Peter Schuman et al v. Microchip Technology Incorporated et al, No. 4:2016cv05544 - Document 185 (N.D. Cal. 2023)

Court Description: ORDER GRANTING IN PART AND DENYING IN PART 163 MOTION FOR SUMMARY JUDGMENT. Show Cause Response due by 9/15/2023. Signed by Judge Haywood S. Gilliam, Jr. on 8/23/2023. (ndr, COURT STAFF) (Filed on 8/23/2023)

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Peter Schuman et al v. Microchip Technology Incorporated et al Doc. 185 1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 PETER SCHUMAN, et al., Plaintiffs, 8 v. 9 10 MICROCHIP TECHNOLOGY INCORPORATED, et al., 11 Case No. 16-cv-05544-HSG ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR SUMMARY JUDGMENT Re: Dkt. No. 163 United States District Court Northern District of California Defendants. 12 Pending before the Court is the motion for summary judgment filed by Defendants 13 14 Microchip Technology, Inc., Atmel Corporation, and Atmel Corporation U.S. Severance 15 Guarantee Benefit Program. Dkt. No. 163. The motion was held in abeyance while the case was 16 stayed, and the parties completed the briefing and the Court heard argument once the stay was 17 lifted. For the reasons detailed below, the Court GRANTS IN PART and DENIES IN PART the 18 motion. 19 I. BACKGROUND 20 A. 21 The parties are familiar with the facts of this case, and many remain undisputed. Plaintiffs 22 are a certified class of 220 former employees of Defendant Atmel Corporation.1 See Dkt. No. 122 23 (order granting class certification); see also Dkt. 107 at 6, n.4; Dkt. 134 at 14, n.7. In July 2015, 24 Atmel created the U.S. Severance Guarantee Benefit Program (“Plan” or “Atmel Plan”). See 25 Berman v. Microchip Technology Inc., Case No. 17-cv-01864-HSG, Dkt. No. 157 at 4115–19. 26 The cover letter distributed with the Plan said that Atmel recognized there “ha[d] been significant Factual Background 27 28 1 The nine plaintiffs in the related action, Berman v. Microchip Technology Inc., Case No. 17-cv01864-HSG, did not sign any release agreements, and the parties settled that case in April 2023. Dockets.Justia.com 1 market speculation regarding possible transactions involving the company,” and that “such rumors 2 can be distracting and unsettling.” Id. at 4117. The letter further explained that the Plan was 3 “intended to ease concerns among [] employees” and allow them to “focus[] on [the company’s] 4 continued success.” See id. 5 6 7 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 The relevant terms of the Plan are as follows: Term of the Severance Guarantee Benefit Program: The U.S. Severance Guarantee Benefit Program is effective from July 1, 2015 and will terminate on November 1, 2015 unless an Initial Triggering Event (as described below) has occurred prior to November 1, 2015, in which event the U.S. Severance Guarantee Benefit Program will remain in effect for 18 (eighteen) months following that Initial Triggering Event. Eligibility: Eligibility is limited to U.S.-based employees of Atmel Corporation as of the date a Change of Control is consummated. Initial Triggering Event: Benefits under the U.S. Severance Guarantee Benefit Program will become available to eligible employees only if the Company enters into a definitive agreement (a “Definitive Agreement”), on or before November 1, 2015, that will result in a Change of Control of the Company. If a Definitive Agreement is not entered into on or before that date, the U.S. Severance Guarantee Benefit Program described in the letter and this Addendum will automatically expire, unless expressly extended by the Company’s Board of Directors. Benefits Conditions: After an Initial Triggering Event occurs that makes available to eligible employees the U.S. Severance Guarantee Benefit Program, participants will then be entitled to receive cash payments and COBRA benefits if, but only if: 19 (A) A Change of Control actually occurs; and 20 (B) Their employment is terminated without “Cause” by the Company (or its successor) at any time within 18 months of the execution date of the Definitive Agreement. 21 22 23 24 For purposes of this U.S. Severance Guarantee Benefit Program, the definition of “Change of Control” and “Cause” will be the same as that contained in the Company’s Senior Executive Change of Control and Severance Plan. 25 Id. at 4115. The Plan further states that Atmel’s successor would “assume the obligations” of the 26 Plan. Id. at 4116. The Plan therefore created three conditions precedent to Plaintiffs’ entitlement 27 to severance benefits: (1) an Initial Triggering Event occurred before November 1, 2015; (2) a 28 Change of Control actually occurred; and (3) Plaintiffs were terminated without cause. Id. at 2 United States District Court Northern District of California 1 4115. The parties in both Berman and Schuman disputed whether the first condition was met 2 because the eventual “Change of Control” did not involve the same company that entered into a 3 “Definitive Agreement with Atmel before November 1, 2015.” 4 In September 2015, Atmel entered into an agreement with Dialog Semiconductor, under 5 which Dialog would acquire Atmel. See Dkt. No. 152 at 2202–48. However, before the merger 6 with Dialog closed, Atmel received a competing offer from Defendant Microchip Technology Inc. 7 See id. at 2250–51. During this time, Atmel’s then-Senior Vice President of Global Human 8 Resources, Suzy Zoumaras, sent a letter to employees—including the named Plaintiffs in this 9 case—stating that the Atmel Plan “continues to remain in place.” See Berman, Dkt. No. 152 at 10 419; see also Dkt. No. 176-1, Ex. B at 25:1–27:24. The letter further reminded employees of the 11 benefits they may be eligible for if terminated following “an acquisition by Dialog or Microchip.” 12 See id.; see also Dkt. No. 176-1, Ex. C at 24:2–16 (Atmel CEO Steve Laub explaining that he 13 communicated to employees “their severance agreements would be effective if Microchip turned 14 out to be the acquirer”). Ultimately, Dialog did not make a new offer, and Atmel entered into a 15 new agreement with Microchip in January 2016. See Dkt. No. 29 at ¶ 36. In February 2016, 16 Atmel’s Human Resources Department circulated a “Frequently Asked Questions” document to 17 employees regarding “compensation & benefits relating to the Microchip merger.” Dkt. No. 176- 18 2, Ex. S at 421–22. The document stated that “Microchip has agreed to honor each of your 19 employment and compensatory contracts agreements”—including severance agreements—“that 20 are in effect immediately prior to the closing of the transaction.” Id. (emphasis added). 21 Employees continued to raise concerns about the applicability of the Atmel Plan to the Microchip 22 merger. See, e.g., Dkt. No. 163-1, Ex. 2 at ¶ 13; Dkt. No. 163-1, Ex. 3 at ¶¶ 11–12; Dkt. No. 163- 23 1, Ex. 4 at ¶¶ 8–20. The merger between Atmel and Microchip ultimately closed in April 2016. 24 See Dkt. No. 29 at ¶ 36. 25 Following the merger, Microchip’s CEO—and the new CEO of Atmel—Steve Sanghi held 26 an “all-hands” meeting for Atmel employees, during which he explained that the Atmel Plan had 27 expired and Microchip would not honor its terms. See Dkt. No. 176-1, Ex. E at 65:24–77:20. He 28 also had a PowerPoint presentation explaining Microchip’s interpretation of the Plan. Id. at 3 United States District Court Northern District of California 1 67:17–23. According to William Coplin, one of the named Plaintiffs, Mr. Sanghi asserted that 2 “Atmel employees would have to fight him in court if they wanted to challenge him on their 3 entitlement to benefits under the [Atmel] Plan.” See Dkt. No. 176-1, Ex. R at 256–57. Mr. Sanghi 4 also explained that Microchip was nevertheless willing to offer terminated Atmel employees 50 5 percent of the benefits provided by the Atmel Plan in exchange for signing a release of any claims 6 under the original Atmel Plan. See Dkt. No. 176-1, Ex. E at 65:24–77:20. 