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Central Laborers' Pension Fund, North Central Illinois v. Nicholas and Associates

September 2, 2011

CENTRAL LABORERS' PENSION FUND, NORTH CENTRAL ILLINOIS
LABORERS' HEALTH AND WELFARE FUND, NORTHERN ILLINOIS ANNUITY FUND, ILLINOIS LABORERS' AND CONTRACTORS JOINT APPRENTICESHIP AND TRAINING FUND, MIDWEST REGION FOUNDATION FOR FAIR CONTRACTING, INC., NORTHERN ILLINOIS WELFARE FUND, INDUSTRY ADVANCEMENT FUND, LABORERS'- EMPLOYERS COOPERATION EDUCATION TRUST, VACATION FUND, MARKET PROMOTION FUND, ORGANIZATION FUND, AND LABORERS' LOCAL 32, PLAINTIFFS-APPELLANTS,
v.
NICHOLAS AND ASSOCIATES, INC., DEFENDANTS-APPELLEES (KMC MASONRY, LLC, DEFENDANT;
THE STATE OF ILLINOIS, INTERVENOR-APPELLANT).
LABORERS' PENSION FUND, LABORERS' WELFARE FUND OF THE HEALTH AND
WELFARE DEPARTMENT OF THE CONSTRUCTION AND GENERAL LABORERS' DISTRICT COUNCIL OF ) CHICAGO AND VICINITY, AND JAMES S. JORGENSEN, ADMINISTRATOR OF THE FUNDS, PLAINTIFFS-APPELLANTS,
v.
NICHOLAS AND ASSOCIATES, INC., AND KANELAND SCHOOL DISTRICT NO. 302, DEFENDANTS-APPELLEES (KMC MASONRY, LLC,
DEFENDANT;
THE STATE OF ILLINOIS,
INTERVENOR-APPELLANT.



Appeal from the Circuit Court of Kane County. No. 09-CH-4038 Honorable Alan W. Cargerman, Judge, Presiding. Appeal from the Circuit Court of De Kalb County. Honorable Kurt P. Klein, Judge, Presiding. No. 09-CH-344

The opinion of the court was delivered by: Justice Burke

JUSTICE BURKE delivered the judgment of the court, with opinion. Justices Schostok and Hudson concurred in the judgment and opinion.

OPINION

¶ 1 These consolidated appeals present the issue of whether the Mechanics Lien Act (770 ILCS 60/0.01 et seq. (West 2010)) is preempted by the Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. § 1001 et seq. (2006)). In separate litigation involving the same general contractor and subcontractor on two construction projects, the circuit courts of De Kalb County and Kane County ruled that ERISA preemption is affirmative matter compelling the involuntary dismissals of plaintiffs' mechanic's lien claims, under section 2-619(a)(9) of the Code of Civil Procedure (Code) (735 ILCS 5/2-619(a)(9) (West 2010)). We hold that ERISA does not preempt the Mechanics Lien Act, and therefore we reverse the involuntary dismissals of plaintiffs' mechanic's lien claims and remand the causes for further proceedings.

¶ 2 FACTS

¶ 3 Defendant Nicholas & Associates (Nicholas) signed contracts with Kaneland School District No. 302 (Kaneland School District) and De Kalb Community School District No. 428 (De Kalb School District) to serve as the general contractor for the construction of two new elementary schools. In turn, Nicholas hired defendant KMC Masonry, LLC (KMC), as a subcontractor to perform masonry work on both projects. KMC secured labor for the project by entering into collective bargaining agreements (CBAs) with plaintiffs Laborers' Local 32 and Laborers' Welfare Fund of the Health and Welfare Department of the Construction and General Laborers' District Council of Chicago and Vicinity. The CBAs required KMC to make monetary contributions to the other plaintiffs, and we assume for purposes of analysis that those plaintiffs qualify as multiemployer benefit plans under ERISA (the funds). See 29 U.S.C. §§ 1002(3), (37)(A) (2006). By signing the CBAs, KMC also agreed to become a party to the various agreements and trust declarations that governed the funds. KMC allegedly breached the CBAs by failing to pay the mandatory contributions.

¶ 4 On May 6, 2009, plaintiffs Laborers' Pension Fund and Laborers' Welfare Fund of the Health and Welfare Department of the Construction and General Laborers' District Council of Chicago and Vicinity, and James S. Jorgensen, the administrator of those funds (Kane plaintiffs), sued KMC in the United States District Court for the Northern District of Illinois to recover the unpaid contributions. Specifically, the Kane plaintiffs brought an action under section 1145 of ERISA (29 U.S.C. § 1145 (2006)), which requires signatories to a CBA to "make contributions to a multiemployer plan *** in accordance with the terms and conditions of *** such agreement." On June 19, 2009, the district court entered a default judgment against KMC in the amount of $279,725, which purportedly included KMC's unpaid contributions to the funds, unpaid union dues, penalties, attorney fees, and costs, as required by section 1132(g) of ERISA. 29 U.S.C. § 1132(g) (2006).

