W.G. Clark Constr. Co. v. Pac. Nw. Reg'l Council of Carpenters ( 2014 )

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IN CLfERI29 U.S.C. § 1144(a). At issue in this case is
WG. ClarkConstr. Co. v. Pac. Nw. Reg'! Council ofCarpenters
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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
Fundv. Merit Co., 123 Wn.2d 565, 870 P.2d 960 (1994); Int'l Bhd. ofElec. Workers,
Local Union No. 46 v. Trig Elec. Constr. Co., 142 Wn.2d 431, 13 P.3d 622 (2000).
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.
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FACTS
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
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.
1
The trusts in this case are the Carpenters Health & Security Trust of Western
Washington, the Carpenters Retirement Trust, the Carpenters-Employers Vacation Trust,
and the Carpenters-Employers Apprenticeship & Training Trust.
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W.O. Clark filed for declaratory judgment in King County Superior Court,
requesting that the lien be released. W.O. 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.
The King County Superior Court judge granted summary judgment to W.O.
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.
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.
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The Trusts appealed the King County Superior Court ruling to this court and
we granted direct review.
ISSUE
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
ERISA is a set of federal laws that regulates pension and welfare plans. Merit,
123 Wn.2d at 568. 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."' Haw. 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).
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
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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.
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
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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. ofTrade,
506 U.S. 125, 130 n.l, 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 and created inconsistent
and unjust results for parties in Washington.
I. We Agree with the National Consensus That These State Laws Are Not
Preempted by ERISA under Current United States Supreme Court Case
Law
ERISA preemption is a matter of federal law. Mackey v. Lanier Collection
Agency & Serv., Inc., 486 U.S. 825, 830, 108 S. Ct. 2182, 100 L. Ed. 2d 836 (1988).
On matters of federal law, we are bound by the decisions of the United States
Supreme Court. Home Ins. Co. ofN.Y v. N. Pac. Ry., 18 Wn.2d 798, 808, 140 P.2d
507 (1943). Decisions of the federal circuit courts are "entitled to great weight" but
are not binding. I d. In Merit, we cited four federal circuit court opinions to support
our interpretation of United States Supreme Court case law on ERISA preemption.
See Merit, 123 Wn.2d at 572. But two of these cases were later expressly overruled,
and the other two involved statutes that-unlike those at issue here-expressly
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referred to benefit trust funds. See Standard Indus., 247 F.3d at 929 (expressly
overruling two of the cases cited in Merit); Merit, 123 Wn.2d at 572-73 (describing
the statutes considered in two of the federal circuit cases as expressly referring to
ERISA plans); Carpenters Local Union No. 26 v. US. Fid. & Guar. Co., 215 F.3d
136, 142 (1st Cir. 2000) (describing the reasoning of the earlier First Circuit case as
relying on the fact that the statute "'expressly single[d] out ERISA plans for special
treatment"' (alteration in original) (quoting McCoy v. Mass. Inst. of Tech., 950 F.2d
13, 19 (1st Cir. 1991))). Therefore, it is appropriate for us to consider current federal
circuit court case law on ERISA preemption in our analysis.
Courts throughout the country-both state and federal-have reached a
consensus that under the United States Supreme Court's ruling in New York State
Conference ofBlue Cross & Blue Shield Plans v. Travelers Insurance Co., 514 U.S.
645, 115 S. Ct. 1671, 131 L. Ed. 2d 695 (1995), ERISA does not preempt state lien
statutes that are generally designed to ensure that workers are paid for their work and
do not specifically target benefit trust funds. See generally Forsberg v. Bovis Lend
Lease, Inc., 2008 UT App 146, ~ 32 n.19, 184 P.3d 610 (reviewing the history ofthis
issue and noting that although prior to Travelers, many courts had concluded that this
type of claim was preempted by ERISA, "[t]he only post-Travelers case we have
found that holds ERISA preempts a mechanics' lien statute of general application is
[Trig Electric]."); Cent. Laborers' Pension Fund v. Nicholas & Assocs., Inc., 2011 IL
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App (2d) 100125, `` 32-45, 956 N.E.2d 609,353 Ill. Dec. 747 (noting that Trig
Electric now represents the "minority view" on this issue and citing no other courts
that currently adhere to its approach), cert denied, 132 S. Ct. 2380 (2012).
