Court Opinion

ID: 2714908
Source: CourtListenerOpinion
Date Created: 2014-08-06 17:03:44.683959+00
Date Added: 2024-06-11T09:49:37.644417
License: Public Domain

Fl L E
       IN CLfERI29 U.S.C. § 1144(a). At issue in this case is
WG. ClarkConstr. Co. v. Pac. Nw. Reg'! Council ofCarpenters
No. 88080-8

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

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