Schuman v. Microchip Tech. Inc., Case No. 16-cv-05544-HSG

372 F.Supp.3d 1054

Peter SCHUMAN, et al., Plaintiffs,

v.MICROCHIP TECHNOLOGY INCORPORATED, et al., Defendants.

Case No. 16-cv-05544-HSG

United States District Court, N.D. California.

Signed March 12, 2019

Cliff Michael Palefsky, Keith A. Ehrman, McGuinn Hillsman & Palefsky, Connie K. Chan, Michael Rubin, Andrew Edward Kushner, Raphael N. Rajendra, Altshuler Berzon LLP, San Francisco, CA, William B. Reilly, Law Office of William Reilly, Mill Valley, CA, for Plaintiffs.

Mark E. Schmidtke, Pro Hac Vice, Ogletree, Deakins, Nash, Smoak, Stewart, P.C., Valparaiso, IN, Elizabeth M. Soveranez, Kristina Holmstrom, Pro Hac Vice, Mark Gerard Kisicki, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Phoenix, AZ, Sean Patrick Nalty, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., San Francisco, CA, for Defendants.

ORDER GRANTING MOTION TO DISMISS COUNTERCLAIM

HAYWOOD S. GILLIAM, JR., United States District JudgePending before the Court is Plaintiffs' motion to dismiss Defendants' counterclaim. See Dkt. No. 76 ("Mot."). For the following reasons, the Court GRANTS the motion to dismiss, without leave to amend.

I. BACKGROUND

Plaintiffs Peter Schuman and William Coplin ("Plaintiffs") originally filed this putative class action in September 2016, alleging violations of the Employee Retirement Income Security Act ("ERISA"). See Complaint, Dkt. No. 1. In short, Plaintiffs claimed that their former employer Atmel Corporation ("Atmel"), its merger partner Microchip Technology, Inc. ("Microchip"), and the Atmel Corporation U.S. Severance Guarantee Benefit Program (the "Plan") failed to honor the terms of an employee severance agreement. See Amended Class Action Complaint ("Am. Compl."), Dkt. No. 29 ¶¶ 1–2.

In response, Atmel and Microchip (for the purposes of this order, "Defendants") brought a counterclaim against Plaintiffs. See Microchip's First Amended Answer to Amended Complaint and Counterclaim for Equitable Relief ("Counterclaim"), Dkt. No. 59; Atmel's First Amended Answer to Amended Complaint and Counterclaim for Equitable Relief, Dkt. No. 60. Plaintiffs moved to dismiss. See Mot.

A. Factual Allegations

For the purposes of this motion to dismiss, the Court must accept the following facts, as alleged in Defendants' counterclaim, as true. See Manzarek v. St. Paul Fire & Marine Ins. Co. , 519 F.3d 1025, 1031 (9th Cir. 2008).

Plaintiffs are former employees of Atmel. See Counterclaim ¶ 3.¹ In 2015, Atmel made a guarantee to its employees that if their employment was terminated and certain conditions were met, it would pay them severance benefits. Id. ¶ 4. This was the original "Atmel Plan," which was governed by ERISA. Id.

Microchip acquired Atmel on April 6, 2016. Id. ¶ 5. After the acquisition, some Atmel employees claimed that they were eligible for benefits under the Atmel Plan. Id. ¶ 7. But in Defendants' view, the Atmel Plan had expired. Id. ¶ 7. Nevertheless, "to resolve the continuing dispute with these Atmel employees," Defendants offered employees the opportunity to receive different severance benefits if they were terminated. Id. This was the "Second Atmel Plan." Id. Employees had 45 days to decide whether to accept it. Id. ¶ 9. In exchange for accepting the Second Atmel Plan, these employees "agreed to execute a release of any claims they might have against ‘Microchip, Atmel, and their affiliates, and subsidiaries.’ " Id. The release in the Second Atmel Plan provided that:

You agree to release the Company, its subsidiaries and affiliates, and its and their officers, agents and employees from any liability related to or arising out of your employment with any of them. This includes a release of any liability for claims of any kind that you ever had or may have at this time, whether you know about them or not. This release is as broad as the law allows and includes a release of claims under federal and state laws, such as anti-discrimination, harassment and retaliation laws and expressly includes any claims under the Age Discrimination in Employment Act. This release also includes a release of any tort and contract claims, and any other claims that could be asserted under federal, state or local statutes, regulations or common law.

Motion to Dismiss Plaintiffs' Amended Class Action Complaint, Dkt. No. 33-1, Ex. 4 at 2.²

Plaintiffs signed the severance agreement and release. Id. ¶ 12.³ Between April 6, 2016 and March 18, 2017, Atmel terminated Plaintiffs' employment. Id. ¶ 3. After their termination, Plaintiffs were paid according to the terms of the Second Atmel Plan. Id. ¶ 16.

