Colaco et al v. The Asic Advantage Simplefied Employee Pension Plan et al

Filing 84

ORDER GRANTING-IN-PART PLAINTIFFS' MOTION TO COMPEL AND DENYING MOTION FOR SANCTIONS by Judge Paul S. Grewal granting-in-part and denying-in-part 48 ; denying 50 . (psglc1S, COURT STAFF) (Filed on 8/10/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

United States District Court
For the Northern District of California

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STEPHEN COLACO, et al.,

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Plaintiffs,
v.

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THE ASIC ADVANTAGE SIMPLIFIED
EMPLOYEE PENSION PLAN, et al.,

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Defendants.

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Case No. 5:13-cv-00972-PSG
ORDER GRANTING-IN-PART
PLAINTIFFS’ MOTION TO COMPEL
AND DENYING MOTION FOR
SANCTIONS
(Re: Docket Nos. 48, 50)

Four years ago, Defendant ASIC Advantage, Inc. terminated its Simplified Employee
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Pension Plan but committed to pay employees like Plaintiffs those SEP benefits accrued through
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June 30, 2011. After the company’s sale to Defendant Microsemi Corporation was completed a
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few days later, Microsemi had a change of heart—or so says Plaintiffs anyway—and refused to
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honor ASIC’s commitment. Not happy with this turn of events, Plaintiffs filed this suit against
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ASIC, Microsemi and others, seeking ERISA benefits under the SEP Plan, equitable relief and
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fines for failure to provide plan and claim-related documents.
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Plaintiffs now move to compel production of documents authored or created by
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Microsemi’s attorney Harley Bjelland in relation to the SEP plan. They assert a fiduciary

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exception to the attorney-client privilege. Plaintiffs also move to compel information relating to
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other former ASIC SEP plan participants.1 Though Plaintiffs fail to demonstrate that Bjelland

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See Docket No. 57 at 5.

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Case No. 5:13-cv-00972-PSG
ORDER GRANTING-IN-PART PLAINTIFFS’ MOTION TO COMPEL AND DENYING
MOTION FOR SANCTIONS

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acted as a fiduciary in the capacity of a claims administrator, they do show that information

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regarding other former ASIC SEP plan participants is relevant to this action. The court GRANTS-

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IN-PART Plaintiffs’ motion to compel and DENIES Plaintiffs’ motion for sanctions.

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I.

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The attorney-client privilege attaches to a confidential communication between the attorney
and the client and bars discovery of the communication irrespective of whether it includes

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unprivileged material.2 “In the Ninth Circuit, the privilege is jealously guarded.”3 The party

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claiming the privilege has the burden of establishing the preliminary facts necessary to support its

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United States District Court
For the Northern District of California

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exercise.4 “Once that party establishes the privilege, . . . the opponent of the claim of privilege has

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the burden of proof to establish the communication was not confidential or that the privilege does

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not . . . apply.”5
One limit to the attorney-client privilege is the fiduciary exception.6 “[A]n employer acting

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in the capacity of ERISA fiduciary is disabled from asserting the attorney-client privilege against

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plan beneficiaries on matters of plan administration.”7 For the purposes of ERISA, “a person is a

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fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or

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discretionary control respecting management of such plan or exercises any authority or control

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respecting management or disposition of its assets, (ii) he renders investment advice for a fee or

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other compensation, direct or indirect, with respect to any moneys or other property of such plan,

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See Upjohn Co. v. United States, 449 U.S. 383, 389 (1981) (holding that only the communications
pertaining to advice between an attorney and client, and not the underlying facts, are protected by
the privilege).
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Fischel v. Equitable Life Assurance, 191 F.R.D. 606, 607 (N.D. Cal. 2000).

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See id.

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Id.

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See United States v. Mett, 178 F.3d 1058, 1063 (9th Cir. 1999) (recognizing a “fiduciary
exception” to the attorney-client privilege “which has been applied to numerous fiduciary
relationships”).
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Id. at 1063; see 29 U.S.C. § 1002 (holding that ERISA is a federal law that sets standards of
protection for individuals in most voluntarily established, private-sector retirement plans).
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Case No. 5:13-cv-00972-PSG
ORDER GRANTING-IN-PART PLAINTIFFS’ MOTION TO COMPEL AND DENYING
MOTION FOR SANCTIONS

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or has any authority or responsibility to do so, or (iii) he has any discretionary authority or

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discretionary responsibility in the administration of such plan.”8
Fed. R. Civ. P. 26 provides that a party “may obtain discovery regarding any non-privileged

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matter that is relevant to any party’s claim or defense.”9 “Once the moving party establishes that

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the information requested is within the scope of permissible discovery, the burden shifts to the

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party opposing discovery. An opposing party can meet its burden by demonstrating that the

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information is . . . privileged.”10

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United States District Court
For the Northern District of California

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ASIC was a California corporation with its principal place of business in Sunnyvale. ASIC
provided a SEP plan for its employees that gave ASIC the discretion to contribute a certain

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percentage of each employee’s compensation toward the employees’ retirement savings.11 ASIC

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established the SEP plan in October 2008 and contributed to the SEP plan through 2009.12 As

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allowed by the Internal Revenue Service, ASIC typically paid SEP contributions in October to

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cover the previous year.13 Consistent with this schedule, in October 2010, ASIC paid SEP

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contributions that employees had earned in 2009.14

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29 U.S.C. § 1002(21)(A).

