Opinion
Case No. CO1-1668C
September 4, 2002
ORDER
Defendants M.A. Mortenson Company, American Home Assurance Company and Federal Insurance Company move to dismiss plaintiffs' claims against them for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted (Dkt. No. 18). In addition, plaintiffs move to strike the affidavit of Jeanine M. Greco (Dkt. No. 25). For the reasons set forth below, defendants' motion to dismiss is DENIED and plaintiffs' motion to strike affidavit is DENIED.
BACKGROUND
Members of the Ironworkers District Council of the Pacific Northwest ("the Union") entered into a contract with P.L. Jones Construction MBE, Inc. ("Jones") for work on the University of Washington campus in Bothell ("the project"). Under the contract, Jones was required to contribute to trust funds ("Trust Funds") managed by the Trustees for the benefit of the Union's members. Jones was itself a subcontractor of the George Sollitt Corporation ("Sollitt").
Jones and the ironworkers began work on the project in or before January 1999. Jones, however, failed to make the required payments to the Trust Funds for the period January 1999 through June 1999. For reasons unexplained in the record, Sollitt terminated Jones' contract and signed its own agreement with the Union in June 1999. At that time, Jones was delinquent in its contributions to the Trust Funds.
Plaintiffs filed this suit against Sollit, as a successor employer to Jones, for Jones' delinquent benefit contributions under the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq ("ERISA") and the Labor Management Relations Act, 29 U.S.C. § 185 et seq ("LMRA"). Plaintiffs also assert claims against M.A. Mortenson, and American Home Assurance Company and Federal Insurance Company ("the Sureties") under RCW § 39.08. That statute requires public works contractors to execute and deliver bonds to secure payment to the workers on public works projects. RCW 39.08.030 provides a cause of action on the bond.
Plaintiff is seeking damages relating only to Jones' delinquent payments from the dates January 1999 through June 1999. Sollit does not appear to be delinquent in any payments due after June 1999.
Plaintiffs also filed claims against the State and against M.A. Mortenson based on RCW 60.28. By Stipulation and Order, filed July 23, 2002, these claims were dismissed. In light of the dismissal of the State, defendants' Eleventh Amendment argument is moot. As stated in the July 23 Order, M.A. Mortenson remains a defendant to the RCW § 39.08 claims.
The Union, the Trust Funds, and Sollilt are Washington citizens. The Trustees are Washington, Oregon. Alaska and Montana citizens. M.A. Mortenson Company is a Minnesota corporation. The American Home Assurance Company is a New York corporation and the Federal Insurance Company is an Indiana corporation.
ANALYSIS
I. DEFENDANTS' MOTION TO DISMISS
A. Subject Matter Jurisdiction
Defendants have moved to dismiss this action under Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction. The court has jurisdiction if the case raises a federal question or if the requirements for diversity jurisdiction are met. See 28 U.S.C. §§ 1331, 1332.
Federal question jurisdiction is present for plaintiffs' ERISA and LMRA claims because the claims arise out of federal law. Defendants argue that the Court has no jurisdiction over the state law claims because the requirements for diversity are not met. Diversity jurisdiction exists where all of the plaintiffs are citizens of different states than all of the defendants and the amount in controversy exceeds $75,000. See 28 U.S.C. § 1332.
Defendants contend that diversity jurisdiction is lacking because defendant Sollitt is a citizen of the same state (Washington) as some of the plaintiffs. This argument fails because Sollitt is not a party to the state law claims. The Ninth Circuit has made clear that the presence of a non-diverse litigant on some counts in a complaint does not destroy diversity with respect to other counts to which the litigant is not a party. Ross v. IBEW, 513 F.2d 840, 843 (9th Cir. 1975); see also Romero v. Int'l. Terminal Operating Co., 358 U.S. 354, 381 (1959) (diversity jurisdiction may be combined with other bases of jurisdiction in the same action).
In this case, Sollitt is only a party to the ERISA and LMRA claims, where jurisdiction is based on the presence of a federal question. The fact that Sollitt is a party to these claims has no effect on the availability of diversity jurisdiction for plaintiffs' state law claims against M.A. Mortenson and the Sureties. Because there is complete diversity among the parties to the state law claims, and because the amount in controversy exceeds $75,000, the Court has diversity jurisdiction over the state law claims.
The Court need not consider the parties' arguments regarding the propriety of supplemental jurisdiction because it finds that it has diversity jurisdiction over the state law claims.
B. Failure to state a claim
Defendants M.A. Mortenson and the Surety companies move to dismiss the bond claim under Federal Rule of Civil Procedure 12(b)(6). A claim may be dismissed either because it asserts a legal theory that is not cognizable or because it fails to allege sufficient facts to support a legal claim.SmileCare Dental Group v. Delta Dental Plan of Cal., Inc., 88 F.3d 780, 783 (9th Cir. 1996). Defendants base their motion on three grounds: 1) the Union lacks standing because the Union itself has suffered no damages, 2) the Union has not exhausted its administrative remedies, and 3) ERISA preempts the state bond statute, RCW § 39.08.