Even though they signed the severance agreements and releases (and accepted severance benefits) under the Second Atmel Plan, Plaintiffs still brought suit. Id. ¶ 21. Plaintiffs did not tender back their benefits and never intended to keep their promises; rather, they "intended to deceive" Defendants. Id. ¶¶ 22–24. Defendants reasonably relied on Plaintiffs' promises, but Plaintiffs "have kept [their] benefits" despite "not honor[ing] their promises." Id. ¶ 25–26. Defendants have been financially injured by Plaintiffs' fraudulent promises, id. ¶ 27, but ERISA does not allow them to obtain money damages, id. ¶ 38. Defendants "have reasonably concluded that Plaintiffs are dissipating the benefits" they received under the Second Atmel Plan. Id. ¶ 32.

Based on these allegations, Defendants brought a counterclaim for equitable relief under ERISA Section 502(a)(3). Id. ¶¶ 36–41. Defendants seek an injunction to prevent Plaintiffs from dissipating benefits received, an order equitably estopping Plaintiffs from continuing to pursue their claims, interest on any sums awarded, and attorneys' fees and costs. See Counterclaim, Prayer for Relief ¶¶ 1–5.

B. Procedural History

Plaintiffs filed their amended complaint on March 31, 2017. See Dkt. No. 29. Atmel, Microchip, and the Plan filed a motion to dismiss on April 28, see Dkt. No. 33, which the Court granted in part and denied in part on February 6, 2018, see Dkt. No. 54.

Atmel, Microchip, and the Plan answered the amended complaint on March 20, 2018. See Dkt. Nos. 56, 57, 58. Atmel and Microchip filed amended answers, in which they raised a counterclaim, on April 10. See Dkt. Nos. 59, 60. Plaintiffs moved to dismiss the counterclaim on May 31. See Mot. Defendants filed an opposition on July 16, see Dkt. No. 84 ("Opp."), and Plaintiffs replied on July 23, see Dkt. No. 85 ("Reply"). The Court held a hearing on September 13, after which it took Plaintiffs' motion under submission. See Dkt. No. 95.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 8(a) requires that a complaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief[.]" A party may move to dismiss a complaint for failing to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). "Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory." Mendiondo v. Centinela Hosp. Med. Ctr. , 521 F.3d 1097, 1104 (9th Cir. 2008). To survive a Rule 12(b)(6) motion, the complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim is facially plausible when it pleads "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

In reviewing the plausibility of a complaint, courts "accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party." Manzarek v. St. Paul Fire & Marine Ins. Co. , 519 F.3d 1025, 1031 (9th Cir. 2008). Nonetheless, Courts do not "accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Sec. Litig. , 536 F.3d 1049, 1055 (9th Cir. 2008). And even where facts are accepted as true, a complaint "may plead [it]self out of court" if it "plead[s] facts which establish that [it] cannot prevail on [its] ... claim." Weisbuch v. Cnty. of Los Angeles , 119 F.3d 778, 783 n.1 (9th Cir. 1997) (quotation marks and citation omitted).

If dismissal is appropriate under Rule 12(b)(6), a court "should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith , 203 F.3d 1122, 1130 (9th Cir. 2000) (quotation marks and citation omitted).

III. DISCUSSION

Defendants brought their counterclaim under ERISA Section 502(a)(3), which authorizes plan fiduciaries to bring a civil action "(A) to enjoin any act or practice which violates ... the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of ... the terms of the plan." 29 U.S.C. § 1132(a)(3). The fiduciary "must prove both (1) that there is a remediable wrong, i.e. , that [it] seeks relief to redress a violation of ERISA or the terms of a plan, see [ Mertens v. Hewitt Associates , 508 U.S. 248, 254 (1993) ]; and (2) that the relief sought is ‘appropriate equitable relief,’ 29 U.S.C. § 1132(a)(3)(B)." Gabriel v. Alaska Elec. Pension Fund , 773 F.3d 945, 954 (9th Cir. 2014).

The term "appropriate equitable relief" refers to "those categories of relief that, traditionally speaking (i.e. , prior to the merger of law and equity) were typically available in equity." CIGNA Corp. v. Amara , 563 U.S. 421, 439, 131 S.Ct. 1866, 179 L.Ed.2d 843 (2011) (internal quotations omitted). Restitution is not necessarily equitable relief: "whether it is legal or equitable depends on the basis for the [party's] claim and the nature of the underlying remedies sought." Great-W. Life & Annuity Ins. Co. v. Knudson , 534 U.S. 204, 213, 122 S.Ct. 708, 151...