Central Laborers' Pension Fund v. Nicholas and Associates, Inc. , 2011 IL App (2d) 100125 ( 2011 )

ILLINOIS OFFICIAL REPORTS
Appellate Court
Central Laborers’ Pension Fund v. Nicholas & Associates, Inc., 2011 IL App (2d) 100125
Appellate Court CENTRAL LABORERS’ PENSION FUND, NORTH CENTRAL
Caption ILLINOIS LABORERS’ HEALTH AND WELFARE FUND,
NORTHERN ILLINOIS ANNUITY FUND, ILLINOIS LABORERS’
AND CONTRACTORS JOINT APPRENTICESHIP AND TRAINING
FUND, MIDWEST REGION FOUNDATION FOR FAIR
CONTRACTING, INC., NORTHERN ILLINOIS WELFARE FUND,
INDUSTRY ADVANCEMENT FUND, LABORERS’-EMPLOYERS
COOPERATION EDUCATION TRUST, VACATION FUND,
MARKET PROMOTION FUND, ORGANIZATION FUND, and
LABORERS’ LOCAL 32, Plaintiffs-Appellants, v. NICHOLAS AND
ASSOCIATES, INC., Defendants-Appellees (KMC Masonry, LLC,
Defendant; The State of Illinois, Intervenor-Appellant).–LABORERS’
PENSION FUND, LABORERS’ WELFARE FUND OF THE HEALTH
AND WELFARE DEPARTMENT OF THE CONSTRUCTION AND
GENERAL LABORERS’ DISTRICT COUNCIL OF CHICAGO AND
VICINITY, and JAMES S. JORGENSEN, Administrator of the Funds,
Plaintiffs-Appellants, v. NICHOLAS AND ASSOCIATES, INC., and
KANELAND SCHOOL DISTRICT No. 302, Defendants-Appellees
(KMC Masonry, LLC, Defendant; The State of Illinois, Intervenor-
Appellant).
District & No. Second District
Docket Nos. 2-10-0125, 2-10-0191 cons.
Filed September 2, 2011
Held The dismissal of plaintiff labor unions’ pension and benefit funds’ action
(Note: This syllabus to enforce mechanics lien claims for unpaid fringe benefit contributions
constitutes no part of on the ground that the preemption clause of the Employee Retirement
the opinion of the court Income Security Act was an affirmative matter compelling the
but has been prepared involuntary dismissal of plaintiffs’ claims was reversed, since ERISA
by the Reporter of does not preempt the Mechanics Lien Act.
Decisions for the
convenience of the
reader.)
Decision Under Appeal from the Circuit Court of De Kalb County, No. 09-CH-344; the
Review Hon. Kurt P. Klein, and Appeal from the Circuit Court of Kane County,
No. 09-CH-4038; the Hon. Alan W. Cargerman, Judges, presiding.
Judgment Reversed and remanded.
Counsel on Lisa Madigan, Attorney General, of Chicago (Michael A. Scodro,
Appeal Solicitor General, and Paul Berks, Assistant Attorney General, of
counsel), for appellant State of Illinois.
Karen I. Engelhardt and Josiah A. Groff, both of Allison, Slutsky &
Kennedy, P.C., of Chicago, for appellants James S. Jorgensen, Laborers’
Pension Fund, and Laborers’ Welfare Fund of Health & Welfare
Department.
John A. Wolters, of Cavanagh & O’Hara LLP, of Springfield, for other
appellants.
Charles B. Lewis, Jeffrey L. Hamera, David I. Curkovic, and Richard P.
Darke, all of Duane Morris LLP, of Chicago, for appellees.
Panel JUSTICE BURKE delivered the judgment of the court, with opinion.
Justices Schostok and Hudson concurred in the judgment and opinion.
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OPINION
¶1 These consolidated appeals present the issue of whether the Mechanics Lien Act (770
ILCS 60/0.01 et seq. (West 2010)) is preempted by the Employee Retirement Income
Security Act of 1974 (ERISA) (29 U.S.C. § 1001 et seq. (2006)). In separate litigation
involving the same general contractor and subcontractor on two construction projects, the
circuit courts of De Kalb County and Kane County ruled that ERISA preemption is
affirmative matter compelling the involuntary dismissals of plaintiffs’ mechanic’s lien
claims, under section 2-619(a)(9) of the Code of Civil Procedure (Code) (735 ILCS 5/2-
619(a)(9) (West 2010)). We hold that ERISA does not preempt the Mechanics Lien Act, and
therefore we reverse the involuntary dismissals of plaintiffs’ mechanic’s lien claims and
remand the causes for further proceedings.
¶2 FACTS
¶3 Defendant Nicholas & Associates (Nicholas) signed contracts with Kaneland School
District No. 302 (Kaneland School District) and De Kalb Community School District No.
428 (De Kalb School District) to serve as the general contractor for the construction of two
new elementary schools. In turn, Nicholas hired defendant KMC Masonry, LLC (KMC), as
a subcontractor to perform masonry work on both projects. KMC secured labor for the
project by entering into collective bargaining agreements (CBAs) with plaintiffs Laborers’
Local 32 and Laborers’ Welfare Fund of the Health and Welfare Department of the
Construction and General Laborers’ District Council of Chicago and Vicinity. The CBAs
required KMC to make monetary contributions to the other plaintiffs, and we assume for
purposes of analysis that those plaintiffs qualify as multiemployer benefit plans under ERISA
(the funds). See 29 U.S.C. §§ 1002(3), (37)(A) (2006). By signing the CBAs, KMC also
agreed to become a party to the various agreements and trust declarations that governed the
funds. KMC allegedly breached the CBAs by failing to pay the mandatory contributions.
