McDonald v. Fidelity and Deposit , 2020 UT 11 ( 2020 )

This opinion is subject to revision before final
publication in the Pacific Reporter
2020 UT 11
IN THE
SUPREME COURT OF THE STATE OF UTAH
MICHAEL MCDONALD, et al.,1
Appellees,
v.
FIDELITY & DEPOSIT COMPANY OF MARYLAND,
Appellant.
No. 20170609
Heard November 12, 2019
Filed February 28, 2020
On Direct Appeal
Fifth District, Iron County
The Honorable Gary D. Stott
No. 110500817
Attorneys:
Kenneth B. Grimes, Salt Lake City, for appellees
Troy L. Booher, Beth E. Kennedy, Robert F. Babcock,
Jeffrey R. Handy, Salt Lake City, for appellant
_____________________________________________________________
1 The other appellees are George Bosiljevac, Mike Baker, Dick
Devries, Eric Sutton, Jerry Romero, Willis Norton, Tom Moen, Jr.,
Mark Calkins, Dennis Walton, Rick Meyer, Ed Norton, Doug
Thomas, Lon West, Sharon Hope, Vinson Hughes, and Eric Sutton,
as Trustees of the Intermountain Ironworkers Pension Plan, the
Intermountain Ironworkers Tax Deferral Plan, the Intermountain
Ironworkers Health & Welfare Plan, the Intermountain Ironworks
Joint Apprenticeship & Training Fund, the Ironworkers
Management Progressive Action Cooperative Trust, the Ironworkers
Vacation Fund of Utah, the Ironworkers Political Action League
Trust, the Ironworkers Industry Advancement Fund, the
Ironworkers HRA Fund, and Ironworkers Local Union No. 27.
MCDONALD v. FIDELITY & DEPOSIT COMPANY OF MARYLAND
Opinion of the Court
ASSOCIATE CHIEF JUSTICE LEE authored the opinion of the Court in
which CHIEF JUSTICE DURRANT, JUSTICE HIMONAS, JUSTICE PEARCE,
and JUSTICE PETERSEN joined.
ASSOCIATE CHIEF JUSTICE LEE, opinion of the Court:
¶1 This case arises out of a state construction project at
Southern Utah University (SUU). One of the subcontractors hired to
work on the project, Idaho Iron, Inc., failed to make contributions to
various trust funds for its employees’ work on the project, as
required by a collective bargaining agreement and various trust
agreements (collectively, the union contract). The trusts sought to
recover the delinquent contributions from the public payment bond2
associated with the SUU project by suing Fidelity & Deposit
Company of Maryland, the surety for the payment bond.3 They also
sought prejudgment interest, liquidated damages, audit and attorney
fees, and court costs as contemplated by the union contract and
statute.
¶2 The governing public payment bond statute provides a
“right of action on a payment bond” for “any unpaid amount due”
the claimant if certain conditions are satisfied. UTAH CODE
§ 63G-6-505(4) (2010) (public payment bond statute).4 Citing this
statute, the trusts have asserted that the amounts they sought to
recover qualified as amounts “due” the Idaho Iron employees who
had worked on the SUU project. And they have claimed that they
_____________________________________________________________
2 A payment bond secures “protection of each person supplying
labor, service, equipment, or material for the performance of the
work provided for in the contract” for which the bond is furnished,
UTAH CODE § 63G-6-505(1)(b) (2010)—in this case the SUU
construction contract between the state and its general contractor.
3 The trust funds also sued Idaho Iron for these delinquent
contributions in federal court in Idaho and obtained a judgment
against Idaho Iron. Idaho Iron, however, filed for bankruptcy and
the delinquent contributions remain unpaid.
4 We cite the 2010 version of the Procurement Code, Utah Code
chapter 63G-6 (2010), because the payment bond and associated
construction contract were signed in 2010. The Procurement Code
has since been amended. Compare Utah Code chapter 63G-6 (2010),
with Utah Code chapter 63G-6a (2013).
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Opinion of the Court
can recover those amounts on behalf of the relevant Idaho Iron
employees because a trust fund stands in the shoes of its
beneficiaries under precedent from the court of appeals. See Forsberg
v. Bovis Lend Lease, Inc., 2008 UT App 146, 184 P.3d 610. The district
court agreed, granting the trusts’ motion for summary judgment and
denying Fidelity’s cross-motion.