1. Standing
Defendants argue that the Union lacks standing to bring this action on behalf of its members because the Union does not allege any monetary injury to itself. In support of this argument, defendants citeIronworkers Dist. Council v. Univ. of Washington Board of Regents, 93 Wn. App. 735 (1999). However. the Washington Supreme Court overruledIronworkers in Int'l. Assn. of Firefighters, Local 1789 v. Spokane Airports, 146 Wn.2d 207, 216 (2002). Under the new rule set out inSpokane Airports, the Union has standing.
The defendants do not dispute that the plaintiff Trust Funds have standing, but the court in Crabtree v. Lewis, 86 Wn.2d 282, 286 (1975), held that trust funds do have standing to prosecute claims for unpaid fringe benefits under RCW § 39.08.
The court in Spokane Airports applied the three prong test established in Hunt v. Wash. State Apple Adver. Comm'n, 432 U.S. 333 (1977). That test provides that a union has standing to bring suit on behalf of its members when the following criteria are satisfied: (1) the members of the organization would otherwise have standing to sue in their own fight; (2) the interests that the union seeks to protect are germane to its purpose; and (3) neither the claim asserted nor the relief requested requires the participation of the organization's individual members. Id. at 343.
All three prongs are easily satisfied here. As to the first prong, the ironworkers have standing to sue in their own right for unpaid wages and benefits. As to the second prong, protection of the ironworkers' wages and benefits is germane to the Union's purpose. The third prong is also satisfied. This prong is a prudential limit on federal jurisdiction that courts employ to maximize administrative convenience and efficiency. Id. The prong is based on the recognition that the efficiencies gained by permitting an organization to pursue a claim on behalf of its members may be lost when the litigation requires a case-by-case inquiry into the circumstances surrounding each individual's claim. Id. In Spokane Airports, the court found that individualized inquiries would not be necessary because the damages were "certain, easily ascertainable, and within the knowledge of the defendant." 146 Wn.2d at 215-216. The same is true here. There is no dispute over the amount of money at issue, and defendant has identified no reason why the individual Union members would need to participate in the litigation. Because the Union easily meets the requirements set out in Spokane Airports, the defendants' standing argument must be rejected.
2. Exhaustion
Defendants argue in the alternative that the Court should not hear the Union's claims because the Union has not exhausted its administrative remedies. Defendants point to RCW 39.12.065, which permits a Union to file a complaint with the Department of Labor and Industries against a public works contractor who does not comply with RCW 39.08. Defendants raised this argument for the first time in their reply brief, Consequently, the argument is not properly before the Court. However the Court notes that the statute specifically provides that "The remedy provided by this section is not exclusive and is concurrent with any other remedy provided by law." RCW 39.12.65(l). Thus, the statute appears expressly to preclude defendants' exhaustion argument.
Even in their belated assertion of the exhaustion defense, defendants do not demonstrate that RCW 39.12.065 is actually available in this case. For example, RCW 39.12.065(l) requires that a complainant file its petition within thirty days of the "acceptance date of the public works contract." Defendants do not state whether this period has run and, if so, why plaintiffs' claims would still be precluded under their exhaustion theory.
3. Preemption
Defendants argue that ERISA preempts plaintiffs' RCW § 39.08 claims. In support of this argument, defendants rely on Int'l. Bhd. of Elec. Workers v. Trig Elec. Constr. Co., 142 Wn.2d 431 (2001). The court in Trig held that ERISA preempted a union's RCW § 39.08 bond suit. Defendants' reliance is misplaced, however, because federal law, not state law, governs questions of ERISA preemption. Mackey v. Lanier Collection Agengy, 486 US. 825, 830-831 (1988) ("ERISA preemption is a matter of federal law."); see also Stewart Org. Inc., v. Ricoh Corp., 487 U.S. 22, 27 (1988) ("[A] district court sitting in diversity must apply a federal statute that controls the issue before the court and that represents a valid exercise of Congress' constitutional powers"). Therefore, Trig is not binding on this Court. The issue of whether ERISA preempts RCW 39.08 is governed by the law of the Ninth Circuit.
Section 514(a) of ERISA provides that "[e]xcept as provided in subsection (b) of this section, the provisions of this [statute] shall supersede any and all state laws insofar as they may now or hereafter relate to any employee benefit plan" covered by the statute. 29 U.S.C. § 1144(a). None of the exceptions in subsection (b) are at issue in this case.
The analysis of ERISA preemption is prescribed by the U.S. Supreme Court's decision in New York State Conference of Blue Cross Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995) The Court inTravelers made clear that state laws are not preempted if they have only a "'tenuous, remote, or peripheral' connection with covered plans."Travelers, 514 U.S. at 661 (quoting District of Columbia v. Greater Wash. Bd. of Trade, 506 U.S. 125, 130 n. 1 (1992)). A court must begin its ERISA preemption analysis with the presumption that Congress did not intend to supplant state law. Travelers, 514 U.S. at 654. The proper analysis focuses on the "objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive."Travelers, 514 U.S. at 656. Congress' primary purpose in enacting ERISA was to ensure that workers receive promised pension benefits upon retirement and to eliminate the threat of conflicting state regulation of employee benefit plans. Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 510 (1981).
