142 Wn.2d 431, ELECTRICAL WORKERS v. TRIG ELECTRIC

Argued June 20, 2000. Decided November 16, 2000.

INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, LOCAL UNION No. 46, Appellant, v. TRIG ELECTRIC CONSTRUCTION COMPANY, ET AL., Respondents.

[1] Judgment - Summary Judgment - Review - Affirmance on Other Grounds. An appellate court may affirm a summary judgment on any basis supported by the record,

[2] Pensions - ERISA - Federal Preemption - "Relating to" Employee Benefit Plan - What Constitutes. For purposes of § 514(a) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. § 1144(a)), under which a state law that relates to an employee benefit plan is preempted by the Act, a state law "relates to" an employee benefit plan if it has reference to or a connection with such a plan.

[3] Labor Relations - Pensions - Labor Union Pension Funds Employer Contributions - Enforcement - Public Works Subcontractor. State law remedies for the collection of unpaid employee benefit contributions owed by a defaulting subcontractor on a public works contract are preempted by § 514(a) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. § 1144(a)).

[4] Public Contracts - Contractor's Bond - Right of Action - Employee Benefit Contributions. Unpaid employee benefit contributions owed by a defaulting subcontractor on a public works contract may not be recovered either from the contractor's bond under chapter 39.08 RCW or from the project retainage fund under chapter 60.28 RCW

[5] Courts - Stare Decisis - Supreme Court Holding - Overruling - Test. Under the doctrine of stare decisis, the Supreme Court will not overrule its own prior holding unless it is clearly established that the holding is incorrect and harmful.

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JOHNSON, SMITH, TALMADGE, and IRELAND, JJ., dissent by separate opinion.

Nature of Action: A labor union sought the enforcement of a lien claim against a contractor's bond and retainage fund on a public works contract to recover unpaid employee benefit contributions owed by a subcontractor on the project.

Superior Court: The Superior Court for King County, No. 98-2-26652-0, R. Joseph Wesley, J., on August 6, 1999, entered a summary judgment dismissing the action.

Supreme Court: Holding that the action was preempted by federal law, the court affirms the judgment.

Michael H. Korpi (of Donaldson, Kiel & McKenzie, P.S.), for appellant.

Michael H. Ferring (of Ferring Nelson, L.L.P.); John H. Parnass (of Davis Wright Tremaine); and Christine 0. Gregoire, Attorney General, and Spencer W. Daniels, Assistant, for respondents.

Terry R. Marston II on behalf of Associated General Contractors of Washington, amicus curiae.

Melvin R. Kang on behalf of Northwest Ironworkers Trust Funds, amicus curiae.

[As amended by order of the Supreme Court November 22,2000.1

SANDERS, J. - We here review an order of the King County Superior Court granting the motion of Lydig Construction Company and the Fidelity and Deposit Company of Maryland to dismiss the complaint of the International Brotherhood

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of Electrical Workers on summary judgment. Finding no issue of material fact and holding Lydig and Fidelity are entitled to judgment as a matter of law, we affirm the trial court's dismissal of appellant's claim on federal preemption grounds.

FACTS

Background

Appellant is Local Union No. 46 of the International Brotherhood of Electrical Workers (IBEW). Respondents are Lydig Construction, Inc. (Lydig), Fidelity and Deposit Company of Maryland (Fidelity), and Washington State Department of General Administration (GA). Trig Electrical Construction Co. (Trig) was Lydig's subcontractor. IBEW seeks to foreclose Lydig's general contractor's bond posted by Fidelity.

Lydig is a general construction contractor and has been doing business for over 40 years. It has been responsible for several notable building projects at leading educational institutions in this state. At issue here is Lydig's contract to build the State Archives Project at Bellevue Community College. Trig subcontracted with Lydig to perform the project's electrical work.

As required by chapter 39.08 RCW, Lydig acquired a surety bond from Fidelity to protect all workers, mechanics, subcontractors, and materialmen supplying material and performing labor on the project. Pursuant to chapter 60.28 RCW, the college withheld a portion of the contract price as a retainage trust fund.

