HAYWOOD S. GILLIAM, JR., District Judge.
Pending before the Court is a motion to dismiss by Defendants Microchip Technology, Inc. ("Microchip"), Atmel Corp. ("Atmel"), and Atmel Corp. U.S. Severance Guarantee Benefit Program ("the Atmel Plan" or "the Plan"). Dkt. No. 9. For the reasons set forth below, the Court
Plaintiffs Robin Berman, Bo Kang, Khashayar Mirfakhraei, Thang Van Vu, Donna Viera-Castillo, Girish Ramesh, Patrick Hanley, Ilana Shternshain, and Mandy Schwarz are former employees of Atmel and Microchip, as well as participants in the Atmel Plan. Dkt. No. 1 ("Complaint" or "Compl.") ¶ 13. They bring this action under the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq. ("ERISA"). For purposes of this motion, the Court accepts the following as true.
Atmel, a supplier of "general purpose microcontrollers," created the Atmel Plan in July 2015 in response to market speculation regarding the company's future and the resulting uncertainty among its approximately 1,800 U.S. employees. See Compl. ¶¶ 17-18. The company confirmed to employees "that it was seeking a merger partner" and notified them "that it was rolling out the [Atmel Plan] to encourage all employees to continue working for Atmel and any successor entity despite the uncertainty surrounding Atmel's corporate future." Id. ¶ 18. The Atmel Plan was covered by ERISA. See id. ¶ 14.
Atmel informed its employees of the specifics of the Plan in documents it delivered on July 9, 2015. See Dkt. No. 9-1, Ex. 1. In a letter, Atmel detailed the three primary severance benefits of the Plan: (1) a cash payment of between 25 percent and 50 percent of annual base salary, depending on the class of employee; (2) paid health insurance premiums for between three to six months, again depending on the class of employee; and (3) a prorated portion of the employee's annual incentive bonus for director-level and professional exempt employees. Compl. ¶ 20; see also Dkt. No. 9-1, Ex. 1, at 2 (letter from Atmel describing severance benefits) (ECF pagination).
In an addendum to the letter, Atmel set forth the terms of the Plan. First, it would "terminate" on November 1, 2015, "unless an Initial Triggering Event . . . occurred prior to November 1, 2015, in which event the [Atmel Plan] will remain in effect for 18 (eighteen) months following that Initial Triggering Event." Dkt. No. 9-1, Ex. 1, at 3 (ECF pagination). The addendum defined the "Initial Triggering Event" as the company's "enter[ing] into a definitive agreement . . . on or before November 1, 2015, that will result in a Change of Control of the Company." Id. Barring such an agreement, the Atmel Plan would "automatically expire," unless the board of directors expressly extended it. Id. If the Initial Triggering Event did occur, participants would be entitled to the Atmel Plan's benefits "if, but only if" (1) a "Change of Control actually occurs"; and (2) "[t]heir 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." Id.; see also Compl. ¶¶ 20-22.
The addendum also stated:
Dkt. No. 9-1, Ex. 1, at 4 (ECF pagination); see also Compl. ¶ 23.
On September 19, 2015, Atmel and a company named Dialog Semiconductor plc ("Dialog") executed and publicly announced a formal merger agreement. Compl. ¶ 27. Afterward Microchip, with whom Atmel had also been in discussions about a potential merger, continued to express interest in a merger or acquisition. Id. ¶ 29. Before the scheduled January 2016 closing date, Microchip "made an offer to acquire Atmel that Atmel's Board of Directors concluded was better than Dialog's offer." Id. After Dialog declined to match or improve upon Microchip's offer, Atmel "withdrew from its agreement with Dialog and entered into a merger agreement with Microchip on or about January 19, 2016." Id. ¶ 35. The merger closed on April 4, 2016. Id. As a result, Atmel became a wholly-owned subsidiary of Microchip. Id. ¶ 49.
Meanwhile, Plaintiffs and other Atmel employees became aware of Microchip's attempt to replace Dialog as Atmel's merger partner in mid-January 2016. Id. ¶ 30. "To alleviate employee concerns," Atmel management
Id. ¶ 31. On January 13, 2016, in a meeting with employees at the Director level and above, Atmel's CEO explained that Microchip had made a better offer, that Dialog would be given four days to make a counteroffer, and "that all severance benefits provided by the [Atmel] Plan would remain available pursuant to the Plan, regardless of whether the ultimate purchaser was Microchip or Dialog." Id. ¶ 32. On January 14, 2016, Atmel's Senior Vice President of Global Human Resources sent a letter to "numerous" employees that acknowledged the speculation regarding the acquisition and confirmed that the Atmel Plan "`continues to remain in place,' and would entitle employees to severance benefits `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.'" Id. ¶ 33. Between January and April 2016, "many other members of Atmel management similarly encouraged" Plaintiffs and other Atmel employees to remain at Atmel, "by assuring [them] that they were fully covered by the severance benefit guarantees provided by the [Atmel] Plan," regardless of who the ultimate merger partner was. Id. ¶ 34.