The Ninth Circuit Court of Appeals' analysis in Standard Industrial is
representative of these cases, and we find its reasoning persuasive. The court started
with the presumption laid out by the United States Supreme Court '"that Congress did
not intend ERISA to preempt areas of "traditional state regulation" that are quite
remote from the areas with which ERISA is expressly concerned."' Standard Indus.,
247 F.3d at 928-29 (quoting Rutledge v. Seyfarth, Shaw, Fairweather & Geraldson,
201 F.3d 1212, 1217 (9th Cir. 2000)). The court then turned to the test laid out by the
United States Supreme Court: a state law "'relates to"' ERISA-and is thus
preempted-if it has a '"connection with'" or a "'reference to'" ERISA plans. !d. at
925 (quoting Geweke Ford v. St. Joseph's Omni Preferred Care Inc., 130 F.3d 1355,
1358 (9th Cir. 1997)). "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." !d. (quoting Egelhoffv. Egelhoff, 532 U.S. 141, 147,
121 S. Ct. 1322, 149 L. Ed. 2d 264 (2001)). A statute has a '"connection with"'
ERISA if it "'implicates an area of core ERISA concern' and jeopardizes national
uniformity in plan administration." !d. (quoting Egelhoff, 532 U.S. at 147).
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Applying this rule to a state law that required public works projects to issue
payment bonds to ensure workers are paid for their labor, the court concluded that the
law had neither a "'connection with"' nor a '"reference to"' ERISA plans. Id. at 925-
26 (quoting Geweke Ford, 130 F.3d at 1358). The court reasoned that such laws do
not require the establishment of a separate plan or impose any reporting, disclosure,
funding, or vesting requirements for ERISA plans. ld. at 925. The court also pointed
out that the statute functions irrespective of any ERISA plans. !d. at 926. It is simply
a general law that ensures workers receive payment for their work on public projects
and has no special applicability to ERISA plans. Ultimately, the court concluded that
"the effect of this state regulated relationship on ERISA' s domain is too tenuous to
precipitate preemption under ERISA." ld. at 927. As described above, courts across
the country have come to the same conclusion.
This reasoning is sound and we now adopt it. These statutes are in place to
ensure that workers on public projects are paid for their work. They apply generally
to all workers on public projects, regardless of the type of work they perform or how
they are paid. The laws have nothing to do with regulating how pension plans operate
and thus do not encroach on ERISA' s territory.
11. These State Claims Are outside ERISA 's Scope and Thus Are Not
Alternative Enforcement Mechanisms
Generally, state statutes that provide plans and participants with alternative
mechanisms for enforcing ERISA obligations are preempted. Ingersoll-Rand Co. v.
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McClendon, 498 U.S. 133, 144, 111 S. Ct. 478, 112 L. Ed. 2d 474 (1990) (explaining
that Congress intended for Section 502(a) of ERISA, 29 U.S.C. § 1132(a), to provide
the "exclusive remedy for rights guaranteed under ERISA"). W.G. Clark argues that
chapters 39.08 and 60.28 RCW provide such alternative enforcement mechanisms, but
this same argument has been raised across the country and rejected time after time
because such statutes are not a mechanism for enforcing ERISA obligations. See, e.g.,
Bellemead Dev. Corp. v. NJ. State Council of Carpenters Benefit Funds, 11 F. Supp.
2d 500, 517 (D.N.J. 1998); Maui Prince Hotel, 81 Haw. at 499-500; Plumber's Local
458 Holiday Vacation Fund v. Howard Immel, Inc., 151 Wis. 2d 233, 238-39,445
N.W.2d 43 (1989). In rejecting this alternative mechanism argument, courts have
relied on the Mackey case, where the United States Supreme Court ruled that ERISA
did not preempt garnishment of ERISA plan benefits, just as it does not preempt "run-
of-the mill state-law claims such as unpaid rent, failure to pay creditors, or even torts
committed by an ERISA plan." 486 U.S. at 833. If plans are subject to such run-of-
the-mill state-law claims, they should also be able to file such claims themselves. See
Howard Immel, 151 Wis. 2d at 238-39. This is just such a general state law claim that
allows the trust fund to recover amounts owed to it, just like any other worker on a
public project.
