S. CA IBEW-NECA Trust Funds v. Standard Indus. Elec Co.

• Decision Date: 18 April 2001
• Docket Number: IBEW-NECA,99-55954,99-55835,Nos. 99-55805,s. 99-55805
• Citation: 247 F.3d 920
• Parties: (9th Cir. 2001) SOUTHERN CALIFORNIATRUST FUNDS; BARRY MEYER; DAN SELLERS;RICHARD RIZOTTO, Plaintiffs-Appellees, v. STANDARD INDUSTRIAL ELECTRIC COMPANY; PHYLLIS M. STROUT, Defendants, and RELIANCE INSURANCE COMPANY, Defendant-Appellant. SOUTHERN CALIFORNIATRUST FUNDS; BARRY MEYER; DAN SELLERS; RICHARD RIZOTTO, Plaintiffs-Appellees, v. STANDARD INDUSTRIAL ELECTRIC COMPANY; PHYLLIS M. STROUT; RELIANCE INSURANCE COMPANY, Defendants, FIDELITY AND DEPOSIT COMPANY OF MARYLAND;UNITED STATES FIDELITY & GUARANTY COMPANY, Defendants-Appellants. SOUTHERN CALIFORNIATRUST FUNDS; BARRY MEYER; DAN SELLERS; RICHARD RIZOTTO, Plaintiffs-Appellees-Cross-Appellants, v. STANDARD INDUSTRIAL ELECTRICAL COMPANY; PHYLLIS M. STROUT, Defendants, RELIANCE INSURANCE COMPANY; FIDELITY AND DEPOSIT COMPANY OF MARYLAND; UNITED STATES FIDELITY & GUARANTY COMPANY; KING/DREW HIGH SCHOOL BUILDERS, a California Joint Venture, Defendants-Appellants-Cross-Appellees
• Court: U.S. Court of Appeals — Ninth Circuit

Page 920

247 F.3d 920 (9th Cir. 2001)

SOUTHERN CALIFORNIA IBEW-NECA TRUST FUNDS; BARRY MEYER; DAN SELLERS;RICHARD RIZOTTO, Plaintiffs-Appellees, v. STANDARD INDUSTRIAL ELECTRIC COMPANY; PHYLLIS M. STROUT, Defendants, and RELIANCE INSURANCE COMPANY, Defendant-Appellant.

SOUTHERN CALIFORNIA IBEW-NECA TRUST FUNDS; BARRY MEYER; DAN SELLERS; RICHARD RIZOTTO, Plaintiffs-Appellees, v. STANDARD INDUSTRIAL ELECTRIC COMPANY; PHYLLIS M. STROUT; RELIANCE INSURANCE COMPANY, Defendants, FIDELITY AND DEPOSIT COMPANY OF MARYLAND;UNITED STATES FIDELITY & GUARANTY COMPANY, Defendants-Appellants.

SOUTHERN CALIFORNIA IBEW-NECA TRUST FUNDS; BARRY MEYER; DAN SELLERS; RICHARD RIZOTTO, Plaintiffs-Appellees-Cross-Appellants, v. STANDARD INDUSTRIAL ELECTRICAL COMPANY; PHYLLIS M. STROUT, Defendants, RELIANCE INSURANCE COMPANY; FIDELITY AND DEPOSIT COMPANY OF MARYLAND; UNITED STATES FIDELITY & GUARANTY COMPANY; KING/DREW HIGH SCHOOL BUILDERS, a California Joint Venture, Defendants-Appellants-Cross-Appellees.

Nos. 99-55805, 99-55835, 99-55954

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted Oct. 4, 2000

Filed April 18, 2001

Benjamin A. Johnson, San Mateo, California, and Cyrus K. Ipkatchi, San Mateo, for the appellants.