Prior to the closing of the merger, Atmel provided Microchip with documentation relating to the Atmel Plan, including summaries and estimates of how much would be owed to Atmel employees under the Plan. Id. ¶ 36. Atmel also "repeatedly communicated to Microchip its interpretation" of the Atmel Plan—namely, that it was in effect until mid-March 2017 because an Initial Triggering Event had occurred in September 2015, regardless of whether Dialog or Microchip was the ultimate merger partner. Id. ¶¶ 36-37. Microchip, in turn, "reviewed and approved" a memorandum that Atmel distributed to employees on February 3, 2016, which affirmed that "Microchip has agreed to honor each of your employment and compensatory contracts (including . . . severance . . . agreements) with Atmel, or its subsidiaries, that are in effect immediately prior to the closing of the transaction." Id. ¶¶ 39-40 (ellipses in original). The Proxy Statement that Microchip and Atmel filed with the Securities and Exchange Commission stated the same. See id. ¶ 41.
On February 29, 2016, three senior members of Microchip's finance team, including Chief Financial Officer Eric Bjornholt, met with senior members of Atmel's finance team. Id. ¶ 42. During that meeting, Bjornholt "assured the Atmel employees that, if Microchip acquired Atmel and then terminated Atmel employees, Microchip would honor the Plan." Id. That same morning, in another meeting with Atmel employees, Bjornholt "reiterated . . . that Microchip would honor the [Atmel] Plan if Microchip later terminated any Atmel employees." Id. ¶ 43.
In the week following the merger's closing, Microchip terminated several Atmel employees without cause, including plaintiffs Berman, Vu, Kang, Viera-Castillo, and Mirfakhraei, and "announced for the first time its position that the [Atmel] Plan had `expired' on November 1, 2015 and therefore it had no obligation to pay, and would not pay, the severance benefits provided by the Plan to any" terminated employees. Id. ¶ 52. On April 6, 2016, Microchip sent letters to these terminated employees offering them four to six weeks of salary (or certain restricted stock units) as severance—a "fraction" of the amount they were entitled to under the Atmel Plan—in exchange for releasing all claims against Microchip and Atmel, including those "based on the enforceability of the severance benefit provisions of the" Atmel Plan. Id. ¶ 53. Approximately one week later, Microchip delivered a second letter to the terminated employees, increasing its severance offer to 50 percent of the cash salary benefit, the pro-rated bonus payments, and the health insurance premium payments that would be due under the Atmel Plan, again in exchange for releasing Atmel and Microchip from all claims ("the 50 Percent Offer"). Id. ¶ 55. Another wave of terminations without cause occurred between April 6, 2016 and March 19, 2017, plaintiffs Ramesh, Hanley, Shternshain, and Schwarz among them. Id. ¶ 58. Their severance offer was "similar in most material respects" to the 50 Percent Offer. See id. ¶ 59.
Many of the terminated employees agreed to Microchip's offer and signed the release. See id. ¶¶ 57, 61. Plaintiffs, however, did not. Id. ¶ 63. Instead, between May 20, 2016 and October 6, 2016, they each submitted a claim for benefits under the Atmel Plan to the plan administrator. Id. ¶ 66. Plaintiffs allege that Defendants "deliberately and repeatedly delayed giving responses to these claims, in an effort to induce more terminated employees to accept fewer severance benefits than they were due under the terms of the [Atmel] Plan. . . ." Id. ¶ 63. Between November 21, 2016 and November 29, 2016, Microchip's human resources manager, identifying herself as the plan administrator, denied each of Plaintiffs' claims on eligibility grounds, stating that the Atmel Plan had expired on November 1, 2015 "with respect to any acquiring entity other than Dialog, and because the merger agreement between Microchip and Atmel was not the `same agreement' that Atmel had entered into with Dialog in September 2015." Id. ¶ 67.
Between January 18, 2017 and January 20, 2017, Plaintiffs each submitted an appeal of the plan administrator's denial. Id. ¶ 68. Plaintiffs allege that Microchip "delayed responding until virtually the last possible day for a response," id. ¶ 65, and then denied their appeals because Atmel's agreement with Dialog did not result in a change of control, which meant the Atmel Plan expired on November 1, 2015 and that Plaintiffs were ineligible for benefits, id. ¶ 69.
Plaintiffs filed the Complaint on April 4, 2017. Dkt. No. 1. Defendants moved to dismiss the Complaint on April 28, 2017. Dkt. No. 9 ("Mot."). Plaintiffs filed their opposition on May 31, 2017, Dkt. No. 22 ("Opp."), and Defendants replied on June 7, 2017, Dkt. No. 23 ("Reply"). On May 1, 2017, this case was related to Schuman v. Microchip Technology Inc., No. 16-cv-05544-HSG, a putative class action alleging similar facts and bringing similar claims against Defendants. Dkt. No. 11.
"To survive a motion to dismiss for failure to state a claim under [Federal] Rule [of Civil Procedure] 12(b)(6), a complaint generally must satisfy only the minimal notice pleading requirements of Rule 8(a)(2)." Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003).
In reviewing the plausibility of a complaint, courts "accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party." Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). Nonetheless, Courts do not "accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008).
Plaintiffs allege "three independent claims for relief." See Opp. at 1. In their First Cause of Action, they seek equitable relief for Defendants' alleged breaches of their fiduciary duty under section 502(a)(3) of ERISA.
