Contractor Wins Key Ruling in Suit with Union Trust Funds over ERISA Preemption
The scenario is all too familiar to Washington general contractors -- a subcontractor neglects to make its fringe benefit contributions to union trust funds. The trust funds in turn threaten to file a lien against the GC's payment bond and foreclose under RCW 39.08.
In the Trig Electric case decided in 2000, our Supreme Court interpreted ERISA as preempting any such bond claim by union trust funds. That's the good news, at least for GCs.
The story gets complex because the 9th Circuit subsequently decided under ERISA that trust funds were allowed to bring such bond claims against the GCs surety, setting up a conflict between how the state and federal courts in Washington approach the same issue of federal law.
As a result, the issue can boil down to which forum controls the matter: if the issue is decided by the state court, the GC will ordinarily win. But if the case goes to federal court, the trust fund has the upper hand.
If a GC wants to enforce its rights, it will therefore bring a declaratory judgment action in state court against the trust fund, to obtain a ruling that its purported lien is preempted. The trust fund's response -- knowing the state venue is probably fatal -- is to remove to federal court. But the attached ruling -- which grants the GCs motion to remand such a case back to state court -- is a decisive victory for GCs in long-running battle with the trust funds over the risks associated with unpaid fringe benefit contributions. Download file