¶4 On May 6, 2009, plaintiffs Laborers’ Pension Fund and Laborers’ Welfare Fund of the
Health and Welfare Department of the Construction and General Laborers’ District Council
of Chicago and Vicinity, and James S. Jorgensen, the administrator of those funds (Kane
plaintiffs), sued KMC in the United States District Court for the Northern District of Illinois
to recover the unpaid contributions. Specifically, the Kane plaintiffs brought an action under
section 1145 of ERISA (29 U.S.C. § 1145 (2006)), which requires signatories to a CBA to
“make contributions to a multiemployer plan *** in accordance with the terms and
conditions of *** such agreement.” On June 19, 2009, the district court entered a default
judgment against KMC in the amount of $279,725, which purportedly included KMC’s
unpaid contributions to the funds, unpaid union dues, penalties, attorney fees, and costs, as
required by section 1132(g) of ERISA. 29 U.S.C. § 1132(g) (2006).
¶5 A. Appeal No. 2-10-0125 (De Kalb)
¶6 On August 21, 2009, plaintiffs Central Laborers’ Pension Fund, North Central Illinois
Laborers’ Health and Welfare Fund, Northern Illinois Annuity Fund, Illinois Laborers’ and
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Contractors Joint Apprenticeship and Training Fund, Midwest Region Foundation for Fair
Contracting, Inc., Northern Illinois Welfare Fund, Industry Advancement Fund, Laborers’-
Employers Cooperation Education Trust, Vacation Fund, Market Promotion Fund,
Organization Fund, and Laborers’ Local 32 (De Kalb plaintiffs), filed in the circuit court of
De Kalb County a complaint for an accounting on a mechanic’s lien against Nicholas and
KMC.
¶7 The complaint alleged that Nicholas contracted with the De Kalb School District to serve
as the general contractor in building the Cortland Elementary School and that Nicholas hired
KMC to perform masonry work on the Cortland project. The complaint alleged that KMC
employees performed labor on the Cortland project from November 2008 through April 2009
and that the CBA required KMC to pay fringe benefits to the De Kalb plaintiffs for each hour
worked. KMC allegedly breached the CBA by failing to pay the contributions. On July 19,
2009, the De Kalb plaintiffs gave Nicholas, KMC, and the De Kalb School District notice
of a claim for a mechanic’s lien for $130,613, representing the amount of the fringe benefit
contributions that KMC had allegedly failed to make, as well as additional costs, damages,
and attorney fees.
¶8 KMC did not respond to the complaint, but Nicholas filed a motion to dismiss under
section 2-619 of the Code, arguing that the mechanic’s lien claim was preempted by ERISA.
On January 12, 2010, the circuit court of De Kalb County granted Nicholas’s motion and
dismissed the complaint on the ground of preemption. The court entered a written finding
that, pursuant to Illinois Supreme Court Rule 304(a), there was no just cause to delay
enforcement or appeal or both. See Ill. S. Ct. R. 304(a) (eff. Feb. 26, 2010). The De Kalb
plaintiffs filed a notice of appeal, and we docketed the matter under appeal No. 2-10-0125.
¶9 B. Appeal No. 2-10-0191 (Kane)
¶ 10 On October 20, 2009, the Kane plaintiffs filed in the circuit court of Kane County a
complaint for an accounting on their mechanic’s lien against Nicholas, KMC, and Kaneland
School District. The complaint alleged that, from February 2009 through May 2009, KMC’s
employees performed union work on the project under KMC’s contract with Nicholas, but
KMC failed to pay $131,504 into the funds as required by the CBA.
¶ 11 The complaint alleged that, on July 24, 2009, plaintiffs served Nicholas, KMC, and
Kaneland School District with a notice of a lien claim on a public improvement (see 770
ILCS 60/23 (West 2010)) and a bond claim (see 30 ILCS 550/1, 2 (West 2010)). At the time
of the notice, Kaneland School District allegedly still was in possession of all the amounts
due under its contract with Nicholas, and before that time, no payment, voucher, or other
evidence of indebtedness had been made. Therefore, the Kane plaintiffs alleged that the lien
attached all of Kaneland School District’s money, bonds, and warrants that it held for
payment for the project.
¶ 12 The complaint sought (1) an accounting of the amounts owed to the funds, including
interest and costs; (2) an order directing Nicholas to pay the amount due; and (3) the entry
of a lien on all of Kaneland School District’s money, bonds, and warrants that were due or
would become due to Nicholas; and (4) an order directing Kaneland School District to pay
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the amount due plus interest and costs.
¶ 13 As in the De Kalb County matter, KMC did not respond, but on December 4, 2009,
Nicholas and Kaneland School District moved to dismiss the complaint under section 2-
619(a)(9) of the Code on the ground that ERISA preemption is affirmative matter that defeats
the Kane plaintiffs’ claim under the Mechanics Lien Act. See 735 ILCS 5/2-619(a)(9) (West
2010). Citing Construction & General Laborers’ District Council v. James McHugh
Construction, 230 Ill. App. 3d 939 (1992), Nicholas and Kaneland School District argued
that ERISA preemption bars any claim to compel a general contractor to make fringe benefit
contributions for its subcontractor. Nicholas and Kaneland School District also submitted
documentary evidence of the $279,725 default judgment entered against KMC in federal
district court.