A collective bargaining agreement between IBEW and Trig required Trig to contribute a portion of its workers' wages to benefit trust fund plans falling under the ambit of the federal Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461. Trig became delinquent on these contributions for the months of December 1997 and January 1998.

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On March 24, 1998, IBEW filed a lien notice asserting a claim against Lydig's bond and retainage trust fund for Trig's unpaid employee benefit contributions. On July 22, 1998, IBEW filed an amended lien notice identical to the previous notice except for the amount of interest and attorney fees claimed.

Procedural History

IBEW filed its lien foreclosure action against Lydig on October 27, 1998, for the required but unpaid contributions to the employee benefit funds. On July 9, 1999, Lydig and Fidelity moved for summary judgment arguing IBEW had no standing to foreclose on the lien and that ERISA preempted the action in any event. On August 6, 1999, the trial court granted defendants' motion for summary judgment and dismissed IBEW's complaint on the grounds that the lien notices were deficient and IBEW lacked standing to sue on behalf of Trig employees. IBEW timely filed a notice of appeal to the Supreme Court and we accepted review of this direct appeal.

ISSUE«1»

The dispositive issue before the court is whether ERISA preempts IBEW's lien foreclosure action under Puget Sound Elec. Workers Health & Welfare Trust Fund v. Merit Co., 123 Wn.2d 565, 870 P.2d 960 (1994), and if so, should we overrule Merit?

DISCUSSION

Standard of Review on Summary Judgment

[1] It is well settled that we review the record on

«1» IBEW assigns error generally to the trial court's dismissal of its case in summary judgment. While the parties brief the specific grounds for which the trial court granted summary judgment, viz., that IBEW lacked standing to bring the foreclosure action under chapters 39.08 and 60.28 RCW, see Clerk's Papers (CP) at 215-16 (Memorandum Decision), the standing issue is not essential to our holding. We therefore pass to the ERISA preemption question.

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summary judgment de novo, engaging in the same inquiry as the trial court. Benjamin v. Wash. State Bar Ass'n, 138 Wn.2d 506, 515, 980 P.2d 742 (1999). Because our review is de novo, we are free to premise our holding affirming summary judgment on an issue not decided by the trial court. See Redding v. Va. Mason Med. Ctr., 75 Wn. App. 424, 426, 878 P.2d 483 (1994) (an appellate court may affirm a trial court's disposition of a summary judgment motion on any basis supported by the record); see also LaMon v. Butler, 112 Wn.2d 193, 200-01, 770 P.2d 1027 (1989). Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Clements v. Travelers Indem. Co., 121 Wn.2d 243, 249, 850 P.2d 1298 (1993); CR 56(c).

There are no disputed material facts in this case. Rather we must determine a pure question of law: whether ERISA preempts IBEW's lien foreclosure action, which question turns on the continued validity of Merit. As counsel for Appellant conceded at oral argument, we must overrule Merit for IBEW to prevail.

The Continuing Validity of Merit

In a factually similar matter, this court six years ago unanimously held Washington's public works lien statutes, chapters 39.08 and 60.28 RCW, which provide a mechanism for collection of a defaulting subcontractor's obligations from the general contractor, are preempted by ERISA. Merit, 123 Wn.2d 565.

Chapter 39.08 RCW requires the execution and delivery of a performance bond with respect to public works construction projects:

Whenever any ... body acting for the state or any county or municipality or any public body shall contract with any person or corporation to do any work for the ... municipality, or other public body, city, town, or district, such ... body shall require the person or persons with whom such contract is made to make, execute, and deliver to such . . . body a good and

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sufficient bond, with a surety company as surety, conditioned that such person or persons shall faithfully perform all the provisions of such contract and pay all laborers, mechanics, and subcontractors and materialmen, and all persons who supply such person or persons, or subcontractors, with provisions and supplies for the carrying on of such work, which bond in cases of cities and towns shall be filed with the clerk or comptroller thereof, and any person or persons performing such services or furnishing material to any subcontractor shall have the same right under the provisions of such bond as if such work, services or material was furnished to the original contractor ....

