W.G. Clark Constr. Co. v. Pac. Nw. Reg'l Council of Carpenters

• Decision Date: 20 March 2014
• Docket Number: No. 88080–8.,88080–8.
• Citation: 180 Wash.2d 54,322 P.3d 1207
• Court: Washington Supreme Court
• Parties: W.G. CLARK CONSTRUCTION CO., a Washington corporation, Respondent, v. PACIFIC NORTHWEST REGIONAL COUNCIL OF CARPENTERS, a Local Union; Carpenters Health & Security Trust of Western Washington; Carpenters Retirement Trust; Carpenters–Employers Vacation Trust; Carpenters–Employers Apprenticeship & Training Trust; and Paramount Scaffold, Inc., a Washington corporation, Appellants.

180 Wash.2d 54

322 P.3d 1207

W.G. CLARK CONSTRUCTION CO., a Washington corporation, Respondent,

v.PACIFIC NORTHWEST REGIONAL COUNCIL OF CARPENTERS, a Local Union; Carpenters Health & Security Trust of Western Washington; Carpenters Retirement Trust; Carpenters–Employers Vacation Trust; Carpenters–Employers Apprenticeship & Training Trust; and Paramount Scaffold, Inc., a Washington corporation, Appellants.

No. 88080–8.

Supreme Court of Washington,

En Banc.

March 20, 2014.

Daniel M. Shanley, DeCarlo Connor & Shanley APC, Los Angeles, CA, Jeffrey Gene Maxwell, Ekman Bohrer & Thulin, PS, Seattle, WA, for Appellants.

John P. Ahlers, Masaki J. Yamada, Brett Mactavish Hill, Ahlers & Cressman PLLC, Seattle, WA, for Respondents.

Michael Allan Urban, Attorney at Law, Bellevue, WA, for Amicus Curiae on behalf of Employee Painters' Trust.

John Stephen Riper, Tymon Berger, Ashbaugh Beal LLP, Seattle, WA, for Amicus Curiae on behalf of Agc of Washington.

Russell Jonas Reid, Thomas A. Leahy, Reid Pedersen McCarthy & Ballew LLP, Seattle, WA, for Amicus Curiae on behalf of Operating Engineers Trust Funds.

Frank J. Morales, Noelle Elyce Dwarzski, McKenzie Rothwell Barlow & Coughran, PS, Seattle, WA, for Amicus Curiae on behalf of Benefit Trusts.

Tymon Berger, Ashbaugh Beal LLP, Seattle, WA, for Amicus Curiae on behalf of National Utility Contractors Association of WA.

Tymon Berger, Ashbaugh Beal LLP, Seattle, WA, for Amicus Curiae on behalf of Associated Builders and Contractors of Western WA.

OWENS, J.

¶ 1 The Employee Retirement Income Security Act of 1974 (ERISA) is a set of federal laws that regulates pension and welfare plans. To provide national uniformity in plan administration, ERISA preempts most state laws that “relate to” employee benefit plans. 29 U.S.C. § 1144(a). At issue in this case is whether ERISA preempts claims made under two Washington state laws designed to ensure that workers on public projects are paid for their work: chapters 39.08 and 60.28 RCW. When we previously addressed this issue in 1994 and 2000, we held that ERISA preempted such claims. Puget Sound Elec. Workers Health & Welfare Trust Fund v. Merit Co., 123 Wash.2d 565, 870 P.2d 960 (1994); Int'l Bhd. of Elec. Workers, Local Union No. 46 v. Trig Elec. Constr. Co., 142 Wash.2d 431, 13 P.3d 622 (2000).

¶ 2 Since then, however, courts across the country (including federal courts here in the Ninth Circuit) have analyzed the United States Supreme Court's developing ERISA preemption jurisprudence and come to a consensus that these types of state law claims are not preempted by ERISA because they have only a tenuous connection to ERISA plans. See, e.g., S. Cal. IBEW–NECA Trust Funds v. Standard Indus. Elec. Co., 247 F.3d 920, 925–27 (9th Cir.2001). As a result of this conflict between our rule and the rule followed by federal courts, the outcome of this type of case in Washington is entirely dependent on whether the lawsuit is filed in federal or state court. This has led to blatant forum shopping and created inconsistent and unjust results for parties in Washington, as lamented by both the superior court judge in this case and the federal district court judge in the parallel federal case. In light of the national shift in ERISA preemption jurisprudence and the persuasive reasoning underlying that shift, we now join courts across the country and hold that this type of state law is not preempted by ERISA.

FACTS

¶ 3 The basic facts of this case are largely undisputed. In 2010, the University of Washington contracted with W.G. Clark Construction Co. for a student housing construction project. W.G. Clark subcontracted certain scaffolding work on the project to Paramount Scaffold, Inc. Paramount entered into a collective bargaining agreement with the Pacific Northwest Regional Council of Carpenters (Union) to provide laborers for the scaffolding work. As is common in this type of labor agreement, Paramount agreed to compensate the laborers for their work in two ways: by paying wages and by making contributions to certain trusts that provide benefits to the laborers, their dependents, and their beneficiaries (collectively the Trusts).¹

¶ 4 In June 2012, the Trusts and the Union reported that Paramount had failed to make $64,905.48 in required payments to the Trusts for work performed by the Union laborers. Later records indicate that Paramount was insolvent. The Trusts and the Union issued a notice of claim on lien on the student housing project pursuant to chapters 39.08 and 60.28 RCW (statutes designed to ensure that workers on public works projects are paid for their work, as discussed in more detail below). The lien was served on Paramount, W.G. Clark, the University of Washington, and the insurance company that issued the performance bond on the project.

