JACQUELINE SCOTT CORLEY, Magistrate Judge.
Plaintiff Judy Ditchey filed this Employee Retirement Income Security Act of 1974 ("ERISA") action against her employer Defendant Mechanics Bank ("the Bank") seeking severance benefits in accordance with Defendant Mechanics Bank Change in Control Plan ("the Plan"). Plaintiff moves for partial summary judgment on her claim for reimbursement of reasonable legal fees and expenses under the Plan. (Dkt. No. 22.) Having considered the parties' briefs, including their supplemental filings, and having had the benefit of oral argument on January 7, 2016, the Court GRANTS Plaintiff's motion. The Plan's unambiguous language requires the Bank to reimburse Plaintiff's legal fees regardless of the outcome of any claim for Plan benefits.
Plaintiff is the Executive Vice President and Director of Human Resources for the Bank.
Plaintiff contends, and the Bank does not dispute, that the purchase constituted a "Change in Control" under the terms of the Plan and triggered a "Change in Control Period" commencing on April 30, 2015, and running for two years, until April 30, 2017. (Complaint ¶ 9.) The Plan provides Severance Benefits in the event of an "Involuntary Termination" during the "Change in Control Period." (Dkt. No. 22-3 at 2.) The Severance Benefits include (a) severance pay equal to 200% of total compensation; (b) a prorated short-term incentive award; (c) reimbursement of COBRA premiums; (d) complete vesting of certain benefits; and (e) executive outplacement services. (Id. at 2-3.) The Severance Benefits available under the Plans of the other five key executives provide nearly identical benefits.
Under the Plan, six different circumstances give rise to an "Involuntary Termination":
(Id. at 12.) A participant must provide the Bank with written notice of the particular condition which triggers an "Involuntary Termination" within 90 days of the occurrence of the triggering condition. (Id.) Once such notice is provided, the Bank has 30 days to cure the condition, and if it is not cured within the 30 day period, the participant is "deemed Terminated." (Id.)
The Plan also includes the following:
(Id. at 8.) This provision, as well as the provisions regarding Involuntary Termination, notice, and cure, is identical among the six executives' plans. (Dkt. Nos. 22-3, 42-3-42-7.)
On July 27, 2015, Plaintiff submitted a letter to the Bank seeking severance benefits under the Plan on the grounds that there had been a material diminution in the scope of her responsibility, duties or authority following the "Change in Control" which had resulted in her Involuntary Termination. (Dkt. No. 22-5.) The Bank never provided a written response to her July 27 letter (although its counsel confirmed that it had until August 27 to do so), but the Bank's counsel orally denied liability for her benefits claim. (Complaint at ¶ 17; Dkt. No. 22-2 at ¶ 5.)
Nearly two weeks after the 30-day response period ran, Plaintiff filed this action alleging a single cause of action under ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), seeking to recover Plan benefits, including reimbursement of reasonable legal fees and expenses. Since filing suit, Plaintiff has submitted two sets of invoices for her legal fees to the Bank, but has not received a response. (Dkt. No. 22-2 at ¶ 6.) In response to the Complaint, the Bank filed a motion to dismiss. (Dkt. No. 19.) The following day, Plaintiff filed the underlying motion for partial summary judgment seeking reimbursement of her attorneys' fees and costs associated with her benefits claim. (Dkt. Nos. 19 & 22.) The Court heard argument regarding both these motions on January 7, 2016. The motion to dismiss was denied and the parties were ordered to submit supplemental briefing regarding the motion for partial summary judgment; specifically, to address whether the Plan is an ERISA plan. (Dkt. Nos. 30 & 31.) The parties have since done so. (Dkt. Nos. 42, 46 & 47.)
Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. Proc. 56(a). The Court must draw "all reasonable inferences [and] resolve all factual conflicts in favor of the non-moving party." Murphy v. Schneider Nat'l, Inc., 362 F.3d 1133, 1138 (9th Cir. 2004). A fact is material if it "might affect the outcome of the suit under the governing law," and an issue is genuine if "a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). There can be "no genuine issue as to any material fact" when the moving party shows "a complete failure of proof concerning an essential element of the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
Where the moving party will have the burden of proof on an issue at trial, it must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party. Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). On an issue where the nonmoving party will bear the burden of proof at trial, the moving party can prevail merely by pointing out to the district court that there is an absence of evidence to support the nonmoving party's case. Celotex, 477 U.S. at 324-25.
If the moving party meets its initial burden, the opposing party must then set forth specific facts showing that there is some genuine issue for trial in order to defeat the motion. Fed. R. Civ. P. 56(e); Anderson, 477 U.S. at 250. All reasonable inferences must be drawn in the light most favorable to the nonmoving party. Olsen v. Idaho State Bd. of Med., 363 F.3d 916, 922 (9th Cir. 2004). The non-moving party's evidence must be such that a reasonable trier of fact could return a verdict in their favor, Triton Energy Corp. v. Square D Co., 68 F.3d 1216, 1221 (9th Cir. 1995), and the Court "is not required to comb the record to find some reason to deny a motion for summary judgment," Forsberg v. Pac. Nw. Bell Tel. Co., 840 F.2d 1409, 1418 (9th Cir. 1988).
Plaintiff contends that the Bank is liable under ERISA § 502(a)(1)(B) for reimbursement of her reasonable legal fees and expenses incurred as a result of the Bank's dispute of her right to Plan benefits. Because the Plan's plain language requires reimbursement of legal fees regardless of the outcome of any dispute, Plaintiff argues that this issue is ripe for determination so long as she states a colorable claim for relief under ERISA. The first issue is whether the Plan is an ERISA plan.
ERISA applies to "employee welfare benefit plans" which may include a severance plan. 29 U.S.C. § 1002(1); Velarde v. PACE Membership Warehouse, Inc., 105 F.3d 1313, 1316 (9th Cir. 1997) ("the definition of `employee benefit plan' can include severance benefits"); Delaye v. Agripac, Inc., 39 F.3d 235, 237 (9th Cir. 1994) ("Provisions for severance pay may constitute an employee welfare benefit plan within the meaning of ERISA."); Bogue v. Ampex Corp., 976 F.2d 1319 (9th Cir. 1992) (severance pay considered "employee welfare benefit plan" under ERISA). Courts employ "a relatively simple test [] to determine whether a plan is covered by ERISA: does the benefit package implicate an ongoing administrative scheme?" Delaye, 39 F.3d at 237.
In Bogue, the Ninth Circuit considered whether ERISA governed a severance plan which provided benefits to certain executives if the company/employer was sold, and neither the employer nor the buyer offered the executive substantially equivalent" employment and the executive's employment was terminated. 976 F.2d at 1321. The court held that such a plan was an ERISA employee benefit plan because it offered more than "[t]he theoretical possibility of a one-time obligation in the future." Id. at 1322. The court reasoned:
Id. at 1323. The same reasoning applies here. The Plan (or a nearly identical version of it) applies to multiple key executives providing each with nearly identical severance benefits. The Plan requires the Bank to determine whether an executive has been involuntarily terminated because she has experienced "a material diminution in the scope of [her] responsibilities, duties or authority or any material change in [her] title, position or reporting relationship," or a material reduction in the executive's base compensation, or a material breach by the Bank of the executive's employment agreement, among other triggering conditions. (Dkt. No. 22-3 at 12.) Just as in Bogue, these events may occur at different times for each covered employee. "There is no way to carry out that obligation with [an] unthinking, one-time, nondiscretionary application." Bogue, 976 F.2d at 1323; see also Velarde, 105 F.3d at 1317 (noting that "the key to our holding in Bogue was that there was `enough ongoing, particularized, administrative discretionary analysis,'" and "not that the agreement simply required some modicum of discretion.").