RCW 39.08.010. Relating thereto, chapter 60.28 RCW requires the public body reserve a retainage fund from the money otherwise due the general contractor:

Contracts for public improvements or work, other than for professional services, by the state, or any county, city, town, district, board, or other public body, herein referred to as "public body", shall provide, and there shall be reserved by the public body from the moneys earned by the contractor on estimates during the progress of the improvement or work, a sum not to exceed five percent, said sum to be retained by the state, county, city, town, district, board, or other public body, as a trust fund for the protection and payment of any person or persons, mechanic, subcontractor or materialman who shall perform any labor upon such contract or the doing of said work, and all persons who shall supply such person or persons or subcontractors with provisions and supplies for the carrying on of such work .... Every person performing labor or furnishing supplies toward the completion of said improvement or work shall have a lien upon said moneys so reserved ....

RCW 60.28.010(1).

Section 514(a) of ERISA states with respect to state laws:

Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title.

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29 U.S.C. § 1144 (a) (1994). Furthermore, "[t]he term 'State law' includes all laws, decisions, rules, regulations, or other State action having the effect of law, of any State." 29 U.S.C. § 1144(c)(1).

In Merit, a group of benefit trust funds sued, as does IBEW herein, under chapters 39.08 and 60.28 RCW to foreclose on a lien against a general contractor's bond for unpaid benefit plan contributions owed to employees by an insolvent subcontractor. Merit, 123 Wn.2d at 567-68. We held the lien foreclosure actions were preempted by ERISA. Id. at 573.

[2-4] To determine whether the public works lien statutes "relate to" ERISA for the purposes of 29 U.S.C. § 1144(a), we looked to the test of Shaw v. Delta Air Lines, 463 U.S. 85, 103 S. Ct. 2890, 77 L. Ed. 2d 490 (1983). Under Shaw, a statute may "relate to" ERISA "if it has a connection with or reference to such a plan." Shaw, 463 U.S. at 97.

We believed the Washington public works lien statutes "connect with" and therefore "relate to" ERISA because they

create an entirely separate cause of action against the general contractors who otherwise have no contractual obligation to the plans. Furthermore, they provide a mechanism for funding employee benefit plans not available under the provisions of ERISA.

Merit, 123 Wn.2d at 572. Therefore the "enforcement and collection mechanisms of the lien statutes must yield to the extent they supplement those provided by ERISA." Id. at 573.

The civil enforcement mechanisms of ERISA are set forth at 29 U.S.C. § 1132(1994) and specifically empower a participant, beneficiary, or fiduciary of a benefit plan to bring a civil action to enforce the terms of the plan. 29 U.S.C. § 1132(a)(3)(B)(ii) (1994). Furthermore 29 U.S.C. § 1145 governs delinquent contributions by employers to employee benefit plans as set forth in collective bargaining agreements. In a nonpreempted enforcement action, then, a party would use 29 U.S.C. § 1132 (a) to enforce 29 U.S.C.

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§ 1145 against the delinquent employer.

As 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. 29 U.S.C. § 1144(a) (1994).

Under the holding of Merit, then, IBEW's action to enforce and collect on its lien against Lydig and Fidelity for Trig's delinquent payments into the employee benefit funds is preempted by ERISA. As noted above, IBEW's counsel conceded as much at oral argument. The question is, then, have subsequent developments in the law occurred which undermine our holding in Merit? IBEW argues both the United States Supreme Court and the Washington Supreme Court have departed from the strict rule of Merit that alternate enforcement mechanisms are preempted. Lydig and Fidelity argue Merit remains good law.

