Peter Schuman et al v. Microchip Technology Incorporated et al

Filing 54

ORDER by Judge Haywood S. Gilliam, Jr. GRANTING IN PART and DENYING IN PART Defendants' #33 Motion to Dismiss. (hsglc1S, COURT STAFF) (Filed on 2/6/2018)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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PETER SCHUMAN, et al.,

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Plaintiffs,

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v.

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MICROCHIP TECHNOLOGY
INCORPORATED, et al.,

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United States District Court
Northern District of California

Case No.16-cv-05544-HSG
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS’
MOTION TO DISMISS
Re: Dkt. No. 33

Defendants.

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Pending before the Court is a motion to dismiss by Defendants Microchip Technology, Inc.

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(“Microchip”), Atmel Corp. (“Atmel”), and Atmel Corp. U.S. Severance Guarantee Benefit

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Program (“the Atmel Plan” or “the Plan”). Dkt. No. 33. For the reasons set forth below, the Court

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GRANTS IN PART and DENIES IN PART the motion.1

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I.

BACKGROUND

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A.

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Plaintiffs Peter Schuman and William Coplin are former employees of Atmel and

Factual Allegations

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Microchip, as well as participants in the Atmel Plan. Dkt. No. 29 (“First Amended Complaint” or

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“FAC”) ¶¶ 13-14. They bring this putative class action under the Employee Retirement Income

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Security Act of 1974, 29 U.S.C. §§ 1001 et seq. (“ERISA”). For purposes of this motion, the

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Court accepts the following as true.

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1.

Atmel, a supplier of “general purpose microcontrollers,” created the Atmel Plan in July

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The Atmel Plan

2015 in response to market speculation regarding the company’s future and the resulting

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The Court finds this matter appropriate for disposition without oral argument and the matter is
deemed submitted. See Civil L.R. 7-1(b).

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uncertainty among its approximately 1,800 U.S. employees. See FAC ¶¶ 18-19. The company

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confirmed to employees “that it was seeking a merger partner” and notified them “that it was

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rolling out the [Atmel] Plan to encourage all employees to continue working for Atmel and any

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successor entity despite the uncertainty surrounding Atmel’s corporate future.” Id. ¶ 19. The

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Atmel Plan was covered by ERISA. See id. ¶ 15.
Atmel informed its employees of the specifics of the Plan in documents it delivered on July

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9, 2015. See Dkt. No. 33-1, Ex. 1. In a letter, Atmel detailed the three primary severance benefits

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of the Plan: (1) a cash payment of between 25 percent and 50 percent of annual base salary,

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depending on the class of employee; (2) paid health insurance premiums for between three to six

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months, again depending on the class of employee; and (3) a prorated portion of the employee’s

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United States District Court
Northern District of California

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annual incentive bonus for director-level and professional exempt employees. FAC ¶ 21; see also

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Dkt. No. 33-1, Ex. 1, at 2 (letter from Atmel describing severance benefits) (ECF pagination).

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In an addendum to the letter, Atmel set forth the terms of the Plan. First, it would

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“terminate” on November 1, 2015, “unless an Initial Triggering Event . . . occurred prior to

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November 1, 2015, in which event the [Atmel Plan] will remain in effect for 18 (eighteen) months

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following that Initial Triggering Event.” Dkt. No. 33-1, Ex. 1, at 3 (ECF pagination). The

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addendum defined the “Initial Triggering Event” as the company’s “enter[ing] into a definitive

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agreement . . . on or before November 1, 2015, that will result in a Change of Control of the

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Company.” Id. Barring such an agreement, the Atmel Plan would “automatically expire,” unless

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the board of directors expressly extended it. Id. If the Initial Triggering Event did occur,

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participants would be entitled to the Atmel Plan’s benefits “if, but only if” (1) a “Change of

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Control actually occurs”; and (2) “[t]heir employment is terminated without ‘Cause’ by the

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Company (or its successor) at any time within 18 months of the execution date of the Definitive

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Agreement.” Id.; see also FAC ¶¶ 21-23.

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The addendum also stated:

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The [Atmel Plan] will be administered and interpreted by the
Company. Any decision made or other action taken by the
Company prior to a Change of Control with respect to the [Atmel
Plan], and any interpretation by the Company prior to a Change of
Control of any term or condition of the [Atmel Plan], or any related
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document, will be conclusive and binding on all persons and be
given the maximum possible deference allowed by law.
Dkt. No. 33-1, Ex. 1, at 4 (ECF pagination); see also FAC ¶ 24.
2.

Atmel’s Merger with Microchip and Defendants’ Pre-Merger Conduct

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On September 19, 2015, Atmel and a company named Dialog Semiconductor plc

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(“Dialog”) executed and publicly announced a formal merger agreement. FAC ¶ 28. Afterward

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Microchip, with whom Atmel had also been in discussions about a potential merger, continued to

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express interest in a merger or acquisition. Id. ¶ 30. Before the scheduled January 2016 closing

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date, Microchip “made an offer to acquire Atmel that Atmel’s Board of Directors concluded was

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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

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United States District Court
Northern District of California

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Microchip on or about January 19, 2016.” Id. ¶ 36. The merger closed on April 4, 2016. Id. As a

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result, Atmel became a wholly-owned subsidiary of Microchip. Id. ¶ 50.

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Meanwhile, Plaintiffs and other Atmel employees became aware of Microchip’s attempt to

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replace Dialog as Atmel’s merger partner in mid-January 2016. Id. ¶ 31. “To alleviate employee

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concerns,” Atmel management

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repeatedly assured its employees orally and in writing in January
2016 and thereafter that, even if Microchip replaced Dialog as the
acquiring company, any employee terminated without cause after
that acquisition and prior to March 19, 2017 [i.e., 18 months after
Atmel and Dialog entered a definitive agreement on September 19,
2015] would still be entitled to receive the severance benefits
provided by the [Atmel] Plan, just as if Dialog were the acquiring
company, because an Initial Triggering Event had occurred prior to
November 1, 2015.

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Id. ¶ 32. On January 13, 2016, in a meeting with employees at the Director level and above,

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Atmel’s CEO explained that Microchip had made a better offer, that Dialog would be given four

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days to make a counteroffer, and “that all severance benefits provided by the [Atmel] Plan would

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remain available pursuant to the Plan, regardless of whether the ultimate purchaser was Microchip

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or Dialog.” Id. ¶ 33. On January 14, 2016, Atmel’s Senior Vice President of Global Human

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Resources sent a letter to “numerous” employees that acknowledged the speculation regarding the

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acquisition and confirmed that the Atmel Plan “‘continues to remain in place,’ and would entitle

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employees to severance benefits ‘in the event that your employment is involuntarily terminated
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without Cause in connection with a Change of Control of the company, including an acquisition

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by Dialog or Microchip.’” Id. ¶ 34. Between January and April 2016, “many other members of

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Atmel management similarly encouraged” Plaintiffs and other Atmel employees to remain at

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Atmel, “by assuring [them] that they were fully covered by the severance benefit guarantees

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provided by the [Atmel] Plan,” regardless of who the ultimate merger partner was. Id. ¶ 35.

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Prior to the closing of the merger, Atmel provided Microchip with documentation relating

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to the Atmel Plan, including summaries and estimates of how much would be owed to Atmel

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employees under the Plan. Id. ¶ 37. Atmel also “repeatedly communicated to Microchip its

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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

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United States District Court
Northern District of California

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Microchip was the ultimate merger partner. Id. ¶¶ 37-38. Microchip, in turn, “reviewed and

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approved” a memorandum that Atmel distributed to employees on February 3, 2016, which

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affirmed that “Microchip has agreed to honor each of your employment and compensatory

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contracts (including . . . severance . . . agreements) with Atmel, or its subsidiaries, that are in effect

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immediately prior to the closing of the transaction.” Id. ¶¶ 40-41 (ellipses in original). The Proxy

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Statement that Microchip and Atmel filed with the Securities and Exchange Commission stated

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the same. See id. ¶ 42.

