Cryer v. Franklin Resources, Inc. et al

Filing 83

ORDER DENYING FRI'S MOTION FOR RECONSIDERATION AND GRANTING-IN-PART FRI'S MOTION TO STRIKE by Judge Claudia Wilken denying 73 Motion for Reconsideration; granting in part 80 Motion to Strike. (tlS, COURT STAFF) (Filed on 10/4/2017)

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1 IN THE UNITED STATES DISTRICT COURT 2 FOR THE NORTHERN DISTRICT OF CALIFORNIA 3 4 5 6 MARLON H. CRYER, individually and on behalf of a class of all other persons similarly situated, and on behalf of the Franklin Templeton 401(k) Retirement Plan, 7 8 9 United States District Court For the Northern District of California 10 11 12 13 Plaintiff, No. C 16-4265 CW ORDER DENYING FRI’S MOTION FOR RECONSIDERATION AND GRANTING-INPART FRI’S MOTION TO STRIKE v. FRANKLIN RESOURCES, INC.; and THE FRANKLIN TEMPLETON 401(k) RETIREMENT PLAN INVESTMENT COMMITTEE, (Docket Nos. 73 and 80) Defendants. ________________________________/ Defendants Franklin Resources, Inc. and The Franklin 14 Templeton 401(k) Retirement Plan Investment Committee (FRI) move 15 for reconsideration of the Court’s order granting Plaintiff’s 16 motion for class certification (Docket No. 67). 17 Plaintiff Marlon H. Cryer to file an opposition and permitted FRI 18 to file a reply and the parties did so. 1 19 papers submitted by the parties, the Court DENIES FRI’s motion for 20 reconsideration. The Court ordered Having considered the 21 22 23 24 25 26 27 28 1 Cryer also submitted a notice of supplemental authority along with two pages of additional argument. Docket No. 79. FRI moved to strike the additional argument. Docket No. 80. Consistent with Civil Local Rule 7-3(d)(2), the Court considers the underlying cases cited by Cryer’s notice, but not any argument contained in the notice. 1 BACKGROUND 2 The parties are familiar with the facts of this case, and so 3 the Court provides only the facts most relevant to the resolution 4 of FRI’s motion for reconsideration. 5 FRI is a financial services company that provides investment 6 products, including mutual funds, to individual and institutional 7 investors. Since 1981, it has sponsored a 401(k) plan for its 8 employees. Complaint ¶¶ 14, 18. 9 contribution plan” under 29 U.S.C. § 1002(34) and an “employee United States District Court For the Northern District of California 10 11 The plan is a “defined pension benefit plan” under 29 U.S.C. § 1002(2). Id. at ¶¶ 15-16. Cryer is a former employee of FRI and a former member of 12 FRI’s 401(k) retirement plan. 13 terminated from his employment with FRI. 14 On February 13, 2016, Cryer signed a document entitled 15 “Confidential Agreement and General Release” (severance 16 agreement). 17 “general release” provision whereby “the Employee” (Cryer) agreed 18 to release all claims against FRI, including “all common law, 19 contract, tort or other Claims the Employee might have, as well as 20 Claims the Employee might have under the . . . Employee Retirement 21 Income Security Act of 1974.” 22 provision is followed by a “carve-out” provision which states that 23 “the Employee does not release any rights that the law does not 24 permit the Employee to release.” 25 provision goes on to state that the Employee does not release “any 26 right that relates to: . . . (iii) the Employee’s vested 27 participation in any qualified retirement plan.” Id. at 1, 12. On February 12, 2016, Cryer was Docket No. 58-13 at 1. The severance agreement contained a Id. at 3. The “general release” Id. at 4. 28 2 The “carve-out” Id. 1 2 3 4 5 6 7 8 9 United States District Court For the Northern District of California 10 11 The severance agreement also contains a “class action waiver” provision which states: (g) Surrender of Class Participation. By executing this Confidential Agreement, the Employee waives and surrenders any right to become, and promises not to consent to become, a member of any class or collective action in which claims are asserted against any Released Party related in any way to the Employee’s employment, or the termination of Employee’s employment, with the Company. If, without the prior knowledge or consent of the Employee, the Employee is made a member of any such class or collective action in any proceeding, the Employee agrees immediately to opt out of the class or collective action at the first opportunity and to forego and not accept any personal relief in such action. Id. at 5. On July 28, 2016, Cryer, “individually and as representative 12 of a class of similarly situated persons,” brought suit against 13 FRI pursuant to ERISA § 502(a)(2), asserting FRI breached its 14 fiduciary duties to the Franklin Templeton 401(k) Retirement Plan. 15 Complaint ¶ 1. 