7 Plaintiffs in this case were terminated without cause following the merger with Microchip 8 and offered reduced severance benefits. See, e.g., Dkt. No. 163-1, Ex. R to Ex. 1 at 815–820. As 9 relevant to this case and Defendants’ motion for summary judgment, 215 of the 220 Plaintiffs 10 signed a release in exchange for a portion of the severance benefits provided for by the Atmel 11 Plan.2 See, e.g., Dkt. No. 176-2, Ex. R at 410–13. The cover letter to the offer explained that 12 “[t]he Company and Microchip are making this offer, in part to resolve any current disagreement 13 or misunderstanding regarding severance benefits previously offered by the Company . . . .” See 14 Dkt. No. 163-1, Ex. R to Ex. 1 at 815. The letter further states that the agreement “supersedes any 15 other actual or perceived promises, warranties, or representations . . . including, for the avoidance 16 of doubt, any programs, policies, or agreements with respect to severance or equity acceleration 17 benefits made prior to April 4, 2016.” Id. at 816. The release itself states in relevant part: 18 19 You agree to release the Company, its subsidiaries and affiliates, and its and their officers, agents and employees from any liability related to or arising out of your employment with any of them. This includes a release of any liability for claims of any kind that you ever had or may have at this time, whether you know about them or not. This release is as broad as the law allows and includes a release of claims under federal and state laws, such as anti-discrimination, harassment and retaliation laws and expressly includes any claims under the Age Discrimination in Employment Act. This release also includes a release of any tort and contract claims, and any other claims that could be asserted under federal, state or local statutes, regulations or common law. 20 21 22 23 24 25 26 27 28 2 Five class members in this case, like those in the Berman case, did not sign a release. See Dkt. No. 176 at 1; see also Dkt. 107 at 6, n.4. 4 1 United States District Court Northern District of California 2 See id. at 818 (emphasis added). Despite signing these releases, named Plaintiffs Peter Schuman and William Coplin filed 3 this class action in September 2016. See Dkt. No. 1. The parties then agreed to give Plaintiffs an 4 opportunity to exhaust ERISA’s administrative claims process and to file an amended complaint. 5 See Dkt. No. 27. Plaintiffs accordingly submitted claims for severance benefits under the Atmel 6 Plan, and the plan administrator denied their claims. See Dkt. No. 176-1, Ex. R at 600–03, 1900– 7 03. The denial letters stated that Plaintiffs were “not eligible for benefits under the Atmel 8 Severance Plan” because the Plan had “automatically expired on November 1, 2015.” Id. The 9 letters further acknowledged Plaintiffs’ requests for recission of the releases, but the plan 10 administrator concluded that Plaintiffs had not supported the request, and in any event, because 11 Plaintiffs were “not eligible for benefits under the Atmel Severance Plan,” the releases were “not 12 relevant” to their claims for benefits. Id. Plaintiffs’ administrative appeals were also denied. See 13 Dkt. No. 176-2, Ex. V at 117–19, 135–37. Again, the letters explained that Plaintiffs were “not 14 eligible for benefits under the Atmel Severance Plan” because it had expired. Id. 15 Plaintiffs then filed an amended complaint in this case. See Dkt. No. 29 (“FAC”). 16 B. 17 In the FAC, Plaintiffs alleged that Defendants (1) breached their fiduciary duties by Procedural History 18 misinterpreting the severance agreements as having expired and encouraging Plaintiffs to sign 19 releases in exchange for reduced severance benefits, in violation of ERISA § 404(a), 29 U.S.C. 20 § 1104(a); (2) improperly denied their claims for benefits, in violation of ERISA § 502(a)(1)(B), 21 29 U.S.C. § 1132(a)(1)(B); and (3) interfered with their right to recover benefits payments, in 22 violation of ERISA § 510, 29 U.S.C. § 1140. See id. at ¶¶ 82–111. In addition to benefits under 23 the Atmel Plan, Plaintiffs also sought several forms of equitable relief based on the alleged breach 24 of fiduciary duty. See id. at ¶¶ 93–97. In February 2018, the Court granted in part and denied in 25 part Defendants’ motion to dismiss, narrowing the scope of the case. See Dkt. No. 54. The Court 26 dismissed Plaintiffs’ third cause of action for interference with claim benefits, and also dismissed 27 several of the forms of equitable relief that Plaintiffs sought as duplicative of their claim for 28 benefits under the Atmel Plan. Id. at 16–25. And as relevant to Defendants’ argument regarding 5 1 the enforceability of the releases that Plaintiffs signed in this case, see Section III.A below, the 2 Court interpreted Plaintiffs’ request to void the releases as a claim for recission. See id. at 22–24. 3 However, the Court dismissed the recission claim because Plaintiffs failed to allege that they 4 offered to tender the partial severance benefits that they received by signing the releases. Id. 5 6 (2) denial of claim benefits. Plaintiffs also seek injunctive relief preventing Microchip from 7 enforcing the releases it obtained and from soliciting new releases. See FAC at ¶¶ 93–97; see also 8 176 at 3 (“[T]he appropriate equitable remedy . . . is an order enjoining the enforcement of 9 Microchip’s wrongfully obtained releases . . . .”). 10 United States District Court Northern District of California The operative complaint thus contains claims for (1) breach of fiduciary duty and In response to the FAC, Defendants filed a counterclaim for equitable relief under ERISA 11 § 502(a)(3) to enjoin Plaintiffs from dissipating benefits received and estopping them from 12 pursuing their claims in this case. See Dkt. No. 59. In March 2019, the Court granted Plaintiffs’ 13 motion to dismiss Defendants’ counterclaim. See Dkt. No. 103. The Court explained that 14 regardless of the effect that any release may eventually have on the merits of Plaintiffs’ case, “it is 15 not a covenant not to sue.” See id. at 6. Defendants therefore had not established that Plaintiffs 16 violated the terms of an ERISA plan. Id. The Court subsequently granted Plaintiffs’ motion for 17 class certification, Dkt. No. 122, and the parties moved for summary judgment. 18 At the same time, the parties continued to litigate the related Berman case, and eventually 19 agreed to stay this case pending resolution of the Berman trial. See Dkt. No. 169. As relevant 20 here, the Court granted the Berman plaintiffs’ motion for partial summary judgment and denied 21 Defendants’ Rule 56(d) request for discovery. See Berman, Dkt. No. 95. At the time, the Court 22 found that under the plain language of the Atmel Plan, it had not expired in November 2015 and 23 the Berman plaintiffs were entitled to severance benefits. Id. The Court further reasoned that as a 24 consequence of this plain meaning, the plan administrator breached its fiduciary duties by 25 misrepresenting the Plan terms and denying benefits. Id. On appeal, the Ninth Circuit reversed in 26 part, concluding that the pertinent plan language was “ambiguous” and that discovery was 27 therefore warranted. See Berman v. Microchip Tech. Inc., 838 F. App’x 292, 293 (9th Cir. 2021). 