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On February 29, 2016, three senior members of Microchip’s finance team, including Chief

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Financial Officer Eric Bjornholt, met with senior members of Atmel’s finance team. Id. ¶ 43.

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During that meeting, Bjornholt “assured the Atmel employees that, if Microchip acquired Atmel

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and then terminated Atmel employees, Microchip would honor the Plan.” Id. That same morning,

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in another meeting with Atmel employees, Bjornholt “reiterated . . . that Microchip would honor

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the [Atmel] Plan if Microchip later terminated any Atmel employees.” Id. ¶ 44.

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3.

Microchip’s Post-Merger Conduct

In the week following the merger’s closing, Microchip terminated several Atmel

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employees without cause, including plaintiff Schuman, id. ¶ 50, and “announced for the first time

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its position that the [Atmel] Plan had ‘expired’ on November 1, 2015 and therefore it had no

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obligation to pay, and would not pay, the severance benefits provided by the Plan to any”
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terminated employees, id. ¶ 53. On April 6, 2016, Microchip sent letters to these terminated

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employees offering them four to six weeks of salary (or certain restricted stock units) as

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severance—a “fraction” of the amount they were entitled to under the Atmel Plan—in exchange

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for releasing all claims against Microchip and Atmel, including those “based on the enforceability

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of the severance benefit provisions of the Plan.” See id. ¶¶ 54-55. Approximately one week later,

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Microchip delivered a second letter to the terminated employees, increasing its severance offer to

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50 percent of the cash salary benefit, the pro-rated bonus payments, and the health insurance

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premium payments that would be due under the Atmel Plan, again in exchange for releasing Atmel

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and Microchip from all claims (“the 50 Percent Offer”). Id. ¶ 56. Plaintiff Schuman alleges he

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was “coerced” into signing the 50 Percent Offer because of Microchip’s “false and threatening

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United States District Court
Northern District of California

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statements and bad faith conduct.” See id. ¶ 58. For those employees who were still employed

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after that initial wave of terminations, Microchip distributed a “‘new’ severance agreement” that

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was “similar in most material respects” to the 50 Percent Offer (“the Continuing Employee

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Offer”). Id. ¶ 60. Plaintiff Coplin signed the Continuing Employee Offer in April 2016 “and was

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subsequently terminated without cause.” Id. ¶ 62.

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On September 29, 2016, Schuman submitted a claim for benefits under the Atmel Plan to

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the plan administrator. Id. ¶ 68. Coplin followed suit on September 30, 2016. Id. On December

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19, 2016, Microchip’s human resources manager, identifying herself as the plan administrator,

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denied Plaintiffs’ claims on eligibility grounds, stating that the Atmel Plan had expired on

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November 1, 2015 “with respect to any acquiring entity other than Dialog, and because the merger

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agreement between Microchip and Atmel was not the ‘same agreement’ that Atmel had entered

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into with Dialog in September 2015.” Id. ¶ 69. In response to Plaintiffs’ “requests that the

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releases they signed [i.e., the 50 Percent Offer and the Continuing Employee Offer] be rescinded,”

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the denial letter deemed the releases irrelevant to their claim for benefits since they were ineligible

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for benefits under the Plan altogether. Id. Moreover, “[t]he letter stated that [Plaintiffs] had

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‘provided no basis to support [their] request for rescission.’” Id. Plaintiffs appealed the denials

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on January 23, 2017. Id. ¶ 70. The plan administrator denied their appeals on March 23, 2017,

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again on grounds of eligibility. Id. ¶ 71. As to Plaintiffs’ request that the releases be rescinded,
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the letter stated that “[t]he Plan Administrator does not consider your request for rescission a claim

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for benefits under the [Atmel Plan], so we do not address this issue.” Id.

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B.

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Plaintiffs filed the FAC on March 31, 2017. Dkt. No. 29. Defendants filed this motion on

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April 28, 2017. Dkt. No. 33 (“Mot.”). Plaintiffs filed their opposition on May 31, 2017, Dkt. No.

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38 (“Opp.”), and Defendants replied on June 7, 2017, Dkt. No. 39 (“Reply”). On May 1, 2017,

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this case was related to Berman v. Microchip Technology Inc., No. 17-cv-01864-HSG, which is

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brought by former Atmel employees who did not sign the post-merger releases but otherwise

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allege similar facts and bring similar claims against Defendants. Dkt. No. 34

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II.

LEGAL STANDARD
“To survive a motion to dismiss for failure to state a claim under [Federal] Rule [of Civil

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United States District Court
Northern District of California

Procedural Posture

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Procedure] 12(b)(6), a complaint generally must satisfy only the minimal notice pleading

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requirements of Rule 8(a)(2).” Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003).2 Under Rule

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8(a)(2), a pleading must include “a short and plain statement of the claim showing that the pleader

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is entitled to relief.” “Specific facts are not necessary; the statement need only give the defendant

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fair notice of what the . . . claim is and the grounds upon which it rests.” Erickson v. Pardus, 551

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U.S. 89, 93-94 (2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

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Accordingly, “[d]ismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a

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cognizable legal theory or sufficient facts to support a cognizable legal theory.” Mendiondo v.

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Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). A plaintiff must plead “enough

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facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. A claim is

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facially plausible when a plaintiff pleads “factual content that allows the court to draw the

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reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,

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556 U.S. 662, 678 (2009).
In reviewing the plausibility of a complaint, courts “accept factual allegations in the

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Defendants suggest in a footnote that Plaintiffs are required to plead with the particularity
required by Federal Rule of Civil Procedure 9(b). See Mot. at 22 n.6. But because they fail to
develop that argument anywhere else in their briefing, the Court applies the pleading requirements
of Rule 8.
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complaint as true and construe the pleadings in the light most favorable to the nonmoving party.”

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Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). Nonetheless,

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Courts do not “accept as true allegations that are merely conclusory, unwarranted deductions of

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fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir.

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2008).

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III.

DISCUSSION
Plaintiffs allege “three independent class action claims for relief.” See Opp. at 1. In their

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First Cause of Action, they seek equitable relief for Defendants’ alleged breaches of their fiduciary

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duty under section 502(a)(3) of ERISA.3 See FAC ¶¶ 82-97; Opp. at 1. In their Second Cause of
Action, they seek to recover the severance benefits they allege were wrongfully denied under

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United States District Court
Northern District of California

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section 502(a)(1)(B) of ERISA.4 See FAC ¶¶ 98-100; Opp. at 1. In their Third Cause of Action,

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Plaintiffs allege that Defendants unlawfully interfered with their ERISA rights under Section 510

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of ERISA.5 See FAC ¶¶ 101-111; Opp. at 1.

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Defendants seek dismissal of the FAC in its entirety on the grounds that it fails to provide a

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“short and plain statement showing that Plaintiffs are entitled to relief.” Mot. at 10. Alternatively,

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Defendants move to dismiss the First and Third Causes of Action for failure to state a claim. See

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id. at 10-23. The Court considers each argument in turn.

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A.

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Defendants’ Contention That the FAC Does Not Comply with Rule 8(a) Is
Unsupported.

Defendants first argue that Plaintiffs’ FAC “is a convoluted amalgam of facts that does not

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meet Rule 8(a)’s fundamental pleading requirement”—one that includes “pages of irrelevant

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facts.” Mot. at 10. The Court disagrees.
Defendants cite a sole source of authority in support of their argument: Cafasso ex rel. U.S.