¶ 14 On February 9, 2010, the trial court dismissed the complaint with prejudice, based on
ERISA preemption. The court directed Kaneland School District to release the money that
had been held for plaintiffs’ lien claim, but the court stayed the release for 30 days. Because
the dismissal applied to Nicholas and Kaneland School District and not to KMC, the court
entered a written finding that there was no just reason for delaying either enforcement or
appeal or both. See Ill. S. Ct. R. 304(a) (eff. Feb. 26, 2010). On February 23, 2010, the Kane
plaintiffs filed a timely notice of appeal, and we docketed the matter under appeal No. 2-10-
0191, which we consolidated with appeal No. 2-10-0125. On May 14, 2010, we granted the
Attorney General leave to intervene in the consolidated appeals.
¶ 15 ANALYSIS
¶ 16 Plaintiffs and the Attorney General argue that ERISA does not preempt the Mechanics
Lien Act. The standard governing these consolidated appeals is familiar. A dismissal
pursuant to section 2-619 is reviewed de novo. Doe A. v. Diocese of Dallas, 234 Ill. 2d 393,
396 (2009). A motion to dismiss under section 2-619(a)(9) asserts that a plaintiff’s claims
against the defendant are “barred by other affirmative matter avoiding the legal effect of or
defeating the claim[s].” 735 ILCS 5/2-619(a)(9) (West 2010); see also Diocese of Dallas,
234 Ill. 2d at 396. When reviewing an order granting dismissal on this basis, we may
consider “all facts presented in the pleadings, affidavits, and depositions found in the
record.” Diocese of Dallas, 234 Ill. 2d at 396. “The pleadings and supporting documents
must be interpreted in the light most favorable to the nonmoving party.” Diocese of Dallas,
234 Ill. 2d at 396.
¶ 17 The purpose of the Mechanics Lien Act is to protect general contractors and
subcontractors who are providing labor and materials for the benefit of an owner’s property,
by permitting them a lien on the property. Crawford Supply Co. v. Schwartz, 396 Ill. App.
3d 111, 119 (2009). Because the rights under the Mechanics Lien Act are in derogation of
common law, the steps necessary to invoke those rights must be strictly construed. Crawford
Supply Co., 396 Ill. App. 3d at 119. However, once the contractor or subcontractor has
strictly complied with the requirements and the lien has properly attached, then the
Mechanics Lien Act should be liberally construed to accomplish its remedial purpose.
Crawford Supply Co., 396 Ill. App. 3d at 119.
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¶ 18 Plaintiffs filed mechanic’s liens under section 23(b) of the Mechanics Lien Act, which
provides as follows:
“Any person who shall furnish labor, services, material, fixtures, apparatus or machinery,
forms or form work to any contractor having a contract for public improvement for any
county, township, school district, city, municipality, municipal corporation, or any other
unit of local government in this State, shall have a lien for the value thereof on the
money, bonds, or warrants due or to become due the contractor having a contract with
such county, township, school district, municipality, municipal corporation, or any other
unit of local government in this State under such contract. The lien shall attach only to
that portion of the money, bonds, or warrants against which no voucher or other evidence
of indebtedness has been issued and delivered to the contractor by or on behalf of the
county, township, school district, city, municipality, municipal corporation, or any other
unit of local government as the case may be at the time of the notice.” 770 ILCS 60/23(b)
(West 2010).
A “contractor” under section 23 is defined to include “any subcontractor.” 770 ILCS 60/23(a)
(West 2010). Plaintiffs argue that, because KMC, a subcontractor, owed contributions to the
funds, section 23 entitles plaintiffs to a lien on any money the school districts owed the
contractors.
¶ 19 In dismissing the complaints, the circuit courts concluded that ERISA preempts the
Mechanics Lien Act and that preemption is affirmative matter defeating plaintiffs’ claims.
Pursuant to the supremacy clause of the United States Constitution, federal law can preempt
state laws that interfere with or are contrary to federal law. U.S. Const., art. VI, cl. 2.
Congress’s purpose “ ‘is the ultimate touchstone’ of pre-emption analysis.” Cipollone v.
Liggett Group, Inc., 505 U.S. 504, 516 (1992) (quoting Malone v. White Motor Corp., 435
U.S. 497, 504 (1978)). “Congress’ intent to preempt State law may be manifested ‘by express
provision, by implication, or by a conflict between federal and state law.’ ” Busch v. Graphic
Color Corp., 169 Ill. 2d 325, 335 (1996) (quoting New York State Conference of Blue Cross
& Blue Shield Plans v. Travelers Insurance Co., 514 U.S. 645, 654 (1995)).
¶ 20 On appeal, plaintiffs argue that the circuit courts’ dismissals of their mechanic’s lien
claims must be reversed because the Mechanics Lien Act is not preempted by ERISA. A
ruling on ERISA preemption is a question of law that we review de novo. Trustees of the
AFTRA Health Fund v. Biondi, 303 F.3d 765, 772 (7th Cir. 2002) (citing Moran v. Rush
Prudential HMO, Inc., 230 F.3d 959, 966 (7th Cir. 2000), aff’d, 536 U.S. 355 (2002)). With
certain exceptions not relevant here, section 1144 of ERISA, the preemption clause, provides
that ERISA “shall supersede any and all State laws insofar as they may now or hereafter
relate to any employee benefit plan.” (Emphasis added.) 29 U.S.C. § 1144(a) (2006). Section
1144(a) is supplemented by two statutory definitions. The first broadly defines “state law”
as including “all laws, decisions, rules, regulations, or other State action having the effect of
law” (29 U.S.C. § 1144(c)(1) (2006)), and the second defines an “employee benefit plan” as
“an employee welfare benefit plan or an employee pension benefit plan or a plan which is
both an employee welfare benefit plan and an employee pension benefit plan” (29 U.S.C.