28 On remand, the Court denied the Berman parties’ cross-motions for summary judgment 6 1 and the case was set for trial. However, the parties settled before the trial. The Court accordingly 2 lifted the stay in this case, Dkt. No. 172, and Defendants renewed their prior motion for summary 3 judgment, see Dkt. Nos. 163, 173. 4 II. Summary judgment is proper when a “movant shows that there is no genuine dispute as to 5 United States District Court Northern District of California LEGAL STANDARD 6 any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). 7 A fact is “material” if it “might affect the outcome of the suit under the governing law.” Anderson 8 v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). And a dispute is “genuine” if there is evidence 9 in the record sufficient for a reasonable trier of fact to decide in favor of the nonmoving party. Id. 10 But in deciding if a dispute is genuine, the court must view the inferences reasonably drawn from 11 the materials in the record in the light most favorable to the nonmoving party, Matsushita Elec. 12 Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587–88 (1986), and “may not weigh the evidence 13 or make credibility determinations,” Freeman v. Arpaio, 125 F.3d 732, 735 (9th Cir. 1997), 14 overruled on other grounds by Shakur v. Schriro, 514 F.3d 878, 884–85 (9th Cir. 2008). If a court 15 finds that there is no genuine dispute of material fact as to only a single claim or defense or as to 16 part of a claim or defense, it may enter partial summary judgment. Fed. R. Civ. P. 56(a). 17 III. DISCUSSION First, Defendants contend that almost all Plaintiffs in this case signed valid releases that 18 19 bar their claims for benefits under the Atmel Plan. Dkt. No. 163 at 7–14. Second, Defendants 20 contend that Plaintiffs’ breach of fiduciary duty claim and their related requests for equitable relief 21 fail. See id. at 14–25. Lastly, Defendants preserve their argument that Plaintiffs’ denial of 22 benefits claim also fails. Id. at 7, n.1. 23 A. 24 As an initial matter, Defendants argue that Plaintiffs knowingly and voluntarily waived Releases 25 their right to pursue claims under the Atmel Plan.3 See Dkt. No. 163 at 7–14. Plaintiffs respond 26 that Defendants waived the right to rely on these releases, and in any event, they are not 27 28 For purposes of this section, when referring to “Plaintiffs” the Court only refers to the 215 of the 220 class members who signed releases in exchange for partial severance benefits. 7 3 1 enforceable given the unique context of this case. See Dkt. No. 176 at 12–15. 2 Waiver 3 Plaintiffs do not appear to dispute that if the releases were valid and enforceable they 4 would bar Plaintiffs’ claims in this case. See Dkt. No. 176 at 3 (“[T]he appropriate equitable 5 remedy . . . is an order enjoining the enforcement of Microchip’s wrongfully obtained releases, 6 thus entitling plaintiffs and class to their long-unpaid severance amounts under the Plan.”). 7 Instead, Plaintiffs first urge that Defendants waived any right to rely on the releases. See id. at 12– 8 14. 9 United States District Court Northern District of California i. Plaintiffs argue that Defendants cannot rely on the releases to bar their right to pursue their 10 claims in this case because the plan administrator did not base the denial of claims on the 11 existence of these releases. Id. Rather, the denial letters simply stated that the Atmel Plan had 12 expired. See Dkt. No. 176-1, Ex. R at 600–03, 1900–03. To the extent the letters referenced the 13 releases at all, they said they were “not relevant.” Id. Plaintiffs point out that the Ninth Circuit 14 has held that “a court will not allow an ERISA plan administrator to assert a reason for denial of 15 benefits that it had not given during the administrative process.” Harlick v. Blue Shield of 16 California, 686 F.3d 699, 719–20 (9th Cir. 2012). 17 In Harlick, the plaintiff had sought coverage for treatment for anorexia nervosa. See id. at 18 703–04. The defendant denied her claim, concluding that the plaintiff’s treatment was at a 19 residential facility, which was not covered under the plan. Id. at 705–06. The Ninth Circuit 20 concluded that the California Mental Health Parity Act required coverage of all “medically 21 necessary treatment for severe mental illness,” and proceeded to consider whether the plaintiff’s 22 stay at the facility was medically necessary. Id. at 719. The claim administrator had not denied 23 the claim based on a failure to show that the treatment was medically necessary. Id. at 719–20. 24 The Ninth Circuit rejected the defendant’s attempt to raise this argument for the first time on 25 appeal, holding that “a court will not allow an ERISA plan administrator to assert a reason for 26 denial of benefits that it had not given during the administrative process.” Id. 27 28 The Court explained that ERISA and its implementing regulations require that “[a]n ERISA plan administrator who denies a claim [ ] explain the ‘specific reasons for such denial’ and 8 1 provide a ‘full and fair review’ of the denial.” Id. at 719 (quoting 29 U.S.C. § 1133). This is 2 designed to allow claimants the ability to prepare for administrative review and appeal to the 3 federal courts, and to prevent them from being “‘sandbagged’ by a rationale the plan administrator 4 adduces only after the suit has commenced.” Id. at 720 (quotation omitted); see also Jebian v. 5 Hewlett–Packard Co. Emple. Benefits Org. Income Prot. Plan, 349 F.3d 1098, 1104 (9th Cir. 6 2003) (explaining that this rule “parallels the general rule that an agency’s order must be upheld, if 7 at all, on the same basis articulated in the order by the agency itself, not a subsequent rationale 8 articulated by counsel.”) (quotation omitted). United States District Court Northern District of California 9 Because the plan administrator here did not base the denial of Plaintiffs’ claims on the 10 existence of the releases, Plaintiffs contend that Defendants waived the ability to rely on them as a 11 defense in this case. See Dkt. No. 176 at 12–14. The Court is not persuaded. Unlike in Harlick, 12 the Court is not considering the releases as part of the merits of Plaintiffs’ claims, but rather as an 13 affirmative defense to determine whether they can pursue their ERISA claims at all. Several 14 courts in this district have addressed this same set of circumstances and concluded that “a right to 15 ERISA benefits and a right to bring an ERISA action in federal court are distinct.” Gonda v. The 16 Permanente Med. Grp., Inc., No. 11-CV-01363-SC, 2015 WL 678969, at *4 (N.D. Cal. Feb. 17, 17 2015), aff’d sub nom. Gonda v. Permanente Med. Grp., Inc., 691 F. App’x 397 (9th Cir. 2017) 18 (collecting cases); see also Upadhyay v. Aetna Life Ins. Co., No. C 13-1368 SI, 2014 WL 186709, 19 at *2 (N.D. Cal. Jan. 16, 2014), aff’d, 645 F. App’x 569 (9th Cir. 2016); Parisi v. Kaiser Found. 20 Health Plan Long Term Disability Plan, No. C 06-04359 JSW, 2008 WL 220101, at *3 (N.D. Cal. 21 Jan. 25, 2008). 