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v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047 (9th Cir. 2011). Cafasso was a False Claims Act

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case in which the Ninth Circuit affirmed the district court’s denial of the relator’s motion for leave

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29 U.S.C. § 1132(a)(3).
29 U.S.C. § 1132(a)(1)(B).
29 U.S.C. § 1140.
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to amend on Rule 8(a) grounds. 637 F.3d at 1059. There, however, “the relator tendered a 733-

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page proposed amended complaint.” Id. at 1058 (emphasis added). While acknowledging that

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“normally, verbosity or length is not by itself a basis for dismissing a complaint,” id. (citation and

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internal quotation marks omitted), the court found that the district court was “well within its

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discretion” to deny leave to file the proposed tome, on grounds of futility and prejudice to the

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opposing party, see id. at 1058-59. Here, Plaintiffs’ FAC is a relatively concise 38 pages,

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rendering the Cafasso complaint, which “approach[ed] the magnitude of War and Peace,” entirely

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distinguishable. See id. at 1059 (original italics).
All that remains of Defendants’ argument on Rule 8(a) grounds is conclusory. They

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contend that because “Plaintiffs repeatedly claim the Atmel Plan’s language is ‘plain’ and ‘clear’,”

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United States District Court
Northern District of California

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their claim is one for “a simple denial of benefits”—and that everything else in the FAC is

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irrelevant and contravenes Rule 8(a). See Mot. at 10. But Defendants’ attempt to recharacterize

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Plaintiffs’ claims for breach of fiduciary duty, see FAC ¶¶ 82-97, and interference with the

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exercise of ERISA rights, see id. ¶¶ 101-111, does not dispose of those claims. Moreover,

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Defendants fail to ground their Rule 8 argument in what the rule actually requires: “fair notice” of

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the claim “and the grounds upon which it rests.” See Erickson, 551 U.S. at 94 (citation omitted).

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Nowhere do Defendants argue that Plaintiffs’ FAC fails to provide such notice. The Court

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accordingly declines to dismiss on this ground.

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B.

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The First Cause of Action States a Claim for Breach of Fiduciary Duty as to
Microchip, but Only Partially States a Claim for Equitable Relief.

In the First Cause of Action, Plaintiffs allege a breach of the fiduciary duties set forth in

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section 404(a) of ERISA6 by Defendants. See FAC ¶ 91. Plaintiffs accordingly seek several

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forms of equitable relief under section 503(a)(3). Defendants raise several arguments as to why

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this cause of action should fail.

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//

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//

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29 U.S.C. § 1104(a).
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1.

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The Atmel Plan is not a proper defendant as to the First Cause of
Action.

First, while not dispositive of the First Cause of Action in its entirety, Defendants contend

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that the Atmel Plan is an improperly-named defendant because “an ERISA claim for breach of

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fiduciary duty cannot be maintained against an ERISA plan.” See Mot. at 25. The Court agrees.

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An ERISA plan generally may be sued as an entity in a civil enforcement suit. 29 U.S.C. §

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1132(d)(1). But because an ERISA plan “cannot, as an entity, act as a fiduciary with respect to its

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own assets,” the plan itself “cannot be sued for breach of fiduciary duty.” Acosta v. Pac. Enters.,

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950 F.2d 611, 618 (9th Cir. 1991); see also Balsley v. Delta Star Emp. Stock Ownership Plan, No.

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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.

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United States District Court
Northern District of California

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Supp. 917, 924 (N.D. Cal. 1990) (stating, in ERISA action alleging breaches of fiduciary duty,

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“that the plan should not be named as a defendant”), aff’d sub nom. Mertens v. Black, 948 F.2d

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1105, 1107 (9th Cir. 1991) (“[W]e hold that the district court did not err in dismissing the Plan as

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a defendant.”). In Acosta, however, the Ninth Circuit cautioned that this “does not inexorably lead

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to the conclusion that a plan cannot be properly named in a suit alleging breach of fiduciary duty.”

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950 F.2d at 618. Instead, “to the extent that a plaintiff seeks to recover benefits due to him under

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the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to

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future benefits under the terms of the plan, the plan may be named as a defendant.” Id. (quoting

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29 U.S.C. §§ 1132(a)(1)(B), 1132(d)) (internal quotation marks omitted). Thus, while a plan may

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not be sued for breach of fiduciary duty under ERISA, it can be named in the lawsuit if the

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plaintiff also seeks to recover benefits, enforce rights, or clarify future rights under the plan. See

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id.

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The propriety of naming the Atmel Plan as a defendant in the First Cause of Action is

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easily resolved by Acosta. Because an ERISA plan cannot be sued for breach of fiduciary duty,

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see Acosta, 950 F.2d at 618, the motion to dismiss the Atmel Plan is granted as to Plaintiffs’ First

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Cause of Action. The Plan may be a named defendant as to the remaining causes of action,

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however.7

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2.

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In their claim for breach of fiduciary duty, Plaintiffs are not required
to seek relief on behalf of the Atmel Plan.

Next, Defendants argue that Plaintiffs’ claim for breach of fiduciary duty fails because they

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“fail to allege any loss the Atmel Plan suffered, or any misuse of plan funds, as a result” of such a

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breach. See Mot. at 18. Defendants also point to Plaintiffs’ failure to “seek relief on behalf of the

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Atmel Plan.” See id. Defendants, however, improperly conflate the requirements of bringing a

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claim for breach of fiduciary duty under section 502(a)(2), which is not at issue in this case, and

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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

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United States District Court
Northern District of California

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409. See 29 U.S.C. § 1132(a)(2). Section 409, in turn, governs liability for breach of fiduciary

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duty. See id. § 1109(a). It is well settled that recovery for a violation of section 409 “for breach of

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fiduciary duty inures to the benefit of the plan as a whole, and not to an individual beneficiary.”

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Paulsen v. CNF Inc., 559 F.3d 1061, 1073 (9th Cir. 2009) (citing Mass. Mut. Life Ins. Co. v.

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Russell, 473 U.S. 134, 140-42 (1985)). But in so stating, the Paulsen court referenced only those

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section 409 claims brought under section 502(a)(2). In that same opinion, the court highlighted a

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critical distinction in discussing claims for breach of fiduciary duty brought under section

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502(a)(3): “Unlike [section 502(a)(2)], which requires that relief sought must be on behalf of the

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entire plan, the Supreme Court has held that a participant or beneficiary has standing pursuant to

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[section 502(a)(3)] to seek individual recovery in the form of ‘appropriate equitable relief.’” See

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Defendants “do[] not argue that the [Atmel] Plan is not a proper defendant” as to the Second
Cause of Action, through which Plaintiffs seek to recover severance benefits. Reply at 11. This is
consistent with the law. See Acosta, 950 F.2d at 618 (holding that “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”). In their motion, Defendants do not address whether the Plan may
be named as a defendant in Plaintiffs’ Third Cause of Action—the interference claim—stating
only that “an ERISA claim for breach of fiduciary duty cannot be maintained against an ERISA
plan.” Mot. at 25. In their reply, Defendants then attempt to broaden that argument by incorrectly
asserting that their motion “clearly states” that the Atmel Plan “is not a proper defendant as to
Plaintiffs’ non-benefits claims in Count I and III, as supported by clear case law.” Reply at 11
(emphasis added). But Defendants provide no case law on the question of whether the Atmel Plan
is a proper defendant as to the interference claim, so the Court declines to dismiss the Plan on this
ground.
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id. at 1075 (quoting Varity Corp. v. Howe, 516 U.S. 489, 509-10 (1996)) (emphasis added); see

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also Zisk v. Gannett Co. Income Prot. Plan, 73 F. Supp. 3d 1115, 1118 (N.D. Cal. 2014)

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(“Supreme Court and Ninth Circuit authorities have both authorized a claim under section

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[502](a)(3) for a fiduciary’s improper handling of an individual benefit claim in violation of its

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fiduciary duties.”) (original emphasis).
Section 502(a)(2) is not at issue in this case. Plaintiffs, rather, seek relief for Defendants’

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alleged breach of fiduciary duty under section 502(a)(3), which is plainly permitted. Plaintiffs’

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failure to seek relief on behalf of the Atmel Plan therefore does not preclude their First Cause of

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Action.