Not long after Merit, the United States Supreme Court in a series of cases attempted to develop a more helpful framework than Shaw's "refer to or connect with" test. IBEW cites N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 115 S. Ct. 1671, 131 L. Ed. 2d 695 (1995) for the proposition that the Supreme Court jettisoned a broad interpretation of ERISA preemption. Indeed, the Supreme Court later harkened back to Travelers for the proposition Congress in enacting ERISA's preemption clause did not intend to supplant existing state law. De Buono v. NYSA-ILA Med. & Clinical Servs. Fund, 520 U.S. 806, 813, 117 S. Ct. 1747, 138 L. Ed. 2d 21 (1997) (citing Travelers Ins. Co., 514 U.S. at 654-55). IBEW argues that after Travelers, overruling Merit would simply restore the status quo ante with respect to the public works lien statutes and employee benefit plans.

Last fall in In re Estate of Egelhoff, 139 Wn.2d 557, 989

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P.2d 80 (1999), cert. granted, 120 S. Ct. 2687 (2000), we took up the issue of whether ERISA preempted a Washington statute (RCW 11.07.010) giving children of decedents rights to the proceeds of employment-based life insurance plans. After a detailed analysis of the federal case law prior to and since Travelers we concluded, "The effect of Travelers and its progeny favors a retreat from the expansive preemption doctrine this court has previously followed to ensure ERISA's objective of protecting workers and Washington's sovereign interest in exercising its traditional police powers in the area of domestic relations and family law." Egelhoff, 139 Wn.2d at 570-71. This language . . the expansive preemption doctrine this Court has previously followed . . . .") bears on the validity of Merit by implication.

However IBEW places a great deal of emphasis on this kind of retreat language without analyzing the salient features of this case vis-a-vis Travelers, Egelhoff, and the cases from other jurisdictions which arguably retreat from a broad reading of ERISA's preemption language.

TravelersD-avelers itself expressly contemplates ERISA preemption in a case such as this where a state statute provides an enforcement mechanism for funding an ERISA plan supplemental to the provisions of ERISA itself. In Travelers, the Supreme Court expressly noted "state laws providing alternative enforcement mechanisms also relate to ERISA plans, triggering pre-emption" Travelers Ins. Co., 514 U.S. at 658 (citing Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 111 S. Ct. 478, 112 L. Ed. 2d 474 (1990)). Travelers Ins. Co., the case on which IBEW would have us overrule Merit, actually reaffirms the appropriateness of ERISA preemption in this kind of case.

Furthermore, Egelhoff is distinguishable from this case because here our task, as in Merit, involves delving into the relationship between Washington's public works lien statutes and ERISA, not the statute dealing with the distribution of nonprobate assets upon dissolution of marriage.

Even Egelhoff noted the distinction between it and those cases where "a state law which directly or Indirectly invades

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the core functions of ERISA regulation must give way to the comprehensive federal scheme favored by Congress under the four-factor approach of the Court of Appeals for the Ninth Circuit." Egelhoff, 139 Wn.2d at 575 n.93 referencing identification of "four factors to determine whether a state law has a 'connection with' an ERISA benefit plan . . . .") (citing Aloha Airlines v. Ahue, 12 F.3d 1498, 1504 (9th Cir. 1993)).

After an analysis of the same "connection with" case the Ninth Circuit followed in Aloha Airlines, we decided in Merit that chapters 39.08 and 60.28 RCW manifest a substantive invasion into the field ERISA occupies by creating a separate cause of action against general contractors otherwise without liability to the employees of a subcontractor under the benefit plans and by providing a non-ERISA enforcement mechanism for funding the plans. Merit, 123 Wn.2d at 572. Nothing in substantive ERISA law has changed in the intervening years between Merit and this case that alters our conclusion. As noted above, the public works lien statutes "directly or indirectly invade[] the core functions of ERISA regulation" by providing a civil enforcement mechanism beyond what Congress specified in ERISA. See generally 29 U.S.C. § 1132(a)(3).

Post-Travelers ERISA preemption decisions in other jurisdictions upon which IBEW relies are equally unpersuasive.