Defendants seek dismissal of the entire Complaint on the grounds that it fails to provide a "short and plain statement showing that Plaintiffs are entitled to relief." Mot. at 9. Alternatively, Defendants move to dismiss the First and Third Causes of Action for failure to state a claim. See id. at 10-22. The Court considers each argument in turn.
Defendants first argue that Plaintiffs' Complaint "is a convoluted amalgam of facts that does not meet Rule 8(a)'s fundamental pleading requirement"—one that includes "pages of irrelevant facts." Mot. at 9-10. The Court disagrees.
Defendants cite a sole source of authority in support of their argument: Cafasso ex rel. U.S. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047 (9th Cir. 2011). Cafasso was a False Claims Act case in which the Ninth Circuit affirmed the district court's denial of the relator's motion for leave to amend on Rule 8(a) grounds. 637 F.3d at 1059. There, however, "the relator tendered a 733-page proposed amended complaint." Id. at 1058 (emphasis added). While acknowledging that "normally, verbosity or length is not by itself a basis for dismissing a complaint," id. (citation and internal quotation marks omitted), the court found that the district court was "well within its discretion" to deny leave to file the proposed tome, on grounds of futility and prejudice to the opposing party, see id. at 1058-59. Here, Plaintiffs' Complaint is a relatively concise 33 pages, rendering the Cafasso complaint, which "approach[ed] the magnitude of War and Peace," entirely distinguishable. See id. at 1059 (original italics).
All that remains of Defendants' argument on Rule 8(a) grounds is conclusory. They contend that because "Plaintiffs repeatedly claim the Atmel Plan's language is `plain' and `clear'," their claim is one for "a simple denial of benefits"—and that everything else in the Complaint is irrelevant and contravenes Rule 8(a). See Mot. at 9-10. But Defendants' attempt to recharacterize Plaintiffs' claims for breach of fiduciary duty, see Compl. ¶¶ 72-87, and interference with the exercise of ERISA rights, see id. ¶¶ 91-101, does not dispose of those claims. Moreover, Defendants fail to ground their Rule 8 argument in what the rule actually requires: "fair notice" of the claim "and the grounds upon which it rests." See Erickson, 551 U.S. at 94 (citation omitted). Nowhere do Defendants argue that Plaintiffs' Complaint fails to provide such notice. The Court accordingly declines to dismiss on this ground.
In the First Cause of Action, Plaintiffs allege a breach of the fiduciary duties set forth in section 404(a) of ERISA
First, while not dispositive of the First Cause of Action in its entirety, Defendants contend that the Atmel Plan is an improperly-named defendant because "an ERISA claim for breach of fiduciary duty cannot be maintained against an ERISA plan." See Mot. at 24. The Court agrees.
An ERISA plan generally may be sued as an entity in a civil enforcement suit. 29 U.S.C. § 1132(d)(1). But because an ERISA plan "cannot, as an entity, act as a fiduciary with respect to its own assets," the plan itself "cannot be sued for breach of fiduciary duty." Acosta v. Pac. Enters., 950 F.2d 611, 618 (9th Cir. 1991); see also Balsley v. Delta Star Emp. Stock Ownership Plan, No. C09-2952 TEH, 2009 WL 4823196, at *3 (N.D. Cal. Dec. 10, 2009) (dismissing breach of fiduciary duty claim under ERISA as to plan defendant); Mertens v. Kaiser Steel Ret. Plan, 744 F.Supp. 917, 924 (N.D. Cal. 1990) (stating, in ERISA action alleging breaches of fiduciary duty, "that the plan should not be named as a defendant"), aff'd sub nom. Mertens v. Black, 948 F.2d 1105, 1107 (9th Cir. 1991) ("[W]e hold that the district court did not err in dismissing the Plan as a defendant."). In Acosta, however, the Ninth Circuit cautioned that this "does not inexorably lead to the conclusion that a plan cannot be properly named in a suit alleging breach of fiduciary duty." 950 F.2d at 618. Instead, "to the extent that a plaintiff seeks to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan, the plan may be named as a defendant." Id. (quoting 29 U.S.C. §§ 1132(a)(1)(B), 1132(d)) (internal quotation marks omitted). Thus, while a plan may not be sued for breach of fiduciary duty under ERISA, it can be named in the lawsuit if the plaintiff also seeks to recover benefits, enforce rights, or clarify future rights under the plan. See id.
The propriety of naming the Atmel Plan as a defendant in the First Cause of Action is easily resolved by Acosta. Because an ERISA plan cannot be sued for breach of fiduciary duty, see Acosta, 950 F.2d at 618, the motion to dismiss the Atmel Plan is granted as to Plaintiffs' First Cause of Action. The Plan may be a named defendant as to the remaining causes of action, however.
Next, Defendants argue that Plaintiffs' claim for breach of fiduciary duty fails because they "fail to allege any loss the Atmel Plan suffered, or any misuse of plan funds, as a result" of such a breach. See Mot. at 18. Defendants also point to Plaintiffs' failure to "seek relief on behalf of the Atmel Plan." See id. Defendants, however, improperly conflate the requirements of bringing a claim for breach of fiduciary duty under section 502(a)(2), which is not at issue in this case, and section 502(a)(3), which is. This argument is therefore inapposite to Plaintiffs' claim.