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3.

United States District Court
Northern District of California

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Plaintiffs adequately allege that Microchip was a fiduciary in breach of
its duties under ERISA.

Defendants next turn to the substance of Plaintiffs’ claim for breach of fiduciary duty,

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contending that the FAC “contains no factual allegations supporting the bare legal conclusion that

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Microchip was a fiduciary of the Atmel Plan,” thus precluding a cause of action for breach of

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fiduciary duty. See Mot. at 24. “To establish an action for equitable relief under ERISA section

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502(a)(3) [for breach of fiduciary duty], the defendant must be an ERISA fiduciary acting in its

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fiduciary capacity, and must violate [ ] ERISA-imposed fiduciary obligations.” See Mathews v.

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Chevron Corp., 362 F.3d 1172, 1178 (9th Cir. 2004) (citations and internal quotation marks

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omitted) (original brackets). The Court considers each prong of the Mathews inquiry in turn.8

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a.

Plaintiffs sufficiently plead Microchip’s fiduciary status.

Plaintiffs assert that “Atmel and Microchip, as Atmel’s successor, are named fiduciaries

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and are therefore fiduciaries ‘for all purposes of the plan.’” Opp. at 16 (citation omitted).

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Defendants, for their part, attempt to assert the merger’s closing date as a sort of dividing line.

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They argue that before the merger’s closing date, the FAC refers to Microchip as the “post-merger

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Plan Administrator” in the conditional tense, amounting to an admission by Plaintiffs that

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Defendants devote their briefing to arguments regarding Microchip’s fiduciary status, and do not
appear to dispute Atmel’s fiduciary status prior to the merger’s closing date. The Court
accordingly declines to reach the question of Atmel’s fiduciary status at this stage of the litigation.
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Microchip was not a fiduciary prior to the merger’s closing. See Mot. at 24 (quoting FAC ¶ 38).

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And, after the merger’s closing, Defendants argue that it was acting as an employer, not a

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fiduciary, “when it interacted with Plaintiffs in the context of an employment termination.” See id.

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at 20-21. The Court finds that Plaintiffs have pled sufficient facts to establish Microchip as a

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fiduciary.
“To determine whether one qualifies as a fiduciary, courts ask whether one exercises

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discretionary authority or control respecting management over the plan . . . or has discretionary

8

authority or responsibility in the administration of the plan.” Brown v. Cal. Law Enforcement

9

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,

11
United States District Court
Northern District of California

10

Mathews, 362 F.3d at 1178 (citing Varity, 516 U.S. at 498)9, and as a matter of law, “[f]iduciary

12

conduct encompasses conveying information about the likely future of plan benefits, thereby

13

permitting beneficiaries to make an informed choice about continued participation,” id. (quoting

14

Bins v. Exxon Co. U.S.A., 220 F.3d 1042, 1048 (9th Cir. 2000) (en banc)) (internal quotation

15

marks and brackets omitted).
Under the test set forth in Brown, Plaintiffs have pled sufficient facts to allege Microchip’s

16
17

fiduciary status.10 Specifically, Plaintiffs allege that after the closing of the merger, Microchip

18

announced that “no former Atmel employees would be entitled to any severance benefits under the

19

Plan,” which was “based on its position that the [Atmel] Plan had ‘expired’ on November 1,

20

2015.” FAC ¶ 53. Microchip was, in other words, describing the “likely future of plan benefits”

21

under the Atmel Plan—namely, that there would be no such benefits. Such a statement by

22
9

23
24
25
26
27
28

But see Steen v. John Hancock Mut. Life Ins. Co., 106 F.3d 904, 913 (9th Cir. 1997) (“[A]
conclusion that someone is not an ERISA fiduciary is essentially a factual conclusion.”). Even if
Steen rather than Mathews states the controlling standard, the Court is satisfied that as a factual
matter, Plaintiffs have pled sufficient facts to allege that Microchip is a fiduciary, at least at this
stage of the litigation.
10
In their opposition, Plaintiffs elect to cite non-binding case authority in support of their
argument that Microchip is a fiduciary to the Atmel Plan because Microchip is a “named
fiduciar[y]” of the Plan within the meaning of 29 U.S.C. § 1102(a)(2). See Opp. at 15-16. But the
issue here is whether Plaintiffs have sufficiently alleged that Microchip was a fiduciary. Plaintiffs
did not allege in the FAC that Microchip is a named fiduciary; nor did they even attach the Atmel
Plan to the FAC. The Court thus looks to whether Plaintiffs have pled sufficient facts to establish
that, for pleading purposes, Microchip is a fiduciary under the test set forth in Brown.
12

1

Microchip also constitutes its management and exercise of authority over the Atmel Plan. See

2

Brown, 81 F. Supp. 3d at 934.

3

Defendants’ arguments to the contrary are unavailing. In arguing that Microchip “was

4

acting as an employer and not acting in an ERISA fiduciary capacity when it interacted with

5

Plaintiffs in the context of an employment termination,” see Mot. at 20-21, Defendants fail to

6

properly consider the legal effect of an employer-fiduciary making representations about the future

7

of plan benefits. “[The Supreme Court’s opinion in] Varity holds that a firm which has dual roles

8

as both plan administrator and employer is acting in its administrator-fiduciary capacity when

9

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

11
United States District Court
Northern District of California

10

practical matter, in these circumstances “reasonable employees” could have thought that

12

Microchip “was communicating with them both in its capacity as employer and in its capacity as

13

plan administrator.” See Varity, 516 U.S. at 503 (original emphasis). While reasonable

14

employees “might not have distinguished consciously between the two roles” of Microchip, “they

15

would have known that the employer was their plan administrator and had expert knowledge about

16

how their plan worked.” See id.

17

Defendants also argue that “Microchip could not act in a fiduciary manner in making [pre-

18

merger] statements when the Complaint admits it was not the fiduciary at that time.” Mot. at 24.

19

Specifically, Defendants cite the FAC’s characterization of Microchip as the plan administrator-to-

20

be prior to the closing of the merger, which they argue amounts to a concession that Microchip did

21

not become a fiduciary until the merger closed. See FAC ¶ 39 (“Microchip repeatedly,

22

affirmatively, and deliberately caused Atmel management and Atmel employees to believe that

23

Microchip, as the post-merger Plan Administrator, recognized the continued existence of the

24

[Atmel] Plan, intended to honor the [Atmel] Plan, and would pay all severance benefits provided

25

by the Plan . . . .”). While it is true that Plaintiffs fail to allege facts showing that Microchip

26

exercised or had “discretionary authority or responsibility in the administration of the plan” prior

27

to the merger, see Brown, 81 F. Supp. 3d at 934, that does not affect the ultimate question of its

28

fiduciary status. As discussed below, however, that temporal distinction does affect what conduct
13

1
2

by Microchip may qualify as a breach of its fiduciary duties.
b.

3

Plaintiffs allege sufficient facts supporting their allegation that
Microchip breached its fiduciary duties.

