District Court, N.D. California

Schuman v. Microchip Tech. Inc.

Case No. 16-cv-05544-HSG·Attorney: *1055Cliff 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., 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., 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)., 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:, 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., 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)., 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], However, there is a fundamental flaw in Defendants' theory. In order to prevail, Defendants must prove "that there is a remediable wrong"-in other words, that they "seek[ ] relief to redress a violation of ... the terms of a plan." Gabriel , 773 F.3d at 954. In Defendants' view, Plaintiffs violated the terms of the Second Atmel Plan when they ignored (or fraudulently contravened) the release agreement and brought this action. See Counterclaim ¶¶ 21-27, 31-35. But whatever the effect of this release may be when it comes to assessing the merits of Plaintiffs' claims (which is for a later day), one thing is certain at this stage: it is not a covenant not to sue. And because the Second Atmel Plan does not bar Plaintiffs from filing suit, they have not violated its terms by doing so. Thus, Defendants have not satisfied the first element of Section 502(a)(3), because there is no wrong to remedy., Because Plaintiffs never agreed not to sue Defendants, they have not violated any term of the Plan by doing so. See Isbell v. Allstate Ins. Co. , 418 F.3d 788, 797 (7th Cir. 2005) (holding that plaintiff "did not breach the Release" where "Release was a release of claims and not a covenant not to sue"). And since there is no violation of the Second Atmel Plan's terms, Defendants do not have a basis for equitable relief under Section 502(a)(3). Of course, Defendants may continue to pursue their affirmative defense that Plaintiffs agreed to release them from liability under the terms of the Second Atmel Plan. See id. (finding that Defendant "received the benefit of its bargain-an affirmative defense"); see also Bukuras v. Mueller Grp., LLC , 592 F.3d 255, 266 (1st Cir. 2010) ("A release is an affirmative defense; it does not supply a defendant with an independent claim for breach of contract.")., *1061Finally, given the clear language of the release provision in the Second Atmel Plan, Defendants could not possibly cure their pleading by alleging more facts. And the theory of fraud explicated in their Opposition, see Opp. at 14, which Defendants proffer as a basis for leave to amend their counterclaim, see id. at 14 n.9, does not allege a violation of the Second Atmel Plan-which is required for Defendants to obtain equitable relief under ERISA. Thus, Defendants' counterclaim must be dismissed without leave to amend., The Court SETS a further case management conference for 2:00 p.m. on April 2 in Oakland, Fourth Floor, Courtroom 2. At the case management conference, the parties should be prepared to discuss a schedule for the prompt resolution of this matter and the proposed form and timing of ADR efforts, including the possibility of a magistrate judge settlement conference. The parties are directed to file a joint case management statement addressing these and any other issues by March 26.0 citations·Filed March 12, 2019

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IT IS SO ORDERED.

Schuman v. Microchip Tech. Inc.