not intend to supplant state law," New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 654 (1995); accord De Buono v. NYSA-ILA Med. & Clin. Servs. Fund, 520 U.S. 806, 813 (1997), and warning that, unless congressional intent to preempt clearly appears, ERISA will not be deemed to supplant state law in areas traditionally regulated by the states, see Dillingham, 519 U.S. at 325; Travelers, 514 U.S. at 655.

Importantly, these variations in emphasis have led the Court to conclude in recent years that the phrase "relate to," as used in ERISA's preemption provision, cannot be read literally. "If 'relate to' were taken to extend to the furthest stretch of its indeterminacy, then for all practical purposes preemption would never run its course...." Travelers, 514 U.S. at 655. To scale the phrase down to size, the Court has devised a disjunctive test: "A law relate[s] to a covered employee benefit plan for purposes of § 514(a) if it [1] has a connection with or [2] a reference to such a plan." Dillingham, 519 U.S. at 324 (citations and internal quotation marks omitted) (alterations in original). We apply this test to the Massachusetts bond statute, mindful that a state law which comes within the compass of either branch of the test is subject to preemption.

A. Connection.

Travelers plainly signaled a significant analytic shift in regard to the "connection with" portion of the ERISA preemption inquiry,³ abandoning strict textualism in favor of a more nuanced approach:

For the same reasons that infinite relations cannot be the measure of pre-emption, neither can infinite connections. We simply must go beyond the unhelpful text and the frustrating difficulty of defining its key term, and look instead to the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive.

Travelers, 514 U.S. at 656; accord Dillingham, 519 U.S. at 324.

Cataloguing the objectives of the ERISA statute is a fairly straightforward exercise. When Congress conceived the ERISA scheme, it made manifest its intention to "protect... the interests of participants in employee benefit plans and their beneficiaries... by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies." 29 U.S.C. § 1001(b). Achieving this end requires the avoidance of "a multiplicity of regulation" and, concomitantly, the creation of a climate that "permit[s] the nationally uniform administration of employee benefit plans." Travelers, 514 U.S. at 657. Using this template, the Massachusetts bond statute, on its face, in no way inhibits the accomplishment of ERISA's overall goals.

It is well accepted, however, even under the new regime, that state laws which furnish alternative enforcement mechanisms threaten the uniformity that Congress labored to achieve and thus are preempted by ERISA.⁴ See id.; see also Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142-45 (1990). This category comes to mind because the most obvious tie between the Massachusetts bond statute and ERISA plans as a class concerns the former's role as a vehicle of enforcing funding obligations. The question, then, is whether the bond statute impermissibly supplies an alternative enforcement mechanism for ERISA plan benefits (and thereby triggers preemption). See Travelers, 514 U.S. at 658; Parrino, 146 F.3d at 705; see also Turner v. Fallon Community Health Plan, Inc., 127 F.3d 196, 199 (1st Cir. 1997).

We answer that question in the negative. ERISA preemption proscribes the type of alternative enforcement mechanism that purposes to provide a remedy for the violation of a right expressly guaranteed and exclusively enforced by the ERISA statute. See Ingersoll-Rand, 498 U.S. at 145. Those state laws which touch upon enforcement but have no real bearing on the intricate web of relationships among the principal players in the ERISA scenario (e.g., the plan, the administrators, the fiduciaries, the beneficiaries, and the employer) are not subject to preemption on this basis. See Woodworker's Supply, Inc. v. Principal Mut. Life Ins. Co., 170 F.3d 985, 990 (10th Cir. 1999). It follows that a state statute which only creates claims against a surety does...