Majority
Terry Cairy is charged with a violation of Labor Code section 227 which makes it a crime to willfully, and with intent to defraud, fail to make payments to an employee pension fund as required by the terms of a collective bargaining agreement.[1]
Cairy demurred to the information on the ground section 227 is preempted by the Federal Employee Retirement Income Security Act (ERISA) ( 29 U.S.C. § 1001 et seq.). Cairy relies on 29 United States Code section 1144(a) which provides ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan...” The People contend section 227 does not fall within the ERISA preemption provision because it is not a law “which purports to regulate, directly or indirectly, the terms and conditions of employee benefit plans....” ( 29 U.S.C. § 1144 (c)(2).) Furthermore, the People contend, even if section 227 would otherwise be preempted, it falls within the savings clause which excepts from preemption “any generally applicable criminal law of a State.” ( 29 U.S.C. § 1144 (b)(4).)
After Cairy’s demurrer was overruled, we issued an alternative writ of mandate and a stay of proceedings in order to consider the preemption question. We have concluded ERISA preempts Labor Code section 227, precluding Cairy’s prosecution under that section.
The People first contend section 227 is not a law “which purports to regulate, directly or indirectly, the terms and conditions” of a pension plan. ( 29 U.S.C. § 1144 (c)(2).) They contend section 227 does not regulate terms and conditions because it does not come into play until after the plan has been adopted and it does not attempt to prescribe what terms and conditions the plan must contain.
We cannot accept such a narrow interpretation of the ERISA preemption provision. In Pacific Airmotive Corp. v. First Interstate Bank (1986) 178 Cal.App.3d 1130 , 1136 [ 224 Cal.Rptr. 233 ], we reviewed the legislative history of the ERISA preemption provision and the Supreme Court decisions construing it. We concluded, “It is now settled section 1144 does not preempt only state laws dealing with subject matters specifically covered by
1 Labor Code section 227 provides in relevant part: “Whenever an employer has agreed with any employee to make payments to a health or welfare fund, pension fund or vacation plan, or other such plan for the benefit of the employees, or a negotiated industrial promotion fund, or has entered into a collective bargaining agreement providing for such payments, it shall be unlawful for such an employer willfully or with intent to defraud to fail to make the payments required by the terms of any such agreement.”
As both Alessi and Pilot Life demonstrate, the preemption provision is not limited to state laws that come into play before the plan is adopted or that attempt to prescribe the terms and conditions of the plan. Both cases involved the application of state laws to existing employee benefit plans. The state laws in Pilot Life made no attempt to dictate the provisions of an employee benefit plan. Rather they were being used by the plaintiff in an attempt to enforce the terms and conditions of the plan.
Section 227 “regulates” the terms and conditions of employee benefit plans to the common sense meaning of that word. “Regulate” means “to control or direct according to a rule.” (American Heritage Dict. (1976) p. 1096.) It is axiomatic, therefore, the power to regulate includes the power to enforce. (See, e.g., Pac. Legal Found, v. State Energy Resources, etc. (9th Cir. 1981) 659 F.2d 903 , 926.) Here the state is attempting directly to regulate the terms and conditions of a pension plan by using its criminal law to obtain compliance with those terms and conditions (i.e., to “control or direct” an employer’s behavior in relation to terms and conditions of the pension plan). Thus, section 227 is preempted by ERISA unless it falls within the exception for “generally applicable” criminal laws of the state.
The majority of courts construing 29 United States Code section 1144(b)(4) have held that “generally applicable” criminal laws are laws that are intended to apply to conduct generally, such as laws against larceny and embezzlement, and that laws which impose criminal sanctions for failure to make contributions to an employee benefit plan, such as Labor Code section 227, are not “generally applicable” criminal laws of a state. (Sforza v. Kenco Constructional Contracting, Inc. (D.Conn. 1986) 629 F.Supp. 489 ; Tr., Sht.
