Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_09-cv-01517/USCOURTS-cand-3_09-cv-01517-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 11:101 Bankruptcy

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

IN RE BROBECK, PHLEGER &

HARRISON,

Debtor.

 /

No. C 09-01517 JSW

ORDER RE: BANKRUPTCY

APPEAL

Now before the Court is the appeal filed by the Trustee for the Brobeck, Phleger &

Harrison LLP Retirement Savings Plan (“Plan Trustee”) from the final order by the bankruptcy

court dated February 23, 2009 in favor of Trustee for the Bankruptcy Estate of Brobeck, Phleger

& Harrison LLP (“Case Trustee”). Pursuant to Civil Local Rule 16-4, the Court deems this case

submitted on the papers without oral argument. Having carefully reviewed the administrative

record and considered the parties’ papers, their arguments and the relevant legal authority, and

good cause appearing, the Court hereby AFFIRMS the bankruptcy court’s judgment.

BACKGROUND

On February 10, 2003, the dissolution of Brobeck, Phleger and Harrison LLP

(“Brobeck”) became effective. Involuntary bankruptcy proceedings against Brobeck began on

September 17, 2003 under title 11 of the United States Bankruptcy Code. Prior to the firm’s

dissolution, partners were covered by the Brobeck, Phleger & Harrison LLP Retirement Savings

Plan (“the Plan”), a “defined contribution plan” subject to the Employee Retirement Income

Security Act of 1974, as amended (“ERISA”). Brobeck was required to make certain profit

sharing and matching contributions to the Plan on behalf of its partners for 2002 (“2002 

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Contributions”). However, it is undisputed that no contributions were made that year. 

On behalf of a substantial majority of the former partners (“the Former Partners”), the

Plan Trustee filed proofs of claim against the Brobeck estate, including claims on account of the

missing 2002 Contributions. Between January 13 and January 21, 2005, the Case Trustee filed

complaints in the Bankruptcy Court against 223 Former Partners alleging that they had taken

over one hundred million dollars in unlawful distributions of firm profits in 2001 and 2002

while Brobeck was insolvent. Ultimately, the Case Trustee settled with all of the Former

Partners pursuant to a comprehensive settlement agreement in which the Former Partners paid

over $24 million to Brobeck’s bankruptcy estate and released all of their claims pending against

the estate. The bankruptcy court entered an order approving the settlements and directed that

any settlements on account of the Plan contributions would be offset, dollar for dollar, against

the Plan Trustee’s claims. 

In 2008, the Plan Trustee disputed the validity of the waiver and release by the Former

Partners and asserted that only the Plan Trustee himself could assert claims to recover the 2002

Contributions to Brobeck’s defined contribution plan. The Plan Trustee contended that the

Former Partners could not have waived rights to claims they never could have asserted. The

bankruptcy court rejected the contention and sustained the Case Trustee’s objection to the Plan

Trustee’s claim. The court concluded that the Former Partners had standing to assert a claim

under ERISA to recover the missed contributions. Thereafter, the Plan Trustee filed an appeal

before this Court.

All other pertinent findings of fact and conclusions of law of the bankruptcy court will

be discussed below where relevant. 

ANALYSIS

A. Standard of Review of Bankruptcy Court’s Judgment.

District courts have jurisdiction to hear appeals from final judgments, orders, and

decrees of bankruptcy judges. 28 U.S.C. § 158. On appeal, a district court must review a

bankruptcy court’s findings of fact under the clearly erroneous standard and its conclusions of

law de novo. Fed. R. Bankr. P. 8013; see also Sigma Micro Corp. v. Healthcentral.com (In re

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Healthcentral.com), 504 F.3d 775, 783 (9th Cir. 2007). The test for clear error is not whether

the appellate court would make the same findings, but whether the reviewing court, based on all

of the evidence, has a definite and firm conviction that a mistake has been made. Anderson v.

City of Bessemer City, 470 U.S. 564, 573 (1985). A reviewing court may not overturn a

decision, even if it would have weighed in the evidence in a different manner, so long as the

trial court’s view of the evidence is plausible in light of the entire record. Id. at 573-74. In

applying the clearly erroneous standard, the appellate court views the evidence in the light most

favorable to the party who prevailed below. Lozier v. Auto Owners Ins. Co., 951 F.2d 251, 253

(9th Cir. 1991).