Section 502(a)(2) of ERISA permits a plan participant to bring a civil action under section 409. See 29 U.S.C. § 1132(a)(2). Section 409, in turn, governs liability for breach of fiduciary duty. See id. § 1109(a). It is well settled that recovery for a violation of section 409 "for breach of fiduciary duty inures to the benefit of the plan as a whole, and not to an individual beneficiary." Paulsen v. CNF Inc., 559 F.3d 1061, 1073 (9th Cir. 2009) (citing Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 140-42 (1985)). But in so stating, the Paulsen court referenced only those section 409 claims brought under section 502(a)(2). In that same opinion, the court highlighted a critical distinction in discussing claims for breach of fiduciary duty brought under section 502(a)(3): "Unlike [section 502(a)(2)], which requires that relief sought must be on behalf of the entire plan, the Supreme Court has held that a participant or beneficiary has standing pursuant to [section 502(a)(3)] to seek individual recovery in the form of `appropriate equitable relief.'" See id. at 1075 (quoting Varity Corp. v. Howe, 516 U.S. 489, 509-10 (1996)) (emphasis added); see also Zisk v. Gannett Co. Income Prot. Plan, 73 F.Supp.3d 1115, 1118 (N.D. Cal. 2014) ("Supreme Court and Ninth Circuit authorities have both authorized a claim under section [502](a)
Section 502(a)(2) is not at issue in this case. Plaintiffs, rather, seek relief for Defendants' alleged breach of fiduciary duty under section 502(a)(3), which is plainly permitted. Plaintiffs' failure to seek relief on behalf of the Atmel Plan therefore does not preclude their First Cause of Action.
Defendants next turn to the substance of Plaintiffs' claim for breach of fiduciary duty, contending that "the Complaint contains no factual allegations supporting the bare legal conclusion that Microchip was a fiduciary of the Atmel Plan," thus precluding a cause of action for breach of fiduciary duty. See Mot. at 22. "To establish an action for equitable relief under ERISA section 502(a)(3) [for breach of fiduciary duty], the defendant must be an ERISA fiduciary acting in its fiduciary capacity, and must violate [ ] ERISA-imposed fiduciary obligations." See Mathews v. Chevron Corp., 362 F.3d 1172, 1178 (9th Cir. 2004) (citations and internal quotation marks omitted) (original brackets). The Court considers each prong of the Mathews inquiry in turn.
Plaintiffs assert that "Atmel and Microchip, as Atmel's successor, are named fiduciaries and are therefore fiduciaries `for all purposes of the plan.'" Opp. at 16 (citation omitted). Defendants, for their part, attempt to assert the merger's closing date as a sort of dividing line. They argue that before the merger's closing date, the Complaint refers to Microchip as the "post-merger Plan Administrator" in the conditional tense, amounting to an admission by Plaintiffs that Microchip was not a fiduciary prior to the merger's closing. See Mot. at 23 (quoting Compl. ¶ 38). And, after the merger's closing, Defendants argue that it was acting as an employer, not a fiduciary, "when it interacted with Plaintiffs in the context of an employment termination." See id. at 23-24. The Court finds that Plaintiffs have pled sufficient facts to establish Microchip as a fiduciary.
"To determine whether one qualifies as a fiduciary, courts ask whether one exercises discretionary authority or control respecting management over the plan . . . or has discretionary authority or responsibility in the administration of the plan." Brown v. Cal. Law Enforcement Ass'n, Long-Term Disability Plan, 81 F.Supp.3d 930, 934 (N.D. Cal. 2015) (citing 29 U.S.C. § 1002(21)(A)). The determination of a corporation's fiduciary status is a conclusion of law, Mathews, 362 F.3d at 1178 (citing Varity, 516 U.S. at 498)
Under the test set forth in Brown, Plaintiffs have pled sufficient facts to allege Microchip's fiduciary status.
Defendants' arguments to the contrary are unavailing. In arguing that Microchip "was acting as an employer and not acting in an ERISA fiduciary capacity when it interacted with Plaintiffs in the context of an employment termination," see Mot. at 23-24, Defendants fail to properly consider the legal effect of an employer-fiduciary making representations about the future of plan benefits. "[The Supreme Court's opinion in] Varity holds that a firm which has dual roles as both plan administrator and employer is acting in its administrator-fiduciary capacity when people within the firm `who had authority to communicate as fiduciaries' make representations to beneficiaries about future plan benefits." See Brown, 81 F. Supp. 3d at 935. In addition, as a practical matter, in these circumstances "reasonable employees" could have thought that Microchip "was communicating with them both in its capacity as employer and in its capacity as plan administrator." See Varity, 516 U.S. at 503 (original emphasis). While reasonable employees "might not have distinguished consciously between the two roles" of Microchip, "they would have known that the employer was their plan administrator and had expert knowledge about how their plan worked." See id.
Defendants also argue that "Microchip could not act in a fiduciary manner in making [pre-merger] statements when the Complaint admits it was not the fiduciary at that time." Mot. at 23. Specifically, Defendants cite the Complaint's characterization of Microchip as the plan administrator-to-be prior to the closing of the merger, which they argue amounts to a concession that Microchip did not become a fiduciary until the merger closed. See Compl. ¶ 38 ("Microchip repeatedly, affirmatively, and deliberately caused Atmel management and Atmel employees to believe that Microchip, as the post-merger Plan Administrator, recognized the continued existence of the [Atmel] Plan, intended to honor the [Atmel] Plan, and would pay all severance benefits provided by the Plan. . . ."). While it is true that Plaintiffs fail to allege facts showing that Microchip exercised or had "discretionary authority or responsibility in the administration of the plan" prior to the merger, see Brown, 81 F. Supp. 3d at 934, that does not affect the ultimate question of its fiduciary status. As discussed below, however, that temporal distinction does affect what conduct by Microchip may qualify as a breach of its fiduciary duties.
