Wehner v. Genentech, Inc.

• Court: District Court, N.D. California
• Decided: January 20, 2022
• Docket: 3:20-cv-06894
• Status: Unknown

Opinion

1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA 9 MATTHEW WEHNER, 10 Case No. 20-cv-06894-RS Plaintiff, 11 v. ORDER DENYING MOTION FOR 12 ENTRY OF JUDGMENT GENENTECH, INC., et al., 13 Defendants. 14

15 I. INTRODUCTION 16 Plaintiff Matthew Wehner moves for entry of final judgment on dismissed claims under 17 Federal Rule of Civil Procedure 54(b). He sued under the Employee Retirement Income Security 18 Act (“ERISA”), averring two “counts” in his Complaint: breach of fiduciary duty and failure to 19 monitor co-fiduciaries’ breaches. The factual bases for each were that the managers of his 20 retirement plan charged excessive fees and made poor investment decisions. A previous order 21 dismissed the portions of each claim that related to the investment decisions. Wehner now argues 22 his Complaint made two claims: one about the fees, and one about the other mismanagement. 23 Thus, he contends he is eligible for a certification of final judgment under Rule 54(b), which 24 allows for an appeal before the rest of the case is decided when there is an entry of final judgment 25 on a claim, and no just reason for delay. This entails considering the policy against piecemeal 26 appeals, prejudice, and judicial economy. Although the law is unclear on what constitutes a claim 27 for purposes of final judgment, even if there were a final judgment here, Defendants prevail on the 1 appeals. Doing so will not expedite the case, but rather will create duplicative litigation. Wehner 2 will not be unduly prejudiced by an appeal in the normal course. For the reasons further stated 3 below, Wehner’s motion is denied. 4 II. BACKGROUND 5 Plaintiff Matthew Wehner brought this putative class action under ERISA against 6 Defendants Genentech, Inc., and the U.S. Roche DC Fiduciary Committee. In March 2021, 7 Wehner filed his First Amended Complaint with two “counts:” (1) breach of fiduciary duty, and 8 (2) failure to monitor fiduciaries and co-fiduciary breaches. Under the first count, he argued 9 Defendants breached their fiduciary duties in several ways, falling into two broad buckets. First, 10 that they charged $10 million of excessive fees relative to similar funds, and second, that they 11 managed the funds poorly, such that they could have made hundreds of millions of dollars more if 12 they had upheld their fiduciary duty. Specifically, Wehner averred Defendants were imprudent in 13 using certain custom-designed target date funds, and in selecting Russell Investment Management 14 Company as the manager of those funds. Further, he averred they breached their duty of loyalty by 15 using a master trust structure and having a continuing relationship with Russell. The failure to 16 monitor fiduciaries count mirrored the preceding one: he accused Defendants of also failing to 17 monitor their co-fiduciaries’ breaches. Defendants moved to dismiss. 18 Defendants’ motion to dismiss was granted in part and denied in part in a previous order. 19 Each count was dismissed only in part. For the first, the motion was denied as to the excessive 20 fees portion of the count, but granted as to all other parts, e.g., it was granted to the extent that it 21 depended on theories of mismanagement such as “imprudence” or breaching the duty of loyalty. 22 The motion was granted as to the second count to the extent that it depended on the portions of the 23 first that were dismissed. In other words, since the only possible breach of fiduciary duty 24 concerned the fees, the only possible breach of co-fiduciary duties or failing to monitor fiduciaries 25 would be those relating to the fees. The portions of each count that were dismissed were dismissed 26 with prejudice. Wehner now moves for entry of final judgment under Federal Rule of Civil 27 Procedure 54(b), and to stay further proceedings in this Court pending appeal. 