22 Plaintiffs attempt to distinguish these cases by suggesting that Defendants may only raise 23 the releases as an affirmative defense if the claim administrator was unaware at the time it 24 evaluated the claims that the releases existed. See Dkt. No. 176 at 13–14. Because Plaintiffs 25 challenged the validity of the releases when they submitted claims for benefits under the Atmel 26 Plan, see Dkt. No. 176-1, Ex. R at 600–03, 1900–03, Plaintiffs point out that the claim 27 administrator here was aware of—and could have relied on—the releases when denying their 28 claims. She did not, and instead simply explained that Plaintiffs were “not eligible” because the 9 1 Atmel Plan had expired. Dkt. No. 176-2, Ex. V at 117–19, 135–37. But as Defendants point out, 2 none of the cases identified above turned on whether the plan administrator was aware of the 3 releases. To the contrary, in Parisi, the court acknowledged that the administrator was “fully 4 aware” of the release but did not use it as a reason to deny benefits. See 2008 WL 220101, at *1, 5 n.1. These cases turned on the idea that there is a meaningful distinction between consideration of 6 the merits of a plaintiff’s claim for benefits and his or her right to bring an ERISA action in federal 7 court. Plaintiffs fail to grapple with this distinction at all. 8 United States District Court Northern District of California 9 The Court finds the reasoning of these cases persuasive and adopts it here. In considering the releases in this case, the Court is neither opening up the administrative record nor reviewing 10 Defendants’ denial of Plaintiffs’ benefits claims. The Court is simply being asked to consider 11 whether the releases bar Plaintiffs’ ERISA action in the first instance. And here, the broad 12 language of the releases is clear, and if enforceable, would preclude an ERISA action in federal 13 court. Under the releases, Plaintiffs agree “to release the Company, its subsidiaries and affiliates, 14 and its and their officers, agents and employees from any liability related to or arising out of 15 [Plaintiffs’] employment with any of them. This includes a release of any liability for claims of 16 any kind that you ever had or may have at this time, whether you know about them or not.” See 17 Dkt. No. 163-1, Ex. R to Ex. 1 at 818 (emphasis added). The accompanying offer letter further 18 explained that Defendants were offering benefits in exchange for releases “to resolve any current 19 disagreement or misunderstanding regarding severance benefits previously offered by the 20 Company . . . .” See Dkt. No. 163-1, Ex. R to Ex. 1 at 815. 21 Plaintiffs briefly suggest that the plan administrator had authority to waive the releases, 22 and thus did so by failing to rely on them during the administrative process. See Dkt. No. 176 at 23 13–14. But the only two cases that Plaintiffs cite are inapposite. In Barron v. UNUM Life 24 Insurance Co. of America, the Fourth Circuit rejected a claim administrator’s attempt to deny the 25 plaintiff benefits based on a general release that she had signed when she worked for a different 26 employer and had coverage under a different employee benefits plan. 260 F.3d 310, 313–16 (4th 27 Cir. 2001). The defendant had attempted to argue that the release, entered into with UNUM Life 28 Insurance, covered not only the earlier UNUM policy, but any other future UNUM policy 10 United States District Court Northern District of California 1 regardless of the policyholder. Id. at 313–14. The court rejected this interpretation, finding no 2 support for it in the language of the policy, and concluding that the defendant was improperly 3 trying to reduce its own insurance risk. Id. at 315–16. And in Jacobs v. Xerox Corp. Long Term 4 Disability Income Plan, the district court simply stated in a footnote that the claim administrator 5 had an “alternative basis” for denying the plaintiff’s claim based on a general release. 356 F. 6 Supp. 2d 877, 891, n.12 (N.D. Ill. 2005). Neither case addressed whether a plan administrator can 7 waive the company’s right to assert a release as an affirmative defense in court if the administrator 8 does not rely on it during the administrative process. Plaintiffs have not offered any on-point 9 support for their contention that Defendants waived the right to rely on the releases in this case. 10 The Court finds that Defendants may raise their waiver defense in this case even though 11 the releases were not relied upon during the administrative process. The Court therefore considers 12 whether the releases are enforceable. 13 14 ii. Enforceability “A release is the abandonment, relinquishment or giving up of a right or claim to the 15 person against whom it might have been demanded or enforced . . . and its effect is to extinguish 16 the cause of action; hence it may be pleaded as a defense to the action.” Skilstaf, Inc. v. CVS 17 Caremark Corp., 669 F.3d 1005, 1017, n.10 (9th Cir. 2012) (quotation omitted). In other words, a 18 release is “the act of giving up a right or claim to the person against whom it could have been 19 enforced.” Syverson v. Int’l Bus. Machines Corp., 472 F.3d 1072, 1084 (9th Cir. 2007) (quoting 20 Release, Black’s Law Dictionary (abridged 7th ed. 2000)). The parties appear to agree that in the 21 context of ERISA, releases must be evaluated under a “heightened scrutiny” standard. See Dkt. 22 No. 176 at 14–15; Dkt. No. 177 at 3–4; see also Vizcaino v. Microsoft Corp., 120 F.3d 1006, 1012 23 (9th Cir. 1997) (noting that in the context of ERISA, releases “must withstand special scrutiny 24 designed to prevent potential employer or fiduciary abuse”). 25 Courts therefore consider whether the release was “‘knowing and voluntary’ by examining 26 the totality of the circumstances.” See Rombeiro v. Unum Ins. Co. of Am., 761 F. Supp. 2d 862, 27 868–69 (N.D. Cal. 2010) (collecting cases). Relevant factors include: 28 11 1 2 3 4 Id. (quotation omitted); accord Gonda, 2015 WL 678969, at *3 (applying same six-factor test as 5 developed in Finz v. Schlesinger, 957 F.2d 78, 82 (2d Cir.1992)); Upadhyay, 2014 WL 186709, at 6 *4 (same); Parisi, 2008 WL 220101, at *4 (same). 7 United States District Court Northern District of California (1) plaintiff’s education and business sophistication; (2) the respective roles of employer and employee in determining the provisions of the waiver; (3) the clarity of the agreement; (4) the time plaintiff had to study the agreement; (5) whether plaintiff had independent advice, such as that of counsel; and (6) the consideration for the waiver. Plaintiffs do not address these factors at all, urging that this analysis is somehow improper 8 under the specific circumstances of this case. Dkt. No. 176 at 14–15. Plaintiffs contend that 9 whether the releases were knowingly and voluntarily obtained is simply irrelevant where, as 10 alleged here, “Microchip violated its fiduciary duties by the very act of obtaining releases in 11 exchange for sharply reduced severance payments.” Dkt. No. 176 at 14 (emphasis omitted). In 12 the FAC and in their opposition brief, Plaintiffs allege that Defendants breached their fiduciary 13 duties in multiple ways, including by failing to provide complete information about the benefits to 14 which Plaintiffs were entitled, failing to investigate the intended meaning of the Atmel Plan, and 15 offering Plaintiffs reduced severance benefits in exchange for releases. See FAC at ¶¶ 87–89; see 16 also Dkt. No. 176 at 2–3, 18–22. In other words, Defendants misinterpreted and misled Plaintiffs 17 about the meaning of the Atmel Plan. During the hearing on the motion, Plaintiffs reiterated their 18 position that a review of the totality of the circumstances or use of the six-factor test to evaluate 19 the releases is inappropriate in light of these alleged breaches. In short, Plaintiffs suggest that 20 releases are never enforceable in cases where, as here, the plaintiffs allege that the defendant 21 breached its fiduciary duty by even seeking them. 22 Yet Plaintiffs offer no authority for this contention. Although emphasizing that waivers of 23 ERISA rights are subject to heightened scrutiny and citing some of the same cases referenced 24 above, Dkt. No. 176 at 14, Plaintiffs state that these cases are somehow meaningfully different 25 from this one. Plaintiffs point out that the releases in these other cases were “the product of 26 legitimate negotiations following a good-faith employment dispute unrelated to any dispute about 27 ERISA benefits.” See Dkt. No. 176 at 15 (emphasis in original). None of these cases, however, 28 conditioned application of the six-factor test in this way. To the contrary, in each case the court 12 United States District Court Northern District of California 1 evaluated the totality of the circumstances, including the nature of the negotiations. See 2 Rombeiro, 761 F. Supp. 2d at 868–69 (considering “the respective roles of employer and 3 employee in determining the provisions of the waiver”). 