Having established that Plaintiffs have sufficiently pled Microchip's fiduciary status, the Court turns to whether Plaintiffs have sufficiently pled the element of breach. "In general terms, fiduciary responsibility under ERISA is simply stated." Pegram v. Herdrich, 530 U.S. 211, 223 (2000). Section 404 of ERISA requires fiduciaries "to discharge [their] duties with respect to a plan solely in the interest of the participants and beneficiaries" and, as relevant here, "for the exclusive purpose of providing benefits to participants and their beneficiaries. . . ." 29 U.S.C. § 1104(a)(1)(A)(i). ERISA "fiduciaries breach their duties if they mislead plan participants or misrepresent the terms of administration of a plan." King v. Blue Cross & Blue Shield of Ill., 871 F.3d 730, 744 (9th Cir. 2017) (quoting Barker v. Am. Mobil Power Corp., 64 F.3d 1397, 1403 (9th Cir. 1995)). They also have an "obligation to convey complete and accurate information material to the beneficiary's circumstance, even when a beneficiary has not specifically asked for the information." Id. (citing Barker, 64 F.3d at 1403).
Plaintiffs sufficiently allege that Microchip breached its fiduciary duties. For example, they allege that Microchip misled employees in telling them that the Atmel Plan "had `expired' on November 1, 2015 and therefore it had no obligation to pay, and would not pay, the severance benefits provided by the [Atmel] Plan" to the employees Microchip terminated without cause. Compl. ¶¶ 52-53. Plaintiffs also allege that Microchip "failed to inform" those terminated employees that "the [Atmel] Plan was still in existence and in effect," providing those employees with rights under ERISA. See id. ¶ 53; see also id. ¶¶ 55, 56, 60.
Defendants' argument to the contrary again fails. They contend that the fact that Plaintiffs still filed for benefits under the Atmel Plan, even after Microchip "expressed its opinion" that the Plan had expired and that employees were not entitled to benefits, "negat[es] any suggestion that [Plaintiffs] felt Microchip's statements were made as a plan fiduciary exercising discretionary authority or control over the management or administration of the Atmel Plan at that time." See Reply at 11. This argument amounts to the assertion that because Plaintiffs filed for benefits under the Atmel Plan—despite Defendants' alleged misrepresentations meant to discourage them from doing just that—there is no cause of action for breach of fiduciary duty. The Court disagrees.
As mentioned above, however, Plaintiffs' failure to allege facts showing that Microchip was a fiduciary before the closing of the merger does preclude it from arguing that conduct that took place before the merger was a breach of fiduciary duty. See 29 U.S.C. § 1109(b) ("No fiduciary shall be liable with respect to a breach of fiduciary duty under this subchapter if such breach was committed before he became a fiduciary or after he ceased to be a fiduciary."); Compl. ¶ 79 (alleging breach based on Microchip's pre-merger "failure to disclose . . . that defendants intended not to provide the benefits described in the [Atmel] Plan," "affirmative[ ] misrepresent[ation] that defendants would honor the [Atmel] Plan when defendants did not intend to do so," and "deliberate[] misleading [of] participants into believing that defendants would pay the full amount of severance benefits provided by the [Atmel] Plan").
In their final argument against Plaintiffs' claim for breach of fiduciary duty, Defendants contend that even assuming Plaintiffs did state a claim, they fail to allege facts showing they are entitled to the specific forms of equitable relief they seek. See generally Mot. at 10-20. Before turning to that argument, the Court addresses two threshold issues on the question of relief: whether Plaintiffs (1) are permitted to bring suit on behalf of all of the Atmel Plan participants without bringing their claims as a class action, and (2) may simultaneously bring a claim for benefits under section 502(a)(1)(B) and a claim for equitable relief under section 502(a)(3).
Defendants argue that Plaintiffs improperly seek "a myriad of requested relief on behalf of `all Plan participants'" without bringing their claims as a class action, in contravention of constitutional standing rules. See Mot. at 20. In support of this argument, Defendants cite Brady v. United of Omaha Life Ins. Co., 902 F.Supp.2d 1274, 1283-84 (N.D. Cal. 2012), in which the plaintiff sought equitable relief under section 502(a)(3). Specifically, she sought an injunction barring the defendant life insurance company "from obtaining input from biased medical consultants," which the court noted "would provide relief for all other similarly situated claimants." See id. But the court also noted that the plaintiff "ha[d] not brought her claim as a class action, the proper mechanism for doing so," and that "the relief she [sought] contravene[d] the general rules applicable to Article III standing and its prudential limitations." See id. Defendants accordingly cite Brady for the principle that "Plaintiffs cannot seek any relief related to the process of any pending or future Atmel Plan benefits claims when Plaintiffs admit they already exhausted administrative remedies on their own benefits claims," or to the releases that Plaintiffs admit they did not sign. See Mot. at 20.