J. David Sachman, Los Angeles, California, for the appellees/cross-appellants.

Appeal from the United States District Court for the Central District of California; Mariana R. Pfaelzer, District Judge Presiding. D.C. Nos. CV-97-09131-MRP, CV-97-09131-MRP-JG, CV-97-09131-MRP-03.

Before: Diarmuid F. O'Scannlain, Ferdinand F. Fernandez and Johnnie B. Rawlinson, Circuit Judges. Opinion by Judge Rawlinson.

RAWLINSON, Circuit Judge:

Barry Meyer, Dan Sellers, Richard Rizotto ("Employees"), and Southern California IBEW-NECA Trust Funds ("Trusts"), the administrators of several employee benefit plans associated with unions which represent employees,¹ are seeking to collect money owed for work performed on a public construction project using California's stop notice and payment bond remedies. The district court found ERISA preempted the stop notice claim but not the payment bond claim. Both parties appeal. Because neither remedy is preempted by ERISA, we reverse the judgment below as to the stop notice claim, affirm the judgment as to the payment bond remedy, and remand.

BACKGROUND

In July 1996, the Los Angeles Unified School District ("LAUSD") hired King/Drew High School Builders ("KDB") as the general contractor for a public construction project (hereafter referred to as "the project"). KDB subcontracted with SSI Joint Venture ("SSI"), which is composed of Standard Industrial Electric Co. ("Standard") and SASCO Electric ("SASCO"), to perform the electrical work. For labor, Standard signed a collective bargaining agreement ("CBA") with Local Union No. 11 of the International Brotherhood of Electrical Workers. That agreement sets the rates of compensation for employees covered by the CBA, with a portion of the employee's compensation to be paid in the form of contributions to benefit plan Trusts.

As required by California law,² KDB, the general contractor, posted a payment bond to guarantee payment of all labor and materials on the project. This bond (hereafter" Fidelity Bond") was issued by Fidelity and Deposit Company of Maryland and Fidelity and Guarantee Company ("Fidelity"). As the general contractor, KDB then required SSI, a subcontractor, to post a bond to indemnify the general contractor in the event of any default by the subcontractors on the project. The bond posted by SSI (hereafter "Reliance Bond") was issued by Reliance Insurance Company.³

During the course of construction, Standard became delinquent in its contributions to the Trusts in the amount of $221,603.98. After Standard defaulted on an agreement and confession of judgment whereby it agreed to pay its delinquent contributions over time, Trusts, as assignee of the employees,⁴ served a stop notice on LAUSD for the amount of the delinquent contributions, plus legal fees and costs pursuant to Cal. Civ. Code 3181 (West 1993). At the same time, Trusts made a claim on the Fidelity and Reliance Bonds for the same amount. Both Sureties denied the bond claims.

Trusts and Employees brought an action in the United States District Court for the Central District of California to collect the delinquent contributions pursuant to Section 515 of the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. 1145 (1999). In addition to the ERISA claim, Trusts and Employees' First Amended Complaint also included state law causes of action to enforce the stop notice and payment bonds.⁵ LAUSD, KDB, and the Sureties all brought motions to dismiss the stop notice and payment bond causes of action on the ground that California's stop notice and payment bond remedies were preempted by ERISA.

The district court found that the stop notice claim was preempted by ERISA, following Carpenters Health and Welfare Trust for California v. Tri-Capital Corp., 25 F.3d 849, 853-54 (9th Cir. 1994), but denied the motion to dismiss as to the payment bond claims, following Operating Engineers Health and Welfare Trust Fund v. JWJ Contracting Corp., 135 F.3d 671 (9th Cir. 1998). Based on this ruling, the parties stipulated to the facts and entry of judgment, and agreed to stay enforcement of the judgment during this appeal. Sureties and KDB each filed timely notices of appeal from the judgment and decision finding the bond claims not to be preempted.

DISCUSSION

We review the district court's interpretation of ERISA preemption de novo. Stewart v. Thorpe Holding Co. Profit Sharing Plan, 207 F.3d 1143, 1148 (9th Cir. 2000).