4 Plaintiffs also briefly cite 29 U.S.C. § 1110(a), which provides that “any provision in an 5 agreement or instrument which purports to relieve a fiduciary from responsibility or liability for 6 any responsibility, obligation, or duty under this part shall be void as against public policy.” See 7 Dkt. No. 176 at 14; see also IT Corp. v. Gen. Am. Life Ins. Co., 107 F.3d 1415, 1418 (9th Cir. 8 1997). Yet courts have routinely explained that § 1110 does not preclude individuals from 9 entering into agreements that settle or release breach of fiduciary duty claims. See, e.g., 10 Upadhyay, 2014 WL 186709, at *3 (“[C]ourts have uniformly permitted ‘knowing and voluntary’ 11 private releases of statutory claims.”) (collecting cases). Here, Defendants offered reduced severance benefits in exchange for releases to resolve 12 13 the dispute over the meaning of the Atmel Plan and Plaintiffs’ entitlement to benefits under it. 14 Taken to its logical extreme, Plaintiffs’ argument would preclude parties from settling cases 15 whenever the parties disagreed about the meaning of an ERISA plan. Plaintiffs have not offered 16 any authority or policy rationale for such a sweeping prohibition, and the Court finds no basis to 17 conclude that a knowing and voluntary release is nonetheless unenforceable in this context. The 18 Court therefore finds it appropriate to evaluate the totality of the circumstances to determine 19 whether the releases were in fact knowing and voluntary.4 20 To the extent Plaintiffs engage at all with the question of whether the releases were 21 knowing and voluntary, they simply urge that Defendants erroneously determined, and declared to 22 employees, that the Atmel Plan had expired. Plaintiffs suggest that Defendants were obligated to 23 pay benefits under the plain language of the Atmel Plan. See Dkt. No. 176 at 15, 19–20 (noting 24 that Defendants “refused to pay the full benefits due under ERISA”). Although the Court initially 25 26 27 28 4 Both in their opposition and during the hearing, Plaintiffs suggest that the Court has already decided that it has the power to prevent Defendants from enforcing the releases. See, e.g., Dkt. No. 176 at 1. But until now the Court has not had occasion to consider the merits of Defendants’ argument that the releases simply bar Plaintiffs’ claims entirely. The Court further notes that its orders on the motions to dismiss and motions for class certification both predated the Ninth Circuit’s memorandum disposition in Berman. 13 1 agreed with Plaintiffs that Defendants’ interpretation of the Plan was unreasonable on its face, see 2 Berman, Dkt. No. 95 at 9–13, the Ninth Circuit disagreed. United States District Court Northern District of California 3 The Ninth Circuit concluded that “the relevant language in the Atmel Plan is ambiguous.” 4 Berman, 838 F. App’x at 293. Specifically, the Court considered the requirement that benefits 5 “will become available to eligible employees only if the Company enters into a definitive 6 agreement [ ], on or before November 1, 2015, that will result in a Change of Control of the 7 Company.” Berman, Dkt. No. 157 at 4115 (emphasis added). The Ninth Circuit explained that 8 “the phrase ‘that will result’ is ambiguous because it does not ‘exclud[e] all alternative readings as 9 unreasonable,’ and the ambiguity is not eliminated by reading the phrase in the context of the plan 10 as a whole.” Berman, 838 F. App’x at, 293 (quoting McDaniel v. Chevron Corp., 203 F.3d 1099, 11 1110 (9th Cir. 2000)). In short, the Ninth Circuit found that the Atmel Plan was susceptible to 12 more than one interpretation. The actual meaning of the Atmel Plan is of course the crux of the 13 parties’ dispute in Berman and in this case. See, e.g., Section III.B.i. 14 But apart from of the actual meaning of the Atmel Plan, the record indicates that Plaintiffs 15 knew there was a dispute about the expiration of the Plan and knew that Defendants explicitly 16 offered the releases (and reduced severance benefits) to resolve this dispute: 17 18 • During the all-hands meeting for Atmel employees, Microchip and the new Atmel 19 CEO Mr. Sanghi explained that Microchip believed the Atmel Plan had expired, 20 and it would not honor its terms. See Dkt. No. 176-1, Ex. E at 65:24–77:20. He 21 also used a PowerPoint presentation during the meeting to explain Microchip’s 22 interpretation of the Plan and their intention to offer reduced benefits. Id. The 23 slides stated that “[e]mployees will have to sign and accept the new severance plan 24 and waive any rights under the old plan.” See Dkt. No. 163-1, Ex. Q to Ex. 1 at 25 3239. 26 27 28 • The offer letters accompanying the releases stated that “Atmel and Microchip are making this offer, in part to resolve any current disagreement or misunderstanding 14 1 regarding severance benefits previously offered by [Atmel], and in part to provide 2 you with the security of certain benefits in the event your relationship is terminated 3 involuntarily without Cause . . . .” See Dkt. No. 163-1, Ex. R to Ex. 1 at 815–20. 4 The letter further explained that the “receipt of the Severance Benefits [under this 5 offer] will be subject to you signing and not revoking a release of any and all 6 claims . . . .” Id. 7 8 • understood they were waiving claims under the Atmel Plan by signing the release. 9 United States District Court Northern District of California Plaintiffs Schuman and Coplin similarly testified during their depositions that they 10 See Dkt. No. 163-1, Ex. W to Ex. 1 at 99:19–100:7; id., Ex. S at 88:19–25. Mr. 11 Schuman said that at the time he signed, he felt like he “was being taken 12 advantage” of, but he “was trying to get this behind [him]” and was “walking 13 away.” Id., Ex. W at 100:19–23. 14 15 Plaintiffs offer no contrary evidence regarding their awareness of the dispute and the nature of the 16 releases. And as the Berman case illustrates, not all Atmel employees signed these releases. 17 Some decided not to sign and to pursue their right to benefits under the Atmel Plan instead. 18 Turning to the other circumstances regarding the releases, Plaintiffs do not challenge 19 Defendants’ proffered evidence that the releases were knowing and voluntary under the 20 “heightened scrutiny” six-factor test. Nor do Plaintiffs offer any evidence of their own that raises 21 a genuine dispute of material fact about these factors. See Dkt. No. 175 at 15 (arguing that “the 22 releases should not be enforceable, whether or not they were ‘knowingly’ or ‘voluntarily’ 23 obtained—and regardless of the extent to which plaintiffs were ‘intimidated and coerced . . . .’”). 