4

Having established that Plaintiffs have sufficiently pled Microchip’s fiduciary status, the

5

Court turns to whether Plaintiffs have sufficiently pled the element of breach. “In general terms,

6

fiduciary responsibility under ERISA is simply stated.” Pegram v. Herdrich, 530 U.S. 211, 223

7

(2000). Section 404 of ERISA requires fiduciaries “to discharge [their] duties with respect to a

8

plan solely in the interest of the participants and beneficiaries” and, as relevant here, “for the

9

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

11
United States District Court
Northern District of California

10

misrepresent the terms of administration of a plan.” King v. Blue Cross & Blue Shield of Ill., 871

12

F.3d 730, 744 (9th Cir. 2017) (quoting Barker v. Am. Mobil Power Corp., 64 F.3d 1397, 1403 (9th

13

Cir. 1995)). They also have an “obligation to convey complete and accurate information material

14

to the beneficiary’s circumstance, even when a beneficiary has not specifically asked for the

15

information.” Id. (citing Barker, 64 F.3d at 1403).

16

Plaintiffs sufficiently allege that Microchip breached its fiduciary duties. For example,

17

they allege that Microchip misled employees in telling them that the Atmel Plan “had ‘expired’ on

18

November 1, 2015 and that consequently, it had no obligation to pay, and would not pay, the

19

severance benefits provided by the Plan” to the employees Microchip terminated without cause.

20

FAC ¶¶ 53-54; see also id. ¶ 58 (alleging coercion due, in part, to Microchip’s false statements).

21

Plaintiffs also allege that Microchip “failed to inform” those terminated employees that “the Plan

22

was still in existence and in effect,” providing those employees with rights under ERISA. See id.

23

¶ 54; see also id. ¶¶ 56, 61.

24

Defendants’ argument to the contrary again fails. They contend that the fact that Plaintiffs

25

still filed for benefits under the Atmel Plan, even after Microchip “expressed its opinion” that the

26

Plan had expired and that employees were not entitled to benefits, “negat[es] any suggestion that

27

[Plaintiffs] felt Microchip’s statements were made as a plan fiduciary exercising discretionary

28

authority or control over the management or administration of the Atmel Plan at that time.” See
14

1

Reply at 10. This argument amounts to the assertion that because Plaintiffs filed for benefits

2

under the Atmel Plan––despite Defendants’ alleged misrepresentations meant to discourage them

3

from doing just that––there is no cause of action for breach of fiduciary duty. The Court

4

disagrees.

5

As mentioned above, however, Plaintiffs’ failure to allege facts showing that Microchip

6

was a fiduciary before the closing of the merger does preclude it from arguing that conduct that

7

took place before the merger was a breach of fiduciary duty. See 29 U.S.C. § 1109(b) (“No

8

fiduciary shall be liable with respect to a breach of fiduciary duty under this subchapter if such

9

breach was committed before he became a fiduciary or after he ceased to be a fiduciary.”); FAC ¶
89 (alleging breach based on Microchip’s pre-merger “fail[ure] to disclose . . . that defendants

11
United States District Court
Northern District of California

10

intended not to provide the benefits described in the Plan,” “affirmative[] misrepresent[ation] that

12

defendants would honor the Plan when defendants did not intend to do so,” and “deliberate[]

13

misleading [of] participants into believing that defendants would pay the full amount of severance

14

benefits provided by the Plan”).

15

4.

16

Plaintiffs have stated a claim to some equitable relief under section
502(a)(3).

17

In their final argument against Plaintiffs’ claim for breach of fiduciary duty, Defendants

18

contend that even assuming Plaintiffs did state a claim, they fail to allege facts showing they are

19

entitled to the specific forms of equitable relief they seek. See generally Mot. at 11-22. Before

20

turning to that argument, the Court addresses the threshold question of whether Plaintiffs may

21

simultaneously bring a claim for benefits under section 502(a)(1)(B) and a claim for equitable

22

relief under section 502(a)(3).

23
24
25
26

a.

Plaintiffs may seek equitable relief under section 502(a)(3) in
addition to their claims under section 502(a)(1)(B) to the extent
that relief obtained under the latter provision does not negate
the need for equitable relief.

Defendants argue that because Plaintiffs’ claims “amount[] to nothing more than a claim

27

for benefits,” ERISA provides them adequate relief under section 502(a)(1)(B), precluding

28

equitable relief under section 502(a)(3) as a matter of law. See Mot. at 10. Unlike section
15

502(a)(1)(B), which permits an ERISA participant or beneficiary to bring an action to recover

2

benefits, to enforce his rights under the plan, or to clarify his rights to future benefits under the

3

plan, 29 U.S.C. § 1132(a)(1)(B), section 503(a)(3) is a catch-all provision that permits an action

4

“to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any

5

provisions of this subchapter or the terms of the plan,” 29 U.S.C. § 1132(a)(3) (emphasis added).

6

Given the Supreme Court’s recognition that “where Congress elsewhere provide[s] adequate relief

7

for a beneficiary’s injury, there will likely be no need for further equitable relief, in which case

8

such relief normally would not be ‘appropriate,’” see Varity, 516 U.S. at 515 (citation omitted),

9

the question becomes whether some other section of ERISA provides adequate relief—i.e., that

10

would negate the need for equitable relief. Accordingly, courts adhere to the general rule that an

11
United States District Court
Northern District of California

1

ERISA plaintiff may “pursu[e] simultaneous claims under [section 502(a)(1)(B)] and [section

12

502(a)(3)],” Moyle v. Liberty Mut. Ret. Benefit Plan, 823 F.3d 948, 965 (9th Cir. 2016), provided

13

that there is no double recovery, id. (citing Silva v. Metro. Life. Ins. Co., 762 F.3d 711, 726 (8th

14

Cir. 2014)).

15

b.

16

With that principle in mind, the Court turns to Plaintiffs’ specific claims under section

17
18

Plaintiffs have stated a claim to limited injunctive relief,
surcharge, and equitable estoppel under section 502(a)(3), but
fail to state a claim for rescission.

502(a)(3) for injunctive relief, surcharge, equitable estoppel, and rescission.11

19

i.

20

Two of Plaintiffs’ claims for injunctive relief under
section 502(a)(3) survive.

Plaintiffs seek injunctive relief (1) prohibiting Defendants from “continuing to deny Plan

21
22

benefits to eligible employees”; (2) prohibiting Defendants “from continuing to make false and

23

fraudulent statements” about the existence of the Atmel Plan or any employee’s right to benefits

24
11

25
26
27
28

Plaintiffs also seek “removal and replacement of Microchip as Plan Administrator with a new
and different Plan Administrator that complies with its fiduciary obligations to Plan participants.”
FAC ¶ 96. Defendants list this claim for relief as an issue to be decided, see Mot. at 4, but fail to
address it specifically. Additionally, Plaintiffs seek several types of declaratory relief under the
Declaratory Judgment Act, 28 U.S.C. § 2201. See FAC ¶ 94. But Defendants only address this
claim indirectly—and when they do, they incorrectly treat it as if it is based in ERISA section
502(a)(3), rather than the Declaratory Judgment Act. See Mot. at 12-16. Accordingly, the Court
does not assess these claims at this juncture.
16

1

under the Plan; (3) prohibiting Defendants “from continuing to delay the processing of any Plan

2

member’s claim for ERISA benefits”; (4) prohibiting Defendants from enforcing existing or

3

soliciting new releases (i.e., like the 50 Percent Offer or the Continuing Employee Offer); and (5)

4

“requiring defendants to pay the full amounts and benefits” promised under the Atmel Plan. See

5

FAC ¶ 9; see also id. ¶ 93.

6

Such relief is clearly encompassed by section 502(a)(3). See Mertens v. Hewitt Assocs.,

7

508 U.S. 248, 256 (1993) (“Congress intended ‘equitable relief’ to include only those types of

8

relief that were typically available in equity, such as injunction, mandamus, and restitution.”).