1 III. LEGAL STANDARD 2 Federal Rule of Civil Procedure 54(b) provides that “[w]hen an action presents more than 3 one claim for relief . . . the court may direct entry of a final judgment as to one or more, but fewer 4 than all, claims or parties only if the court expressly determines that there is no just reason for 5 delay.” Otherwise, “any order or other decision, however designated, that adjudicates fewer than 6 all the claims or the rights and liabilities of fewer than all the parties does not end the action as to 7 any of the claims or parties.” Id. Rule 54(b) certification is not available as of right. Rather, the 8 Ninth Circuit has cautioned against granting such motions absent unusual circumstances. See 9 Wood v. GCC Bend, LLC, 422 F.3d 873 (9th Cir. 2005). 10 There are two prongs to consider in determining whether to grant Rule 54(b) certification. 11 First, the district court must determine whether there has been a “final judgment” with respect to 12 the moving party, which the Supreme Court defined as “an ultimate disposition of an individual 13 claim entered in the course of a multiple claims action.” Curtiss-Wright Corp. v. General Elec. 14 Co., 446 U.S. 1, 7-8 (1980). 15 Second, if there was a final judgment on an individual claim, the district court must then 16 determine whether there is no just reason to delay appeal of the claim at issue, in light of the 17 judicial policy against piecemeal appeals, and equitable factors such as prejudice and delay. 18 Curtiss-Wright, 446 U.S. at 8-10. The district court must “evaluate the ‘interrelationship of the 19 claims’ and determine . . . ‘whether the claims under review [are] separable from the others 20 remaining to be adjudicated.’” Pakootas v. Teck Cominco Metals, Ltd., 905 F.3d 565, 576 (9th Cir. 21 2018) (quoting Curtiss-Wright, 446 U.S. at 8). Rule 54(b) certification is left to the sound 22 discretion of the district court. Core–Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482, 1484 (9th Cir. 23 1993). 24 IV. DISCUSSION 25 A. What Constitutes a Claim for Final Judgment Purposes? 26 What constitutes a “claim” is not well-defined. Pakootas, 905 F.3d at 574. The Supreme 27 Court has expressly declined to define the term. Id., discussing Liberty Mut. Ins. Co. v. Wetzel, 1 424 U.S. 737, 743 n.4 (1976). Indeed, Wright and Miller notes that “[T]he policies underlying 2 Rule 54(b) are not well served, and certainly are not well explained, by reliance on efforts to 3 define a claim.” 15A Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal 4 Practice and Procedure: Jurisdiction § 3914.7 (2d ed. 2018). This has led the Ninth Circuit to take 5 a pragmatic approach to the issue. Pakootas, 905 F.3d at 575. 6 To cut through this morass, Defendants argue the critical factor is how a plaintiff organizes 7 his or her complaint into counts. This elevates form over substance to an untenable degree. The 8 one Ninth Circuit case discussed in this section of the Opposition is misinterpreted; the quoted 9 sections refer to the second prong of the Rule 54(b) analysis,1 and the out-of-circuit district court 10 cases are not binding. Wehner, on the other hand, argues that a claim for purposes of Rule 54(b) 11 connotes “a set of facts giving rise to legal rights,” quoting Pakootas, 905 F.3d at 575 (itself 12 quoting CMAX, Inc. v. Drewry Photocolor Corp., 295 F.2d 695, 697 (9th Cir. 1961)). In his view, 13 since he has two factual bases for his Complaint, he has two claims: the fees and the 14 mismanagement. 15 Pakootas did not squarely define “claim” like Wehner wishes. True, it discussed cases in 16 which the existence of one set of facts or multiple set of facts was a critical factor, e.g., Ariz. State 17 Carpenters Pension Tr. Fund v. Miller, 938 F.2d 1038, 1040 (9th Cir. 1991) (one set of facts 18 giving rise to multiple remedies still constituted one claim). Yet the number of sets of facts is not 19 dispositive. Pakootas also discussed cases holding that claims with partially “overlapping facts” 20 are not “foreclosed from being separate for purposes of Rule 54(b).” 905 F.3d at 575, citing Wood, 21 422 F.3d at 881. Under Wehner’s view, every case with a distinct set of facts would be 22 automatically eligible for Rule 54(b) certification. If only it were so simple. Instead, Pakootas also 23 considered other factors, such as whether each claim required proving a factual showing not 24 required by the other. Id. (explicitly invoking the Blockburger test from the Double Jeopardy 25 context, Blockburger v. United States, 284 U.S. 299, 304 (1932)). In other words, do the claims 26