¶3 Fidelity challenges both decisions on this appeal. It asks us
to reverse both the grant of summary judgment in favor of the trusts
and the denial of Fidelity’s cross-motion. In Fidelity’s view, the
amounts owed to the trusts, “including liquidated damages, interest,
costs, and attorney fees,” are not amounts due the employee under
the public payment bond statute. Fidelity asks us to interpret the
statute to limit the right of action on a payment bond to amounts due
to an employee. The trusts stake out a different view. They ask us to
interpret the statute to encompass claims for any amounts due for an
employee or on the employee’s behalf.
¶4 We adopt a middle position. We conclude that the right of
action under the payment bond statute extends to any amount due
an employee, meaning any amount that is traceable specifically to an
employee. On that basis we reverse the decision granting summary
judgment in favor of the trusts. But we stop short of reversing the
denial of Fidelity’s cross-motions because we identify some disputes
requiring further proceedings on remand.
I
¶5 Sometime prior to March 2010 the State hired Big-D
Construction to complete a construction project at SUU. Big-D
procured a payment bond for the full cost of the construction
contract as required by Utah Code section 63G-6-505(1)(b) (2010). It
purchased the bond from Fidelity. Big-D then hired Idaho Iron as a
subcontractor to do ironwork for the SUU project. And Idaho Iron, in
turn, hired eight employees—some union and some non-union—to
work on the project.
¶6 Pursuant to its union contract, Idaho Iron was obligated to
make contributions to several different trusts based on the number
of hours worked by its employees on this and other projects,
regardless of the employees’ union status. The relevant trusts
include a tax deferral fund and a vacation fund, under which
contributions seem to lead directly to a monetary payout to the
specific employee for whom the contributions were made; a welfare
fund, under which employees gain coverage by working a certain
number of hours, if contributions are paid; a pension plan, under
which employees receive benefits service credits for covered work
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MCDONALD v. FIDELITY & DEPOSIT COMPANY OF MARYLAND
Opinion of the Court
regardless of whether contributions were made; and a variety of
other funds such as an apprenticeship fund, working dues fund, and
industry fund, under which the contributions provide a variety of
benefits to the ironworkers’ industry, union, signatory employers,
and workers in general (as opposed to direct benefits to individual
ironworkers).
¶7 Idaho Iron, however, failed to make any trust contributions
for the hours that its employees worked on the SUU project. And the
trusts filed two lawsuits attempting to recover the delinquent
contributions. They first sued in federal court in Idaho, seeking to
recover from Idaho Iron itself. The trusts obtained a judgment
against Idaho Iron, but Idaho Iron filed for bankruptcy and the
delinquent contributions remain unpaid. The trusts also brought this
suit, seeking to recover the delinquent contributions from Fidelity,
the surety for the payment bond associated with the construction
contract for the SUU project.
¶8 In this suit, the trusts sought below to recover the
delinquent contributions—as well as prejudgment interest,
liquidated damages, audit and attorney fees, and court costs—from
the Fidelity payment bond.5 They relied on the public payment bond
statute, which provides that “[a] person shall have a right of action
on a payment bond under this section for any unpaid amount due
him if: (a) the person has furnished labor, service, equipment, or
material for the work provided for in the contract for which the
payment bond is furnished under this section; and (b) the person has
not been paid in full.” UTAH CODE § 63G-6-505(4) (2010).
¶9 While the trust funds did not “furnish[] labor, service,
equipment, or material,” they argued that they “stand in the shoes of
the employees” and thus have standing to recover against the
payment bond. In support of this view, the trust funds cited Forsberg
v. Bovis Lend Lease, Inc.—a case arising under the private payment
bond statute. 2008 UT App 146, 184 P.3d 610. Under that statute, an
owner who fails to obtain a payment bond is liable to “each person
who performed labor or service . . . under the commercial contract
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5 In addition to recovery of delinquent contributions by the trust
funds, the union contract contemplated recovery of “assessments,
liquidated damages, interest, expenses of collection court costs,
and/or attorney’s fees arising from or relating to any such
delinquencies.”
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Opinion of the Court
for the reasonable value of the labor or service performed” by the
employees. UTAH CODE § 14-2-2 (2005). The Forsberg court
interpreted this provision to allow employee trust funds to sue to
recover unpaid employer contributions to the trust funds. 2008 UT
App 146, ¶ 12. It concluded that unpaid contributions were part of
the employee compensation package and thus constituted part of the
“reasonable value of the labor” under that statute. Id. ¶ 50. And it
thus held that the trustees were entitled to seek recovery for those
amounts on behalf of the employees because “[t]he trustees stand in
the shoes of the employees and are entitled to enforce their rights.”
Id. ¶ 13 (quoting United States v. Carter, 353 U.S. 210, 220 (1957)).
