RONALD L. BUCKWALTER, Senior District Judge.
I. FACTUAL BACKGROUND ............................................................. 332A. Allstate's Agency Programs Prior to 1999 .................................... 332 1. The NOA Program .......................................................... 333 2. R830 and R1500 Contracts ................................................. 334 3. Allstate's Exclusive Agent Independent Contractor Program ................ 337 4. Allstate's Litigation with the IRS ....................................... 338B. The Preparing for the Future Group Reorganization Program ................. 340 1. The Sales Organization of the Future Initiative .......................... 340 2. Background Behind the Preparing for the Future Program ................. 341 3. The Announcement of the Preparing for the Future Program ................. 343 4. Program Information Provided After the Program Announcement .............. 344 5. The Release .............................................................. 346 6. The OWBPA Disclosure ..................................................... 348 7. State-Specific Issues .................................................... 349 a. New Jersey ............................................................ 349 b. Montana ............................................................... 349 c. West Virginia ......................................................... 349 d. Delaware .............................................................. 349 8. Alleged Misrepresentations by Allstate about the Program ................. 350 a. Confidentiality and Non-Compete Restrictions .......................... 350 b. Rehire Policy ......................................................... 350 c. Commission Rates ...................................................... 351 d. Expected Results for R3001 Agents ..................................... 352 e. Allstate's Level of Control Over Exclusive Agents ..................... 352C. The Romero Plaintiffs ....................................................... 353 1. General Information ...................................................... 353 2. Plaintiffs' Consultations Regarding the Program and Release .............. 355 3. Plaintiffs' Program Option Selections .................................... 355 a. The E A Option ........................................................ 355 b. The Sale Option ....................................................... 356 c. The Enhanced Severance Option ......................................... 356 d. The Base Severance Option ............................................. 357 4. Rationales' for Plaintiffs' Program Selections ........................... 357 5. EEOC Charges ............................................................. 357D. Procedural History .......................................................... 358II. SUMMARY JUDGMENT STANDARD OF REVIEW ............................................ 360III. DISCUSSION ..................................................................... 361A. Whether the Release Reaches All of The Claims Asserted in Romero I and Count II of Romero II ................................................ 361 1. Romero I Claims and Count II of Romero II ................................ 361 2. Counts I and III of Romero II ............................................ 363 a. Whether the Language of the Release Excepts Out the Claims or Is Ambiguous and Should Be Construed in Plaintiffs' Favor ................................................................ 365 (i) "Claim to Benefits" ............................................. 367 (ii) "Benefits to which I am entitled" ............................... 370 b. Whether Counts I and III Arose After the Execution of the Release .............................................................. 372 c. Whether Plaintiffs' ERISA Claims Are Protected by ERISA's Anti-Alienation Provision ............................................ 373 3. Conclusion Regarding the Scope of the Release ............................ 375B. Whether the Release Is Valid ................................................ 375 1. Compliance with the OWBPA Disclosure Requirements ........................ 375 a. The Disclosure Requirements ........................................... 377 (i) Voluntary and Involuntary Terminations ........................... 378
(ii) Montana Agents .................................................. 381 (iii) Exclusion of R3000 Agents from the List of Those Not Eligible or Selected ........................................... 383 (iv) Inclusion of New Jersey Agents .................................. 385 b. The "Understandability" Requirement ................................... 387 (i) Complex Language ................................................. 388 (ii) Whether the Release Created the False Impression that Agents Could Not Challenge Its Validity or File EEOC Charges .................................................... 391 c. The Consideration Requirement ......................................... 397 (i) Whether Plaintiffs Were Entitled to Continued Employment and Employment Benefits .............................................. 397 (ii) Whether Allstate Provided Plaintiffs With Any Consideration in Addition to That to Which They Were Already Entitled ........................................... 399 (iii) Conclusion as to Consideration .................................. 404 d. Conclusion as to the OWBPA Requirements ............................... 404 2. Whether the Release Was Knowingly and Voluntarily Executed Under the Totality of the Circumstances ................................ 404 a. Whether the Release Was Voluntarily Signed ............................ 405 b. Whether the Release Was Knowingly Signed .............................. 412 c. Conclusion as to Knowing and Voluntary Execution of the Release .............................................................. 417 3. Whether the Release Was Unconscionable ................................... 417 a. Procedural Unconscionability .......................................... 417 b. Substantive Unconscionability ......................................... 418 IV. CONCLUSION ..................................................................... 419
Currently pending before the Court are the Cross-motions for Summary Judgment by Plaintiffs Gene R. Romero, et al. (collectively "Plaintiffs"), Defendants Allstate Insurance Company, et al. (collectively "Allstate" or "Defendant"), and Defendant Edward M. Liddy as to the Validity of the Release. For the following reasons, all Motions are denied.