§ 1002(3) (2006)). The parties correctly agree that the Mechanics Lien Act is a “state law”
and that at least some of the funds qualify as “employee benefit plans” under ERISA.
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¶ 21 A. History of ERISA Preemption
¶ 22 Biondi set forth a comprehensive summary of the Supreme Court’s recent jurisprudence
in the area of ERISA preemption. The critical statutory phrase, “relate to any employee
benefit plan,” is not self-defining, and the Supreme Court “[has] been at least mildly
schizophrenic in mapping its contours.” (Internal quotation marks omitted.) Biondi, 303 F.3d
at 773 (quoting Carpenters Local Union No. 26 v. United States Fidelity & Guaranty Co.,
215 F.3d 136, 139 (1st Cir. 2000)).
¶ 23 The Supreme Court’s early ERISA preemption cases glossed over the phrase “relate to”
in section 1144(a) (29 U.S.C. § 1144(a) (2006)) by portraying the phrase as deliberately
expansive. Biondi, 303 F.3d at 773 (citing Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41,
45-46 (1987)). In recent years, the Court has taken a more restrictive view of section 1144(a),
beginning with the seminal decision of New York State Conference of Blue Cross & Blue
Shield Plans v. Travelers Insurance Co., 514 U.S. 645 (1995), where the Court emphasized:
“ ‘Our past cases have recognized that the Supremacy Clause, U.S. Const., Art. VI,
may entail pre-emption of state law either by express provision, by implication, or by a
conflict between federal and state law. And yet, despite the variety of these opportunities
for federal pre-emption, we have never assumed lightly that Congress has derogated state
regulation, but instead have addressed claims of pre-emption with the starting
presumption that Congress does not intend to supplant state law. Indeed, in cases like this
one, where federal law is said to bar state action in fields of traditional state regulation,
we have worked on the “assumption that the historic police powers of the States were not
to be superseded by the Federal Act unless that was the clear and manifest purpose of
Congress.” ’ ” Biondi, 303 F.3d at 773 (quoting Travelers, 514 U.S. at 654-55).
¶ 24 Additionally, the Travelers Court noted that, because preemption claims turn on
congressional intent, it is necessary, as with any exercise of statutory construction, to begin
the analysis “ ‘with the text of the provision in question, and move on, as need be, to the
structure and purpose of the Act.’ ” Biondi, 303 F.3d at 774 (quoting Travelers, 514 U.S. at
655). In addressing the “clearly expansive” text of section 1144(a) of ERISA, the Court
concluded that, if the statute’s “words of limitation”–i.e., “relate to”–“were taken to extend
to the furthest stretch of its indeterminacy, then for all practical purposes pre-emption would
never run its course, for ‘really, universally, relations stop nowhere.’ ” Biondi, 303 F.3d at
774 (quoting Travelers, 514 U.S. at 655).
¶ 25 Travelers also noted that the Court’s prior decision in Shaw v. Delta Air Lines, Inc., 463
U.S. 85 (1983), did not provide much guidance. In Shaw, the Court held that “[a] law ‘relates
to’ an employee benefit plan, in the normal sense of the phrase, if it has a connection with
or reference to such a plan.” Shaw, 463 U.S. at 96-97. However, “an uncritical literalism [of
the phrase ‘connection with’] is no more help than in trying to construe ‘relate to.’ For the
same reasons that infinite relations cannot be the measure of pre-emption, neither can infinite
connections.” Travelers, 514 U.S. at 656.
¶ 26 For this reason, the Travelers Court decided to add another layer to its ERISA
preemption analysis, holding that, for purposes of section 1144(a) of ERISA, the evaluation
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of a state law’s relation to an employee benefit plan 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.” (Emphasis added.) Travelers, 514 U.S. at 656. The Court amended the “objectives”
principle from Travelers slightly in California Division of Labor Standards Enforcement v.
Dillingham Construction, N.A., Inc., 519 U.S. 316 (1997), rephrasing it to stress that the
objectives of ERISA are also to be used to determine the “nature of the effect of the state law
on ERISA plans.” Dillingham, 519 U.S. at 325; see also De Buono v. NYSA-ILA Medical &
Clinical Services Fund, 520 U.S. 806, 813-14 (1997) (utilizing the “objectives” principle
from Travelers and Dillingham); Egelhoff v. Egelhoff, 532 U.S. 141, 147 (2001) (same). The
Illinois Supreme Court and this court each have recognized how Travelers honed the test for
ERISA preemption. Scholtens v. Schneider, 173 Ill. 2d 375, 382 (1996); Hinterlong v.
Baldwin, 308 Ill. App. 3d 441, 448 (1999) (“In 1995, the Court retreated from its rigid textual
analysis of section [1144](a).”).