But Defendants fail to address the factor distinguishing this case from Brady: here, Plaintiffs bring a cause of action for breach of fiduciary duty. The case of Shaver v. Operating Engineers Local 428 Pension Trust Fund, 332 F.3d 1198 (9th Cir. 2003), is instructive here. In Shaver, the plaintiffs alleged that the defendants violated their fiduciary duty by failing to maintain accurate "records of the fund's operation." 332 F.3d at 1199. The court noted that, while the plaintiffs "did not allege that any loss occurred" as a result of the alleged breach, such an omission was "not fatal" to this cause of action. See id. at 1203. Distinguishing from cases in which a participant seeks monetary relief from an ERISA fiduciary, the court found that the plaintiffs were "seek[ing] purely equitable relief," and that
Id. The Ninth Circuit reached a similar conclusion in another ERISA case involving a claim for breach of fiduciary duty, in which the plaintiffs sought a constructive trust, in part under section 502(a)(3), see Amalgamated Clothing & Textile Workers Union, AFL-CIO v. Murdock, 861 F.2d 1406, 1412-13 (9th Cir. 1988), despite the fact that they had already "be[en] paid the monies they were actuarially due under the plan," see id. at 1409. The court held that the plaintiffs were permitted to "seek relief on behalf of all plan participants and beneficiaries, not to compensate them for damages suffered, but to deny the fiduciaries profits from their alleged breach and thereby to deter future breaches of ERISA's duty of loyalty." See id. at 1414 (original emphasis); see also id. at 1412 ("The key to removing a fiduciary's financial incentive to breach his duty of loyalty is to make sure that the fiduciary is not allowed to keep any ill-gotten profits. Whether the ill-gotten profits are returned to an ERISA plan or ultimately distributed to plan participants and beneficiaries is not critical to effective deterrence.").
At bottom, the principles set forth in Shaver and Amalgamated Clothing allow an ERISA plaintiff to bring a claim for breach of fiduciary duty, even when there is no allegation of loss. It is therefore clear that Plaintiffs may bring this cause of action for breach of fiduciary duty on behalf of all participants to the extent they seek purely equitable relief, without bringing their claims as a class action.
Defendants next argue that because Plaintiffs' claims "amount[ ] to nothing more than a claim for benefits," ERISA provides them adequate relief under section 502(a)(1)(B), precluding equitable relief under section 502(a)(3) as a matter of law. See Mot. at 10. Unlike section 502(a)(1)(B), which permits an ERISA participant or beneficiary to bring an action to recover benefits, to enforce his rights under the plan, or to clarify his rights to future benefits under the plan, 29 U.S.C. § 1132(a)(1)(B), section 503(a)(3) is a catch-all provision that permits an action "to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan," 29 U.S.C. § 1132(a)(3) (emphasis added). Given the Supreme Court's recognition that "where Congress elsewhere provide[s] adequate relief for a beneficiary's injury, there will likely be no need for further equitable relief, in which case such relief normally would not be `appropriate,'" see Varity, 516 U.S. at 515 (citation omitted), the question becomes whether some other section of ERISA provides adequate relief—i.e., that would negate the need for equitable relief. Accordingly, courts adhere to the general rule that an ERISA plaintiff may "pursu[e] simultaneous claims under [section 502(a)(1)(B)] and [section 502(a)(3)]," Moyle v. Liberty Mut. Ret. Benefit Plan, 823 F.3d 948, 965 (9th Cir. 2016), provided that there is no double recovery, id. (citing Silva v. Metro. Life. Ins. Co., 762 F.3d 711, 726 (8th Cir. 2014)).
With the principles above in mind, the Court next turns to Plaintiffs' specific claims under section 502(a)(3) for declaratory and injunctive relief, surcharge, and equitable estoppel.
Plaintiffs seek a declaration that "the Plan is valid and enforceable and remains in existence," and that "all Plan participants, including plaintiffs, are entitled to the full amount of benefits." See Compl. ¶ 85. They also seek injunctive relief (1) prohibiting Defendants from "continuing to deny Plan benefits to eligible employees"; (2) prohibiting Defendants "from continuing to make false and fraudulent statements" about the existence of the Atmel Plan or any employee's right to benefits under the Plan; (3) prohibiting Defendants "from continuing to delay the processing of any Plan member's claim for ERISA benefits"; and (4) "requiring defendants to pay the full amounts and benefits" promised under the Atmel Plan. Id.