24 The evidence, at least as to Plaintiffs Schuman and Coplin, indicates that the releases were in fact 25 knowingly and voluntarily entered into: 26 27 28 • Defendants point out that both Schuman and Coplin were sophisticated individuals, holding management positions at Atmel. Plaintiff Coplin was a Director of Human 15 1 Resources, and was responsible for understanding benefits programs, assisting 2 employees as they needed help, and interfacing with in-house attorneys with any 3 legal issues that arose. See Dkt. No. 163-1, Ex. S. to Ex. 1 at 11:2–12:25, 23:9–25. 4 He also was trained regarding ERISA, attending multiple seminars on the subject. 5 Id. Plaintiff Schuman, in turn, was a Senior Director of Investor Relations. See 6 Dkt. No. 163-1, Ex. JJ to Ex. 1. 7 8 • the offer letters themselves and in the all-hands PowerPoint presentation that the 9 United States District Court Northern District of California As already discussed above, the record indicates that Defendants were clear both in 10 releases and payments were offered to resolve any dispute about the meaning of the 11 Atmel Plan and employees’ entitlement to benefits under that Plan. And both 12 Plaintiffs Schuman and Coplin testified during their depositions that they 13 understood they were waiving claims under the Atmel Plan by signing the releases. 14 15 • The record also indicates that Plaintiffs were given sufficient time to consider the 16 offer. Plaintiff Schuman acknowledged that he had 45 days to consider whether to 17 accept the offer. See Dkt. No. 108-1, Ex. 6 at 101:3–10; see also Dkt. No. 163-1, 18 Ex. W to Ex. 1 at 84:8–13. During that time, he consulted with a lawyer, but 19 ultimately decided to sign after just a couple weeks “to be done with this” and 20 “walk[] away.” See Dkt. No. 163-1, Ex. W to Ex. 1 at 84:12–21, 100:5–7, 100:19– 21 23. Plaintiff Coplin similarly acknowledged that he had “ample time” to review the 22 offer and release, though he ultimately took just a few days to do so. See Dkt. No. 23 163-1, Ex. S to Ex. 1 at 73:2–4. The offer itself advised employees to consult with 24 lawyers. See id. at 78:3–25. However, Plaintiff Coplin explained that he did not 25 consult with a lawyer or other ERISA expert before signing because he thought 26 things were “clear” since “Mr. Sanghi had told [them] what was going on and [the 27 offer] was the end result of what he had planned,” and there was no need to consult 28 outside help. See id. at 73:5–74:5. 16 1 2 • In exchange for accepting the offer and signing the release, Plaintiff Schuman 3 received 25% of his annual base salary, or $53,045.00, an incentive bonus of 4 $5,917.81, 100% vesting acceleration of stock, and three months of COBRA 5 benefits paid by Microchip. See Dkt. No. 163-1, Ex. EE to Ex. 1. Plaintiff Coplin, 6 in turn, received 25% of his annual base salary, or $48,255.99, an incentive bonus 7 of $7,745.90, 100% vesting acceleration of stock, and three months of COBRA 8 benefits paid by Microchip. See Dkt. No. 163-1, Ex. DD to Ex. 1. As the Court 9 previously explained, they did not offer to tender as part of this lawsuit, and they 10 appear to have retained this consideration. See Dkt. No. 54 at 23–24. United States District Court Northern District of California 11 12 During the hearing on the motion for summary judgment, Plaintiffs suggested for the first 13 time that the release was not sufficiently clear because it did not explicitly reference ERISA 14 claims, although it mentioned statutory provisions generally. The Court does not ordinarily 15 consider arguments raised for the first time at the hearing. But even if the Court were to consider 16 this argument, as noted above, Plaintiffs Schuman and Coplin testified that they knew that the 17 releases were intended to resolve the outstanding dispute about their right to ERISA benefits under 18 the Atmel Plan. See Dkt. No. 163-1, Ex. W to Ex. 1 at 99:19–100:7; id., Ex. S at 88:19–25. Mr. 19 Sanghi explained during the all-hands meeting that “[e]mployees will have to sign and accept the 20 new severance plan and waive any rights under the old plan.” See Dkt. No. 163-1, Ex. Q to Ex. 1 21 at 3239. And the offer letters themselves explained that “Atmel and Microchip are making this 22 offer, in part to resolve any current disagreement or misunderstanding regarding severance 23 benefits previously offered by [Atmel] . . . .” See Dkt. No. 163-1, Ex. R to Ex. 1 at 815–20. 24 Having considered the totality of the circumstances based on the undisputed facts, the 25 Court finds that the releases signed by Plaintiffs Peter Schuman and William Coplin were obtained 26 knowingly and voluntarily. As a consequence, it is not clear to the Court how this class action can 27 proceed without the two named Plaintiffs. And it does not appear that any of the other class 28 members would be meaningfully different from Messrs. Schuman or Coplin for purposes of 17 1 substituting in as a class representative. The five individuals who did not sign releases do not 2 appear to be similarly situated to the vast majority of the class, and the other class members all 3 signed releases. United States District Court Northern District of California 4 Despite Defendants’ urging, however, there is not sufficient evidence for the Court to 5 evaluate the six factors as to the remaining Plaintiffs who signed the releases. As discussed during 6 the hearing on the motion, the Court’s order granting class certification was premised, at least in 7 part, on the idea that questions about the enforceability of the releases could be addressed on a 8 class-wide basis. The parties’ class certification briefs focused on the uniformity (or lack thereof) 9 of the communications that Defendants made to class members, but did not discuss the six-factor 10 test described above. See, e.g., Dkt. No. 108 at 8–9, 15–20. It is now apparent, however, that the 11 threshold question regarding enforceability of the releases implicates individualized 12 considerations. The Court therefore ORDERS the parties to SHOW CAUSE why the class 13 should or should not be decertified in light of the Court’s finding that individualized consideration 14 is required under the six-factor test to determine whether the releases were obtained knowingly 15 and voluntarily. The Court sets a briefing schedule for the OSC in Section IV below.. * 16 * * 17 The Court GRANTS the motion for summary judgment as to the two named Plaintiffs. 18 B. 19 As to the remaining non-named Plaintiffs, Defendants argue that their breach of fiduciary 20 duty claim fails. Defendants argue that (1) Plaintiffs lack factual support for their contention that 21 Defendants breached any fiduciary duties, and in any event (2) Plaintiffs are not entitled to any of 22 their requested equitable relief for such a breach. See Dkt. No. 163 at 14–25. 23 24 Breach of Fiduciary Duties and Equitable Relief i. Alleged Breach “To establish an action for equitable relief under ERISA section 502(a)(3) [for breach of 25 fiduciary duty], the defendant must be an ERISA fiduciary acting in its fiduciary capacity, and 26 must ‘violate [ ] ERISA-imposed fiduciary obligations.’” See Mathews v. Chevron Corp., 362 27 F.3d 1172, 1178 (9th Cir. 2004) (quoting Varity Corp. v. Howe, 516 U.S. 489, 506 (1996)). Under 28 ERISA, fiduciaries must “discharge [their] duties with respect to a plan solely in the interest of the 18 United States District Court Northern District of California 1 participants and beneficiaries” and as relevant here, “for the exclusive purpose of providing 2 benefits to participants and their beneficiaries . . . .” 