¶10 Fidelity challenged this view. It asserted that the trusts
could not recover against the payment bond because the amounts
sought by the trust funds were not “due” the Idaho Iron employees
under the terms of the statute. And it accordingly claimed that the
trusts’ right to stand in the shoes of the employees was beside the
point.
¶11 Both parties filed motions for summary judgment in the
district court. In its motion, Fidelity claimed that the trusts could not
recover anything because the eight project employees had agreed to
work without any fringe benefits and had thus been paid in full—
such that there was nothing due to the employees. Alternatively,
Fidelity asserted that the trusts should not be able to recover on
behalf of the employees because the employees would receive little
or no benefit from the contributions.
¶12 In their motion, the trusts contended that the employment
agreements waiving fringe benefits were invalid under federal labor
law. They also disputed the lack of benefits flowing directly to
individual employees. And they argued that the amount of benefits
flowing to individual employees was nonetheless irrelevant under
Forsberg because the contributions were being made for the
employees. Consequently, the trusts claimed that they should be able
to recover all delinquent contributions stemming from the SUU
project.
¶13 The district court granted the trusts’ motion and denied
Fidelity’s. It thus allowed the trusts to recover the full $79,167.06 of
unpaid Idaho Iron contributions related to the SUU project as well as
prejudgment interest, liquidated damages, audit and attorney fees,
and court costs, for a total judgment of $314,339.72. Fidelity
appealed, contending that neither part of the judgment was
recoverable under the public payment bond statute as amounts
“due” the employees.
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MCDONALD v. FIDELITY & DEPOSIT COMPANY OF MARYLAND
Opinion of the Court
II
¶14 The disposition of this appeal turns largely on the meaning
of the terms of the public payment bond statute. A range of other
issues are raised in the briefing. The parties devote considerable
attention, for example, to the question whether the Idaho Iron
employees are barred by federal law from waiving their fringe
benefit rights under the union contract—whether either ERISA6 or
the NLRA7 preclude union and non-union employees from waiving
employee benefits negotiated on their behalf by a collective
bargaining agent. These are important questions. But we need not
resolve them to decide this appeal.8 We may resolve most of the
questions on appeal by deciding whether the contributions and other
amounts owed to the trusts under the union contract constitute
amounts “due” the employee under the statute. And we can answer
that question without wading into complex issues of federal law.
¶15 We do so in the paragraphs below. First, we present our
interpretation of the statute. We hold that the public payment bond
statute is not limited to recovery of either amounts “due to” an
employee or amounts “due for” an employee—as Fidelity and the
trusts, respectively, have argued. Instead, the statute contemplates
recovery of traceable benefits that are due an individual employee—
“due him” means a traceable amount that an employee will actually
and individually benefit from. Second, we apply our interpretation
to the parties’ competing motions for summary judgment. We
reverse the decision granting the trusts’ motion for summary
judgment but reverse and remand for further proceedings on
Fidelity’s motion.
A
¶16 The public payment bond statute provides that “[a] person
shall have a right of action on a payment bond . . . for any unpaid
_____________________________________________________________
6Employee Retirement Income Security Act of 1974 (ERISA),
29 U.S.C. §§ 1001–1461.
7 National Labor Relations Act (NLRA), 29 U.S.C. §§ 151–169.
8 Regardless of the terms of the individual employment contracts,
the parties agree that the terms of the union contract remained intact.
And under the unaltered union contract, each Idaho Iron employee
is eligible for certain fringe benefits according to the terms of the
individual trust agreements.
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Opinion of the Court
amount due him if: (a) the person has furnished labor, service,
equipment, or material for the work provided for in the contract for
which the payment bond is furnished under this section; and (b) the
person has not been paid in full.” UTAH CODE § 63G-6-505(4) (2010)
(emphasis added). Here the bond was furnished by Big-D for its
SUU construction project in the amount of the full contract price
between the State and Big-D, as required by law. See
id. § 63G-6-505(1)(b) (2010). Thus, the class of persons entitled to
recover under that bond is limited to those who “furnished labor,
service, equipment, or material for . . . work” on the SUU project and
had “not been paid in full.” Id. § 63G-6-505(4) (2010).
¶17 The trusts themselves do not fall within the class of persons
allowed to recover under the public payment bond statute—they did
not furnish “labor, service equipment, or material” for the SUU
project. But the eight employees hired by Idaho Iron did furnish
labor for the project. And the trustee of a benefit fund for such
employees may have standing to sue on their behalf where “[t]he
trustees stand in the shoes of the employees and are entitled to
enforce their rights.” Forsberg v. Bovis Lend Lease, Inc., 2008 UT App
146, ¶ 13, 184 P.3d 610 (quoting United States v. Carter, 353 U.S. 210,
220 (1957)). On this point we agree with the opinion of our court of
appeals in the Forsberg case.