Several of these claims are duplicative of relief available under other provisions of ERISA. Plaintiffs' request for declaratory relief under section 502(a)(3) is barred because such relief is nothing more than a request for the Court to "clarify [their] rights to future benefits under the terms of the plan"—relief for which ERISA provides under section 502(a)(1)(B). See 29 U.S.C. § 1132(a)(1)(B). That leaves Plaintiffs' request for injunctive relief. While such relief is clearly encompassed by section 502(a)(3), see Mertens v. Hewitt Assocs., 508 U.S. 248, 256 (1993) ("Congress intended `equitable relief' to include only those types of relief that were typically available in equity, such as injunction, mandamus, and restitution."), the Court still must inquire as to whether this claim is duplicative, see Moyle, 823 F.3d at 961. Plaintiffs' request that the Court enjoin Defendants from "continuing to deny Plan benefits to eligible employees" and require Defendants "to pay the full amounts and benefits promised under the Atmel Plan," see Compl. ¶ 85, is no more than a plea to enforce the terms of the plan—a remedy which is available under section 502(a)(1)(B), see 29 U.S.C. 1132(a)(1)(B) ("A civil action may be brought by a participant or beneficiary . . . to enforce his rights under the terms of the plan. . . ."). And their request that the Court enjoin Defendants from "continuing to make false and fraudulent statements" about the existence of the Atmel Plan, or any employee's right to benefits under the Plan, see Compl. ¶ 85, amounts to a request for the Court to "clarify [Plaintiffs'] rights to future benefits under the terms of the plan," see 29 U.S.C. § 1132(a)(1)(B).
Only one of Plaintiffs' claims for injunctive relief remains: that the Court prohibit Defendants "from continuing to delay the processing of any Plan member's claim for ERISA benefits." See Compl. ¶ 85. For a plaintiff to establish that it is entitled to an injunction, it "must satisfy a four-factor test," and show
Ctr. for Biological Diversity v. Mattis, 868 F.3d 803, 827 (9th Cir. 2017) (quoting Sierra Forest Legacy v. Sherman, 646 F.3d 1161, 1184 (9th Cir. 2011) (per curiam)). In support of their claim, Plaintiffs allege that Defendants, "[d]espite having no justification for doing so . . . deliberately and repeatedly delayed giving responses to these claims . . . despite knowing from the outset that they intended to deny those claims," based on their position that the Atmel Plan no longer existed. See Compl. ¶ 63. Plaintiffs further allege that when they appealed those denials, Defendants "delayed responding until virtually the last possible day for a response and then denied their appeals on the identical erroneous and wrongful grounds." Id. ¶ 64.
Viewing the alleged facts in the light most favorable to Plaintiffs, the Court concludes that they have sufficiently stated a claim for injunctive relief. Delay in paying out ERISA benefits is grounds for a finding of irreparable harm. See Bd. of Trs. of Bay Area Roofers Health & Welfare Trust Fund v. Westech Roofing, No. 12-cv-05655-JCS, 2014 WL 4383062, at *4 (N.D. Cal. Sept. 4, 2014) (collecting cases).
Accordingly, Plaintiffs have pled sufficient facts to state a claim for an injunction enjoining Defendants from continuing to delay the processing of any Plan participant's benefits. The Court dismisses Plaintiffs' remaining claims for injunctive relief and all of Plaintiffs' claims for declaratory relief under section 502(a)(3). Moreover, because the Court is satisfied that there are no additional facts that Plaintiffs could plead that would render this relief non-duplicative, the remaining claims are dismissed without leave to amend. See Foman v. Davis, 371 U.S. 178, 182 (1962) (enumerating futility as a permissible basis on which to deny leave to amend).
Plaintiffs next seek to "recover as an equitable surcharge the difference between what defendants paid them in severance benefits and what defendants should have paid them in severance benefits, disgorgement of profits gained as a result of defendants' breaches, plus interest and attorneys' fees." Compl. ¶ 87.
The remedy of surcharge provides an ERISA beneficiary with "monetary `compensation' for a loss resulting from a [fiduciary's] breach of duty, or to prevent the [fiduciary's] unjust enrichment." See CIGNA Corp. v. Amara, 563 U.S. 421, 441 (2011) (citation omitted); see also id. at 442 (stating that the "surcharge remedy extended to a breach of trust committed by a fiduciary encompassing any violation of a duty imposed on that fiduciary"). It is well-established that "appropriate equitable relief" under section 502(a)(3) includes surcharge. See Gabriel v. Alaska Elec. Pension Fund, 773 F.3d 945, 957 (9th Cir. 2014). Moreover, such relief would not be duplicative as Defendants contend. See Mot. at 14-15. Rather, unlike the relief available under section 502(a)(1)(B), surcharge would provide Plaintiffs with a remedy for other losses caused by Defendants' alleged breach of fiduciary duty, beyond the amount of benefits allegedly withheld.
"[T]o obtain relief by surcharge for a breach of the ERISA trustee's duties, a plan participant or beneficiary must show that the violation injured him or her, but need only show harm and causation, not detrimental reliance." Gabriel, 773 F.3d at 957-58 (quoting Amara, 563 U.S. at 444) (internal punctuation marks omitted). Under the "unjust enrichment" theory of surcharge, a fiduciary "who gains a benefit by breaching his or her duty must return that benefit to the beneficiary." Skinner v. Northrop Grumman Ret. Plan B, 673 F.3d 1162, 1167 (9th Cir. 2012). "[T]he fact that this relief takes the form of a money payment does not remove it from the category of traditionally equitable relief." Amara, 563 U.S. at 441.