Defendants' reliance on Fontenot v. NL Indus., Inc., 953 F.2d 960 (5th Cir. 1992), for the contrary conclusion is unpersuasive. The Bogue test —that the plan "requires an administrative scheme because the circumstances of each employee's termination" must be "analyzed in light of certain criteria"—derives from Fontenot. Bogue, 976 F.2d at 1323. There, the Fifth Circuit considered a "golden parachute" severance plan which provided that "if an executive was terminated within two years of a change of control, the company would pay the executive a lump sum cash payment of three times his highest annual compensation for the preceding three years, as well as a three year continuation of certain benefits." Id. at 961. In concluding that this was not an ERISA plan, the court focused on the plan's requirement of "a one-time lump sum payment triggered by a single event" which does not require "any administrative scheme whatsoever to meet the employer's obligation." Id. at 962 (internal citation and quotation marks omitted). The court specifically distinguished the plan before it from that at issue in Pane v. RCA Corp., 667 F.Supp. 168 (D.N.J. 1987), aff'd, 868 F.2d 631 (3d Cir. 1989), on the grounds that under the Pane plan "the circumstances of each employee's termination [had to be] analyzed in light of [certain] criteria." Id. at 963 (internal quotation marks and citation omitted). Just as the plans at issue in Pane and Bogue, the Plan here requires the Bank to determine whether the particular circumstances of a Plan participant meet various criteria.
The Plan is thus governed by ERISA.
Plaintiff contends that the Plan's fee provision requires the Bank to pay her reasonable legal fees regardless of the outcome of any dispute regarding Plan benefits. The Bank counters that Plaintiff is ineligible to receive Plan benefits because she failed to satisfy a condition precedent to the receipt of benefits, and lacks standing to pursue a benefits claim for the same reason. Both of the Bank's arguments turn on their assertion that Plaintiff's claims are barred because she failed to provide a general release within 30 days of her "Termination"—an argument the Court rejected in denying Defendants' motion to dismiss. (Dkt. No. 31.) On the motion to dismiss, however, the question was whether the Bank had shown as a matter of law that the failure to submit the release defeated Plaintiff's claim. It had not.
On Plaintiff's motion for summary judgment her burden is to show that her failure to submit the release does not defeat or at least create a dispute to her claim for attorneys' fees. She has met this burden. Although the Bank refers to the Plan's requirement of a general release as a condition precedent to the receipt of attorney fees, there is no such limitation in the Plan. Section 12 of the Plan states that "the Bank agrees to pay as incurred" "to the full extent permitted by law, all legal fees and expenses that you may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Bank, you or others." (Dkt. No. 22-3 at 8.) The Bank is correct that the payment of Severance Benefits is contingent upon delivery of a general release within 30 days of Plaintiff's "Termination." And, Section 2, entitled "Severance Benefits" states that failure to meet this 30 day deadline "will cause you to forfeit the Severance Benefits under this Letter." (Id.) The reimbursement of legal fees, however, is not one of the delineated "Severance Benefits" that can be forfeited; instead, it appears in a separate Plan section. Compare id. at 2-3 (listing benefits as (a) 200% of total compensation; (b) a prorated short-term incentive award; (c) reimbursement of COBRA premiums; (d) complete vesting of certain benefits; and (e) executive outplacement services) with id. at 7-8 (requiring reimbursement of legal fees and expenses under Section 12 entitled "Full Settlement").
The cases cited by the Bank do not suggest a contrary conclusion as Plaintiff has not argued that the Bank was prohibited from conditioning her receipt of Severance Benefits on submission of the general release. See, e.g., Lockheed Corp. v. Spink, 517 U.S. 882, 894 (1996) (concluding that a requirement for a release of claims was an acceptable condition to place on an employee's receipt of benefits under an ERISA plan); Harlan v. Sohio Petroleum Co., 677 F.Supp. 1021, 1026-27 (N.D. Cal. 1988) (concluding that the plan permissibly conditioned the receipt of specified benefits under the plan on execution of a release of claims). Rather, Plaintiff contends, and indeed, the Plan language unambiguously provides, that the release condition only applies to the receipt of Severance Benefits and Severance Benefits do not include the at-issue reimbursement of legal fees and expenses.