9

Three of these claims, however, are improperly duplicative of relief available under other
provisions of ERISA. Plaintiffs’ request that the Court enjoin Defendants from “continuing to

11
United States District Court
Northern District of California

10

deny Plan benefits to eligible employees” and require them “to pay the full amounts and benefits

12

promised under the Plan,” see FAC ¶ 9, is no more than a plea to enforce the terms of the plan—a

13

remedy which is available under section 502(a)(1)(B), see 29 U.S.C. 1132(a)(1)(B) (“A civil

14

action may be brought by a participant or beneficiary . . . to enforce his rights under the terms of

15

the plan . . . .”). And their request that the Court enjoin Defendants from “continuing to make

16

false and fraudulent statements” about the existence of the Atmel Plan, or any employee’s right to

17

benefits under the Plan, see FAC ¶ 9, amounts to a request for the Court to “clarify [Plaintiffs’]

18

rights to future benefits under the terms of the plan,” see 29 U.S.C. § 1132(a)(1)(B).

19

Only two of Plaintiffs’ claims for injunctive relief remain: that the Court prohibit

20

Defendants from enforcing existing releases or soliciting new ones, and “from continuing to delay

21

the processing of any Plan member’s claim for ERISA benefits.” See FAC ¶ 9. For a plaintiff to

22

25

establish that it is entitled to an injunction, it “must satisfy a four-factor test,” and show
(1) that it has suffered an irreparable injury; (2) that remedies
available at law, such as monetary damages, are inadequate to
compensate for that injury; (3) that, considering the balance of
hardships between the plaintiff and defendant, a remedy in equity is
warranted; and (4) that the public interest would not be disserved by
a permanent injunction.

26

Ctr. for Biological Diversity v. Mattis, 868 F.3d 803, 827 (9th Cir. 2017) (quoting Sierra Forest

27

Legacy v. Sherman, 646 F.3d 1161, 1184 (9th Cir. 2011) (per curiam)). Viewing the alleged facts

28

in the light most favorable to Plaintiffs, the Court concludes that they have sufficiently stated a

23
24

17

1

claim for injunctive relief on both of these grounds.
First, in support of their claim for injunctive relief relating to the releases, Plaintiffs allege

2
3

that Microchip effectively misled terminated employees into believing that the releases were the

4

“only severance benefits available,” in an effort to coerce those employees to forego the more

5

substantial benefits to which they were lawfully entitled under the Atmel Plan. See FAC ¶¶ 57,

6

61. At this stage of the litigation, Plaintiffs have adequately pled irreparable harm, as the

7

consequences of losing job benefits are not always “merely monetary,” and can “carr[y] emotional

8

damages and stress, which cannot be compensated by mere back payment of wages.” See Collins

9

v. Brewer, 727 F. Supp. 2d 797, 813 (D. Ariz. 2010) (quoting Nelson v. Nat’l Aeronautics & Space
Admin., 530 F.3d 865, 882 (9th Cir. 2008), rev’d on other grounds sub nom. Nat’l Aeronautics &

11
United States District Court
Northern District of California

10

Space Admin. v. Nelson, 562 U.S. 134 (2011)) (internal quotation marks omitted). Moreover, a

12

finding of irreparable harm generally “tips the balance of hardships that may result from an

13

injunction in favor of the plaintiff.” Bd. of Trs. of Bay Area Roofers Health & Welfare Trust Fund

14

v. Westech Roofing, No. 12-cv-05655-JCS, 2014 WL 4383062, at *4 (N.D. Cal. Sept. 4, 2014).

15

The Court finds that to be the case here, particularly given the narrow scope of the injunctive relief

16

sought. Nor are monetary damages necessarily adequate to compensate Plaintiffs for the harm

17

caused by a loss of benefits. See Collins, 727 F. Supp. 2d at 813. As to the fourth prong of the

18

injunction inquiry, “the entry of a permanent injunction is in the public interest because it will

19

support the integrity” of the Atmel Plan. See Westech Roofing, 2014 WL 4383062, at *4 (citing

20

cases).

21

Second, in support of their claim for injunctive relief relating to Defendants’ alleged delay

22

in processing benefits, Plaintiffs contend that Defendants, “[d]espite having no justification for

23

doing so . . . deliberately and repeatedly delayed giving responses to these claims,” even though

24

they knew “from the outset that they intended to deny those claims,” based on their position that

25

the Atmel Plan no longer existed. See FAC ¶ 65. Plaintiffs further allege that when they appealed

26

those denials, Defendants “delayed responding until virtually the last possible day for a response

27

and then denied their appeals on the identical erroneous and wrongful grounds.” Id. ¶ 66. Delay

28

in paying out ERISA benefits is grounds for a finding of irreparable harm. See Westech Roofing,
18

1

2014 WL 4383062, at *4 (collecting cases).12 Plaintiffs state facts sufficient to support the

2

remaining three prongs of the injunctive relief inquiry for the reasons stated above.
Accordingly, Plaintiffs have pled sufficient facts to state a claim for an injunction

3
4

enjoining Defendants from (1) enforcing and soliciting releases and (2) continuing to delay the

5

processing of any Plan participant’s benefits. The Court dismisses Plaintiffs’ remaining claims for

6

injunctive relief under section 502(a)(3). Moreover, because the Court is satisfied that there are no

7

additional facts that Plaintiffs could plead that would render this relief non-duplicative, the

8

remaining claims are dismissed without leave to amend. See Foman v. Davis, 371 U.S. 178, 182

9

(1962) (enumerating futility as a permissible basis on which to deny leave to amend).

10

ii.

United States District Court
Northern District of California

11

Plaintiffs have pled sufficient facts to state a claim for
surcharge.

Plaintiffs next seek to “recover as an equitable surcharge the difference between what

12
13

defendants paid them in severance benefits and what defendants should have paid them in

14

severance benefits, disgorgement of profits gained as a result of defendants’ breaches, plus interest

15

and attorneys’ fees.” FAC ¶ 97.
The remedy of surcharge provides an ERISA beneficiary with “monetary ‘compensation’

16
17

for a loss resulting from a [fiduciary’s] breach of duty, or to prevent the [fiduciary’s] unjust

18

enrichment.” See CIGNA Corp. v. Amara, 563 U.S. 421, 441 (2011) (citation omitted); see also

19

id. at 442 (stating that the “surcharge remedy extended to a breach of trust committed by a

20

fiduciary encompassing any violation of a duty imposed on that fiduciary”). It is well-established

21

that “appropriate equitable relief” under section 502(a)(3) includes surcharge. See Gabriel v.

22

Alaska Elec. Pension Fund, 773 F.3d 945, 957 (9th Cir. 2014). Moreover, such relief would not

23

be duplicative as Defendants contend. See Mot. at 14-15. Rather, unlike the relief available under

24
25
26
27
28

12

The Court does, however, agree with Defendants that Plaintiffs’ allegation that Defendants
“delayed responding until virtually the last possible day for a response and then denied their
appeals” comes close to an admission that Defendants’ denial on appeal was, in fact, timely. See
Mot. at 13 n.4; Reply at 5. But Plaintiffs also make broader allegations that Defendants
“deliberately and repeatedly delayed” responding to their claims for benefits. See FAC ¶ 65.
Because the facts must be construed in Plaintiffs’ favor at the motion to dismiss stage, the Court
finds that such allegations sufficiently plead irreparable harm.
19

1

section 502(a)(1)(B), surcharge would provide Plaintiffs with a remedy for other losses caused by

2

Defendants’ alleged breach of fiduciary duty, beyond the amount of benefits allegedly withheld.

3

“[T]o obtain relief by surcharge for a breach of the ERISA trustee’s duties, a plan

4

participant or beneficiary must show that the violation injured him or her, but need only show

5

harm and causation, not detrimental reliance.” Gabriel, 773 F.3d at 957-58 (quoting Amara, 563

6

U.S. at 444) (internal punctuation marks omitted). Under the “unjust enrichment” theory of

7

surcharge, a fiduciary “who gains a benefit by breaching his or her duty must return that benefit to

8

the beneficiary.” Skinner v. Northrop Grumman Ret. Plan B, 673 F.3d 1162, 1167 (9th Cir. 2012).