Fed. R. Civ. P. 26(b)(1) (“Unless otherwise limited by court order, the scope of discovery is as
follows: Parties may obtain discovery regarding any non-privileged matter that is relevant to any
party’s claim or defense—including the existence, description, nature, custody, condition, and
location of any documents or other tangible things and the identity and location of persons who
know of any discoverable matter. For good cause, the court may order discovery of any matter
relevant to the subject matter involved in the action. Relevant information need not be admissible
at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible
evidence. All discovery is subject to the limitations imposed by Rule 26(b)(2)(C).”).
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Khalilpour v. CELLCO P-ship, Case No. 3:09-cv-02712-CW, 2010 WL 1267749, at *1 (N.D.
Cal. Apr. 1, 2010) (citing Ellison v. Patterson-UTI Drilling, Case No. 08-cv-67-JDR, 2009 WL
3247193 at *2 (S.D. Tex. Sept. 23, 2009)).
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See Docket No. 57 at 2-3; Docket No. 48 at 1 (stating that a SEP plan allows employers to
contribute up to 25 percent of the employee’s pay each year on a tax-favored basis to individual
retirement accounts).
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See Docket No. 48 at 2.

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See id.

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See id.

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Case No. 5:13-cv-00972-PSG
ORDER GRANTING-IN-PART PLAINTIFFS’ MOTION TO COMPEL AND DENYING
MOTION FOR SANCTIONS

In the wake of a pending acquisition by Microsemi, ASIC’s board of directors passed a

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resolution that terminated the SEP plan as of July 1, 2011.15 Plaintiffs contend that ASIC’s

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President and Chief Executive Officer had previously and repeatedly promised the ASIC

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employees that their SEP contributions would still be paid for 2010 and the first half of 2011.16

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Microsemi acquired ASIC on July 5, 2011 and terminated many employees, including 12 of the 15

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Plaintiffs. The remaining three resigned in late 2011.17 Defendants say 13 of the 15 Plaintiffs

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signed general releases for which they received enhanced severance payments.18

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United States District Court
For the Northern District of California

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When Plaintiffs noticed their SEP payments had not been made, they contacted a former
ASIC board director through counsel who responded that Microsemi should pay Plaintiffs the

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remaining SEP plan contributions.19 In early 2012, Plaintiffs requested in writing the payment of

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the SEP contributions, and upon Microsemi’s request, provided the names of the individuals

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seeking the SEP contributions.20 Microsemi then retained Bjelland, who emailed Plaintiffs to

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inform them that their claims were denied.21 Plaintiffs requested documents referring to their

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claims,22 and upon receiving limited documents, appealed the denial.23 In a response from

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Bjelland, Microsemi did not budge from its decision.24 Plaintiffs then filed this suit and served

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See Docket No. 57 at 2-3; Docket No. 48 at 2.

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See Docket No. 25 at ¶¶ 34, 35; Docket No. 48 at 2.

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See Docket No. 25 at ¶¶ 34, 35, 40, 47-50; Docket No. 48 at 2.

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See Docket No. 57 at 2-3.

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See Docket No. 25 at ¶ 52.

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See id. at ¶¶ 55, 56; Docket Nos. 49-3, 49-4.

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See Docket No. 25 at ¶ 57.

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See id. at ¶ 56. Among the limited documents produced were several emails between Bjelland
and various Microsemi and ASIC employees, which Defendants later contended were inadvertently
produced attorney-client privileged communications that should be returned. See Docket No. 48 at
6.
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See Docket No. 25 at ¶¶ 60, 61; Docket No. 48 at 5 (explaining which documents were not
produced).

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See Docket No. 25 at ¶¶ 60, 61; Docket No. 48 at 5.
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Case No. 5:13-cv-00972-PSG
ORDER GRANTING-IN-PART PLAINTIFFS’ MOTION TO COMPEL AND DENYING
MOTION FOR SANCTIONS

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various document requests.25 Plaintiffs now request an order compelling Defendants to produce

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responsive documents authored or created by Bjelland, and information regarding other former

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ASIC employees who participated in the SEP plan.26

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II.