The factual and procedural background of this case is a lengthy and convoluted one, commencing in 1999 and spanning to the present day. The general facts are well-known to both the parties and the Court. The sole issue of relevance at this juncture is whether the release of claims signed by Plaintiffs is valid and/or bars Plaintiffs' claims for relief. For the sake of both simplicity and judicial economy in an already complex case, the Court will set forth only the basic, undisputed facts regarding the events that led to this litigation
Defendant Allstate Insurance Company is an Illinois Corporation that sells insurance
As of November 1999, Allstate's agency force included approximately 15,200 captive agents that worked for either Allstate Insurance Company or Allstate New Jersey and could sell and service only Allstate authorized products. Approximately fifty-four percent of the agents operated under one of several employment contracts—the R830 Agent Compensation Agreement, the R1500 Agent Employment Agreement, the eighteen-month R3000 Exclusive Agent Employment Agreement, or the eighteen-month R4616 associate agent contract. After eighteen months under the R3000 contract, Allstate offered approved agents the R3001 contract. The R4616 contract was self-terminating after eighteen months and, with good performance by the agent, could lead to an additional contract. The remaining forty-six percent of agents worked as independent contractors under the R3001 contract. All of the Plaintiffs in this case, except Arlene Wendt, were employed as an employee agent under either an R830 or R1500 contract. Each of the agent programs and contracts had a variety of differing terms. Allstate's R830 and R1500 contracts, however, were not subject to negotiation and were therefore uniform or "standardized." All captive agents, regardless of their contract, sold the same products and had the same managers. In addition, as of November 1999, Allstate had about 400 captive employee agents in Canada who sold Allstate property and casualty insurance.
Prior to 1984, Allstate sold its insurance products primarily through employee agents located in Sears retail stores or in Neighborhood Sales Offices or Local Sales Offices. In 1984, Allstate introduced the Neighborhood Office Agent ("NOA") Program, the reasons for which are disputed by the parties. At the time it introduced the NOA Program, Allstate also introduced the R1500 Agreement. Existing R830 agents could continue working under their existing agent program or voluntarily enter the NOA Program by either signing an amendment to the R830 Agreement or entering into an R1500 Agreement. Also effective in 1984, all new agents joining Allstate were required to both be NOAs and work under the R1500 Agreement.
According to Allstate, the NOA Program was designed to provide employee agents more "entrepreneurial" discretion than those working in Sears stores or company-owned Neighborhood Sales Offices since NOA agents were able to operate individual Allstate agencies with clerical and solicitor support staff they hired through a
Allstate required the NOA employee agents to lease or otherwise secure their agency office location in their own names within an Allstate specified geographic area. Agents in the NOA Program also paid their own office and operating expenses, including telephone lines, certain of which were subject to reimbursement from an Allstate-provided office expense allowance ("OEA"). NOA agents had discretion to manage their OEA funds and office expenses, but the OEA was not always sufficient to cover routine office expenses. The maximum amount of OEA reimbursement available under the NOA employee program was approximately twenty percent of the commissions earned when a policy was issued or renewed. Agents had to invest their own funds to pay for operating costs above the OEA. Indeed, Allstate's NOA Ready Reference Guide for Market Sales Managers directed managers, when interviewing prospective NOAs, to "[m]ake sure that the candidate is willing and able to spend his or her money. . . ." (Meehan Decl., Ex. 93 ("NOA Ready Reference Guide"), at ARI 142109.) The NOA Manual also stated that an agent could obtain an OEA advance from Allstate to pay up front expenses. Agents who received an OEA advance signed a "permanent advance receipt" acknowledging that the funds were Allstate's property and that the agents promised to repay them. The NOA Manual provided that unpaid advances outstanding at termination would be deducted from final pay and/or reimbursement where permitted by law. Plaintiffs contend that, over the years, Allstate urged all of its NOA agents to invest in their agencies. In turn, many of the Plaintiffs made substantial investments in their agencies. All Plaintiffs incurred over $10,000 in unreimbursed business expenses, and over half incurred such expenses in excess of $100,000.
The introductory paragraph of Allstate's R830 contract represented to employee agents that their "agreement was carefully planned to provide you with financial opportunity and security[, including] . . . the security of continued income gained through renewals[,] . . . the opportunity to share in the profits you help create, and the usually broad protection plans for you and your family through the Allstate benefit package. (Declaration of Jordan M. Heinz ("Heinz Decl."), Ex. 10 ("R830 Agreement"), at ARI 020338.) The R830 Agreement, however, provided that, "You do not have . . . any vested interest in any business produced under the terms of this agreement." (Id. Part Four ¶ II, at ARI 020346.) Similarly, the R1500 Agreement provided that "[t]he Company will own all business produced under the terms of this Agreement. You acknowledge that you have no vested interest in such business." (Heinz Decl., Ex. 11 ("R1500 Agreement") ¶ 3.b, at ARI 002036.)
Employee agents under the R830 and R1500 agents were eligible for a wide range of company-sponsored health and welfare benefits, including group medical
Both the R830 and the R1500 Agreements had termination provisions. The R830 Agreement stated as follows:
(Heinz Decl., Ex. 10, R830 Agreement, Part Four ¶ XI.) Employees who signed the R830 contract had the right to have any involuntary termination reviewed by the Agent Review Board. Likewise, the R1500 Agreement contained the following termination provision:
(Heinz Decl., Ex. 11, R 1500 Agreement, ¶ 11, at ARI 002038) The R1500 Procedure Manual also provided for agents to receive a job in jeopardy notice, be given a reasonable opportunity to cure, and receive a review of the termination through the Agent Review Board.