9

“[T]he fact that this relief takes the form of a money payment does not remove it from the

10

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

United States District Court
Northern District of California

11
12

enrichment. See FAC ¶ 97. For example, they allege that Microchip “intimidated and coerced

13

Atmel employees . . . into waiving statutory rights and benefits and accepting significant

14

‘discounts’ on the severance benefits those employees were legally owed and guaranteed under the

15

[Atmel] Plan, in order to save Microchip money.” Id. ¶ 52; see also id. ¶ 57 (alleging that

16

Microchip misled employees into accepting a smaller severance package “as part of a calculated

17

plan by Microchip to save itself money”); id. ¶ 61 (same). Additionally, the Court rejects

18

Defendants’ argument that Plaintiffs’ request for prejudgment interest on the surcharge amount is

19

duplicative of their claim for benefits under section 502(a)(1)(B) because “Plaintiffs have the

20

opportunity to request prejudgment benefits if they are successful in their Section 502(a)(1)(B)

21

claim.” Mot. at 15. As discussed above, surcharge provides relief beyond and distinct from that

22

provided for in section 502(a)(1)(B), so the interest on the surcharge amount cannot be duplicative

23

of any interest awarded on their claim for benefits.13
Accordingly, Defendants’ motion is denied as to Plaintiffs’ claim for surcharge.

24
25

//

26
13

27
28

Defendants suggest that Plaintiffs’ request for attorneys’ fees is also duplicative, see Mot. at 1415, but section 502 expressly provides for such relief, see 29 U.S.C. § 1132(g)(1) (“In any action
under this subchapter . . . by a participant, beneficiary, or fiduciary, the court in its discretion may
allow a reasonable attorney’s fee and costs of action to either party.”).
20

1

iii.

Plaintiffs have pled sufficient facts to state a claim for
equitable estoppel.

2

Plaintiffs also seek, “[t]o the extent that any Plan language is found to be ambiguous . . .

3

an order equitably estopping defendants from disputing the Plan participants’ entitlement to the

4

full amount of severance benefits” provided by the Atmel Plan to employees terminated without

5

cause after the merger. See FAC at 37 (ECF pagination).

6

The remedy of equitable estoppel “holds the fiduciary to what it had promised and operates

7

to place the person entitled to its benefit in the same position he would have been in had the

8

representations been true.” Gabriel, 773 F.3d at 955 (quoting Amara, 563 U.S. at 441). It is

9

among the equitable remedies contemplated in section 502(a)(3), see Amara, 563 U.S. at 441, and

13

Defendants do not dispute that such relief is not provided elsewhere in ERISA.
Under this theory of relief[,] “(1) the party to be estopped must
know the facts; (2) he must intend that his conduct shall be acted on
or must so act that the party asserting the estoppel has a right to
believe it is so intended; (3) the [party asserting the estoppel] must
be ignorant of the true facts; and (4) he must rely on the former’s
conduct to his injury.”

14

Gabriel, 773 F.3d at 955 (quoting Greany v. W. Farm Bureau Life Ins. Co., 973 F.2d 812, 821 (9th

15

Cir. 1992)). In the ERISA context, “the party asserting estoppel . . . must also allege (1)

16

extraordinary circumstances; (2) ‘that the provisions of the plan at issue were ambiguous such that

17

reasonable persons could disagree as to their meaning or effect’; and (3) that the representations

18

made about the plan were an interpretation of the plan, not an amendment or modification of the

19

plan.” Id. at 957 (quoting Spink v. Lockheed Corp., 125 F.3d 1257, 1262 (9th Cir. 1997)).

10

United States District Court
Northern District of California

11
12

20

At first, Defendants challenged Plaintiffs’ allegations as to two of the six prongs of the

21

equitable estoppel standard. They suggested that because “Plaintiffs’ case rests on the argument

22

that the ‘plain language’ of the Atmel Plan unambiguously entitles them to benefits and it

23

breached a fiduciary duty to tell them otherwise,” they cannot plead facts showing that the Plan

24

was ambiguous without undermining their case. See Mot. at 17. Defendants also argue that

25

Plaintiffs fail to allege the requisite extraordinary circumstances. See id. In their reply, however,

26

Defendants not only repeat the arguments set forth in their motion, but further contend that

27

Plaintiffs fail to allege that they “reasonably and detrimentally relied on an oral ‘material

28

misrepresentation’ of ambiguous plan terms.” See Reply at 5.
21

Viewing the facts in Plaintiffs’ favor, the Court finds that Plaintiffs have sufficiently pled

1
2

their claim for equitable estoppel. First, the Court is satisfied, notwithstanding Plaintiffs’

3

assertions that the provisions of the Atmel Plan are unambiguous, that reasonable parties could

4

disagree as to whether the Plan required the Initial Triggering Event and the Change of Control to

5

involve the same merger partner—particularly at the motion to dismiss stage, and particularly

6

since that interpretation is one of the primary disputes in this case.14 Second, Plaintiffs sufficiently

7

allege detrimental reliance on an oral, material misrepresentation of that ambiguity by Defendants.

8

See, e.g., FAC ¶¶ 35 (alleging that, between January and April 2016, Atmel management

9

encouraged employees to remain with the company “by assuring [them] that they were fully
covered by the severance benefit guarantees provided by the Plan,” regardless of the identity of the

11
United States District Court
Northern District of California

10

ultimate merger partner), 64 (alleging that no Atmel Plan participant would have signed

12

Microchip’s releases but for its misrepresentations that no employees had a right to severance

13

benefits under the Plan). The latter allegations are also sufficient for purposes of pleading

14

extraordinary circumstances. See Gabriel, 773 F.3d at 957 (holding that “making a promise that

15

the defendant reasonably should have expected to induce action or forbearance on the plaintiff’s

16

part . . . can constitute extraordinary circumstances”) (citation and internal quotation marks

17

omitted).
Defendants’ motion is therefore denied as to Plaintiffs’ claim for equitable estoppel.

18
19

iv.

Plaintiffs fail to state a claim for rescission.

The last form of relief Plaintiffs seek under section 502(a)(3) is “to void the releases . . .

20
21

obtained by defendants through the misrepresentations, breaches of fiduciary duty, and other

22

wrongful conduct alleged herein, and restitution of the full amount of benefits to which they

23
24
25
26
27
28

14

It is beyond dispute that Plaintiffs are permitted to plead that the relevant terms of the Atmel
Plan were unambiguous or, in the alternative, that the ambiguity of the Plan supports a claim for
equitable estoppel. See Fed. R. Civ. P. 8(d)(3) (“A party may state as many separate claims or
defenses as it has, regardless of consistency.”); Summit Estate, Inc. v. Cigna Healthcare of Cal.,
Inc., No. 17-cv-03871-LHK, 2017 WL 4517111, at *4 (N.D. Cal. Oct. 10, 2017) (citing cases
supporting the principle that a plaintiff may plead inconsistent theories in the alternative but may
not prevail on both claims). Defendants’ argument that “any claim for equitable estoppel would
directly refute—and destroy—their entire case,” see Mot. at 17, misconstrues the pleading rules
set forth in Rule 8.
22

1

would otherwise be entitled under the Plan.” FAC ¶ 95. Defendants style this as a request for

2

rescission, see Mot. at 18-20, while Plaintiffs characterize it as a request for “an order declaring

3

voidable the wrongfully obtained releases (and not rescission per se),” Opp. at 21.

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As a preliminary matter, the Court agrees with Defendants that Plaintiffs’ claim is for

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rescission, despite the latter’s contention that they do not seek “rescission per se.” In Miniace v.