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This court has subject matter jurisdiction and supplemental jurisdiction pursuant to 28

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U.S.C. §§ 1331 and 1367. The parties further consented to the jurisdiction of the undersigned

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magistrate judge under 28 U.S.C. § 636(c) and Fed. R. Civ. P. 72(a).27

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III.

United States District Court
For the Northern District of California

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To avoid the restrictions of the attorney-client privilege, Plaintiff must show that Bjelland

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did more than conduct ministerial duties for the plan; Bjelland must be shown to have exercised

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fiduciary control or authority over the SEP contributions.28 Plaintiffs fall short of meeting this

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burden for two reasons.

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First, Bjelland’s July 12, 2012 letter denying Plaintiffs’ appeal indicates that the decision to

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deny the disputed SEP plan contributions was based on an investigation conducted by Microsemi’s

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appointed “Administrative Appeals Committee.”29 The committee was made up of two members,

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John Holtrust and David Goren.30 Bjelland was not part of the committee that had control or

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authority over the fate of the SEP contributions. In fact, he was not hired until after the plan

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terminated. These facts all underscore Microsemi’s contention that it—not the plan, not the plan

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See Docket No. 57 at 3; Docket No. 48 at 5.

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See Docket No. 48 at 1.

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See Docket Nos. 12, 13.

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See 29 U.S.C. § 1002(21)(A) (requiring a fiduciary to have authority or control over the plan).

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See Docket No. 49-6 at 2.

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See id.

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Case No. 5:13-cv-00972-PSG
ORDER GRANTING-IN-PART PLAINTIFFS’ MOTION TO COMPEL AND DENYING
MOTION FOR SANCTIONS

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sponsor, not the plan trustee—hired Bjelland to provide legal advice about its legal liability to

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Plaintiffs, and nothing more.31

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Second, there is no evidence that Bjelland’s functions involved the exercise of discretionary
authority or control over the SEP plan. Indeed, the record evidence suggests that his functions

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beyond rendering legal advice were limited to ministerial-type tasks—such as mailing denial letters

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to Plaintiffs on behalf of his client.32 “[W]ithout any responsibility or authority over a plan’s

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management and administration, one cannot be a fiduciary.”33 “An attorney or other professional

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service provider who represents an ERISA plan will not qualify as an ERISA fiduciary so long as

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United States District Court
For the Northern District of California

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he ‘performs purely ministerial functions’ . . . within a framework of policies, interpretations, rules,

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practices and procedures made by other persons.”34 Because his role as post-termination advisor

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alone did not give Bjelland any discretionary control or authority over the SEP plan contribution,

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Bjelland cannot be said to have acted as an ERISA fiduciary.35

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Cf. Aull v. Cavalcade Pension Plan, 988 F.Supp. 1360, 1365 (D. Colo. 1997) (holding that once
a plan terminates, ERISA trustee is no longer a fiduciary); Trigon Ins. Co. v. Columbia Naples
Capital, LLC, 235 F. Supp. 2d 495, 505 (E.D. Va. 2002) (same).
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See Pension Trust Fund for Operating Engineers Local 3 v. McMorgan & Co., Case No. 06-cv904-WBS, 2007 WL 201247, at *8 (E.D. Cal. Jan. 24, 2007) (citing Yeseta v. Baima, 837 F.2d 380,
385 (9th Cir. 1988)) (concluding that an attorney was not an ERISA fiduciary when neither his
“status as an attorney nor as executor showed he controlled the Plan in a manner other than by
usual professional functions.”). See also 29 C.F.R. § 2509.75-5(D-1); 29 C.F.R. § 2509.75-8(D-2)
(clarifying that “preparation of employee communications material or preparation of reports
concerning participants’ benefits” are tasks that do not make an attorney a fiduciary so long as the
attorney does not perform any of the functions in 29 U.S.C. § 1002(21)(A)); Custer v. Sweeney, 89
F.3d 1156, 1162 (4th Cir. 1996).
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Brown v. California Law Enforcement Ass’n, Long-Term Disability Plan, Case No. 14-cv03559-JCS, 2015 WL 890564, at *3 (N.D. Cal. Mar. 2, 2015).
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Custer, 89 F.3d at 1156, 1162 (holding that attorney’s day-to-day payment of bills, securing of
funds, and monitoring of the progress of construction and operations on fund property were
ministerial tasks); see 29 C.F.R. § 2509.75-8(D-2) (“A person who performs purely ministerial
functions . . . within a framework of policies, interpretations, rules, practices and procedures made
by other persons is not a fiduciary because such person” does not perform any of the functions in
29 U.S.C. § 1002(21)(A)); see also 29 U.S.C. § 1002(21)(A) (providing the definition of a
fiduciary as applied in ERISA cases).
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See 29 C.F.R. § 2509.75-8(D-2); Mett, 178 F.3d at 1064 (“On the one hand, where an ERISA
trustee seeks an attorney’s advice on a matter of plan administration and where the advice clearly
does not implicate the trustee in any personal capacity, the trustee cannot invoke the attorney-client
privilege against the plan beneficiaries. On the other hand, where a plan fiduciary retains counsel
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Case No. 5:13-cv-00972-PSG
ORDER GRANTING-IN-PART PLAINTIFFS’ MOTION TO COMPEL AND DENYING
MOTION FOR SANCTIONS