¶18 Fidelity does not contest the trusts’ general right to stand in
the shoes of the employees. It just contends that the claims at issue
do not fit the requirements of the public payment bond statute—that
the claim is not for amounts “due” the eight Idaho Iron employees,
but for amounts due the trust funds under the union contract.
Fidelity asserts that the Idaho Iron employees waived the right to
collect any fringe benefits under the terms of their individual
employment contracts. And although Fidelity acknowledges that the
union contract required Idaho Iron to make trust contributions that
may benefit the SUU project employees, Fidelity contends that those
contributions are not directly “due” the employees as that term is
used in the statute.
¶19 Fidelity thus concedes that the trusts have a right to recover
unpaid contributions from Idaho Iron. But it insists that the trusts
have no right of action on the payment bond because the amounts
sought are not due directly to the employees who worked on the
SUU project. In Fidelity’s view, then, the statute limits recovery to
amounts due to the employees—direct obligations to individual
employees.
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MCDONALD v. FIDELITY & DEPOSIT COMPANY OF MARYLAND
Opinion of the Court
¶20 The trust funds advance a much broader view of the statute.
They claim that the unpaid contributions are amounts “due” the
employees because the contributions were due on behalf of or for the
employees in question. As to other amounts included in the
judgment, the trusts assert that these amounts are recoverable
because they will benefit the employees as opposed to the trusts,
which exist only to benefit their employee beneficiaries.
¶21 Each side thus advances an “all or nothing” position under
the statute. Fidelity says that the trusts can recover nothing because
the statute is limited to “amounts due [to]” an individual employee.
The trusts, on the other hand, say they are entitled to everything
encompassed in the judgment entered below because the statute
encompasses all “amounts due [for]” an employee. And both sides
claim a right to judgment as a matter of law on the basis of their
positions.
¶22 We embrace a middle ground. We find neither side’s
interpretation of the statute to be correct. And we reject an all or
nothing result because we find it incompatible with the statute.
¶23 The key statutory question concerns the scope of the
statutory “right of action on a payment bond . . . for any unpaid
amount due him”—due a person who has furnished “labor, service,
equipment, or material” on a project covered by a payment bond.
UTAH CODE § 63G-6-505(4) (2010) (emphasis added). The operative
phrase—“due him”—is not restricted or qualified. It says neither
“due to him” nor “due for him.”9 And it would flout our interpretive
canons to add qualifying or limiting language that is not stated on
the face of the statute. See Nevares v. M.L.S., 2015 UT 34, ¶ 34, 345
P.3d 719 (rejecting an interpretation of a statute on the ground that it
ran afoul of the canon against “read[ing] into the statute a limitation
not expressly stated on its face”); Olsen v. Eagle Mtn. City, 2011 UT
10, ¶ 18, 248 P.3d 465 (declining to “add conditions . . . that are not
set forth expressly by legislation”).
¶24 We thus read the statute to encompass any and all traceable
amounts that are ultimately “due” an individual employee. This
would clearly encompass wages or other payments made directly to
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9A recent amendment to the statute added a “to.” Compare UTAH
CODE § 63G-6-505(4) (2010), with id. § 63G-6a-1103(4) (2013). We
express no opinion on the proper interpretation of the amended
provision, as the matter is not presented to us.
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Opinion of the Court
an employee. But it would also extend to employment benefits that
are “due” an employee in a less immediate or direct sense.10 A
contribution to a 401(k) or similar retirement account comes to mind.
Such a contribution is not made directly “to” an employee in the
sense of an amount received immediately in a paycheck. But it is
impossible to think of such contributions as amounts that aren’t
“due” the employee—the whole point of the contribution is to add to
an account that an employee will be able to access later, at the time
of retirement.
¶25 The contribution in question, however, must be specifically
traceable to an individual employee. A general contribution that
vaguely benefits all employees would not be thought to be “due” an
individual—even if it could be viewed as for an employee or on her
behalf. Sticking with the retirement theme, a government employer
may provide general financial support that keeps a pension fund
solvent. But the employer’s general support of the fund’s solvency
would not be thought of as an amount “due” an employee (at least
where the support bears no traceable relationship to the amount of
the employee’s pension).
¶26 This is the principle we find in the text of the statute. The
statutory right of action is a right to sue for amounts “due” a
person—meaning any amounts specifically traceable to that person.