¶ 27 B. ERISA’s Statutory Objectives
¶ 28 Cataloging ERISA’s statutory objectives is a fairly straightforward exercise. ERISA’s
primary objectives are to “protect *** the interests of participants *** and their beneficiaries,
by requiring the disclosure and reporting *** of financial and other information *** by
establishing standards of conduct, responsibility, and obligation for fiduciaries of employee
benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the
Federal courts” (29 U.S.C. § 1001(b) (2006)), and “by improving the equitable character and
the soundness of such plans by requiring them to vest the accrued benefits of employees with
significant periods of service, to meet minimum standards of funding, and by requiring plan
termination insurance” (29 U.S.C. § 1001(c) (2006)). These objectives weigh against a
finding of preemption, as barring plaintiffs’ mechanic’s lien claims would undermine the
goal of protecting the interests of the plan participants and their beneficiaries.
¶ 29 Additionally, we know that, when Congress enacted the preemption provision of section
1144(a), it intended “to ensure that plans and plan sponsors would be subject to a uniform
body of benefits law; the goal was to minimize the administrative and financial burden of
complying with conflicting directives among States or between States and the Federal
Government . . ., [and to prevent] the potential for conflict in substantive law . . . requiring
the tailoring of plans and employer conduct to the peculiarities of the law of each
jurisdiction.” (Internal quotation marks omitted.) Biondi, 303 F.3d at 774 (quoting Travelers,
514 U.S. at 656-57). Application of the Mechanics Lien Act does not conflict with ERISA
plans or otherwise disturb the uniform body of benefits law; thus, this objective weighs
against preemption as well.
¶ 30 Under this rubric, the Supreme Court has identified at least three instances where a state
law can be said to have a “connection with” or “reference to” employee benefit plans: (1)
when the state law “mandate[s] employee benefit structures or their administration”
(Travelers, 514 U.S. at 658); (2) when the state law binds employers or plan administrators
to particular choices or precludes uniform administrative practice, thereby functioning as a
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regulation of an ERISA plan itself (Travelers, 514 U.S. at 659-60); and (3) when the state
law provides an alternative enforcement mechanism to ERISA (Travelers, 514 U.S. at 658).
Biondi, 303 F.3d at 775.
¶ 31 Because plaintiffs’ state-law claims are for statutory mechanic’s liens, a traditional area
of state regulation, defendants bear “ ‘the considerable burden of overcoming “the starting
presumption that Congress does not intend to supplant state law.” ’ ” Biondi, 303 F.3d at 775
(quoting De Buono, 520 U.S. at 814). Defendants argue that the circuit courts correctly
concluded that they have rebutted the presumption against preemption, on the ground that
the Mechanics Lien Act provides an alternative enforcement mechanism to ERISA’s civil
enforcement provisions and is therefore expressly preempted. The Supreme Court has
identified two categories of state laws that act as alternative enforcement mechanisms to
ERISA. One is where “the existence of a pension plan is a critical element of a state-law
cause of action,” and the other is where a “state statute contains provisions that expressly
refer to ERISA or ERISA plans.” De Buono, 520 U.S. at 815. The former is preempted under
ERISA’s express preemption provision in section 1144(a) (29 U.S.C. § 1144(a) (2006)), and
the latter is preempted under ERISA’s field (“complete”) preemption statute (29 U.S.C.
§ 1132(a) (2006)). Recognizing that the Mechanics Lien Act does not expressly refer to
ERISA or ERISA plans, defendants argue that the existence of the pension plans is a critical
element of the mechanic’s lien claims and that, but for the CBAs, KMC’s conduct would not
be actionable.
¶ 32 The issue of whether a state mechanic’s lien claim qualifies as an alternative enforcement
mechanism triggering ERISA preemption has resulted in a post-Travelers majority view and
minority view, which are set forth in Forsberg v. Bovis Lend Lease, Inc., 2008 UT App 146,
184 P.3d 610 (finding no preemption), and International Brotherhood of Electrical Workers,
Local Union No. 46 v. Trig Electric Construction Co., 13 P.3d 622 (Wash. 2000) (finding
preemption), respectively.
¶ 33 C. Forsberg
¶ 34 In Forsberg, a hospital hired a general contractor to expand the hospital’s building, and
the general contractor hired a subcontractor for the project’s electrical work. Forsberg, 2008
UT App 146, ¶ 2, 184 P.3d 610. The subcontractor executed a CBA, which required it to
make trust fund contributions and pay wage assessments for its employees, but the
subcontractor was historically late on making its contributions. Forsberg, 2008 UT App 146,
¶ 3, 184 P.3d 610. Several funds filed an ERISA claim in federal court seeking payment of
the delinquent contributions. After the funds obtained a judgment against the subcontractor,
the federal court issued a “Garnishee Order,” requiring the general contractor to retain certain
earnings due to the subcontractor for its work on the project. The amount was credited
against the most delinquent contributions. Forsberg, 2008 UT App 146, ¶ 3, 184 P.3d 610.
The subcontractor filed for bankruptcy protection, and the funds filed a state mechanic’s lien
against the hospital property. The general contractor and its surety executed a bond to release
the lien, but the trial court ruled, inter alia, that the mechanic’s lien claim was preempted by
ERISA. Forsberg, 2008 UT App 146, ¶ 5, 184 P.3d 610.
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¶ 35 On appeal, the funds argued that there is no evidence that, at the time of ERISA’s
enactment, Congress intended to supersede state mechanic’s lien statutes or private bond
statutes or that such statutes conflict with any provision of ERISA. The funds argued that,
without such evidence, ERISA is presumed not to preempt such claims. In contrast, the
defendants argued that the ERISA preemption clause is intended to be interpreted broadly
and that employees may not use alternative causes of action to collect benefits protected by
ERISA. Forsberg, 2008 UT App 146, ¶ 20, 184 P.3d 610.