¶ 5 W.G. Clark filed for declaratory judgment in King County Superior Court, requesting that the lien be released. W.G. Clark moved for summary judgment, arguing that ERISA preempted any claims the Trusts might have under chapters 39.08 and 60.28 RCW. Shortly thereafter, the Trusts filed a separate action in the United States District Court for the Western District of Washington, seeking foreclosure on the lien and monetary damages.

¶ 6 The King County Superior Court judge granted summary judgment to W.G. Clark, ruling that our state precedent is clear that such state law claims are preempted by ERISA. The judge acknowledged that the outcome would have been different in federal court and lamented, “Ultimately, this is going to have to get resolved one way or another.... [F]rom my perspective, it's broken.” Clerk's Papers at 465.

¶ 7 In light of the judge's decision in the King County Superior Court case, United States District Court Judge Ricardo Martinez ruled that he had no choice but to dismiss the federal case. Nonetheless, he pointed out the serious consequences of the existing conflict between the state and federal courts on this issue:

The situation is unfortunate, because diverging results in state and federal court inevitably perpetuate the practice of forum shopping. As in the present case, Defendants acknowledge they filed a “preemptive declaratory judgment action” (Dkt.# 22, p. 5) in Superior Court in order to receive a favorable ruling. Such action constitutes blatant forum shopping, which is highly discouraged.

Br. of the Appellant Carpenters Trusts, Ex. 1, at 7–8.

¶ 8 The Trusts appealed the King County Superior Court ruling to this court and we granted direct review.

ISSUE

¶ 9 Should we adopt the reasoning of the federal courts and hold that under current United States Supreme Court precedent, ERISA does not preempt the Trusts' chapters 39.08 and 60.28 RCW claims?

ANALYSIS

¶ 10 ERISA is a set of federal laws that regulates pension and welfare plans. Merit, 123 Wash.2d at 568, 870 P.2d 960. Congress passed ERISA in 1974 with two goals in mind: “to protect plan participants and beneficiaries from abuses and mismanagement in the administration of employee pension and benefit plans” and “to protect plan administrators from the ‘burden that would be imposed by a patchwork scheme of regulation.’ ” Hawai‘i Laborers' Trust Funds v. Maui Prince Hotel, 81 Haw. 487, 493, 918 P.2d 1143 (1996) (quoting Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 11–12, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987)). The second goal was addressed through ERISA's preemption clause, which provides that ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” covered under ERISA. 29 U.S.C. § 1144(a).

¶ 11 At issue in this case is whether ERISA preempts claims made under two Washington state laws: chapters 39.08 and 60.28 RCW. Under chapter 39.08 RCW, a general contractor on a public works project must execute and deliver a bond to the public agency. RCW 39.08.010(1)(a). The bond ensures that “all laborers, mechanics, and subcontractors and material suppliers” on the project are paid for their work. RCW 39.080.010(1)(a)(ii). Such individuals have a right of action against the bond if they are not paid for their work. RCW 39.08.010(1)(b). Chapter 60.28 RCW also provides protections for workers on public improvement contracts. It requires the public agency to retain a percentage of the money earned by the general contractor for the protection and payment of claims under the contract. RCW 60.28.011(1)(a). Any person performing labor or furnishing supplies under the public improvement contract has lien rights against the retained percentage. RCW 60.28.011(2). Notably, both statutes apply generally to any laborer, supplier, or subcontractor on a project, and neither makes any reference to ERISA plans.

¶ 12 As described above, the workers on this project did not receive the compensation they were owed in the form of payments to the Trusts that provide the workers with various health and retirement benefits, but the superior court ruled that under this court's precedent in Merit and Trig Electric, the Trusts' claims under chapters 39.08 and 60.28 RCW are preempted by ERISA. The Trusts appeal that ruling, arguing that chapters 39.08 and 60.28 RCW are not preempted by ERISA under current federal jurisprudence and that Washington courts should adopt the reasoning of the federal courts. We agree. First, we agree with the reasoning of the federal courts, which have concluded that current United States Supreme Court case law requires that we begin our ERISA preemption analysis with a presumption that state law is not preempted, and that laws of general applicability with only “a tenuous, remote, or peripheral connection with ERISA plans” are not preempted. See Standard Indus., 247 F.3d at 927 (citing District of Columbia v. Greater Wash. Bd. of Trade, 506 U.S. 125, 130 n. 1, 113 S.Ct. 580, 121 L.Ed.2d 513 (1992)). Second, we recognize the need to address the current conflict between state and federal courts in Washington, which has resulted in blatant forum shopping...