B. The Bankruptcy Court Did Not Err In Its Findings of Fact.

On appeal, the district court must review a bankruptcy court’s findings of fact under the

clearly erroneous standard. Fed. R. Bankr. P. 8013. The facts, as carefully outlined by the

bankruptcy court are, for the most part, procedural in nature. There is no dispute between the

parties regarding the accuracy of the material facts as stated by the bankruptcy court.

C. The Bankruptcy Court Did Not Err In Its Conclusions of Law.

On appeal, the district court must review a bankruptcy court’s conclusions of law under

the de novo standard. In re Healthcentral.com, 504 F.3d at 783. The bankruptcy court, faced

with the claim objection, had to address the ultimate legal question whether the Former Partners

released their ERISA claims against Brobeck for the 2002 Contributions and/or waived their

rights to share in any funds collected. However, first the court had to address whether the

Former Partners had a cognizable ERISA claim against Brobeck to release. (Id.) The

bankruptcy court correctly found that the Former Partners, as participants in the Plan, had the

right to sue for monetary relief for benefits to which they claimed entitlement under the terms of

their benefit contribution plan pursuant to 29 U.S.C. § 1132(a)(1)(B) (“Section 502(a)(1)(B)”). 

Section 502(a)(1)(B) provides that a participant or beneficiary may bring a civil action

to recover benefits due to him under the terms of the plan, to enforce his rights under the terms

of the plan, or to clarify his rights to future benefits under the terms of the plan. This section

deals exclusively with contractual rights under the plan, as it was designed “to protect

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 A defined contribution plan, as distinct from a defined benefit plan, “promises the

participant the value of an individual account at retirement, which is largely a function of the

amounts contributed to that account and the investment performance of those contributions. 

A ‘defined benefit plan,’ by contrast, generally promises the participant a fixed level of

retirement income, which is typically based on the employee’s years of service and

compensation.” LaRue v. DeWolff, Boberg & Associates, Inc., 552 U.S. 248, 250 n.1 (2008).

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contractually defined benefits.” Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 148 (1985). 

There is no dispute that Brobeck had a contractual obligation to make the 2002 Contributions. 

Therefore, the bankruptcy court correctly concluded that the claim against Brobeck would be

for breach of contract and it would be the Former Partners, as participants or beneficiaries under

the Plan, who would have standing to assert such a claim. The court correctly found that if the

Former Partners had a claim to the missed contributions as a recovery for “benefits due” under

Section 502(a)(1)(B), such a claim could be asserted against Brobeck as the Plan’s

administrator. 

Next, the bankruptcy court addressed whether a participant’s claim for missed employer

contributions is a proper claim to “recover benefits due.” The legal issue presented was

whether a participant in a defined contribution plan can bring a claim for unpaid employer

contributions under ERISA Section 502(a)(1)(B).1

 The court relied on a recent case addressing,

in the context of a defined contribution plan, whether unpaid and owing contributions constitute

assets. The Seventh Circuit, Judge Posner presiding, held:

Contributions to a plan and benefits owed by a plan are not necessarily equivalent,

and section [502](a)(1)(B) authorizes suit only for benefits. But the benefits to

which [the participant] was entitled were the assets that would have been in her

401(k) account had the defendants complied with their fiduciary duties.

Leister v. Dovetail, Inc., 546 F.3d 875, 881 (7th Cir. 2008); see also Simons v. Midwest

Telephone Sales and Service, Inc., 433 F. Supp. 2d 1007, 1010 (D. Minn. 2006) (finding that

participant’s claim for unpaid contributions was a proper claim for “benefits due” under Section

502(a)(1)(B)). This Court finds the reasoning of the bankruptcy court persuasive and upholds

its legal finding that unpaid contributions are a “benefit due” for which a participant may sue

under Section 502(a)(1)(B). Accordingly, the Court affirms the bankruptcy court’s finding that

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the Former Partners had a claim to assert under Section 502(a)(1)(B) and released those claims

against Brobeck for the unpaid contributions.

CONCLUSION

For the foregoing reasons, the judgment entered by the bankruptcy court in favor of

Defendant on February 23, 2009 and the underlying findings of fact and conclusions of law are

AFFIRMED.

IT IS SO ORDERED.

Dated: March 16, 2010 

JEFFREY S. WHITE

UNITED STATES DISTRICT JUDGE

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