27 1 Understandably, as the questions overlap, as discussed in n.2. 1 have different elements, as opposed to merely involving different facts? Under Blockburger, one 2 can be convicted for the same act under two different statutes only if the second requires proving a 3 different fact than the first. The test does not concern multiple counts of the same crime (or claim) 4 involving different facts, e.g., robbing the same store twice on two different days—it concerns two 5 claims for the same set of facts, e.g., being convicted twice for robbing a store once. 6 In sum, determining whether something is a claim must involve considering both the “set 7 of facts” and the “legal rights” involved. There may be situations where distinct sets of facts create 8 claims of the same type, just as one set of facts can create multiple claims. This is why Pakootas 9 merely tried to give “some guidance” at the “doctrine’s outer edges.” 905 F.3d at 575.2 10 B. Final Judgment in This Case 11 Here, Wehner has not obtained a final judgment on any claim. If the claims are the 12 “counts” as he framed them in his Complaint, breach of fiduciary duty and failure to monitor, the 13 analysis favors finding there was no final judgment. After all, only a portion of each was 14 dismissed. Using the separate elements test from Pakootas by way of Blockburger, there is no 15 standalone “imprudence” cause of action even to compare. There are only the statutory 16 requirements of ERISA. The multiple factual bases for each claim are irrelevant under this line of 17 scrutiny.3 However, there is some merit to Wehner’s contention that the Ninth Circuit caselaw 18

19 2 Fortunately, even though the lack of clear rules on final judgment might appear to lead to unsatisfying outcomes, there is a similar analysis as part of the second prong of the Rule 54(b) 20 analysis, discussed in the next section, which allows for a more holistic approach. In that process, where equitable factors such as prejudice and judicial economy are considered, courts must 21 consider the “interrelationship of the claims” to determine whether they are “separable.” Pakootas, 905 F.3d at 576. Thus, even if it is not entirely clear whether something is one claim or two in the 22 first prong, the wider array of factors that can be considered in the second prong will allow for a sensible disposition. 23 3 In discussing the second prong in his Reply, Wehner argues courts consider different factors 24 when considering fee cases and mismanagement cases. Cases with different facts invite different considerations, but those cases are not necessarily discussing distinct claims for relief. This 25 question would require further development if Wehner had brought state law claims for breach of fiduciary duty, which may or may not have different elements from ERISA (if they were not 26 preempted, see Halperin v. Richards, 7 F.4th 534 (7th Cir. 2021)). However, assuming Wehner has brought all his possible claims against Defendants based on these facts to avoid being 27 precluded from bringing them, both sets of facts create only these two types of claims for relief. 1 establishes a final judgment on a claim where it is factually distinct from other claims. Under this 2 line of argument, Wehner at least comes closer to establishing separate claims. In his view, he has 3 two claims because the fees give rise to each of his two claims, and the mismanagement gives rise 4 to a second version of each claim. He could have styled them as two counts of each claim, one 5 relating to each set of facts. He points out he would be entitled to two separate recoveries, which 6 some courts have found indicative of separate claims. Sussex Drug Prods. v. Kanasco, Ltd., 920 7 F.2d 1150, 1154 (3d Cir. 1990). 8 Ultimately the question comes down to whether multiple factual breaches of fiduciary duty 9 constitute multiple breaches, or merely alternative grounds to find a breach. Wehner points to an 10 example of a court discussing multiple “breaches” of fiduciary duty, but courts are not always so 11 careful clearly to demarcate claims outside the context of a Rule 54(b) motion. In some areas of 12 law, multiple factual bases clearly establish multiple breaches. For example, if an assailant hits 13 someone three days in a row, there are three claims for battery. By contrast, in contract law, a 14 breach of contract is often framed as one claim for relief, with multiple theories supporting said 15 breach. One of the few tenets that is clear in the law surrounding Rule 54(b)’s first prong is that 16 different legal theories are not different claims. CMAX, Inc., 295 F.2d at 697 (“The word ‘claim’ 17 in Rule 54(b) refers to a set of facts giving rise to legal rights in the claimant, not to legal theories 18 of recovery based on those facts.”). Fortunately, this need not be definitively determined, because 19 even if he had a final judgment, Wehner does not prevail under the second prong of the analysis. 20 C. Just Reason for Delay 21 Even if there were a final judgment, Wehner does not prevail on the second prong of the 22 Rule 54(b) analysis. Judicial economy does not compel certification of an appeal, and Wehner 23 would not suffer any undue prejudice from filing an appeal in the normal course. First, as for the 24 interest in judicial economy, Rule 54(b) certification is “scrutinized to ‘prevent piecemeal appeals 25 in cases which should be reviewed only as single units.’” Texaco, Inc. v. Ponsoldt, 939 F.2d 794, 26 797-98 (9th Cir. 1991) (quoting Curtiss-Wright, 446 U.S. at 10). In this prong the interrelatedness 27 of the claims can be considered more holistically. See Purdy Mobile Homes, Inc. v. Champion 1 Homes Builders Co., 594 F.2d 1313 (9th Cir. 1979). “A similarity of legal or factual issues will 2 weigh heavily against entry of judgment under Rule 54(b).” Wood, 422 F.3d at 881. 3 Here, it is clear the claims are interrelated, and the case is a single unit. Both claims are for 4 the same type of relief against the same parties for similar factual conduct (financial 5 mismanagement of one sort or another). If certification were granted, a breach of fiduciary duty 6 case against these Defendants would have to be tried and appealed in two separate cases. 7 Witnesses would have to testify twice, and there would be overlapping testimony. For example, 8 even Wehner has argued in his amended Complaint that Defendants were supposed to understand 9 the “interrelationship” between the fees it negotiated and the investment options it chose. Dkt. No. 10 46 ¶ 100. Judges would have to refamiliarize themselves with the basic facts of the case, and then 11 the overlapping testimony. That is the opposite of judicial economy. See Curtiss-Wright, 446 U.S. 12 at 8.4 13 Even the most expansive statements of when certification is appropriate, e.g., when it will 14 “aid expeditious decision of the case,” certification is inappropriate here. Texaco, Inc., 939 F.2d at 15 797-98. At most, it would speed decision of one part of the case, but that is true of every possible 16 54(b) motion, and so it is not the standard under any reading of the Rule, and it would do so at the 17 expense of judicial economy overall. Certification would not streamline the case. Id. Instead, it 18 would break it in two. 19 Second, as to prejudice, Wehner argues that he will “suffer significant prejudice if he is not 20 able to pursue a timely appeal . . . if such an appeal is possible” when the current proceedings are 21 resolved. Dkt. No. 67 at 9. However, Wehner does not explain why he would be unable to file an 22 appeal in the normal course.5 It is also not even entirely clear what prejudice he fears. Wehner 23