Although neither the R830 Agreement nor the R1500 Agreement provided severance or post-termination pay in the event of termination, Allstate maintained two pre-existing ERISA plans—the Allstate Severance Pay Plan and Allstate Service Allowance Plan—in the event of certain types of involuntary terminations. The Allstate Severance Pay Plan stated that post-termination pay could be provided under the Allstate Severance Pay Plan if the agent's employment was "involuntarily terminated by the Employer for lack of work, employees, rearrangement of work, or reduction in workforce, as determined in the sole discretion of the appropriate Human Resource Account Team leader of the Employer." (Heinz Decl., Ex. 24, ("Allstate
The Allstate Service Allowance Plan provided for post-termination pay if the agent's employment was "involuntarily terminated by the Employer for inability to satisfactorily perform the responsibilities of his/her position as determined in the sole discretion of the appropriate Human Resource Account Team Leader of the Employer." (Heinz Decl., Ex. 25 ("Allstate Service Allowance Plan"), at A004944.) The amount of the mandatory service allowance under this plan depended on the agents' completed years of service and ranged from "two weeks of pay (for 1-4 years of continuous service) and thirteen weeks of pay (for 20 and over years of continuous service)." (Id. at A004945.) Like the previous plan, this plan did not impose any non-solicitation or non-compete obligations.
R830 and R1500 employee agents also participated in the Pension Plan, a traditional defined benefit plan designed "to provide, at no cost to employee agents, an income based on [their] level of compensation and length of employee service, upon retirement." (Meehan Decl., Ex. 67 ("Agents Pension Plan"), at A008649.) Under the Pension Plan's benefit formula, the greater the agent's compensation and the greater their years of service, the larger their pension benefit at retirement, although the Pension Plan benefits ceased accruing once an agent hit a certain income level. Normal retirement benefits were payable on or after age sixty-five, but those with twenty or more years of continuous service could retire and start their benefit as early as age fifty-five. In addition, those who completed twenty or more years of continuous service were entitled to an early retirement subsidy for a "beef-up" of the compensation used in calculating their pension before Allstate purported to phase out the benefit between 1991 and 1999. "Continuous service" required that an employee have no more than twelve months between any termination of or retirement from employment with Allstate and his/her reemployment by Allstate.
Aside from employer-provided pension benefits, R830 and R1500 agents could fund their retirement through Allstate's 401(k) plan—the Savings and Profit Sharing Fund—and receive an annual company match up to a certain percentage. In addition, Allstate had long provided subsidized medical coverage for its retirees and their eligible dependents, as well as retiree life insurance benefits for those eligible. To be eligible for retiree medical and life, employee agents needed to work as Allstate employees until they attained at least (a) age sixty or (b) age fifty-five with at least twenty years of continuous service. These eligibility requirements were reduced to age fifty with at least ten years of service in cases involving "a right sizing, migration environment, or for health reasons." (Meehan Decl., Ex. 69 ("March 12, 1993 Memo to Managers"), at ARI 071978.) If an R830/R1500 agent converted to an Exclusive Agent (described below), the agent forever lost the opportunity to receive the retiree medical or life insurance benefits. Like the Pension Plan, the greater the number of years of service completed by an R830/R1500 agent, the greater the company subsidy for retiree medical coverage.
In 1990, Allstate introduced the Exclusive Agency ("EA") Program. In that Program, agents could first operate under an eighteen-month provisional R3000 employee contract. After eighteen months under the R3000 Contract, Allstate offered approved agents the R3001 contract to become so-called independent contractor Exclusive Agents. Alternatively, agents could enter directly as independent contractors under an R3001 Agreement. With the introduction of the R3000/R3001 contracts, Allstate ceased using the R1500 contract for newly hired agents. This was the first time in Allstate's history that it deviated from an all-employee agency force.
The R3001 Agreement differed from the employee agent programs in several respects. First, the R3001 expressly provided that agents under this Agreement were "independent contractor[s] for all purposes and not . . . employee[s] of the Company." (Heinz Decl., Ex. 31 ("R3001 Agreement"), at I.B.) Second, Allstate contends that while employee agents were required to run individual agencies under Allstate's supervision, EAs had more flexibility in their office operations—a fact which Plaintiffs dispute. Third, agents operating under the R3001 contract accrued an immediate vested interest in the business developed under the R3001 contract, and those who converted to the EA Agreement before January 1, 2000 possessed an "interest," transferable after a set period of time, in the policies and accounts that they had generated while working as an employee under the R830 and/or R1500 contracts. Fourth, renewal commissions payable to EAs were greater than the commissions payable to R830 and R1500 agents. Fifth, EAs were not entitled to the same office expense reimbursements as R830/R1500 agents. Finally, EAs were not given the same employee benefit entitlements of R830/R1500 agents.