The minority view expressed in Goldstein, Sasso, and Nat. Metal Crafters, supra, is that a law is of general applicability if it extends to the entire state and embraces all persons or things of a particular class. (Goldstein, supra, 417 N.Y.S.2d at p. 374.) As we explain below, this definition embraces every state criminal law and nullifies the ERISA preemption provision insofar as criminal laws are concerned.
We agree with the majority view that Congress intended to preempt criminal laws directed specifically at employee benefit plans. This conclusion is consistent with the language of ERISA, its legislative history, and its construction by the United States Supreme Court.
The sweeping language of 29 United States Code section 1144(a) preempting “any and all State laws” which “relate to” any employee benefit plan would have precluded the state from prosecuting an employer who steals money from an employee benefit plan whether the employer was prosecuted under the state’s general theft statute or a specific statute aimed at thefts from pension plans. (Commonwealth v. Federico, supra, 419 N.E.2d at p. 1378.) If both types of laws are exempted from the preemption provision then the phrase “generally applicable” has no meaning. The exception to preemption for generally applicable criminal laws becomes necessary only if there is a distinction between such laws and laws specifically designed to affect employee benefit plans. Every criminal law, if it is constitutional, is “general” in the sense that it applies to some class of circumstances rather than to specific acts of a specific individual. (Tr., Sht. Met. Wkrs. Wel. Fund v. Aberdeen BSM Wkrs., supra, 559 F.Supp. at p. 563.) We cannot attribute to Congress the purpose either to except from preemption all the criminal laws of the states or to preempt only bills of attainder.[2]
The legislative history is slim on the question of what constitutes a generally applicable criminal law for purposes of 29 United States Code section
2 The People suggest a state criminal law which applies to only one category of employers, e.g., pharmacists, would be an example of a criminal law not “generally applicable.” (See Blue Cross v. Peacock’s Apothecary, Inc., supra, 567 F.Supp. at p. 1276.) But, it could be argued just as well such a law is a law of general applicability because it applies to all pharmacists throughout the state.
The United States Supreme Court has not construed the term “generally applicable” criminal law as used in section 1144(b)(4). However, the Court has recognized on several occasions “that the express pre-emption provisions of ERISA are deliberately expansive, and designed to ‘establish pension plan regulation as exclusively a federal concern.’ ” (Pilot Life, supra, 481 U.S. at p._ [95 L.Ed.2d at p. 46, 107 S.Ct. at p. 1552]; see also Alessi v. Raybestos-Manhattan, Inc., supra, 451 U.S. at p. 523 [68 L.Ed.2d at pp. 416-417]; Shaw v. Delta Air Lines, Inc. (1983) 463 U.S. 85 , 98 [ 77 L.Ed.2d 490 , 501-502, 103 S.Ct. 2890 ].) We doubt the court would strain to give section 1144(b)(4) the all-encompassing interpretation urged by the People in the case at bar.
Our decision does not mean Mr. Cairy is immune from prosecution under California law for his alleged actions in this case. As the People point out, he may be subject to prosecution under California’s general theft statute, Penal Code section 484, or some other generally applicable criminal laws of the state. At this point it would be improper for us to express any views on the propriety of some further prosecution.
Disposition
The petition is granted. Let a peremptory writ of mandate issue directing the Los Angeles County Superior Court to vacate its order of December 5, 1986, overruling petitioner’s demurrer to the information in case number
Lillie, P. J., and Thompson, J., concurred.
The petition of real party in interest for review by the Supreme Court was denied September 23, 1987.
Cases cited
- Pacific Airmotive Corp. v. First Interstate Bank 178 Cal.App.3d 1130 at 1136 p. 842
- Alessi v. Raybestos-Manhattan, Inc. 451 U.S. 504 p. 843
- Pilot Life Insurance v. Dedeaux 481 U.S. 41 p. 843
- Goldstein v. Mangano 99 Misc.2d 523 p. 844
- Sasso v. Vachris 116 Misc.2d 797 p. 844
- Shaw v. Delta Air Lines, Inc. 463 U.S. 85 at 98 p. 845