16 arising from FRI’s alleged breach of fiduciary duties. 17 Cryer seeks restoration of all losses to the plan Id. at 21. On October 24, 2016, FRI brought a motion for summary 18 judgment, contending that Cryer could not advance his claims 19 because he had released them in his severance agreement. 20 Motion for Summary Judgment at 6. 21 Cryer’s claims are barred by the “general release” provision. 22 id. at 3-4. 23 Relying on Bowles v. Reade, 198 F.3d 752 (9th Cir. 1999), the 24 Court held that Cryer could not give up the claims that he brought 25 on behalf of the plan. 26 Order on Specifically, FRI argued that The Court rejected FRI’s motion. See Id. at 6-8. Id. On June 9, 2017, Cryer brought a motion to certify a class of 27 all current and former participants in the Franklin Templeton 28 401(k) Retirement Plan from July 28, 2010 to the present. 3 Motion 1 to Certify Class. 2 “class action waiver” provision prevented Cryer from serving as 3 the class representative in this case. 4 argument, finding that the severance agreement’s “class action 5 waiver” provision was not enforceable under Morris v. Ernst & 6 Young, LLP, 834 F.3d 975, 983 (9th Cir. 2016). 7 Certification at 7. 8 class certification, which the Court rejected. 9 Court granted Cryer’s motion for class certification. United States District Court For the Northern District of California 10 11 The Court rejected FRI’s Order on Class FRI made a number of other arguments against Ultimately, the Id. at 16. On August 8, 2017, FRI sought reconsideration of the Court’s order granting class certification. 12 13 FRI argued that Cryer’s severance agreement’s DISCUSSION FRI urges the Court to reconsider its decision that Cryer’s 14 severance agreement’s “class action waiver” provision is not 15 enforceable under the National Labor Relations Act (NLRA) and 16 Morris. 17 provision would seem to prevent Cryer from becoming a member of a 18 class action such as this one. 19 On its face, the language of the “class action waiver” In its motion for reconsideration, FRI informs the Court that 20 Cryer signed the severance agreement on February 13, 2016, a day 21 after his employment terminated. 22 58-13 at 1, 12. 23 Morris holds that class action waivers are unenforceable under the 24 NLRA when they are required by the employer as a condition of 25 employment. 26 contracts that foreclose the possibility of concerted work-related 27 claims. An employer may not condition employment on the 28 requirement that an employee sign such a contract.”). Motion at 5; see also Docket No. This is material to the Court’s decision because Morris, 834 F.3d at 983, 990 (“The NLRA precludes 4 If, however, a class action waiver is signed after employment has 2 already ended, then it cannot be said to be required by an 3 employer as a condition of employment, and may be enforceable. 4 See id. 5 action waiver” provision after his employment had already 6 terminated, and not as a condition of continued employment. 7 Birdsong v. AT & T Corp., 2013 WL 1120783, at *6 (N.D. Cal. Mar. 8 18, 2013) (in holding that a class action waiver signed as part of 9 a severance agreement was enforceable, noting “that Plaintiff 10 United States District Court For the Northern District of California 1 signed the instant release agreement after her employment had 11 ended, rather than as a precondition to employment or to continued 12 employment.”). 13 unenforceable. 14 Cryer signed the severance agreement and its “class See Accordingly, Morris does not render the provision Cryer argues that the NLRA and Morris protect former 15 employees as well as current employees. 16 recognized, however, the NLRA protects the rights of “employees” 17 as defined by the statute. 18 establishes the rights of employees in § 7.”). 