R830 and R1500 agents could apply to convert to the EA Program. In order to convert, agents had to undergo a multi-step application process, which included submission of an Exclusive Agent Appointment Request, a Letter of Understanding, a business plan, and a final approval request, as well as repayment of all outstanding advances to Allstate. Between 1990 and May 1998, agents who wished to convert also had to meet certain production requirements and have certain ratings on their most recent evaluations. As of June 1998, however, Allstate eliminated the production and performance criteria for conversion to the EA program. Agents that converted to the EA Program from the R830 or R1500 Agreements between 1990 and November 1999 did not receive a conversion bonus. In addition, for those R830 or R1500 agents who converted to the EA Program prior to November 1999, their economic interest in the book of business serviced while an employee agent became transferable after
In the mid-1990s several employee agents in the NOA Program obtained a tax court ruling in the case of Butts v. Commissioner of Internal Revenue, 49 F.3d 713 (11th Cir.1995). The court found that the agents had proven that their professional relationship with Allstate was not as employees, but rather as independent contractors, meaning that their business deductions were to be reported under Schedule C of the tax return and not as Schedule A unreimbursed employee business expenses. Id. This ruling meant that the continued participation of independent contractors in Allstate's tax-qualified employee benefit plans could have resulted in those plans losing their tax-qualified status.
Allstate and the Internal Revenue Service ("IRS") subsequently entered into amicable negotiations in order to resolve how to maintain the employee pension plans. Several options were discussed. Allstate's first option, proposed by the IRS, was for Allstate to re-classify all employee agents as independent contractors. Allstate rejected this proposal and insisted on continuing the NOA program as an employee option. As it stated to the IRS:
(Meehan Decl., Ex. 54 ("Allstate Insurance Company Pre-Submission for June 23, 1997 Meeting"), at ARI 10110.)
Next, the IRS proposed that Allstate eliminate the financial risk faced by NOAs by paying for more or all of their business expenses. Allstate likewise rejected this solution. Finally, Allstate proposed that it could change financial control over the
After several years of negotiations, Allstate and the IRS finally reached an agreement in 1998 (the "IRS Closing Agreement"). This Agreement provided, in part, that beginning by January 1, 1999, NOAs were to perform services for Allstate under the following express terms:
(Heinz Decl, Ex. 41 ("IRS Closing Agreement"), at ARI 04485.)
In March 1998, Allstate announced to agents that the changes agreed to by Allstate in the Closing Agreement with the IRS would take effect on January 1, 1999. In turn, Allstate required agents to sign an "Acknowledgment of Understanding," in which NOAs specifically agreed and acknowledged as follows:
(Heinz Decl., Ex. 42 ("Acknowledgment of Understanding") (emphasis in original).) In addition, Allstate required agents in the NOA Program to prepare Office Expense Allowance Worksheets to comply with paragraph three of the foregoing Closing Agreement requirements. If the amount of OEA was insufficient to cover office lease and support staff payments, NOA agents could increase the OEA available by reallocating one or two commission percentage points to OEA.
As a result of these changes, there were multiple groups of captive agents and the NOA Program had multiple reimbursement arrangements. According to Allstate, but disputed by Plaintiffs, these modifications resulted in inefficiency and impaired its ability to make product and pricing changes. Moreover, Allstate contends, and Plaintiffs dispute, that the IRS Closing Agreement requirements hindered Allstate's flexibility and ability to take advantage of opportunities in the marketplace.
The Sales Organization of the Future ("SOOF") initiative was large in scope and used extensive Allstate resources from 1997 to 1998, including dozens of Allstate employees, some of whom worked full-time on the initiative. SOOF was a project led by outside consultant McKinsey & Company ("McKinsey") to simplify procedures, take low-value-added activities out of the agents' offices, and allow agents to sell more products. McKinsey was paid $525,000 per month in consulting fees. Nonetheless, the SOOF work was overseen by a high level "steering committee" that included certain of Allstate's senior officers, including Edward Liddy, who was then Chief Operating Officer of Allstate. Among the other officers on the steering committee were Bob Gary, then President of Allstate's Personal Property & Casualty business; Steve Groot, then Senior Vice President and President of Allstate Indemnity; Lou Lower, then President of Allstate Life Insurance; Frank Pollard, then Senior Vice President and Chief Information Officer; Rita Wilson, then Senior Vice President; and Tom Wilson, then Senior Vice President and Chief Financial Officer. As Allstate advised the IRS, Mr. Liddy chaired a SOOF "task force . . . appointed to work directly on [the NOA classification] issues" in the course of "reviewing Allstate's agent distribution system and. . . recommending changes . . . to best position Allstate for the future." (Meehan Decl., Ex. 54, ("Allstate Insurance Company Pre-Submission for June 23, 1997 Meeting"), at ARI 180109.) By November 1997, Messrs. Liddy and Gary had reportedly
Several proposals were offered by McKinsey, although the evidence is disputed as to whether Allstate ever considered such proposals. First, there was a suggestion to impose minimum performance standards, which would result in approximately 1500 agents unable to meet those standards. Second, the SOOF initiative included a separation allowance proposal to allow agents to voluntarily leave Allstate if they did not want to participate in changes. Neither of these proposals was adopted.