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A separate issue is whether Defendants must produce SEP plan information of other former

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ASIC SEP participants. Defendants primarily object to Plaintiffs’ request due to privacy and lack

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of notice.36 But the clear relevance of the information outweighs Defendants’ concerns.
“Federal courts have recognized a person’s interest in preserving confidentiality of

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information contained in his or her personal file.”37 “Personnel records, because of the privacy

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interests involved, should not be ordered produced except upon a compelling showing of

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relevance.”38 The “resolution of a privacy objection or request for a protective order requires a

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balancing of the need for the information sought against the privacy right asserted.”39

United States District Court
For the Northern District of California

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Defendants contend the privacy of non-party, former ASIC employees should be preserved,

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especially because these former employees received no notice pursuant to Cal. Civ. Code §§

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1985.3 and 1985.6.40 But even if state procedural rules were relevant here, Plaintiffs convincingly

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show that documents from other SEP participants regarding the July 5, 2011 company-wide

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meeting and similarly filed claims are relevant to Plaintiffs’ claims for their SEP contributions in

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this action.41 Several Plaintiffs testified at deposition that during the company-wide meeting on

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in order to defend herself against the plan beneficiaries (or the government acting in their stead),
the attorney-client privilege remains intact.”).

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See Docket No. 57 at 9. Defendants also challenge the breadth of the requests, but the court
finds that as argued to the court they are sufficiently tailored.

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Nakagawa v. Regents of Univ. of Cal., Case No. 06-cv-2066-SI, 2008 WL 1808902, at *2 (N.D.
Cal. Apr. 22, 2008).
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See Kress v. Price Waterhouse Coopers, Case No. 08-cv-0965-LKK, 2011 WL 5241852, at *1
(E.D. Cal. Nov. 1, 2011) (citing Miller v. Fed. Express Corp., 186 F.R.D. 376, 384 (W.D. Tenn.
1999)).
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Soto v. City of Concord, 162 F.R.D. 603, 603 (N.D. Cal. 1995).

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See 29 U.S.C. § 1059; see also Docket No. 48 at 6; Docket No. 57 at 10 (referring to
Defendants’ citation to Cal. Civ. Code § 1985.3 and § 1985.6, which require statutory notices to be
provided to third parties); Soto, 162 F.R.D. at 616 (“Resolution of a privacy objection or request
for a protective order requires a balancing of the need for the information sought against the
privacy right asserted.”).
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See Docket No. 60 at 5; see also 29 U.S.C. § 1059 (requiring a plan administrator to maintain
records that might be relevant to a determination of the benefit entitlements of a participant or
beneficiary).
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Case No. 5:13-cv-00972-PSG
ORDER GRANTING-IN-PART PLAINTIFFS’ MOTION TO COMPEL AND DENYING
MOTION FOR SANCTIONS

1

July 5, 2011, ASIC board members said the SEP plan contributions for 2010 and the first six

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months of 2011 would be made.42 Whether other plan participants submitted claims and whether

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those claims were accepted or denied is plainly relevant to Plaintiffs’ contentions of what

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Defendants said and when they said it.43 Denying Plaintiffs the production of these documents

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would unfairly prejudice Plaintiffs’ efforts to establish their claims.44

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IV.
Plaintiffs’ motion to compel Defendants to produce documents Bjelland authored or created

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is DENIED.
Plaintiffs’ motion to compel the production of other former ASIC SEP participants’ SEP

United States District Court
For the Northern District of California

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plan information is GRANTED. Defendants shall produce documents relevant to a determination

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of the SEP benefit entitlements of other participants for the disputed period, excluding any

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privileged documents.

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Because Defendants acted reasonably in disputing this production, Plaintiffs’ motion for

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sanctions is DENIED.

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SO ORDERED.

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Dated: August 10, 2015
_________________________________
PAUL S. GREWAL
United States Magistrate Judge

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See Docket No. 60 at 5.

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See id.

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See Soto, 162 F.R.D. at 603, 616. Production will not unreasonably burden Defendants, since
they should have been keeping these records anyway under Section 1059. If these documents are
not reasonably accessible after diligent efforts at recovery and production, Defendants shall
supplement their responses accordingly.
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Case No. 5:13-cv-00972-PSG
ORDER GRANTING-IN-PART PLAINTIFFS’ MOTION TO COMPEL AND DENYING
MOTION FOR SANCTIONS