29 U.S.C. § 1104(a)(1)(A)(i). ERISA 3 fiduciaries have “an obligation to convey complete and accurate information material to the 4 beneficiary’s circumstance, even when a beneficiary has not specifically asked for the 5 information.” King v. Blue Cross & Blue Shield of Ill., 871 F.3d 730, 744 (9th Cir. 2017) 6 (quotation omitted). And ERISA “fiduciaries breach their duties if they mislead plan participants 7 or misrepresent the terms of administration of a plan.” Id. (quotation omitted). 8 Here, Plaintiffs contend that Defendants breached their fiduciary duties by failing to 9 provide complete information about the benefits to which Plaintiffs were entitled, failing to 10 investigate the intended meaning of the Atmel Plan, and offering Plaintiffs reduced severance 11 benefits in exchange for releases. See FAC at ¶¶ 87–89; see also Dkt. No. 176 at 2–3, 18–22. At 12 bottom, these allegations collapse into the same core claim: Defendants knew or should have 13 known that the Atmel Plan had not in fact expired. 14 In support of this theory, Plaintiffs point out that in early April 2016, Lauren Carr, 15 Microchip’s Senior Vice President of Global Human Resources, saw a letter written to Plaintiff 16 Schuman from Atmel’s Senior Vice President of Global Human Resources, which stated in 17 relevant part: 18 19 20 21 22 We recognize that there continues to be significant speculation regarding the acquisition of the company and understand that this can be distracting and unsettling. As a result we believe it is important to remind you of the benefits for which you may be eligible in the event that your employment is involuntarily terminated without Cause in connection with a Change of Control of the company, including an acquisition by Dialog or Microchip. 23 See Dkt. No. 176-1, Ex. 6 at 33:10–35:10; see also id., Ex. 2 to Ex. 6 (emphasis added). The letter 24 further stated that the Atmel Plan “remain[ed] in place.” Id. Critically, the letter was dated 25 January 14, 2016, over two months after the November 1, 2015, date on which Defendants 26 contend the Atmel Plan expired. Id. Despite this letter, however, Ms. Carr testified that she 27 thought the language of the Plan was clear that it had expired, and there was no reason to discuss 28 an alternate interpretation with the Plan’s drafters. See id., Ex. 6 at 28:23–33:9. Similarly, and as 19 1 already discussed, Mr. Sanghi testified that he met with Atmel employees after the merger, and 2 understood they were upset by—and disagreed with—Microchip’s interpretation that the Plan had 3 expired. See Dkt. No. 176-1, Ex. E at 65:25–71:1, 73:14–77:20. United States District Court Northern District of California 4 Defendants argue that irrespective of this evidence, they did not breach any fiduciary duty 5 when they interpreted the Plan as having expired. Dkt. No. 163 at 15–16; Dkt. No. 177 at 6–8. 6 They point out that the Ninth Circuit concluded that the Plan itself was ambiguous, and 7 characterize that court’s decision as finding that their interpretation was reasonable. Id. As 8 already explained, the Ninth Circuit in Berman concluded that summary judgment should not have 9 been entered in the Berman plaintiffs’ favor because the Atmel Plan was ambiguous on its face. 10 See Berman, 838 F. App’x at 293. The Ninth Circuit quoted this Court’s motion to dismiss order 11 in concluding that “reasonable parties could disagree as to whether the [Atmel] Plan required the 12 Initial Triggering Event and the Change of Control to involve the same merger partner.” Id. 13 (quoting Berman, Dkt. No. 35 at 23). The Court believes that a somewhat detailed discussion of 14 the circumstances that led to its motion to dismiss order and the Ninth Circuit’s memorandum 15 disposition in Berman is necessary to provide important clarification. 16 In their initial motion to dismiss in Berman, Defendants argued that Plaintiffs had not 17 sufficiently stated a claim for equitable estoppel. See Berman, Dkt. No. 9 at 17. Defendants 18 pointed out that Plaintiffs’ theory of the case “rest[ed] on the argument that the ‘plain language’ of 19 the Atmel Plan unambiguously entitle[d] them to benefits . . . .” Id. Defendants urged that 20 because a claim for equitable relief requires Plaintiffs to show that provisions of the Plan were 21 ambiguous, “any claim for equitable estoppel would directly refute—and destroy—their entire 22 case.” Id. In response to this argument, the Court simply concluded that at the motion to dismiss 23 stage, Plaintiffs could plead in the alternative. See Berman, Dkt. No. 35 at 23, & n.14. The Court 24 further explained that Plaintiffs had sufficiently pleaded this alternative claim when viewing the 25 fact in the light most favorable to them, as required at the motion to dismiss stage: 26 27 28 Viewing the facts in Plaintiffs’ favor, the Court finds that Plaintiffs have sufficiently pled their claim for equitable estoppel. First, the Court is satisfied, notwithstanding Plaintiffs’ assertions that the provisions of the Atmel Plan are unambiguous, that reasonable parties 20 1 2 could disagree as to whether the Plan required the Initial Triggering Event and the Change of Control to involve the same merger partner—particularly at the motion to dismiss stage, and particularly since that interpretation is one of the primary disputes in this case. United States District Court Northern District of California 3 4 Id. The Court did not make any factual findings about the interpretation of the Plan. See id. The 5 Court simply concluded that under the relevant legal standard for a motion to dismiss, a 6 reasonable factfinder could conclude that the Plan was ambiguous and required the same merger 7 partner for both the Initial Triggering Event and the Change of Control. Id. 8 In citing to this Court’s language on appeal, the Ninth Circuit did not definitively resolve 9 the meaning of the Plan either. It concluded that “the relevant language in the Atmel Plan [wa]s 10 ambiguous,” meaning that summary judgment could not be granted in Plaintiffs’ favor based 11 solely on the face of the Plan. See Berman, 838 F. App’x at 293. Despite Defendants’ urging, the 12 Ninth Circuit did not hold that any claim, including a breach of fiduciary duty claim, somehow 13 fails as a matter of law if it is premised on the misinterpretation of an ambiguous plan. Id. Nor 14 did it make any factual findings about the Plan itself. Rather, it found that discovery was 15 appropriate under the circumstances. Id. The Berman memorandum disposition, therefore, does 16 not definitively resolve this case or even this particular claim. 17 Still, Defendants repeatedly state that a “reasonable interpretation of an ambiguous plan [ ] 18 cannot constitute a breach of fiduciary duty.” See, e.g., Dkt. No. 163 at 15. But they offer no 19 legal support for this conclusion. The Ninth Circuit, on the other hand, has explained that ERISA 20 fiduciaries may misinform beneficiaries and violate their fiduciary duties, not only through direct 21 misstatements, but also “by saying that something is true when the person does not know whether 22 it is true or not.” Mathews, 362 F.3d at 1183 (quotation omitted) (emphasis omitted); see also 29 23 U.S.C. § 1104(a)(1)(A)(i) (requiring that fiduciaries “discharge [their] duties with respect to a plan 24 solely in the interest of the participants and beneficiaries”). Even if the Plan on its face may have 25 been ambiguous, Plaintiffs allege that Defendants’ interpretation was wrong, and that they should 26 have known it was wrong based on the information available to Defendants after the merger. The 27 Court need not, and cannot, decide at this stage the veracity of Defendants’ interpretation that the 28 Plan expired, or assess the strength of Plaintiffs’ evidence that Defendants knew or should have 21 1 known the actual meaning of the Plan. But Plaintiffs have raised at least one material dispute of 2 fact regarding Defendants’ knowledge of the Plan and its intended interpretation that precludes 3 summary judgment. The Court therefore DENIES the motion on this basis. 