Carpenters Southern California Administrative Corp. v. El Capitan Development Co.

• Decision Date: 11 January 1988
• Citation: 243 Cal.Rptr. 132,223 Cal.App.3d 1034
• Court: California Court of Appeals Court of Appeals
• Parties: Previously published at 223 Cal.App.3d 1034 223 Cal.App.3d 1034, 117 Lab.Cas. P 56,513 CARPENTERS SOUTHERN CALIFORNIA ADMINISTRATIVE CORPORATION, Plaintiff and Appellant, v. EL CAPITAN DEVELOPMENT COMPANY, Defendant and Respondent. Civ. F008840.

Page 132

243 Cal.Rptr. 132

Previously published at 223 Cal.App.3d 1034

223 Cal.App.3d 1034, 117 Lab.Cas. P 56,513

CARPENTERS SOUTHERN CALIFORNIA ADMINISTRATIVE CORPORATION, Plaintiff and Appellant, v. EL CAPITAN DEVELOPMENT COMPANY, Defendant and Respondent.

Civ. F008840.

Court of Appeal, Fifth District, California.

Jan. 11, 1988.

Review Granted April 21, 1988.

[223 Cal.App.3d 1035] Cox, Castle & Nicholson, James P. Watson, Los Angeles, Law Offices of Charles P. Scully, Inc., San Francisco, Donald C. Carroll, De Carlo & Connor, John T. De Carlo, Law Offices of Richard A. Brownstein, Karen L. Holliday, Los Angeles, for plaintiff and appellant.

Littler, Mendelson, Fastiff & Tichy, Karen E. Ford and Major Williams, Jr., San Francisco, for defendant and respondent.

OPINION

WOOLPERT, Acting Presiding Justice.

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...