One of the questions that the SOOF team discussed was whether agents should be employees or EA's/independent contractors. The SOOF team recognized that Allstate could "not force conversion of reticent employee agents" and thus proposed a "[g]radual transition to EA . . . through [i]ncenting employee agents to convert and removing barriers." (Meehan Decl., Ex. 134 ("SOOF Blueprint of Emerging Vision"), at ARI 210916, ARI 210931.) The draft document entitled "SOOF Emerging Blueprint," created by McKinsey, stated that "[o]ur objective is to migrate existing agents to EA over a multi-year period. . . . We will not force conversion; rather we will make migration to EA as attractive as possible by removing barriers such as medical and retirement benefit options." (Meehan Decl., Ex. 129 ("SOOF Emerging Blueprint November 1997"), at ARI 018587.) The draft document also noted that two-thirds of Allstate agents were employee agents, of which fifty percent were over fifty years old. A McKinsey-prepared document, entitled "Compensation Comparison Across Contracts," revealed that, in comparing the R830/R1500 contracts versus the EA's R3001 contract, conversion of all R830/R1500 agents to EAs would result in an Allstate savings of $90 million per year due to the elimination of employee benefits and entitlements. The same document recognized that the "best financial strategy" for an R830/ R1500 agent was "to remain an employee (earning higher revenue)" and then convert to an EA five years before retirement "to cash in on the book as well." (Meehan Decl., Ex. 120 ("SOOF Compensation Comparison Across Contracts"), at AF061697.) The SOOF team projected, however, that if Allstate took no action to encourage the R830/R1500 agents to convert to EA's or leave, it would take thirty-one years to remove R830 agents from the system and thirty-five years to remove R1500 agents from the system. McKinsey subsequently looked into how to provide incentives for conversion and to identify disincentives to voluntary conversion. To that end, McKinsey proposed various options. At no time prior to November 1999, however, did Allstate adopt any deadline for conversion or change the age/service requirements under the Pension Plan.
Allstate contends that by November 1999, SOOF was never used in building any real program. It further asserts that SOOF was irrelevant to the November 1999 Program that is the subject of this litigation.
Effective January 1, 1999, Allstate had five captive agent programs operating pursuant to the following contracts: (1) R3001 contract; (2) R3000 contract; (3) R4614 Associate Agent contract; (4) R830 contract; and (5) R1500 contract. As noted previously, each of these programs had different compensation/commission structures, different OEA formulas, and different evaluation standards. Therefore, in June 1999, Allstate began evaluating whether changes could be made to consolidate its agency programs into a single program. Barry Hutton, an Assistant
Because the team discussed highly sensitive topics and met frequently, the team worked at an off-site location. Members of the team signed a confidentiality and non-disclosure agreement. The team then reported, every one or two weeks, to a small group of Allstate officers that included Robert Gary, Phil Lawson, Rick Cohen, and Jeff Kaufman.
The Channel Integration Team was assigned to investigate three broad topics: (1) whether Allstate should move to a single-contract agent program whereby all agents would operate under the same contract; (2) what Allstate could do to help underperforming agencies; and (3) how Allstate could better align agent compensation with company objectives. Mr. Hutton identified two possible designs, both of which involved forcing the conversion of employee agents to the R3001 contract. The parties dispute the reasoning and logic behind the merging of the various agency programs into one. Allstate claims that it was an effort to address the inefficiencies associated with changing all of Allstate's existing programs to respond to fluid market conditions, the complexity associated with introducing and pricing of new insurance products, and the challenge of supporting an agency force comprised of both employees and independent contractors. Plaintiffs, however, argue that Allstate managed employee agents and exclusive agents in the same way and that Allstate suffered no additional complexities.
The Hutton team selected the EA Program as the program of choice to which it would move all of its agents. Both parties agree that this Program was not impacted by the same IRS issues. Allstate, however, claims that this Program was its most successful and provided the agents with the most freedom. Plaintiffs, on the other hand, suggest that Allstate chose this Program because it significantly lowered the company's costs by allowing it to have captive agents without either the office expense reimbursement or the costly employee benefits entitlements of its employee agents. By July 1999, the concept of a Release was included in one of the Channel Integration Team presentations entitled "Winning in the New Century," and the concept of offering three options to employee agents was introduced. The presentation remarked that "[e]mployee agents cannot convert, sell BOB [books of business] or receive the Separation Plan without signing a release." (Meehan Decl., Ex. 155 ("Winning in the New Century"), at ARI 000631.)
On July 12-13, 1999, Allstate met with its Board of Directors to discuss, among other items, its strategy for employee agents. The discussion was led by Bob Gary, the President of Allstate Property and Casualty. Allstate set aside an hour and one-half with the Board to address its strategy for the agents. One of the slides presented at that meeting stated as follows:
(Meehan Decl., Ex. 151 ("Allstate Board of Directors Strategy Meeting"), at ARI 003317.) This same document advised Allstate's Board that an agent reduction in force based on standards was not legally possible. No minutes were taken of the July 12-13, 1999 Allstate Board of Directors strategy meeting.