¶ 36 After thoroughly chronicling ERISA preemption jurisprudence, the Court of Appeals of
Utah noted that Travelers had “sent a strong message to the lower courts that section
[1144](a) was subject to significant limitations and that any challenge to a state law of
general application affecting an area of traditional state concern must overcome a strong
presumption that Congress did not intend to preempt it” and that “most courts after 1995
have held that ERISA does not preempt mechanic’s lien laws or contractors’ bond statutes
of general application. [Citations.]” Forsberg, 2008 UT App 146, ¶ 32, 184 P.3d 610. In
agreement with a long line of cases, the court held that Utah’s mechanic’s lien and private
bond statutes, which make no reference to trust funds or ERISA itself, are not preempted by
section 1144(a). Forsberg, 2008 UT App 146, ¶ 32, 184 P.3d 610.
¶ 37 Like Utah’s mechanic’s lien statute, the Mechanics Lien Act (1) has general applicability,
(2) predates ERISA, (3) makes no reference to trust funds or ERISA itself, (4) functions
irrespective of ERISA, and (5) regulates an area of traditional state concern. See Forsberg,
2008 UT App 146, ¶ 34, 184 P.3d 610. Furthermore, the Mechanics Lien Act fits none of the
categories of state law that “relate to” ERISA for purposes of preemption: (1) laws that
regulate the type of benefits or terms of ERISA plans; (2) laws that create reporting,
disclosure, funding, or vesting requirements for ERISA plans; (3) laws that provide rules for
the calculation of the amount of benefits to be paid under ERISA plans; and (4) laws and
common-law rules that provide remedies for misconduct growing out of administration of
ERISA plans. See Forsberg, 2008 UT App 146, ¶ 35, 184 P.3d 610 (quoting Airparts Co.
v. Custom Benefit Services of Austin, Inc., 28 F.3d 1062, 1064-65 (10th Cir. 1994)).
¶ 38 The mechanic’s lien claims in these appeals do not affect “ ‘relations among the principal
ERISA entities–the employer, the plan, the plan fiduciaries, and the beneficiaries,’ ” and if
there is no such effect, there is no preemption. Forsberg, 2008 UT App 146, ¶ 36, 184 P.3d
610 (quoting Airparts, 28 F.3d at 1065). No defendant in these cases is an ERISA entity: the
employer, the plan, the plan fiduciaries, or the beneficiaries. See Forsberg, 2008 UT App
146, ¶ 37, 184 P.3d 610. Although the collection of contributions through a lien claim may
indirectly affect relations among the principal ERISA entities, “such a broad application of
the term ‘affect’ would create the same ‘uncritical literalism’ disapproved [of] in Travelers.”
Forsberg, 2008 UT App 146, ¶ 37, 184 P.3d 610 (quoting Travelers, 514 U.S. at 656).
¶ 39 Forsberg rejected the position advocated by defendants in these cases: that a mechanic’s
lien claim is preempted because the funds essentially are employees resorting to state law to
avail themselves of an alternative cause of action to collect benefits. Forsberg, 2008 UT App
146, ¶ 38, 184 P.3d 610. The Forsberg court concluded that, because any ERISA preemption
analysis must consider whether the action is between or among ERISA entities or between
one or more ERISA entities and an outside party, the defendants’ status as “outside parties”
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means that the state claims are not alternatives to the remedies provided by ERISA, which
governs actions only between or among ERISA entities. Forsberg, 2008 UT App 146, ¶ 38,
184 P.3d 610 (citing 29 U.S.C. § 1132 (2000 & Supp. V 2005)). The court stated, “[i]ndeed,
‘[p]erhaps the most salient consideration is whether the state law in question regulates the
terms, duties, or administration of ERISA plans.’ ” Forsberg, 2008 UT App 146, ¶ 38, 184
P.3d 610 (quoting Harmon City, Inc. v. Nielson & Senior, 907 P.2d 1162, 1169 (Utah 1995)).
Like the Utah mechanic’s lien statute, the Mechanics Lien Act does not.
¶ 40 We are further persuaded by the Forsberg court’s conclusion that permitting a
mechanic’s lien claim would not be contrary to ERISA’s goal to ensure that “ ‘plans and plan
sponsors would be subject to a uniform body of benefits law *** [and] to minimize the
administrative and financial burden of complying with conflicting directives among States
or between States and the Federal Government.” Forsberg, 2008 UT App 146, ¶ 39, 184 P.3d
610 (quoting Ingersoll-Rand v. McClendon, 498 U.S. 133, 142 (1990)). Like the Utah
mechanic’s lien statute, the Mechanics Lien Act is not a “benefits law” but, rather, is a law
of general applicability, operating irrespective of ERISA. Furthermore, neutral application
of the Mechanics Lien Act will not subject any ERISA entity to conflicting laws concerning
the terms, duties, or administration of ERISA plans. See Forsberg, 2008 UT App 146, ¶ 39,
184 P.3d 610 (citing 29 U.S.C. § 1132 (2006)). We agree with Forsberg that there is nothing
to rebut the strong presumption that Congress does not intend for ERISA to supplant state
mechanic’s lien statutes of general applicability. Forsberg, 2008 UT App 146, ¶ 40, 184 P.3d
610 (citing Travelers, 514 U.S. at 654). We hold that ERISA does not preempt the
Mechanics Lien Act, because “the state law has only a tenuous, remote, or peripheral
connection with covered plans, as is the case with many laws of general applicability.”