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Pacific Maritime Association, the court dealt with a breach of fiduciary duty claim under ERISA

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in which a corporation sought under section 503(a)(3) “an equitable decree rescinding,” inter alia,

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certain amendments to a benefits plan. No. C 04-3506 SI, 2007 WL 963160, at *13 (N.D. Cal.

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Mar. 30, 2007). The fact that it sounded in declaratory relief notwithstanding, the court construed
the corporation’s request as one for rescission. See id. This Court construes Plaintiffs’ request

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United States District Court
Northern District of California

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accordingly.

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Under California law, a party to a contract may unilaterally rescind a contract if her

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consent “was given by mistake, or obtained through duress, menace, fraud, or undue influence.”

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Cal. Civ. Code § 1689(b)(1). A rescinding party must (1) provide notice of his rescission and (2)

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“[r]estore to the other party everything of value which he has received from him under the contract

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or offer to restore the same upon condition that the other party do likewise, unless the latter is

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unable or positively refuses to do so.” Id. § 1691; see also Citicorp Real Estate, Inc. v. Smith, 155

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F.3d 1097, 1103 (9th Cir. 1998) (“[I]n order to escape from its obligation [under a contract,] the

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aggrieved party must rescind by prompt notice and offer to restore the consideration received, if

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any.”) (citations and internal quotation marks omitted) (original emphasis). At the pleading stage,

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plaintiffs seeking rescission “must at least allege that [they] ha[ve] offered to tender to support a

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claim for equitable rescission under section 1691.” Das v. WMC Mortg. Corp., 831 F. Supp. 2d

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1147, 1162 (N.D. Cal. 2011) (quoting Davenport v. Litton Loan Servicing, LP, 725 F. Supp. 2d

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862, 880 (N.D. Cal. 2010)) (original brackets). A plaintiff who fails to allege that they have

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offered to tender fails to state a claim for rescission. See id.

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Plaintiffs appear to concede that they fail to allege tender, arguing that even if such an

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allegation were required, they “have effectively pleaded as much by requesting that they recover

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only ‘the difference between what defendants paid them in severance benefits and what defendants
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1

should have paid them in severance benefits.’” Opp. at 21 (quoting FAC ¶¶ 97, 111). But

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Plaintiffs cite no authority in support of their argument, and the law is clear: a plaintiff seeking

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rescission must allege tender. Because Plaintiffs have failed to do so, they are precluded from

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seeking rescission.

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Defendants’ motion is therefore granted as to this claim to relief. In keeping with federal

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courts’ policy of “freely” giving leave to amend “when justice so requires,” Fed. R. Civ. P.

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15(a)(2), Plaintiffs are granted leave to amend.

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C.

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Last, Defendants argue that Plaintiffs have failed to plead facts sufficient to establish a

Plaintiffs Fail to State a Claim for ERISA Interference.

prima facie case of ERISA interference. See Mot. at 23. Section 510 of ERISA, in relevant part,

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Northern District of California

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makes it

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unlawful for any person to discharge, fine, suspend, expel,
discipline, or discriminate against a participant or beneficiary for
exercising any right to which he is entitled under the provisions of
an employee benefit plan . . . or for the purpose of interfering with
the attainment of any right to which such participant may become
entitled under the plan . . . .

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29 U.S.C. § 1140. The provision’s purpose “is to ‘prevent persons and entities from taking actions

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which might cut off or interfere with a participant’s ability to collect present or future benefits or

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which punish a participant for exercising his or her rights under an employee benefit plan.’”

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Lessard v. Applied Risk Mgmt., 307 F.3d 1020, 1024 (9th Cir. 2002) (quoting Tolle v. Carroll

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Touch, Inc., 977 F.2d 1129, 1134 (7th Cir. 1992)). To establish a prima facie case of interference

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under section 510, an ERISA plaintiff generally must show that (1) he has “participate[d] in a

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statutorily protected activity; (2) an “adverse employment action” has been taken against him; and

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(3) “a causal connection existed between the two.” Kimbro v. Atl. Richfield Co., 889 F.2d 869,

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881 (9th Cir. 1989) (quoting McKinney v. Dole, 765 F.2d 1129, 1143 (D.C. Cir. 1985)). Where a

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plaintiff alleges discriminatory interference under section 510, a showing of the defendant’s

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“specific intent” to interfere with ERISA rights is also required. See Viteri-Butler v. Univ. of Cal.,

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Hastings Coll. of the Law, No. C 12-2651 PJH, 2014 WL 1022174, at *11 (N.D. Cal. Mar. 13,

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2014) (“Where a plaintiff alleges discriminatory interference with her exercise of protected rights

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under § 510, the plaintiff must ‘put forth sufficient evidence to establish [the defendant’s]

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“specific intent to interfere with [her] benefit rights.”’”) (quoting Lessard, 307 F.3d at 1025);

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Karamsetty v. Wells Fargo & Co., 967 F. Supp. 2d 1305, 1327 (N.D. Cal. 2013) (citing Lessard

3

for the same principle).
Plaintiffs neither allege specific facts that satisfy this standard nor cite to the correct

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standard.15 They allege no facts regarding any “statutorily protected activity,” which is

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foundational to determining whether Defendants were driven by such activity to take an

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employment action adverse to Plaintiffs. See Kimbro, 889 F.2d at 881. And while they do allege

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an adverse employment action, see FAC ¶ 49, they fail to allege facts showing that their attempt to

9

exercise their rights under ERISA caused that adverse action. Perhaps more importantly,
practically speaking, Plaintiffs fail to allege how their interference claim under section 510

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United States District Court
Northern District of California

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bolsters their relief. They make no mention of any freestanding remedies associated with

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interference claims. Nor do they state what further relief such a cause of action would provide.
Still, the Court cannot be certain that amendment of the Complaint as to this cause of

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14

action is futile. See Fed. R. Civ. P. 15(a)(2). Accordingly, Plaintiffs’ Third Cause of Action is

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dismissed with leave to amend.

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IV.

For the foregoing reasons, the Court GRANTS IN PART and DENIES IN PART

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CONCLUSION

Defendants’ motion as follows:
1.

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Plaintiffs’ claims for injunctive relief under section 502(a)(3) of ERISA (1)

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prohibiting Defendants from “continuing to deny Plan benefits to eligible

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employees”; (2) prohibiting Defendants “from continuing to make false and

22

fraudulent statements” about the existence of the Atmel Plan or any employee’s

23

right to benefits under the Plan; and (3) “requiring defendants to pay the full

24

amounts and benefits” promised under the Atmel Plan are DISMISSED

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15

Instead, Plaintiffs cite to a case from the Northern District of Illinois for the proposition that
“fraudulent activity excluding an employee from participation in a benefit plan can constitute an
act of discrimination.” See Opp. at 23-24 (quoting Healy v. Axelrod Constr. Co. v. Defined
Benefit Pension Plan & Trust, 787 F. Supp. 838, 845 (N.D. Ill. 1992)). They then point to their
allegations of such fraudulent activity.
25

WITHOUT LEAVE TO AMEND.

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2.

WITH LEAVE TO AMEND.

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4

Plaintiffs’ claim for rescission under section 502(a)(3) of ERISA is DISMISSED

3.

Plaintiffs’ Third Cause of Action under section 510 of ERISA is DISMISSED
WITH LEAVE TO AMEND.

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The remainder of Defendants’ motion is DENIED.

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4.

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Should Plaintiffs choose to amend the FAC, they are directed to do so in accordance with

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the discussion above no later than 28 days from the date of this Order.
IT IS SO ORDERED.
Dated: 2/6/2018

United States District Court
Northern District of California

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HAYWOOD S. GILLIAM, JR.
United States District Judge

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