19 the term “employee” as follows: 20 21 22 23 As the Morris court Morris, 834 F.3d at 981 (“The NLRA The NLRA defines The term “employee” shall include any employee, and shall not be limited to the employees of a particular employer, unless this subchapter explicitly states otherwise, and shall include any individual whose work has ceased as a consequence of, or in connection with, any current labor dispute or because of any unfair labor practice. 24 29 U.S.C. § 152(3) (emphasis added). Read plainly, the statute 25 protects only (1) current employees and (2) former employees whose 26 work ceased because of or in connection with “any current labor 27 dispute or because of any unfair labor practice.” 28 5 Cryer does not 1 allege that his work ceased because of or in connection with “any 2 current labor dispute or because of any unfair labor practice.” 3 Cryer also cites a number of out-of-circuit cases to support 4 his position on this point, but none is persuasive. 5 Cellular Sales of Missouri, LLC v. NLRB, 824 F.3d 772, 779 (8th 6 Cir. 2016), to show that “a former employee continues to be an 7 ‘employee’ within the meaning of the NLRA.” 8 that case, however, the court considered a mandatory employment 9 agreement whereby the employee agreed as “a condition of his Cryer cites Opposition at 2. In United States District Court For the Northern District of California 10 employment” to arbitrate individually all claims related to his 11 employment and found that it was unenforceable under the NLRA. 12 Id. at 774, 778. 13 a condition of employment, Cellular Sales of Missouri, LLC is 14 consistent with Morris. 15 Cropscience, LP, 139 F.3d 795, 803 (S.D.W.V. 2015), for the 16 assertion, “Severance pay is a term and condition of employment 17 . . . under the NLRA.” 18 requires union leadership and employers to bargain in good faith 19 about conditions of employment, including severance pay, which 20 becomes clear if the quotation is read as a whole. 21 (“Severance pay is a term and condition of employment subject to 22 mandatory bargaining under the NLRA.”) (emphasis added). 23 does not mean that the NLRA applies to preclude a term in a 24 severance agreement that a former employee signed after his 25 employment had already ended. 26 Because the offending agreement was executed as Cryer also cites Hayes v. Bayer But this case merely states that the NLRA See id. That Even if the NLRA and Morris do not bar enforcement of the 27 “class action waiver” provision, the provision may be 28 unenforceable for a different reason. 6 Cryer argues in the 1 alternative that, because he is bringing this action as a plan 2 participant on behalf of the plan pursuant to § 502(a)(2), the 3 “class action waiver” provision he signed cannot be used to waive 4 substantive rights which belong to the plan. 5 FRI responds that the “class action waiver” provision does not 6 affect any substantive rights belonging to the plan. 7 Opposition at 4. Reply at 2. The Court previously adjudicated a similar issue in its order 8 on FRI’s motion for summary judgment. 9 released the claim-in-suit when he signed the “general release” FRI argued that Cryer United States District Court For the Northern District of California 10 provision in his severance agreement. 11 Judgment at 6. 12 decision in Bowles v. Reade, which held that a plan participant 13 cannot settle, without the plan’s consent, a § 502(a)(2) breach of 14 fiduciary duty claim seeking “a return to [the plan] and all 15 participants of all losses incurred and any profits gained from 16 the alleged breach of fiduciary duty.” 17 Cir. 1999). 18 to restore value to the plan, he could not have released the claim 19 without the consent of the plan. 20 Judgment at 6. 21 not release the claim for breach of fiduciary duty. 22 Order on Motion for Summary Cryer responded by citing the Ninth Circuit’s 198 F.3d 752, 760 (9th Because Cryer seeks to bring the same type of claim Order on Motion for Summary The Court agreed with Cryer, holding that he did Id. at 7-8. Cryer now contends that Bowles’ reasoning also bars 23 enforcement of the “class action waiver” provision. 24 that the “class action waiver” provision cannot be enforced 25 because it constitutes a waiver of the plan’s rights, citing Munro 26 v. Univ. of S. California, No. CV166191VAPCFEX, 2017 WL 1654075, 27 at *4 (C.D. Cal. Mar. 23, 2017) in support of his position. 