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Varr v. Olimpia5/17/1996
COTTLE, P. J.
In this appeal, we are asked to determine whether Civil Code section 1917.220 is preempted by the Employee Retirement Income Security Act of 1974 (ERISA). (29 U.S.C.S. § 1001 et seq.) We hold that it is. We also hold that ERISA does not preempt California's general usury laws.
FACTS
In February 1988, plaintiff J. Anthony Varr retained the law firm of Olimpia, Whelan & Lively (the law firm) to represent him in a marital dissolution action. The law firm in turn retained McCahan, Helfrick, Thiercof & Butera Accountancy Corporation (the accounting firm) to provide accounting services and evaluate "the going business value of J. Anthony Varr Corporation . . . ."
The law firm has a profit sharing plan (the Plan), which is a qualified employee pension plan within the meaning of ERISA and the Internal Revenue Code. In February 1990, the Plan lent Varr $110,000 to pay for legal services rendered. In connection with the loan, Varr executed a promissory note secured by a deed of trust on real property in Scotts Valley. In October 1990, the accounting firm lent Varr $50,000 to pay for accounting services rendered. In connection with this loan, Varr executed a second promissory note, which was secured by a deed of trust on the same Scotts Valley property. The Plan later purchased Varr's note from the accounting firm. In March 1992, the Plan lent Varr another $19,531 to pay for additional legal services. Again, Varr executed a promissory note secured by the Scotts Valley property. All three notes bore interest at the rate of 11.5 percent per annum.
After Varr defaulted on the notes, the Plan initiated foreclosure proceedings. Varr filed an application in the trial court for a preliminary injunction to restrain the Plan and its agents from selling or attempting to sell the trust property, contending that the underlying obligations were usurious. The trial court denied Varr's application on the grounds "that California Civil Code § 1917.220 exempts Employee Retirement Income Security Act (ERISA) pension funds from the usury provision of California Constitution Article XV, § 1, plaintiff has an adequate remedy at law, and therefore plaintiff has not demonstrated that he has a reasonable probability of success on the merits."
Varr appeals from the denial of his application for preliminary injunction.
Discussion
A. The Scope of Federal Preemption Under ERISA
Section 514(a) of ERISA, which preempts "any and all State laws insofar as they . . . relate to any employee benefit plan . . . ." (29 U.S.C.S. § 1144(a)), is "virtually unique" among preemption provisions (Franchise Tax Bd. v. Laborers Vacation Trust (1983) 463 U.S. 1, 24, fn. 26 [77 L. Ed. 2d 420, 440, 103 S. Ct. 2841]) due to its extraordinary breadth ( FMC Corp. v. Holliday (1990) 498 U.S. 52 [112 L. Ed. 2d 356, 111 S. Ct. 403]).
The "breadth of § 514(a)'s pre-emptive reach is apparent from language" ( Shaw v. Delta Air Lines, Inc. (1983) 463 U.S. 85, 96 [77 L. Ed. 2d 490, 501, 103 S. Ct. 2890]), which was "chosen by Congress" to be " 'deliberately expansive.' " ( District of Columbia v. Greater Washington Board of Trade (1992) 506 U.S. 125, 129 [121 L. Ed. 2d 513, 520, 113 S. Ct. 580], quoting Pilot Life Ins. Co. v. Dedeaux (1987) 481 U.S. 41, 46 [95 L. Ed. 2d 39, 46-47, 107 S. Ct. 1549].)
"The key to § 514(a) is found in the words 'relate to.' " ( Ingersoll-Rand Co. v. McClendon, (supra) , 498 U.S. at p. 138 [112 L. Ed. 2d at p. 483].) "A law 'relates to' an employee benefit plan . . . if it has a connection with or reference to such a plan." ( Shaw v. Delta Air Lines, Inc., (supra) , 463 U.S. at p
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