Robin Berman v. Microchip Technology Incorporated

Background

The plaintiffs were former employees of Atmel Corporation. In July 2015, Atmel created the U.S. Severance Guarantee Benefit Program. The plan said it would apply if Atmel entered into a definitive agreement leading to a change of control by November 1, 2015, and if a change of control later occurred and an employee was terminated without cause within 18 months of the definitive agreement. The plan also said that Atmel’s successor would assume its obligations.

Atmel first entered into an agreement under which Dialog Semiconductor would acquire it. Before that transaction closed, Atmel accepted a competing offer from Microchip Technology Incorporated. The plaintiffs continued working for Atmel and were terminated without cause in 2016 after the merger with Microchip. Microchip told them the plan had expired, offered them a smaller amount of severance, and denied their claims under the plan.

The plaintiffs brought claims under the Employee Retirement Income Security Act, including a claim for denial of benefits and a claim for breach of fiduciary duty. The parties’ central dispute was whether the agreement with Dialog triggered the plan for the later change of control involving Microchip, or whether the triggering agreement and the transaction causing the change of control had to involve the same company.

Standard of Review

The court first considered the standard for reviewing the plan administrator’s benefit decision. Under the usual rule, a court independently reviews an ERISA benefit denial unless the plan clearly gives the administrator discretion to decide eligibility or interpret the plan. If the plan clearly grants that discretion, the court generally applies abuse-of-discretion review, a more deferential standard.

The plan gave the company maximum deference for decisions and interpretations made before a change of control. After a change of control, however, the plan used different language for actions affecting benefits and did not say that the company’s interpretations were binding or exclusive. The court held that the plaintiffs’ reading—that fresh judicial review applied after the merger—was not unreasonable. Because the plan did not unambiguously grant post-merger discretion, the court applied de novo review, meaning it would independently review the plan and the benefit decision.

The court also held that de novo review was appropriate because the company’s authorization documents designated Carly Petrovic as plan administrator but specifically designated Sue Flores as the claims appeal administrator. Petrovic alone reviewed and denied the plaintiffs’ appeals. The defendants did not identify a document authorizing Petrovic to decide those appeals.

The court additionally agreed that conflicts of interest required consideration. The plan was self-funded, meaning the employer both funded the benefits and evaluated claims. The plaintiffs also presented evidence that Petrovic’s supervisor had already told her that Microchip had determined the plan had expired before Petrovic reviewed the claims. The court concluded that these circumstances would have warranted closer scrutiny even if the abuse-of-discretion standard applied.

Evidence Outside the Administrative Record

The court rejected the plaintiffs’ request to decide the case solely from the administrative record. It explained that the Ninth Circuit had previously determined that the plan language was ambiguous and had allowed additional discovery. Because the plan was ambiguous, the court could consider evidence outside the administrative record to determine the parties’ intent.

Plan Interpretation and Summary Judgment

The court did not decide which party had the better interpretation of the plan. The plaintiffs offered testimony from Atmel executives stating that the plan was intended to cover employees regardless of whether Dialog or Microchip became the acquirer. The defendants offered evidence that could be read to contradict that interpretation, including uncertainty among employees, statements that the plan was no longer guaranteed with the Microchip merger, and evidence that Atmel’s attorneys had recognized the ambiguity.

Because that competing evidence created at least one genuine dispute of material fact—a dispute that could affect the outcome and would require a factfinder to resolve—the court held that summary judgment could not be granted to either side. The court therefore DENIED the parties’ cross-motions for summary judgment. It also set a telephonic case-management conference and directed counsel to meet and submit a joint case-management statement.