Peter Schuman v. Microchip Technology Incorporated

Background

Atmel created the U.S. Severance Guarantee Benefit Program in July 2015. The plan offered eligible employees cash severance, paid health-insurance premiums, and, for some employees, a prorated portion of an annual incentive bonus. The plan stated that benefits would become available if Atmel entered into a definitive agreement leading to a change of control by November 1, 2015. If that triggering event occurred, the plan would remain effective for 18 months after the agreement’s execution. Benefits required an actual change of control and termination without cause within the specified period.

Atmel first entered into a merger agreement with Dialog Semiconductor PLC, but that transaction did not close. Atmel later entered into a merger agreement with Microchip on January 19, 2016, and the merger closed on April 4, 2016. Before closing, Atmel gave Microchip information about the severance plan. Atmel also told employees that the plan would remain in effect regardless of whether the merger involved Dialog or Microchip. After the merger closed, however, Microchip announced that the plan had expired on November 1, 2015 and that it would not pay the plan’s severance benefits.

Microchip offered some terminated employees reduced severance in exchange for releases of their claims. It also offered reduced benefits to some employees who continued working, conditioned on signing releases. Schuman and Coplin submitted claims for benefits under the Atmel plan. The plan administrator denied their claims and appeals on the ground that the plan had expired; the administrator did not rely on the releases in denying the claims.

Claims and Proposed Class

The plaintiffs alleged that the defendants breached fiduciary duties under Section 404(a) of the Employee Retirement Income Security Act, or ERISA, by misinterpreting the plan and encouraging employees to sign releases in exchange for reduced benefits. They also alleged improper denial of benefits under ERISA Section 502(a)(1)(B). They sought, among other relief, injunctions concerning the releases and the payment of plan benefits, an order preventing Microchip from denying entitlement to benefits, and an equitable surcharge based on unjust enrichment.

The proposed class consisted of:

All former U.S.-based employees of defendant Atmel Corporation who were employed as of the April 4, 2016 closing date of the Atmel-Microchip merger and who were terminated by defendant Microchip Technology Incorporated without cause between April 4, 2016 and March 19, 2017.

The class excluded the plaintiffs in a related case identified in the opinion as Berman v. Microchip, Case No. 17-cv-01864.

Rule 23(a) Requirements

Federal Rule of Civil Procedure 23(a) requires numerosity, commonality, typicality, and adequacy of representation. The court found all four requirements satisfied.

- Numerosity: The parties did not dispute, and the court agreed, that a proposed class of approximately 200 people was large enough that joining every member in one case would be impracticable. - Commonality: The court identified common questions, including whether the Dialog merger agreement satisfied the plan’s triggering-event requirement, whether Microchip was a plan fiduciary, whether Microchip violated its fiduciary duties by stating that the plan had expired, and whether Microchip improperly obtained releases. The court found that these questions could produce answers applicable to the class as a whole. - Typicality: The court rejected the argument that Schuman and Coplin’s director-level positions, knowledge of the plan, or consultations with an attorney made their claims atypical. The court concluded that their claims arose from the same alleged course of conduct and relied on similar legal arguments as the class members’ claims. - Adequacy: The court found no established conflict between the named plaintiffs and the proposed class. It also rejected the argument that the named plaintiffs lacked sufficient harm to seek an equitable surcharge, accepting the plaintiffs’ position that the surcharge would be based on a class-wide unjust-enrichment theory and Microchip’s records.

Rule 23(b) Requirements

The plaintiffs sought certification under Rules 23(b)(1), 23(b)(2), and 23(b)(3). Rule 23(b)(1) addresses the risk of inconsistent obligations, Rule 23(b)(2) generally concerns class-wide injunctive or declaratory relief, and Rule 23(b)(3) requires that common issues predominate and that a class action be superior to other methods of resolving the dispute.

Rule 23(b)(1)(A)

The court concluded that certification under Rule 23(b)(1)(A) was not appropriate for the fiduciary-duty claim because the plaintiffs had not provided evidence showing that their requested equitable surcharge would be merely incidental to the requested injunctive relief. The plaintiffs had not conducted discovery establishing what benefit Microchip received from using unpaid benefits or how large any surcharge would be. The court therefore did not certify the fiduciary-duty claim under Rule 23(b)(1)(A).

Rule 23(b)(2)

The court certified the fiduciary-duty claim under Rule 23(b)(2). It found that the claim was based on alleged class-wide conduct, including Microchip’s statements that the Atmel plan had expired and its offers of reduced benefits in exchange for releases. The court accepted the plaintiffs’ theory that the requested surcharge would be based on Microchip’s benefit or profit from the alleged breach and would not require individualized damage calculations at the certification stage. The court emphasized that it was not deciding whether the plaintiffs would ultimately succeed on the fiduciary-duty claim or whether a surcharge would ultimately be proper.

Rule 23(b)(3)

The court found that common issues predominated for both claims. For the benefits-denial claim, the court found that eligibility depended on a common interpretation of the Atmel plan and whether the Dialog merger agreement was an initial triggering event. The court also found that the plaintiffs’ challenge to the releases was based on class-wide communications rather than individualized threats or coercion.

For the fiduciary-duty claim, the court found that common issues included whether Microchip was a fiduciary and whether it accurately informed employees about their ERISA rights or instead misled them about the plan’s enforceability. The court also concluded that the requested surcharge theory relied on common proof. Individualized damages, by themselves, did not defeat certification.

The court found a class action superior to individual lawsuits because resolving common issues together could reduce litigation costs and promote efficiency. It therefore certified the denial-of-benefits claim under Rule 23(b)(3) and, alternatively, certified the fiduciary-duty claim under Rule 23(b)(3), in addition to certifying that claim under Rule 23(b)(2).

Disposition

The court GRANTED the motion for class certification. It also set a further case-management conference for March 17, 2020, directed the parties to meet and confer, and required a joint case-management statement by March 10, 2020. The opinion did not decide the ultimate merits of the plaintiffs’ ERISA claims.

Judge

The order was signed by Haywood S. Gilliam, Jr., United States District Judge.