B
¶27 This sets the stage for our assessment of the parties’
cross-motions for summary judgment. In light of the above, we can
hold conclusively that the district court erred in granting summary
judgment to the trust funds. Because the statutory right of action
does not extend to all amounts due for or on behalf of a person, the
summary judgment in the trusts’ favor cannot stand. That judgment
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10 Fidelity effectively concedes this point in its briefing. It states
that “[m]ost of the contributions” to the trusts in this case “will never
benefit the five non-union employees,” and that “even the three
union members will never receive many of the amounts.” But if only
“most” or “many” of the contributions will not benefit the eight
employees in question, then it follows that some contributions will.
And if the benefit, whether direct or indirect, that an employee will
receive for her work under a public payment bond is tied to the
delinquent contribution in a traceable manner, then that delinquent
contribution should qualify as an amount due the employee.
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MCDONALD v. FIDELITY & DEPOSIT COMPANY OF MARYLAND
Opinion of the Court
was premised on the idea that the trusts have a right to sue on
amounts not due the employees but merely due on their behalf. That
is incorrect. And we reverse the decision granting the trusts’ motion
for summary judgment on that basis.
¶28 It is much more difficult, however, to render a conclusive
opinion on the viability of Fidelity’s cross-motion for summary
judgment. The difficulty is a result of the positions of the parties in
the briefing on this appeal. Because each side took an all or nothing
approach, neither analyzed the subtlety that we have identified—as
to whether unpaid contributions reflect amounts traceable to
individual employees. And the parties’ framing requires a remand.
¶29 For some of the contributions in question, it seems that there
is no amount traceable to individual employees. This would seem to
apply, for example, to the pension plan in question. In the district
court, the funds conceded that each of the eight workers in question
had already received service credits toward their pensions for their
work on the project. That suggests that Idaho Iron’s failure to make
contributions toward the pension fund had no traceable effect on
individual workers—a conclusion that seems to jibe with the funds’
description of the pension fund as a defined benefit plan. If these
premises are confirmed on remand, it would appear that the funds
would have no right of action on the payment bond for unpaid
contributions to the pension plan, since the nonpayment of those
contributions could not be traced to an amount “due” an individual
employee.
¶30 This may also hold for other contributions described in the
record. The record includes references to funds that “provide for a
variety of benefits to ironworks’ industry, union, signatory
employers, and workers in general,” but that “do not provide
benefits directly to individual ironworkers.” This suggests a lack of
traceability, and thus a lack of a right of action on the payment bond.
The same could conceivably hold for the claims for prejudgment
interest, liquidated damages, audit fees, and court costs. If these
amounts benefit employees only by increasing the trusts’ financial
well-being generally, and not by providing any benefit that is
traceable to individual employees, then these amounts would also be
unavailable in an action on the payment bond.
¶31 Other contributions in question may be more likely
traceable. Some of the material in the record regarding the tax
deferral fund and the vacation fund, for example, could arguably be
read to suggest that unpaid employer contributions to these funds
could qualify as amounts “due” employees. This could hold, for
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Opinion of the Court
example, if contributions to these funds could be shown to lead
directly to payouts or benefits due employees under the governing
terms of the trust agreements.
¶32 We discuss these funds and contributions only by way of
illustration, and to offer some guidance for remand. None of the
above should be taken as a conclusive determination on whether the
funds have a right of action for any of these contributions under the
standard we have established. On this record and this briefing, we
cannot discern whether or to what extent there may be amounts that
the trusts are seeking that are “due” employees in the sense of being
specifically traceable to them. So we leave this matter for the parties
and the district court on remand.
III
¶33 It is our province and duty to say what the law is. In
fulfilling that duty we are not limited to a choice between the parties’
competing positions. We must get the law right, even if in so doing
we establish a standard that differs from either of the approaches
presented in the briefing on appeal.
¶34 That is the path we follow here. We hold that the right of
action under the public payment bond statute is not limited to
recovery of either amounts “due to” or “due for” a person providing
service or materials under the bond. It contemplates recovery of any
specific benefit that is due a person in the sense of being traceable to
that person. That holding sustains a decision to reverse the entry of
summary judgment in favor of the trusts but to remand for further
proceedings on the summary judgment motion filed by Fidelity.
¶35 Our holding also leaves for remand the question of any
award for attorney fees. The Procurement Code provides for an
award of “reasonable attorney fees to the prevailing party” “[i]n any
suit upon a payment bond.” UTAH CODE § 63G-6-505(6) (2010). We
are not yet in a position to discern whether Fidelity or the trusts may
be entitled to fees as the “prevailing party” in this action.
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