In late September 1999, the Hutton team recommended to Richard Cohen, Allstate's President, that Allstate discontinue its employee agency program and offer all employee agents the opportunity to become Exclusive Agents under an R3001 contract. In September and October 1999, Cohen and Edward Liddy had frequent discussions concerning the Hutton team's recommendation. In late October, Liddy and Cohen made the decision to go forward with this recommendation. Allstate contends that this decision was necessary to effectively compete in the marketplace, whereas Plaintiffs believe that Allstate made this decision to strip the employee agents of their employee benefits, including pensions, and to rid itself of older employee agents. Ultimately, by late October 1999, the Hutton team moved forward with what became known as the Preparing for the Future Group Reorganization Program (the "Program"). In November 1999, Allstate formally adopted the Agent Transition Severance Plan ("ATSP"), which contained both non-compete and non-solicitation provisions that constituted eligibility requirements for participation in that Plan.
On November 10, 1999, Allstate announced the Program by noting that as part of a "New Business Model" it was "reorganiz[ing] its existing captive agency program to a single exclusive agency independent contractor program." (Meehan Decl, Ex. 37 ("Nov. 10, 1999 Press Release"), at ARI 001257.) At the November 1999 scripted presentation to employee agents, Allstate represented that the Exclusive Agency program is the "premier program" and provides agents with more flexibility to grow their agencies and effectively manage their operations. (Id. at ARI 001264.) With few exceptions, Allstate terminated the employment contracts of the 6,200-plus R830 and R1500 employee agents effective no later than June 30, 2000. Those agents were not given job-in-jeopardy notices, were not offered the opportunity to have their termination reviewed by an Agent Review Board, and were not terminated based on any individual circumstances. While Allstate argues that the Program applied to all agents regardless of age, productivity, or performance, Plaintiffs contend that it adversely and disproportionately impacted older employees since, as agreed by the parties, approximately ninety percent of the R830/R1500 agents were over forty years of age.
In connection with the termination of the R830 and R1500 employment contracts, Allstate offered the agents working
The second option was the "Sale Option." This option also permitted an agent to enter into R3001C/S Agreement with Allstate, thus converting the agent to an EA independent contractor. In turn, the agent would receive a "conversion bonus" and Allstate would forgive any advances owed, assume certain lease and advertising obligations incurred as an employee agent, and permit the agent, after thirty-days' service as an EA, to sell his or her book of business written while an R830 or R1500 agent. Again, this option required the agent to sign a release.
The third option was the "Enhanced Severance Option." Under this option, Allstate would pay the agent "enhanced" severance equal to one year's pay based on the better of 1997 or 1998 total compensation, forgive debt and/or expenses that Allstate had advanced to the agent, and relieve the agent of certain lease and advertising obligations incurred as an R830 or R1500 agent. Yet again, this option was not available unless the agent signed a release.
The final option was the "Base Severance Option." If an agent elected this option, then Allstate paid him or her up to thirteen weeks of pay. The agent electing this option did not need to enter into a release, although he/she was subject to certain additional non-compete and non-solicitation obligations. Notably, Allstate had determined that agents affected by the Program were ineligible for the existing severance or post-termination pay plans described above (the Allstate Severance Pay Plan and Allstate Service Allowance Plan) because they were not terminated for any of the reasons set forth in those Plans. Allstate also took the position that the pre-existing severance/post-termination pay Plans were inapplicable because they did not apply to group reorganization programs.
Following the November 10, 1999 Program announcement, Allstate held meetings with agents on a regional basis to provide information about the Program. After the initial meetings, Allstate conducted additional regional and local meetings with agents to further discuss the details of the Program. Although agents were not permitted to ask questions at the initial November meeting, Allstate managers took questions and provided answers at many of the subsequent regional meetings.
In addition, Allstate provided each employee agent with a detailed package of written materials regarding the Program. Each package included a Program Information Booklet that explained the Program and the Program options, as well as a copy of the Release, copies of the R3001S and R3001C booklets explaining the impact of conversion on agent benefits and descriptions of the EA benefit plans,
Allstate also gave each employee agent an Informational Notice, dated November 16, 1999, that purported to explain the Release requirement for the EA Option, Sale Option, or Enhanced Severance Option. The Notice stated, in its entirety, the following:
(Heinz Decl., Ex. 62 ("Informational Notice") (emphasis in original).)
From November 1999 through June 2000, agents could submit questions to their agency manager, then to their local HR manager, and finally to Allstate's 800-number resolution line. Allstate identified between 500-600 agency managers and 13-14 local Human Resources managers as persons who would answer questions from employee agents about the Program. Agency managers were provided with uniform materials to answer questions and were instructed to stick to Allstate's script. Allstate then provided R830 and R1500 agents with eleven sets of Questions and Answers regarding various aspects of the Program that were generated from agent inquiries. In total, there were more than 230 Questions and Answers provided to agents.
As noted above, in connection with the announcement of the Program and the provision of the Informational Notice in November 1999, agents also received a copy of the Release. The Release was three-pages long, including a signature page. The Release and Waiver Provision stated:
(Heinz Decl., Ex. 186 ("Release"), at ARI 004101.)
The next section of the Release states: I acknowledge that:
(Id.)
