Ninth Circuit Expands Test for ERISA Claim Releases to Include Fiduciary Misconduct

By Gustavo F. Bruckner and Basya Bates

On June 5, 2025, the United States Court of Appeals for the Ninth Circuit issued a significant ruling in Schuman v. Microchip Tech. Inc., No. 24-2624, 2025 WL 1584981 (9th Cir.). The Court held that, when considering the enforceability of ERISA claim releases or waivers signed by employees, the Court must consider whether the fiduciary acted improperly in obtaining the release from the employee. This decision reversed a lower court ruling holding that claims releases signed by former employees bar them from leading a class action against their former employer.

What is ERISA?

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal statute that governs certain employer-sponsored employee retirement and benefit plans. ERISA protects workers’ retirement funds by ensuring that plan fiduciaries do not breach their duties or misuse plan assets. As defined by ERISA, plan fiduciaries refer to individuals or entities with discretionary authority over a plan’s management and funds. Fiduciaries can include employers, trustees and plan administrators.

A fiduciary’s principal responsibility is to manage the plan in the sole interest of the plan participants and beneficiaries for the purpose of furnishing benefits and paying plan expenses. ERISA requires that fiduciaries manage the plan and control plan assets with prudence and minimize risk by diversifying plan investments. They must also comply with the plan terms and guidelines outlined in the plan documents insofar as the plan terms are consistent with ERISA. Additionally, fiduciaries are obligated to disclose details regarding plan fees and benefits to participants. Importantly, ERISA provides plan participants the right to sue fiduciaries for benefits and for breaches of fiduciary duty.

Pomerantz represents plan beneficiaries in several ERISA cases. Most recently, Pomerantz defeated defendants’ motion to dismiss in Jacobsen et al. v. Long Island Community Hospital, where plaintiffs alleged that the plan fiduciary breached its fiduciary duties under ERISA by improperly investing plan funds and failing to perform proper due diligence before offering certain stable value funds to plan participants. This case is proceeding to trial in spring 2026.

Case Study: Schuman v. Microchip Tech. Inc.

Background

In 2015, prior to its merger with Microchip Technology Inc., Atmel Corporation implemented a benefits plan to ensure that employees would receive severance benefits if the acquiring company did not retain staff post-merger. Shortly after completing the merger in 2016, Microchip fired named plaintiffs Peter Schuman and William Coplin without cause, providing significantly fewer benefits than those outlined in the benefits plan in exchange for plaintiffs’ release of potential claims against Microchip. Microchip had informed Atmel employees that the Atmel benefits plan had expired and that the benefits were no longer available. Microchip offered the reduced benefits in exchange for signing the claims releases to “resolve any current disagreement or misunderstanding regarding severance benefits previously offered by [Atmel].” Schuman and Coplin signed the releases.

In 2016, Schuman and Coplin filed a class-action complaint against Microchip, Atmel Corp., and Atmel Corp. U.S. Severance Guarantee Benefit Program (collectively, “Microchip”), on behalf of nearly 200 former Atmel employees who had also signed releases, challenging the enforceability of the releases. Plaintiffs alleged that by misinterpreting the severance plan as having expired and by encouraging plaintiffs to sign releases in exchange for reduced severance benefits, Microchip breached its fiduciary duties.

District Court Decision

Microchip filed a motion for summary judgment, arguing that plaintiffs knowingly and voluntarily waived their right to pursue claims under the Atmel Plan. Schuman and Coplin countered that the claims releases were unenforceable because of Microchip’s violations of its fiduciary duties in obtaining claims releases in exchange for significantly reduced severance benefits. The district court granted summary judgment against Schuman and Coplin, applying a non-exhaustive six-factor test from the First and Second Circuits, determining that the releases were signed knowingly and voluntarily and therefore enforceable. The court refused to address allegations that Microchip violated its fiduciary duties in obtaining the releases.

Ninth Circuit Analysis

Schuman and Coplin appealed the decision in the Ninth Circuit. The Ninth Circuit wanted to know which legal test should be used to determine the enforceability of ERISA releases. The Court specifically questioned whether waivers or releases of ERISA claims should be treated with heightened scrutiny when there are allegations of fiduciary abuse. Because ERISA’s purpose is to protect employees and plan beneficiaries from potential employer or fiduciary abuse, the Court held that alleged improper misconduct by the fiduciary must be considered. In doing so, the Court rejected the First and Second Circuit’s limited test as applied by the district court and adopted language similar to that used by the Seventh and Eighth Circuits.

The Ninth Circuit broadened the test for ERISA claim releases to include consideration of any improper conduct by the fiduciary in its non-exhaustive nine-factor test. Specifically, a court must consider: (1) the employee’s education and business experience; (2) the employee’s input in negotiating the terms of the settlement; (3) the clarity of the release language; (4) the amount of time the employee had for deliberation before signing the release; (5) whether the employee actually read the release and considered its terms before signing it; (6) whether the employee knew of their rights under the plan and the relevant facts when they signed the release; (7) whether the employee had an opportunity to consult with an attorney before signing the release; (8) whether the consideration given in exchange for the release exceeded the benefits to which the employee was already entitled by contract or law; and (9) whether the employee’s release was induced by improper conduct on the fiduciary’s part.

In embracing the Seventh and Eighth Circuits’ tests, the Ninth Circuit found that their approach struck “the right balance between a strictly traditional voluntariness examination and an ERISA-based analysis.”

This case sends a powerful message to employers acting as fiduciaries over severance plans. The Ninth Circuit cautioned fiduciaries that providing fewer benefits than guaranteed under the plans in exchange for a release of ERISA claims can amount to a breach of fiduciary duties, resulting in the unenforceability of the releases. The Ninth Circuit’s broad test ensures that waivers and releases of claims under ERISA are met with “special scrutiny,” potentially providing greater protection for plaintiffs whose releases may have been “knowing” or “voluntary.” As the Ninth Circuit noted, the final factor considering fiduciary misconduct “warrants serious consideration and may weigh particularly heavily against finding that the release was ‘knowing’ or ‘voluntary’ or both.”

Pomerantz continues to track ERISA developments while vigorously representing plan beneficiaries in ERISA cases nationwide.