Several cases upon which IBEW relies involve general contractors liable on their bonds as employers. See Greenblatt v. Delta Plumbing & Heating Corp., 68 F.3d 561 (2d Cir. 1995) (ERISA did not preempt a surety bond claim against an employer's bond to enforce the terms of a collective bargaining agreement when employer was delinquent on benefit payments). However the Second Circuit noted, "Pre-emption may be proper, for example, when state laws 'mandate[] employee benefit structures or their administration' or 'provid[e] alternative enforcement mechanisms' to § 502(a)." Greenblatt, 68 F.3d at 574 (alteration in original) (emphasis added) (quoting Travelers Ins. Co., 514

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U. S. 645, 658). See also Bd. of Trs. of Operating Eng'rs Local 825 Fund Serv. Facilities v. L.B.S. Constr. Co., 148 N.J. 56 1, 691 A.2d 339 (1997) (ERISA did not preempt foreclosure action against a general contractor's bond for the general contractor's delinquent payments to a fringe benefit plan); Operating Eng'rs Health & Welfare Rust Fund v. JWJ Contracting Co., 135 F.3d 671 (9th Cir. 1998) (same). These cases are distinguishable because the bond foreclosure actions were against the delinquent employers themselves and did not attempt to shift liability to fund an ERISA plan to a third party. There is a significant difference between plaintiffs enforcing their rights against their employer's bond as opposed to applying a state lien law to recover benefit contributions from a third party to the contract rather than enforce rights under a contract.

Notably, the Ninth Circuit in JWJ distinguished itself from a case like ours:

The statutes involved in both Marjo and Tri Capital provided remedies against third parties who never directly agreed to make contributions to ERISA trust funds when the employer failed to do so. By making additional parties liable to plan employees, these state statutes expand remedies by offering additional substantive mechanisms beyond what was contemplated by ERISA to solve the problem for which ERISA was created. In contrast, as JWJ's surety, Continental's contractual agreement to issue payment bonds transfers the obligation from the employer to its underwriter, for the protection of employees, and does not expand the remedies provided or contemplated by ERISA. This contractual relationship merely substitutes obligors.

JWJ Contracting Co., 135 F.3d at 679. Yet, as we succinctly described in Merit:

By imposing liability upon general contractors who have not agreed to make contributions to ERISA funds, Washington's public works lien statutes regulate how ERISA plans are funded. Consequently, they relate to ERISA benefit plans and the provisions of ERISA that address the nonpayment of contributions by employers to employee benefit plans.

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Merit, 123 Wn.2d at 572.

Some recent United States Supreme Court cases cited by IBEW, and upon which we relied in Egelhoff, 139 Wn.2d at 569-70, are simply inapposite. See, e.g., De Buono, 520 U.S. 806 (ERISA does not preempt a New York state gross receipts tax on hospitals); Cal. Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., 519 U.S. 316,117 S. Ct. 832, 136 L. Ed. 2d 791 (1997) (ERISA does not preempt a California statute prohibiting a contractor on a public works project from paying an apprentice wage to an apprentice trained in an unapproved apprenticeship program). These cases differ from the instant case because, insofar as a lien foreclosure action under our public works lien statutes permits an alternative funding mechanism for the ERISA plans, such interferes with their administration well beyond the disparate fact patterns before the Supreme Court in De Buono and Dillingham.

In sum, the post-Merit and post-Travelers authority IBEW cites simply does not take this case outside of the preemptive scope of ERISA as recognized explicitly even in Travelers itself.

Stare Decisis

[5] Stare decisis " 'requires a clear showing that an established rule is incorrect and harmful before it is abandoned."' Waremart, Inc. v. Progressive Campaigns, Inc., 139 Wn.2d 623, 634, 989 P.2d 524 (1999) (quoting In re Rights to Waters of Stranger Creek, 77 Wn.2d 649, 653, 466 P.2d 508 (1970)). By failing to demonstrate a change in ERISA's preemptive force over state statutes providing an alternative enforcement mechanism to 29 U.S.C. § 1132(a), IBEW has not met this substantial burden. Merit remains good law.