24 4 Wehner asks for a stay, but that would only delay the wasteful, duplicative litigation, and 25 prolong the uncertainty for all involved. His request might reveal he plans to drop the fee claims if he loses on the mismanagement claims, but as discussed below, the fee claims seem to be worth 26 litigating on their own. 27 5 The closest he comes is saying “any resolution of the Remaining Claims short of trial would likely necessitate the release of the Dismissed Claims.” Dkt. No. 67 at 15. Even if credited, going 1 argues the excessive fees are only a small part of the case, as the mismanagement supposedly cost 2 || the funds hundreds of millions in lost profits. Yet Wehner is not senselessly waiting on the 3 adjudication of a mere flyspeck: $10 million in fees would be sufficient cause to litigate on its 4 || own. Granting certification on this basis alone would transform 54(b) from an exception into a 5 || norm. “Plainly, sound judicial administration does not require that Rule 54(b) requests be granted 6 || routinely.” Curtiss-Wright, 446 U.S. at 10. Wehner’s motion notes the dismissed claims relate to 7 retirement investments, but it does not describe any specific prejudice that will result from an 8 appeal in the normal course. No retirees are rendered insolvent until this action is resolved, a 9 || circumstance which would compel unusual haste. Wehner’s supposed urgency is also belied by his 10 || four-month delay in filing this Motion. Neither Wehner nor any putative class members would 11 suffer any prejudice from an appeal in the normal course, other than having to wait for a possible 12 || award like any other litigant. Ultimately, nothing differentiates this case from the “usual case 5 13 || where some issues are adjudicated earlier than others.” Foreman vy. Bank of America N.A., No. 18- 14 || CV-01375, 2019 WL 8137145, at *4 (N.D. Cal. Dec. 3, 2019). 3 15 V. CONCLUSION a 16 For the reasons stated above, Wehner’s motion for entry of final judgment is denied.

|| rr1sso ORDERED. 19 20 || Dated: January 20, 2022 21 RICHARD SEEBORG _ Chief United States District Judge 23 24 25 26 27 to trial is not prejudice, nor is deciding to release dismissed claims to pursue others. 28 ORDER DENYING MOTION FOR ENTRY OF JUDGMENT CASE No. 20-cv-06894-RS