(Internal quotation marks omitted.) Travelers, 514 U.S. at 661.
¶ 41 Our holding conforms to the post-Travelers majority view that ERISA does not preempt
mechanic’s lien laws or contractor’s bond statutes that have general application and do not
mention ERISA. See Forsberg, 2008 UT App 146, ¶ 32, 184 P.3d 610 (citing Southern
California IBEW-NECA Trust Funds v. Standard Industrial Electric Co., 247 F.3d 920, 928-
29 (9th Cir. 2001) (disavowing pre-Travelers cases and holding that payment-bond and stop-
notice statutes of general application are not preempted by ERISA); Greenblatt v. Delta
Plumbing & Heating Corp., 68 F.3d 561, 575 (2d Cir. 1995) (citing Travelers and Ingersoll-
Rand and concluding that the “surety law does not touch upon any rights or duties incident
to the ERISA plan itself, nor does it conflict with any ERISA cause of action”); Bellemead
Development Co. v. New Jersey State Council of Carpenters Benefit Funds, 11 F. Supp. 2d
500, 507-08, 516-17 (D.N.J. 1998) (citing Travelers and following Ragan v. Tri-County
Excavating, Inc., 62 F.3d 501 (3d Cir. 1995), to hold that ERISA does not preempt
construction lien law of general application); Betancourt v. Storke Housing Investors, 82
P.3d 286, 288-96 (Cal. 2003) (citing Travelers and holding that mechanic’s lien law of
general application is not preempted by ERISA); Hawai’i Laborers’ Trust Funds v. Maui
Prince Hotel, 918 P.2d 1143, 1155-56 (Haw. 1996) (holding that mechanic’s lien law of
general application is not preempted by ERISA)).
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¶ 42 D. Trig Electric Construction Co.
¶ 43 Trig is in the minority of post-Travelers opinions, which hold that ERISA preempts a
mechanic’s lien statute of general application. Forsberg, 2008 UT App 146, ¶ 32 n.19, 184
P.3d 610 (citing Trig, 13 P.3d at 627-28). In Trig, a general contractor contracted to work on
a project at a local community college and hired a subcontractor to perform the electrical
work. The general contractor obtained a surety bond to protect all workers, mechanics,
subcontractors, and materialmen supplying material and performing labor on the project; and
the college withheld a portion of the contract price as a retainage trust fund. A CBA between
the union and the subcontractor required the subcontractor to contribute a portion of its
workers’ wages to benefit-trust-fund plans falling under the ambit of ERISA. The
subcontractor became delinquent on these contributions, and a union sued to foreclose on the
general contractor’s bond. Following the entry of summary judgment for the defendants, the
matter reached the Supreme Court of Washington, where the dispositive issue was whether
ERISA preempted the lien foreclosure action. Trig, 13 P.3d at 623.
¶ 44 The lien action in Trig was brought under Washington’s public works lien statutes
(Wash. Rev. Code Ann. §§ 39.08.10, 60.28.10), which provide a mechanism for a defaulting
subcontractor’s obligations to be collected from the general contractor. Trig, 13 P.3d at 624.
In a narrow 5 to 4 decision, the Washington Supreme Court decided that, despite the new line
of cases following Travelers, it would not depart from an earlier holding that ERISA
preempts the Washington public works lien statutes. Trig, 13 P.3d at 624 (citing Puget Sound
Electrical Workers Health & Welfare Trust Fund v. Merit Co., 870 P.2d 960 (Wash. 1994)).
The majority held that, “[a]s we understood in Merit, to the extent the public works lien
statutes provide an enforcement mechanism by imposing liabilities on general contractors’
bonds and retainage funds for the delinquent benefit plan payments of a subcontractor, they
provide alternative enforcement mechanisms to those provided by Congress when it enacted
ERISA. The state statutes, then, undeniably ‘relate to’ and ‘connect with’ ERISA for the
purposes of ERISA’s preemption provision.” Trig, 13 P.3d at 625 (citing 29 U.S.C. § 1144(a)
(1994)).
¶ 45 The dissent strongly disagreed, stating, “[i]n this case, the lien laws are of general
applicability. They have only tenuous connections with ERISA plans. Under Travelers, such
a connection is not enough to overcome the presumption that Congress does not intend to
supplant state law.” Trig, 13 P.3d at 631 (Johnson, J., dissenting, joined by Smith, Talmadge,
and Ireland, JJ.). The dissent pointed out that the majority erroneously had employed an
“abandoned” preemption analysis without considering the “ ‘objectives of the ERISA statute
as a guide to the scope of the state law that Congress understood would survive.’ ” Trig, 13
P.3d at 628 (Johnson, J., dissenting, joined by Smith, Talmadge, and Ireland, JJ.) (quoting
Travelers, 514 U.S. at 656). Upon consideration of ERISA’s objectives and the traditional
presumption that Congress does not intend to supplant state law (Trig, 13 P.3d at 628-29
(Johnson, J., dissenting, joined by Smith, Talmadge, and Ireland, JJ.)), the dissent concluded
that the court’s prior decision did not compel a finding of preemption, because “[t]he public
works lien laws at issue in [Merit] and in this case are laws of general applicability that are
used by a class of creditors regardless of whether there is an ERISA plan. Thus, Travelers’
reaffirmation of Ingersoll-Rand’s holding [that preemption occurs when the state law was
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specifically designed to affect employee benefits plans] has no bearing on whether [Merit]
is good law.” Trig, 13 P.3d at 630 (Johnson, J., dissenting, joined by Smith, Talmadge, and
Ireland, JJ.). Like the Forsberg court, we conclude that the dissent in Trig is the better-
reasoned approach, as it is supported by the narrower view on preemption set forth in
Travelers.