The Release then goes on to provide information regarding the right to revoke or rescind, as follows:
(Id.)
The Release further requires the signer to acknowledge receipt of information about the Program:
(Id. at ARI 004102.)
Finally, following some state-specific announcements, the Release provides an Election of Option and Signature section:
(Id. at ARI 004103.)
Allstate's corporate designee, Mr. Hutton, conceded that without the Release, Allstate would not have moved forward with the Preparing for the Future Program. The Release was drafted by Allstate and the terms were completely non-negotiable. Allstate further made clear that it would not accept any signed Releases that were marked up in any way, either with language crossed our or additional terms or notes added to the Release by hand. Indeed, Plaintiffs Romero, Kelly, T. Kearney, and Wiktor submitted Releases to their managers with modifications and Allstate declined to accept them.
Also in November 1999, Allstate provided its agents with a written document entitled "Age Discrimination in Employment (`ADEA') Waiver Information." This document was issued in an effort by Allstate to comply with the requirement of the Older Workers Benefit Protection Act ("OWBPA"), 29 U.S.C. § 626(f)(1)(H), that employers seeking a release of ADEA claims as part of an employment termination program provide the employees with the job titles and ages of those selected, and those that are not selected, for the program. Under that statute, the list of individuals not eligible or selected for the program must include only individuals "in the same job classification or organization unit" as those employees who are eligible or selected for the program. Id.
Allstate's document stated:
(Heinz Decl., Ex. 74 ("Age Discrimination in Employment Waiver Information"), at ARI 003839.) The document went on to list, by contract, the number of agents from each age that were eligible and selected for the Program and the number of agents from each age that were not-eligible and not selected for the Program. The document remarked that nine R830 and eleven R1500 agents from Montana were not selected for the Program, and that 175 R830 agents from New Jersey were not selected for the Program. The document did not disclose (a) that R830 and R1500 employee agents in West Virginia hired on or after June 8, 1984 were "not eligible and not selected" for the Program; (b) that at least four R830 employee agents from other states did not have their contracts terminated; (c) and that Allstate's associate and R3000 agents were "not eligible and
As of October 1999, the average age of the R830 agents employed by Allstate New Jersey was fifty-nine years old. Allstate determined that New Jersey employee agents in the Program were ineligible for inclusion in the Program because (1) they were employed by Allstate New Jersey Insurance Company, a separate company under a different management structure and compensation system than the rest of the employee agents in the United States and (2) New Jersey had unique state insurance withdrawal laws, which could have been triggered in the event of a decrease in the number of agencies in New Jersey.
Allstate considered Montana agents for the Program and listed them as not eligible and not selected on the OWBPA disclosure. Allstate avers that it listed them as ineligible on the November 16, 1999 disclosure because of certain unidentified Montana state laws. By February 2000, however, Allstate ultimately determined that Montana agents were eligible for the Program. On February 15, 2000, Allstate included Montana agents in the Program and distributed the Program materials with an updated disclosure to the Montana agents. The Montana-specific version of the Preparing for the Future Information Booklet informed Montana agents that they had until September 1, 2000 to consider whether to accept one of the Options available under the Program and that their contracts would be terminated no later than September 30, 2000. Thereafter, Montana agents were moved to the eligible category in the revised ADEA Waiver Information distributed only to Montana agents.
West Virginia employees who entered into their Allstate contracts on or after June 8, 1984 could not be terminated as part of the Program. Allstate nonetheless included them as eligible because each of them was, according to Allstate, offered consideration in exchange for entering into the Release. In turn, it included the ages of West Virginia employee agents hired on or after June 8, 1984 in the list of eligible agents on the OWBPA disclosure.
Under a Delaware statute requiring twelve months' notice to terminate an insurance agency contract, Delaware agents were given until December 1, 2000 to sign the Release or have their relationship with Allstate terminated. Thus, the Delaware-specific version of the Preparing for the Future Information Booklet informed Delaware agents that they had until December 1, 2000 to consider whether to accept one of the Options available under the Program and that their contracts would be
Allstate informed agents that Allstate customer lists were the property of Allstate and that the names, addresses, and ages of these customers were confidential information and the exclusive property of Allstate. Specifically, in a March 23, 2000 set of Questions and Answers ("Q & As") regarding the Program and Release, Allstate explained:
(Declaration of Erica B. Zolner ("Zolner Decl."), Ex. 102 ("Preparing for the Future Questions and Answers # 8"), Q20 at ARI 094111.) Another Q & A, issued on June 7, 2000, stated:
(Zolner Decl., Ex. 156 ("Preparing for the Future Questions and Answers # 10"), Q1 at ARI 090472.) If agents eligible for the Program left Allstate, they could only sell products or services to Allstate customers if a "customer initiate[d] contact with his/her prior agent" or "if the customer responds to general advertising that is not considered a solicitation." (Id. Q4 at ARI 090473.) Both the R830 and R1500 established the confidential nature of customer lists and contained a mandate that when an employee leaves Allstate, all records pertaining to Allstate policyholders shall be returned to Allstate and not be divulged. Neither contract, however, contained an express non-competition agreement prohibiting contact with former clients for commercial purposes.