Before Travelers was decided in 1995, the Court had held that a state law "related to an employee benefit plan" if it had a "connection with" or made "reference to" such a plan. See, e.g., Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97 (1983). Under this expansive interpretation, the Court found that state laws having even remote effects on ERISA plans were preempted. Id.
Since Travelers, the Ninth Circuit has analyzed the "relates to" criterion by determining whether a state law (1) has a "connection with" or (2) a "reference to" employee benefit plans. Southern Cal. IBEW-NECA Trust Funds v. Standard Indus. Elec. Co., 247 F.3d 920, 925 (9th Cir. 2001). In determining whether an impermissible connection exists, the Ninth Circuit looks to the objectives of ERISA and the "nature of the effect of the state law on ERISA plans." Id. The Ninth Circuit has identified the following factors as significant in the determination of whether a state law is "connected with" an ERISA plan:
(1) whether the state law regulates the types of benefits of ERISA employee welfare; (2) whether the state law requires the establishment of a separate employee benefit plan to comply with the law; (3) whether the state law imposes reporting, disclosure, funding, or vesting requirements for ERISA plans; and (4) whether the state law regulates certain ERISA relationships, including the relationships between an ERISA plan and employer and, to the extent an employee benefit plan is involved, between the employer and employee.Operating Eng'rs Health and Welfare Trust Fund v. JWJ Contracting Co., 135 F.3d 671, 678 (9th Cir. 1998) (quoting Aloha Airlines, Inc. v. Ahue, 12 F.3d 1498, 1504 (9th Cir. 1993).
Moreover, 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." Standard Industrial, 247 F.3d at 925.
The Ninth Circuit has held that ERISA does not preempt California's public works bond statutes similar to RCW § 39.08. Standard Industrial, 247 F.3d at 927; JWJ, 135 F.3d at 679. In Standard Industrial, ERISA-regulated trust funds brought actions against surety companies for delinquent contributions for public works projects pursuant to state bond statutes nearly identical to those here. The Ninth Circuit rejected the defendant's ERISA preemption argument because the statutes at issue did not require the establishment of a new benefit plan and imposed no requirements on existing plans. In the absence of such a direct connection to an ERISA plan, the court found that any indirect effect the bond statutes might have on ERISA regulated relationships was too tenuous to warrant preemption. Id. at 927.
See Cal.Civ. Code §§ 3181 and 3249.
Under this analysis, it is clear that RCW 39.08 is not impermissibly "connected to" ERISA benefit plans. Like the statute at issue in Standard Industrial, RCW 39.08 does not regulate ERISA benefits, require the establishment of a separate benefit plan or impose new requirements for ERISA plans. While it is possible that the statute could be relevant to the relationship between the ERISA trust funds and the Surety companies, the Ninth Circuit has ruled that such an incidental intrusion into ERISA territory is too "tenuous, remote, or peripheral' to justify preemption.Standard Industrial, 247 F.3d at 927.
Moreover, it is clear that the RCW 39.08 does not impermissibly make "reference to" ERISA benefit plans. First, it does not refer to ERISA benefit plans on its face. Second, the Washington legislature could not have intended for it to refer to an ERISA plan because it was enacted in 1909, long before ERISA was enacted. Third, the statute applies whether or not the ironworkers participate in ERISA. Finally, the Washington statute regulates the enforcement of rights and obligations governed by state contract law and therefore concerns a subject area traditionally left to the states. The Ninth Circuit has held that district courts should be circumspect in finding ERISA preemption in areas traditionally left to state regulation. JWJ, 135 F.3d at 677. The controlling authority of Standard Industrial thus requires that defendants' ERISA preemption argument be rejected.
II. PLAINTIFFS' MOTION TO STRIKE AFFIDAVIT
Plaintiffs move to strike the affidavit of Jeanine M. Greco of American Home Assurance Co. Defendants submitted this affidavit with their reply brief to demonstrate that the Surety companies have no knowledge of the delinquent payments. Plaintiffs argue that the affidavit should be stricken under Fed.R.Civ.P. 6(d). Rule 6(d) provides service requirements for submitting affidavits, but is silent as to when reply affidavits must be filed. A court will not strike affidavits supporting a reply when they are filed simultaneously with the reply and do not prejudice the moving party. Peters v. Lincoln Elec. Co., 285 F.3d 456, 476 (6th Cir. 2002);Time Oil Co. v. Cigna Prop. Cas. Ins. Co., 743 F. Supp. 1400, 1406 (W.D.Wash. 1990); McGinnis v. Southeast Anasthesia Assoc., P.A., 161 F.R.D. 41, 42 (W.D.N.D. 1995).
Here, the affidavit was filed with the reply brief and the moving party has failed to show prejudice. Therefore, the Court will not strike the Jeanine M. Greco affidavit.
CONCLUSION
Based on the above considerations, defendants' motion to dismiss for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(l) is DENIED, and defendants' motion to dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6) is DENIED. Furthermore, plaintiffs' motion to strike affidavit under Fed.R.Civ.P. 6(d) is DENIED.