¶ 46 E. McHugh
¶ 47 Defendants renew their argument that plaintiffs’ mechanic’s lien claims are barred by
McHugh, where a union sued a general contractor under the Prevailing Wage Act (820 ILCS
130/1 et seq. (West 2010)). The union sought an order requiring a contractor to pay benefit
contributions owed by a subcontractor. McHugh, 230 Ill. App. 3d at 941. The Prevailing
Wage Act establishes a “prevailing wage” to be paid on certain construction projects as an
hourly wage “plus fringe benefits for health and welfare, insurance, vacation and pensions
generally.” (Internal quotation marks omitted.) McHugh, 230 Ill. App. 3d at 941-42 (quoting
Ill. Rev. Stat. 1989, ch. 48, ¶ 39s-2 (now 820 ILCS 130/2 (West 2010))). Section 11 of the
Prevailing Wage Act (820 ILCS 130/11 (West 2010)) creates a cause of action against
contractors and subcontractors who fail to pay the prevailing wage. McHugh, 230 Ill. App.
3d at 941. Under section 11, an employee or an employee representative may sue a contractor
or subcontractor in state court to recover the difference between the wages paid and the
“prevailing wage” as defined in section 2. 820 ILCS 130/11 (West 2010). In McHugh, the
union invoked section 11 in alleging that the subcontractor violated the Prevailing Wage Act
when “it failed to pay six of its employees ‘fringe benefit contributions.’ ” McHugh, 230 Ill.
App. 3d at 941.
¶ 48 The trial court and the Appellate Court, First District, concluded that the complaint must
be dismissed on the ground that the claim “related to” an employee benefit plan and, thus,
was preempted by section 1144(a) of ERISA. McHugh, 230 Ill. App. 3d at 946. The appellate
court relied heavily on language in pre-Travelers cases that said that ERISA’s “ ‘deliberately
expansive’ language was ‘designed to “establish pension plan regulation as exclusively a
federal concern” ’ ” (McHugh, 230 Ill. App. 3d at 943 (quoting Pilot Life Insurance Co. v.
Dedeaux, 481 U.S. 41, 46 (1987), quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S.
504, 523 (1981))); and said “Congress used the words ‘relate to’ in their broad[est] sense,
rejecting more limited preemption language that would have made the clause ‘applicable
only to state laws relating to the specific subjects covered by ERISA’ ” (McHugh, 230 Ill.
App. 3d at 943 (quoting Shaw, 463 U.S. at 98)). In finding preemption, the court held that
“ERISA preemption is triggered by not just any indirect effect on administrative procedures,
but rather by an effect on the primary administrative functions of benefit plans, such as
determining an employee’s eligibility for a benefit and the amount of that benefit.” McHugh,
230 Ill. App. 3d at 946.
¶ 49 McHugh predates Travelers and is not a useful guide. We decline to follow McHugh and
Trig because neither employs the narrower test for ERISA preemption that the Supreme
Court announced in Travelers and its progeny. We emphasize that we reach no conclusion
as to whether ERISA preempts the Prevailing Wage Act, as our analysis does not require us
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to decide whether McHugh still is good law after Travelers. Cf. State v. Philips, 2000 WI
App 184, ¶ 33, 617 N.W.2d 522 (McHugh is “inapposite” because it predates Travelers);
Burgess v. E.L.C. Electric, Inc., 825 N.E.2d 1, 14 n.12 (Ind. App. 2005) (ERISA does not
preempt Indiana’s prevailing wage act, and McHugh does not “represent modern ERISA
preemption jurisprudence”). Rather, we comment only that McHugh’s outdated and
incomplete ERISA preemption analysis regarding the Prevailing Wage Act does not compel
us to conclude that ERISA preempts the Mechanics Lien Act.
¶ 50 Finally, we note that certain plaintiffs argue that they are funds that are not governed by
ERISA and its preemption provision and, therefore, even if ERISA preempts the Mechanics
Lien Act, the circuit courts erred in dismissing their claims on preemption grounds. We need
not reach the issue, because we hold that ERISA does not preempt the Mechanics Lien Act.
Moreover, Nicholas argues that allowing plaintiffs to enforce their mechanic’s lien claims
would lead to an inequitable result because Nicholas already has paid KMC the contributions
that KMC was to pass along to the funds. However, Nicholas cites no provision in the
Mechanics Lien Act that might afford such a defense or any authority for the proposition that
equity is a factor to be considered in our ERISA preemption analysis.
¶ 51 CONCLUSION
¶ 52 In light of the uncertainty of McHugh’s validity after Travelers, we understand the circuit
courts’ reliance on the doctrine of stare decisis as support for continuing to follow McHugh
in these cases. See O’Casek v. Children’s Home & Aid Society of Illinois, 229 Ill. 2d 421,
440 (2008) (stare decisis requires courts to follow the decisions of higher courts). However,
for the preceding reasons, we hold that ERISA does not preempt the Mechanics Lien Act,
and the dismissals of plaintiffs’ claims in the circuit courts of Kane County and De Kalb
County are reversed and the causes are remanded for further proceedings consistent with this
opinion.
¶ 53 Reversed and remanded.
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