The Board of Trustees of the Glazing Health and Welfare Trust v. Chambers, 090418 FED9, 16-15588

Docket Nº:16-15588
Opinion Judge:CALLAHAN, CIRCUIT JUDGE
Party Name: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;...
Attorney: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. Se...
Judge Panel:Before: J. Clifford Wallace and Consuelo M. Callahan, Circuit Judges, and James V. Selna, District Judge. WALLACE, Circuit Judge, dissenting:
Case Date:September 04, 2018
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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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 872 Training 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

September 4, 2018

Argued and Submitted March 12, 2018 San Francisco, California

Appeal from the United States District Court for the District of Nevada D.C. No. 2:15-cv-01754-KJD-VCF Kent J. Dawson, Senior District Judge, Presiding

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.

SUMMARY

[**]

ERISA Preemption / Mootness

Vacating the district court's summary judgment in favor of the plaintiffs, the panel held that Nevada Senate Bill 223 was a legitimate exercise of Nevada's traditional state authority and was not preempted by the Employee Retirement Income Security Act.

Nevada law holds general contractors vicariously liable for the labor debts owed by subcontractors to subcontractors' employees on construction projects. SB 223 limited the damages that can be collected from general contractors and imposed notification requirements on contractors and welfare benefit plans regulated under ERISA before an action could be brought under Nevada law against general contractors. Plaintiffs, ERISA trusts that managed ERISA plans, claimed that SB 223 was preempted by ERISA because it impermissibly "related to" ERISA plans.

The panel concluded that the appeal was not moot following the Nevada legislature's repeal of SB 223 and enactment of SB 338, a replacement that repeats some of the challenged aspects of SB 223. The panel held that legislative change in response to an adverse judicial ruling is generally the type of "voluntary cessation" that defeats mootness on appeal. The panel concluded that Nevada did not rebut a presumption that its appeal was not moot because it did not demonstrate that the legislature would certainly not reenact the challenged provisions of SB 223.

On the merits, the panel held that SB 223 was not preempted because it did not intrude on any federally-regulated field, conflict with ERISA's objectives, or otherwise impermissibly "relate to" ERISA plans. Instead, it targeted an area of traditional state concern-debt collection-and pared back a state-conferred entitlement to collect unpaid debts from third-party general contractors. The panel explained that ERISA empowers ERISA trusts to bring actions against subcontractors for subcontractors' labor debts, but it does not establish a cause of action for collecting debts from non-parties to an ERISA plan, such as general contractors. That right exists, if at all, as a matter of state vicarious liability law. The panel held that, because SB 223 targeted an area of traditional state regulation, a presumption against preemption applied. The panel concluded that SB 223 did not invade the federal field regulated by ERISA or pose an obstacle to ERISA's objectives; rather, plaintiffs' obligations under ERISA remained the same with or without SB 223. Thus, SB 223 had neither an impermissible "connection with" nor did it make an impermissible "reference to" ERISA plans. The panel vacated the district court's grant of summary judgment and remanded for entry of judgment consistent with the panel's opinion.

Dissenting, Judge Wallace wrote that it was his conclusion that the Nevada legislature's repeal of SB 223, and its enactment of SB 338, mooted the appeal. Judge Wallace explained that the general rule in this circuit is that statutory change is generally enough to render a case moot unless the case presents a rare situation, such as "where it is virtually certain that the repealed law will be reenacted." In this case, Judge Wallace concluded that the Nevada legislature's repeal and replacement of SB 223 amounted to a "complete statutory overhaul," and that there was no indication the legislature intended to reenact the repealed law. Therefore, in Judge Wallace's view, there was no reason to depart from the rule that statutory change is usually enough to render a case moot.

OPINION

CALLAHAN, CIRCUIT JUDGE

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 pares 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

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