4 ii. “ERISA authorizes participants and beneficiaries to seek equitable relief for violations of 5 United States District Court Northern District of California Equitable Relief 6 [fiduciary] duty.” Guenther v. Lockheed Martin Corp., 972 F.3d 1043, 1051 (9th Cir. 2020) 7 (citing 29 U.S.C. § 1132(a)(3)); 29 U.S.C. § 1132(a)(3)(B) (permitting beneficiary to bring civil 8 action “to obtain other appropriate equitable relief . . . to redress [ERISA] violations”). But 9 without regard to any factual disputes regarding liability for a breach of fiduciary duty, Defendants 10 argue that Plaintiffs are not entitled to any of the equitable relief they seek under § 502(a)(3). See 11 Dkt. No. 163 at 15–25. Since they initially filed this case, Plaintiffs have winnowed down their 12 requested equitable relief. They acknowledge that the only equitable relief they are now seeking is 13 an injunction to preclude the enforcement of the releases.5 See Dkt. No. 176 at 3, 25 (“[T]he 14 appropriate equitable remedy—the only remedy that would restore the plaintiffs and class 15 members to their pre-breach status and make them whole from the consequences of those breaches 16 of fiduciary duty—is an order enjoining the enforcement of Microchip’s wrongfully obtained 17 releases, thus entitling plaintiffs and class to their long-unpaid severance amounts under the 18 Plan.”). Defendants argue that Plaintiffs’ claim for injunctive relief fails because the Ninth Circuit 19 20 previously ruled that the Berman plaintiffs’ remaining claims for injunctive relief should have 21 been dismissed. See Dkt. No. 163 at 23–24; see also Berman, 838 Fed. App’x at 293. 22 Defendants’ primary argument that Plaintiffs’ injunctive relief is precluded by res judicata is not 23 well taken. The Ninth Circuit’s memorandum disposition does not discuss this issue at any length, 24 but states in the penultimate sentence that “[t]he district court erred in denying the defendants’ 25 motion to dismiss . . . the claim for injunctive relief because plaintiffs failed to plead ‘irreparable 26 injury.’” Berman, 838 Fed. App’x at 293 (citation omitted). 27 28 5 Plaintiffs acknowledge that they are no longer seeking equitable estoppel or equitable surcharge. See Dkt. No. 176 at 1, 19, & n.1; see also Dkt. No. 144 at 19, n.5. 22 United States District Court Northern District of California 1 Critically, Defendants made no effort in their motion to establish that privity exists 2 between the Berman plaintiffs and Plaintiffs in this case. See Ruiz v. Snohomish Cty. Pub. Util. 3 Dist. No. 1, 824 F.3d 1161, 1164 (9th Cir. 2016) (citing requirements for res judicata to apply, 4 including identity or privity between parties). Defendants simply asserted in a single sentence that 5 “privity exists between the Schuman plaintiffs and the Berman plaintiffs,” without any 6 explanation. See Dkt. No. 163 at 24. Only in their reply brief did Defendants attempt to explain 7 how they are in privity, urging in summary fashion that the Berman plaintiffs raised similar 8 arguments based on the same underlying factual allegations and were represented by the same 9 attorneys. See Dkt. No. 177 at 14. Defendants’ attempt to support their argument only in reply is 10 improper. But regardless, their contentions fall short of establishing that a finding of privity is 11 appropriate here. 12 “[P]rivity may exist if there is substantial identity between parties, that is, when there is 13 sufficient commonality of interest.” See Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l Plan. 14 Agency, 322 F.3d 1064, 1081 (9th Cir. 2003) (quotation omitted). Yet Defendants have not 15 adequately explained how the Berman plaintiffs had a sufficient commonality of interest to 16 Plaintiffs in this case to warrant a finding of res judicata. As discussed at length above, unlike in 17 Berman, the vast majority of Plaintiffs in this case signed releases and obtained reduced severance 18 benefits upon their termination from Microchip. Although the complaint in Berman references 19 such releases, see Berman, Dkt. No. 1 at ¶¶ 53–60, 79, 83–84, Prayer for Relief at ¶ 6, none of the 20 Berman plaintiffs signed them. Cf. Berman, Dkt. No. 9 (“[T]he Separation Agreement[s] have no 21 relevancy to Plaintiffs’ claims as they admit that none of them signed one.”) (emphasis in 22 original). It is therefore unsurprising that in their briefs to the Ninth Circuit the Berman parties 23 did not address whether injunctive relief to prevent the enforcement of such releases was 24 appropriate or properly pled. See generally Dkt. No. 179. The Court therefore finds that res 25 judicata does not bar Plaintiffs’ requested injunctive relief in this case. 26 Nevertheless, given the current posture of this case, the Court need not evaluate whether 27 such relief is actually available or sufficiently supported. This requested relief—preventing the 28 enforcement of the releases—would be irrelevant to any Plaintiffs whose claims are able to 23 United States District Court Northern District of California 1 proceed in this case. As to the five Plaintiffs who never signed a release, Defendants could not— 2 and do not seek—to enforce the releases against them. As to the other non-named Plaintiffs who 3 did sign releases, they will have to establish that the releases were not obtained knowingly and 4 voluntarily in order to proceed with their claims. If they are able to do so, the releases would be 5 unenforceable anyway. Following the briefing on class decertification, if any non-named 6 Plaintiffs who signed releases still seek injunctive relief to prevent the enforcement of releases, 7 Defendants may raise this argument again. For now, the Court DENIES the motion on this basis. 8 C. 9 Lastly, in a footnote to their motion, Defendants preserve their argument for appeal that 10 summary judgment is appropriate as to Plaintiffs’ Section 502(a)(1)(B) claim for benefits. See 11 Dkt. No. 163 at 7, n.1. Defendants acknowledge that the Court rejected these same arguments in 12 the Berman action, finding that material disputes of fact precluded summary judgment. Id. The 13 Court continues to find this reasoning correct. See Berman, Dkt. No. 177. The Court therefore 14 DENIES the motion on this basis. 15 IV. Denial of Claim Benefits CONCLUSION Accordingly, the Court GRANTS the motion for summary judgment as to the two named 16 17 Plaintiffs, but otherwise DENIES the motion. As explained in Section III.A.ii above, the Court 18 further ORDERS the parties to SHOW CAUSE why the class should or should not be decertified 19 based on the individualized inquiry necessary to assess the validity of the releases signed by the 20 majority of class members. The parties shall submit simultaneous briefs of no more than 15 pages 21 by September 15, 2023. The parties may then file simultaneous reply briefs of no more than 10 22 pages by September 29, 2023. The matter will be deemed submitted upon receipt of the replies 23 unless otherwise ordered by the Court. 24 IT IS SO ORDERED. 25 26 27 Dated: 8/23/2023 ______________________________________ HAYWOOD S. GILLIAM, JR. United States District Judge 28 24

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