More fundamentally, the argument that these statutes are alternative
enforcement mechanisms fails because state lien claims that apply to third parties are
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outside the scope of ERISA and thus not preempted. See Bellemead, 11 F. Supp. 2d at
517. ERISA regulates the responsibilities of employers and those administering
pension plans with the goal of"protect[ing] plan participants and beneficiaries from
abuses and mismanagement in the administration of employee pension and benefit
plans." Maui Prince Hotel, 81 Haw. at 493. Here, W.G. Clark is not an employer or
plan administrator and thus is not subject to ERISA obligations. W.G. Clark contends
that since it has no obligations under ERISA, state law cannot impose any similar
obligations. But the state laws at issue do not assign any ERISA-like obligations to
W.G. Clark. The state law has nothing to do with the administration or management
of a pension plan. It simply provides a mechanism to ensure that all workers on
public projects are paid the amounts they are owed. Ensuring workers are paid for
their work does not fall within the scope of ERISA.
Because we hold that ERISA does not preempt the Trusts' claims, we do not
reach their argument that to hold otherwise would violate their due process and equal
protection rights.
III. Stare Decisis
Finally, we take this opportunity to clarify how we apply the doctrine of stare
decisis when the United States Supreme Court provides additional guidance or
clarifies the proper analytical approach for a federal issue. Generally, under stare
decisis, we will not overturn prior precedent unless there has been "a clear showing
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that an established rule is incorrect and hannful." In re Rights to Waters of Stranger
Creek, 77 Wn.2d 649, 653, 466 P.2d 508 (1970). However, this court must have the
flexibility to consider emerging United States Supreme Court case law when
considering earlier decisions on federal issues. As the First Circuit thoughtfully
remarked when considering this issue,
stare decisis is neither a straightjacket nor an immutable rule; it leaves
room for courts to balance their respect for precedent against insights
gleaned from new developments, and to make informed judgments as to
whether earlier decisions retain preclusive force.
US. Fid. & Guar. Co., 215 F.3d at 142. The court observed that there are '"relatively
rare'" occasions when a court should eschew prior precedent in deference to
intervening authority. Id. at 141 (quoting Williams v. Ashland Eng'g Co., 45 F.3d
588, 592 (1st Cir. 1995)). We agree. The doctrine of stare decisis should not keep
this court from fully considering all United States Supreme Court guidance on federal
issues, even when the newer cases have not directly overruled or superseded prior
cases. See id. at 141-42.
Thus, we can reconsider our precedent not only when it is has been shown to be
incorrect and harmful but also when the legal underpinnings of our precedent have
changed or disappeared altogether. See United States v. Gaudin, 515 U.S. 506, 521,
115 S. Ct. 231 0, 13 2 L. Ed. 2d 444 ( 199 5) (declaring that stare decisis may yield
when a precedent's "underpinnings [have been] eroded[] by subsequent decisions of
[the] Court"); Planned Parenthood ofSe. Pa. v. Casey, 505 U.S. 833, 854-55, 112 S.
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Ct. 2791, 120 L. Ed. 2d 67 4 (1992) (observing that review of a precedent might be
justified when "related principles of law have so far developed as to have left the old
rule no more than a remnant of abandoned doctrine").
CONCLUSION
Merit was a reasonable interpretation of United States Supreme Court
precedent in 1994, but the United States Supreme Court has since narrowed its ERISA
preemption doctrine. Since the last time we considered the rule in Trig Electric, other
jurisdictions, including the Ninth Circuit Court of Appeals, have consistently held that
these types of state claims are not preempted by ERISA. Not only is their reasoning
persuasive, but the existing split encourages litigants to engage in blatant and harmful
forum shopping. We take this opportunity to update our approach to ERISA
preemption in light of these developments. We reverse the trial court's summary
judgment ruling and remand for further proceedings in accordance with this opinion.
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WE CONCUR:
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