The Bank next argues that Plaintiff is not a Plan participant and therefore lacks standing. An ERISA participant is "any employee or former employee of an employer . . . who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer." 29 U.S.C. § 1002(7). An individual may become eligible for benefits if she has "a colorable claim that (1) he or she will prevail in a suit for benefits, or that (2) eligibility requirements will be fulfilled in the future." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117-18 (1989).
Plaintiff is a current employee with a colorable claim for benefits and is therefore a Plan participant with standing. The Bank's insistence that her claim is not colorable because she failed to execute and submit the general release within 30 days of her Termination conflates the question of eligibility for benefits with entitlement to benefits.
The Bank's insistence that it requires discovery before the Court rules on Plaintiff's partial motion for summary judgment is unavailing. When seeking relief under Federal Rule of Civil Procedure 56(d), "[t]he requesting party must show: (1) it has set forth in affidavit form the specific facts it hopes to elicit from further discovery; (2) the facts sought exist; and (3) the sought-after facts are essential to oppose summary judgment." Family Home & Fin. Ctr., Inc. v. Fed. Home Loan Mortg. Corp., 525 F.3d 822, 827 (9th Cir. 2008). The "[f]ailure to comply with these requirements is a proper ground for denying discovery and proceeding to summary judgment." Id. (internal quotation marks omitted).
While the Bank has submitted the required affidavit, it falls far short of satisfying Rule 56(d). First, as to whether the Plan is covered by ERISA, the Bank merely baldly states that "Defendant needs to conduct discovery to determine whether the Plan qualifies as an ERISA plan." (Dkt. No. 26-1 ¶ 2.) The Bank also insists that discovery "will uncover extrinsic evidence of the circumstances of the Plan's formation, negotiation, and Plaintiff's intentions and understandings of the negotiated terms in the event the Court finds the Plan to be ambiguous." But the Bank has not argued that the fee provision at issue on Plaintiff's motion for summary judgment is ambiguous, and absent an ambiguity, the Court must give effect to the plain meaning of the Plan.
In their supplemental brief, the Bank asks the Court to certify its Order for immediate appeal under Federal Rule of Civil Procedure 54(b) if the Court grants Plaintiff's motion for partial summary judgment. Defendants' request is both procedurally and substantively improper. Federal Rule of Civil Procedure 54(b) provides that
Plaintiff's complaint here includes only one claim for relief. Thus, Rule 54(b) does not apply. See Arizona State Carpenters Pension Trust Fund v. Miller, 938 F.2d 1038, 1040 (9th Cir. 1991) (dismissing an appeal under Rule 54(b) based on the rule that "a complaint asserting only one legal right, even if seeking multiple remedies for the alleged violation of that right, states a single claim for relief.") (internal citations omitted). In Miller, the Ninth Circuit concluded that a "count for punitive damages is not `separate and distinct' from the remainder of the counts in the complaint, but is based on a single set of facts giving rise to a legal right of recovery under several different remedies." Id. Further, the point of the final judgment rule is "not merely to prevent an appeal on an issue concerning which the trial court has not yet made up its mind beyond possibility of change but also to eliminate the need for separate appellate consideration of different elements of a single claim." Cinerama, Inc. v. Sweet Music, S. A., 482 F.2d 66, 70 (2d Cir. 1973). Here, as Plaintiff correctly points out, review of the attorneys' fee provision would necessarily involve review of the same Plan documents and facts that the Court will be reviewing in considering the merits of Plaintiff's claim for relief. Defendants' request for entry of judgment under Rule 54(b) is therefore denied.
The Bank's alternative request that the Court stay any payment of fees under the at-issue provision until final judgment is likewise without any legal support and contradicts the Plan's language. The plain language of the attorneys' fees provision states that "[a]ny reimbursement of legal fees paid to you pursuant to this Section 12 shall be paid within ten (10) days following the Bank's receipt of an invoice from you and in no event later than the end of your taxable year next following your taxable year in which the related expense is incurred." (Dkt. No. 22-3 at 8.)
For the reasons stated above, Plaintiff's motion for partial summary judgment (Dkt. No. 22) is GRANTED.