Plaintiffs sufficiently allege that they are entitled to surcharge on a theory of unjust enrichment. See Compl. ¶ 87. For example, they allege that Microchip "intimidated and coerced Atmel employees . . . into waiving statutory rights and benefits and accepting significant `discounts' on the severance benefits those employees were legally owed and guaranteed under the [Atmel] Plan, in order to save Microchip money." Id. ¶ 51; see also id. ¶ 56 (alleging that Microchip misled employees into accepting a smaller severance package "as part of a calculated plan by Microchip to save itself money"); id. ¶ 60 (same). Additionally, the Court rejects Defendants' argument that Plaintiffs' request for prejudgment interest on the surcharge amount is duplicative of their claim for benefits under section 502(a)(1)(B) because "Plaintiffs have the opportunity to request prejudgment benefits if they are successful in their Section 502(a)(1)(B) claim." Mot. at 15. As discussed above, surcharge provides relief beyond and distinct from that provided for in section 502(a)(1)(B), so the interest on the surcharge amount cannot be duplicative of any interest awarded on their claim for benefits.
Accordingly, Defendants' motion is denied as to Plaintiffs' claim for surcharge.
Plaintiffs also seek, "[t]o the extent that any Plan language is found to be ambiguous . . . an order equitably estopping defendants from disputing the Plan participants' entitlement to the full amount of severance benefits" provided by the Atmel Plan to employees terminated without cause after the merger. See Compl. at 32 (prayer for relief).
The remedy of equitable estoppel "holds the fiduciary to what it had promised and operates to place the person entitled to its benefit in the same position he would have been in had the representations been true." Gabriel, 773 F.3d at 955 (quoting Amara, 563 U.S. at 441). It is among the equitable remedies contemplated in section 502(a)(3), see Amara, 563 U.S. at 441, and Defendants do not dispute that such relief is not provided elsewhere in ERISA.
Gabriel, 773 F.3d at 955 (quoting Greany v. W. Farm Bureau Life Ins. Co., 973 F.2d 812, 821 (9th Cir. 1992)). In the ERISA context, "the party asserting estoppel . . . must also allege (1) extraordinary circumstances; (2) `that the provisions of the plan at issue were ambiguous such that reasonable persons could disagree as to their meaning or effect'; and (3) that the representations made about the plan were an interpretation of the plan, not an amendment or modification of the plan." Id. at 957 (quoting Spink v. Lockheed Corp., 125 F.3d 1257, 1262 (9th Cir. 1997)).
At first, Defendants challenged Plaintiffs' allegations as to two of the six prongs of the equitable estoppel standard. They suggested that because "Plaintiffs' case rests on the argument that the `plain language' of the Atmel Plan unambiguously entitles them to benefits and it was a breach of fiduciary duties to tell them otherwise," they cannot plead facts showing that the Plan was ambiguous without undermining their case. See Mot. at 17. Defendants also argue that Plaintiffs fail to allege the requisite extraordinary circumstances. See id. In their reply, however, Defendants not only repeat the arguments set forth in their motion, but further contend that Plaintiffs fail to allege that they "reasonably and detrimentally relied on an oral `material misrepresentation' of ambiguous plan terms." See Reply at 5-6.
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 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.
Defendants' motion is therefore denied as to Plaintiffs' claim for equitable estoppel.
Last, Defendants argue that Plaintiffs have failed to plead facts sufficient to establish a prima facie case of ERISA interference. See Mot. at 21. Section 510 of ERISA, in relevant part, makes it
29 U.S.C. § 1140. The provision's purpose "is to `prevent persons and entities from taking actions which might cut off or interfere with a participant's ability to collect present or future benefits or which punish a participant for exercising his or her rights under an employee benefit plan.'" Lessard v. Applied Risk Mgmt., 307 F.3d 1020, 1024 (9th Cir. 2002) (quoting Tolle v. Carroll Touch, Inc., 977 F.2d 1129, 1134 (7th Cir. 1992)). To establish a prima facie case of interference under section 510, an ERISA plaintiff generally must show that (1) he has "participate[d] in a statutorily protected activity; (2) an "adverse employment action" has been taken against him; and (3) "a causal connection existed between the two." Kimbro v. Atl. Richfield Co., 889 F.2d 869, 881 (9th Cir. 1989) (quoting McKinney v. Dole, 765 F.2d 1129, 1143 (D.C. Cir. 1985)). Where a plaintiff alleges discriminatory interference under section 510, a showing of the defendant's "specific intent" to interfere with ERISA rights is also required. See Viteri-Butler v. Univ. of Cal., Hastings Coll. of the Law, No. C 12-2651 PJH, 2014 WL 1022174, at *11 (N.D. Cal. Mar. 13, 2014) ("Where a plaintiff alleges discriminatory interference with her exercise of protected rights under § 510, the plaintiff must `put forth sufficient evidence to establish [the defendant's] "specific intent to interfere with [her] benefit rights."'") (quoting Lessard, 307 F.3d at 1025); Karamsetty v. Wells Fargo & Co., 967 F.Supp.2d 1305, 1327 (N.D. Cal. 2013) (citing Lessard for the same principle).
Plaintiffs neither allege specific facts that satisfy this standard nor cite to the correct standard.
Still, the Court cannot be certain that amendment of the Complaint as to this cause of action is futile. See Fed. R. Civ. P. 15(a)(2) ("The Court should freely give leave [to amend] when justice so requires."). Accordingly, Plaintiffs' Third Cause of Action is dismissed with leave to amend.
For the foregoing reasons, the Court
Should Plaintiffs choose to amend the Complaint as to the Third Cause of Action, they are directed to do so in accordance with the discussion above no later than 28 days from the date of this Order.