28 7 Cryer argues 1 The Munro court considered whether an arbitration agreement signed 2 by employees at the start of their employment could bind the 3 employees to arbitrate their ERISA § 502(a)(2) claims on behalf of 4 the plan, noting that it was an issue of first impression in the 5 Ninth Circuit. 6 in Bowles and held, “Just as a participant suing on behalf of a 7 plan under § 502(a)(2) cannot waive a plan's right to pursue 8 claims, a participant cannot waive a plan's right to file its 9 claims in court.” United States District Court For the Northern District of California 10 Id. at *3. The Munro court followed the reasoning Id. at *5. The Munro court noted that participants cannot “abandon even 11 their own claims under § 502(a)(2) to sue on the plans' behalf.” 12 Id. (citing cases); see also Bowles, 198 F.3d at 761 (holding that 13 Bowles properly “remained as plaintiff in her representative 14 capacity” even though her own individual claims had been 15 released). 16 arbitration agreement could not be enforced against the 17 plaintiffs, who could continue to pursue their claims in court. 18 Id. at *7. 19 that belongs to the plan, and “it cannot be bargained away without 20 the plan's consent.” 21 is closely aligned with the goals of ERISA.” 22 individual employees’ arbitration agreements could affect their 23 ability to bring § 502(a)(2) claims on behalf of the plan in 24 court, then “fiduciaries could mitigate their ERISA obligations to 25 their plans and erect barriers to ERISA enforcement on behalf of 26 plans by requiring employees to sign arbitration agreements.” 27 Fiduciaries could similarly require employees to sign “provisions 28 requiring confidentiality, expedited arbitration procedures, Accordingly, the Munro court ruled that the The decision whether to arbitrate a claim is a right Id. This holding makes “practical sense and 8 Id. at *6. If Id. 1 limited discovery, required splitting of arbitrators’ fees, and 2 mandatory payment of the prevailing party’s attorneys’ fees” -- 3 all of which would “give fiduciaries many procedural advantages” 4 and discourage participants from bringing suit to hold fiduciaries 5 accountable in court for potential wrongdoing. 6 The same reasoning applies here. Id. The decision whether to 7 file a § 502(a)(2) claim as a class action is a right that belongs 8 to the plan, and it cannot be bargained away without the plan’s 9 consent. Accordingly, the “class action waiver” provision cannot United States District Court For the Northern District of California 10 be enforced against Cryer, who brought § 502(a)(2) claims in this 11 case behalf of the plan. 12 waivers could affect their ability to bring a § 502(a)(2) claim as 13 a class action, then this could prevent fiduciaries from being 14 held accountable in court for potential wrongdoing. 15 If individual participants’ class action The ability to file a § 502(a)(2) claim as a class action is 16 an important one. 17 in a representative capacity on behalf of the plan and are bound 18 to “employ procedures to protect effectively the interests they 19 purport to represent.” 20 Cir. 2006); see also Massachusetts Mut. Life Ins. Co. v. Russell, 21 473 U.S. 134, 142 n.9 (1985). 22 duty by ensuring absent participants are properly represented, 23 joining or making a good faith effort to join other participants, 24 or filing a class action pursuant to Rule 23. 25 259-60. 26 may be the most appropriate procedural device. 27 also Shady Grove Orthopedic Associates v. Allstate Ins. Co., 559 28 U.S. 393, 402 (2010) (Rule 23 provides “procedural fairness and Participants bringing a § 502(a)(2) claim act Coan v. Kaufman, 457 F.3d 250, 259 (2d Representatives can discharge their Coan, 457 F.3d at Where the number of participants is large, a class action 9 Id. at 260; see 1 efficiency”). 2 is important for fair resolution of § 502(a)(2) claims, and cannot 3 be bargained away without the plan’s consent. Accordingly, the right to seek class certification 4 5 6 CONCLUSION For the foregoing reasons, the Court DENIES FRI’s motion for reconsideration (Docket No. 73). 7 8 IT IS SO ORDERED. 9 Dated: October 4, 2017 United States District Court For the Northern District of California 10 CLAUDIA WILKEN United States District Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10

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