¶ 5 A. Appeal No. 2-10-0125 (De Kalb)

¶ 6 On August 21, 2009, plaintiffs Central Laborers' Pension Fund, North Central Illinois Laborers' Health and Welfare Fund, Northern Illinois Annuity Fund, Illinois Laborers' and Contractors Joint Apprenticeship and Training Fund, Midwest Region Foundation for Fair Contracting, Inc., Northern Illinois Welfare Fund, Industry Advancement Fund, Laborers'-Employers Cooperation Education Trust, Vacation Fund, Market Promotion Fund, Organization Fund, and Laborers' Local 32 (De Kalb plaintiffs), filed in the circuit court of De Kalb County a complaint for an accounting on a mechanic's lien against Nicholas and KMC.

¶ 7 The complaint alleged that Nicholas contracted with the De Kalb School District to serve as the general contractor in building the Cortland Elementary School and that Nicholas hired KMC to perform masonry work on the Cortland project. The complaint alleged that KMC employees performed labor on the Cortland project from November 2008 through April 2009 and that the CBA required KMC to pay fringe benefits to the De Kalb plaintiffs for each hour worked. KMC allegedly breached the CBA by failing to pay the contributions. On July 19, 2009, the De Kalb plaintiffs gave Nicholas, KMC, and the De Kalb School District notice of a claim for a mechanic's lien for $130,613, representing the amount of the fringe benefit contributions that KMC had allegedly failed to make, as well as additional costs, damages, and attorney fees.

¶ 8 KMC did not respond to the complaint, but Nicholas filed a motion to dismiss under section 2-619 of the Code, arguing that the mechanic's lien claim was preempted by ERISA. On January 12, 2010, the circuit court of De Kalb County granted Nicholas's motion and dismissed the complaint on the ground of preemption. The court entered a written finding that, pursuant to Illinois Supreme Court Rule 304(a), there was no just cause to delay enforcement or appeal or both. See Ill. S. Ct. R. 304(a) (eff. Feb. 26, 2010). The De Kalb plaintiffs filed a notice of appeal, and we docketed the matter under appeal No. 2-10-0125.

¶ 9 B. Appeal No. 2-10-0191 (Kane)

¶ 10 On October 20, 2009, the Kane plaintiffs filed in the circuit court of Kane County a complaint for an accounting on their mechanic's lien against Nicholas, KMC, and Kaneland School District. The complaint alleged that, from February 2009 through May 2009, KMC's employees performed union work on the project under KMC's contract with Nicholas, but KMC failed to pay $131,504 into the funds as required by the CBA.

¶ 11 The complaint alleged that, on July 24, 2009, plaintiffs served Nicholas, KMC, and Kaneland School District with a notice of a lien claim on a public improvement (see 770 ILCS 60/23 (West 2010)) and a bond claim (see 30 ILCS 550/1, 2 (West 2010)). At the time of the notice, Kaneland School District allegedly still was in possession of all the amounts due under its contract with Nicholas, and before that time, no payment, voucher, or other evidence of indebtedness had been made. Therefore, the Kane plaintiffs alleged that the lien attached all of Kaneland School District's money, bonds, and warrants that it held for payment for the project.

¶ 12 The complaint sought (1) an accounting of the amounts owed to the funds, including interest and costs; (2) an order directing Nicholas to pay the amount due; and (3) the entry of a lien on all of Kaneland School District's money, bonds, and warrants that were due or would become due to Nicholas; and (4) an order directing Kaneland School District to pay the amount due plus interest and costs.

¶ 13 As in the De Kalb County matter, KMC did not respond, but on December 4, 2009, Nicholas and Kaneland School District moved to dismiss the complaint under section 2-619(a)(9) of the Code on the ground that ERISA preemption is affirmative matter that defeats the Kane plaintiffs' claim under the Mechanics Lien Act. See 735 ILCS 5/2-619(a)(9) (West 2010). Citing Construction & General Laborers' District Council v. James McHugh Construction, 230 Ill. App. 3d 939 (1992), Nicholas and Kaneland School District argued that ERISA preemption bars any claim to compel a general contractor to make fringe benefit contributions for its subcontractor. Nicholas and Kaneland School District also submitted documentary evidence of the $279,725 default judgment entered against KMC in federal district court.

ΒΆ 14 On February 9, 2010, the trial court dismissed the complaint with prejudice, based on ERISA preemption. The court directed Kaneland School District to release the money that had been held for plaintiffs' lien claim, but the court stayed the release for 30 days. Because the dismissal applied to Nicholas and Kaneland School District and not to KMC, the court entered a written finding that there was no just reason for delaying either enforcement or appeal or both. See Ill. S. Ct. R. 304(a) (eff. Feb. 26, 2010). On February 23, 2010, the Kane plaintiffs filed a timely notice of appeal, and we docketed the matter under appeal ...


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