I. The Payment Bond

Once again, we must determine whether or not ERISA preempts a state law. Our first decision on the issue rejected a claim that ERISA preempted California's payment bond remedy, under the assumption that Congress never intended to supplant certain obligations "fixed by contract and regulated by state law." See Carpenters S. Cal. Admin. Corp. v. D & L Camp Constr. Co., 738 F.2d 999, 1000 (9th Cir. 1984) (concluding no preemption of the obligation of a surety to a plaintiff seeking to enforce a payment bond.) However, subsequent decisions of the Supreme Court placed the validity of this principle in doubt by broadly reading ERISA's literal text, which is deliberately expansive. See Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523-24, 68 L. Ed. 2d 402, 101 S. Ct. 1895 (1981). Ironically, after we abrogated our rulings in D&L Camp and Carpenters S. Cal. Admin. Corp. v. Majestic Housing⁶ to follow the Supreme Court's broad pronouncements regarding ERISA's preemption clause,⁷ ERISA's scope was narrowed. See New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co. 514 U.S. 645, 131 L. Ed. 2d 695, 115 S. Ct. 1671 (1995). We now proceed to resolve an issue once resolved guided by principles once held, to make it crystal clear California's payment bond and stop notice remedies are not preempted by ERISA.

ERISA preempts and supersedes any and all State laws insofar as they may now or hereafter "relate to "any employee benefit plan. See 29 U.S.C. 1144 (a). Since the Supreme Court narrowed the scope of ERISA preemption in Travelers, the "relates to" criterion has been analyzed by determining whether a state law (1) has a "connection with "or (2) a "reference to" employee benefit plans. See Geweke v. Ford, 130 F.3d 1355, 1357 (9th Cir. 1997); see also District of Columbia v. Greater Washington Board of Trade, 506 U.S. 125, 129, 121 L. Ed. 2d 513, 113 S. Ct. 580 (1992). To find an impermissible 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, as well as to the nature of the effect of the state law on ERISA plans." Rutledge v. Seyfarth, 201 F.3d 1212, 1216 (9th Cir. 2000), amended and superseded on other grounds in 208 F.3d 1170. Most recently, the Supreme Court has held that a Washington state statute that binds ERISA plan administrators to a particular choice of rules for determining beneficiary status has an impermissible "connection with" ERISA, as the statute "implicates an area of core ERISA concern" and jeopardizes national uniformity in plan administration. See Egelhoff v. Egelhoff, U.S. , 121 S. Ct. 1322, 1324-25, L.Ed.2d (2001). A statute has an impermissible "reference to" an employee benefit plan if it acts immediately and exclusively upon the plans or if the plans are essential to the law's operation. Id.

For example, in JWJ, we found that Arizona's payment bond remedy was not preempted by ERISA because it did not have a connection with, nor was it related to, an employee benefit plan. 135 F.3d at 679. We found that the payment bond remedy did not require the establishment of a separate benefit plan, and imposed no new reporting, disclosure, funding, or vesting requirements for ERISA plans. Id. Even if we applied the simpler "relates to" analysis used before Travelers,⁸ the outcome of JWJ would have remained the same because Arizona's law did not tell employers how to write ERISA benefit plans, nor condition any requirements on how the ERISA benefit plan was written.⁹.

California's payment bond remedy, Cal. Civ. Code 3249 (West 1993), is no more of an intrusion on ERISA benefit plans than Arizona's payment bond remedy. Similar to Arizona's law, California's statute does not require the establishment of a separate benefit plan, and imposes no new reporting, disclosure, funding, or vesting requirements for ERISA plans. California's statute similarly does not tell employers how to write ERISA benefit plans or how to determine ERISA beneficiary status, and does not condition requirements on how ERISA benefit plans are written.

Moreover, California's payment bond statute does not impermissibly "refer" to an employee benefit plan within the meaning of ERISA because it functions...