Plaintiffs claim that, on the day the Program was announced and thereafter, Allstate represented to employees and agents that employee agents who were terminated could find employment elsewhere in the company. Plaintiffs also allege that local managers made similar statements about the opportunity for re-employment and encouraged employee agents to apply. In fact, some Plaintiffs actually applied and interviewed for non-agent positions at Allstate, but were not hired. Allstate contends, however, that these new job opportunities referenced non-agent employees who were terminated as part of a reduction in force, rather than R830/R1500 employee agents eligible for the Program. It
It is undisputed that, on September 26, 2000, Allstate formally adopted and implemented the Rehiring Moratorium. This Moratorium prohibited Allstate from offering re-employment to former employee agents who left Allstate as a result of the Program, and that such former employee agents would be eligible for re-employment when they reached the one year anniversary of their termination or were no longer receiving enhanced severance payments, whichever was longer. This policy had the effect of preventing any employee agent who left Allstate as a result of the Program from satisfying the continuous service requirement that would entitle them to early retirement and/or the "beef up" provisions for purposes of pension benefits. Indeed, Allstate took the position that a former employee agent's service as an R3001 exclusive agent did not count towards the continuous service requirement to be eligible for retiree medical or life insurance benefits. Nor could an employee agent who converted to the R3001 agent contract either grow into the retiree medical benefits or participate in the subsidized retiree medical benefits while he/she was an EA agent.
The Moratorium was a change in Allstate's policy. From January 1, 1990 to June 1, 2000, former employee agents— other than retirees—whose records of prior employment were satisfactory, were eligible for re-employment with Allstate and did not have to wait any period after separation from Allstate before being considered for rehire. Notably, non-agent employees terminated in reductions-in-force announced in November 1999, at the same time as the Program, were able to rejoin Allstate immediately, consistent with the company's normal rehire policy.
As part of the Program, Allstate provided each R830/R1500 agent a personalized information worksheet. In several of the Plaintiffs' worksheets, Allstate represented that the commission income paid to the agents under the R3001 contract was the equivalent to and/or exceeded the combined commission and OEA reimbursements that employee agents previously received under either an R830 or R1500 contract. Plaintiffs contend that the same thing happened with many if not all of the terminated employee agents. These worksheets did not quantify the value of the benefits that employee agents were losing as a result of the conversion to the R3001 contract.
In addition, Allstate did not advise employee agents that Allstate intended to reduce commissions paid to R3001 agents and Plaintiffs contend that, during the time that agents were deciding among their choices under the Program, Allstate affirmatively represented that it was not planning on cutting commissions. Allstate avers, however, that it did not first begin to consider commission rate changes for Exclusive Agents until October 2001, at which time it announced to all Exclusive Agents that it would begin reviewing agent revenue and compensation. On September 25, 2002, Allstate gave notice to Exclusive Agents that commission changes would take effect on January 1, 2003. Allstate ultimately reduced commission rates for Exclusive Agents on that date, at which point the new property commission rates payable to R3001 agents went from twenty percent to ten percent. Allstate denies that it had been evaluating commission rate reductions since work began on the Program. Plaintiffs produce evidence, on the other hand, that beginning in the summer of 1999, each of Allstate's analyses assumed some reduction in the commission
Allstate informed Plaintiffs on numerous occasions that they would be required to meet certain business objectives as R3001 Exclusive Agents, but, according to Plaintiffs, Allstate did not disclose that it would hold agents to significantly higher standards under the R3001 contract than under the R830 or R1500 contracts. Allstate's Program Information Booklet provided that R3001 agents "will be expected to achieve certain results." (Heinz Decl., Ex. 52 ("Program Information Booklet"), at ARI 000806.) Agents were reviewed periodically and if an agency did not achieve the Expected Results, the agency had twenty-four months to effectively address the problem in order to avoid termination. Allstate claims that agents that it made agents aware of the precise sales targets during EA conversion meetings.
On August 9, 1999, prior to the announcement of the Program, the Channel Integration Team had another "Winning in the New Century" meeting, at which time the team recommended placing five percent of agencies on probation each year for not meeting its new expected results. Under that plan, the underperforming or "GAP" agencies would have six months to improve and meet newly-imposed quotas or they would receive a ninety-day termination notice. Although Plaintiffs claim that agents were never informed of this plan, Allstate asserts that this portion of the presentation was never implemented and, thus, there was no plan for Allstate to share with agents.
Nonetheless, for the year 2000, Allstate evaluated agents based on expected results and those agents who did not meet the expectations were notified that they were expected to address the deficiencies. Beginning in late 2001, on a quarterly basis, Allstate sent notices to the worst performers in each region informing them that they faced termination unless they demonstrated sufficient improvement in the next quarter. In addition, it sent notices to the next lowest performers that their jobs were in danger. According to Plaintiffs, they did not anticipate such stringent standards.
Allstate told agents that "R3001 Exclusive Agents have more freedom and flexibility in operating their agencies." (Meehan Decl., Ex. 141 ("November 16, 1999 Preparing for the Future Presentation"), at ARI 000327.) Allstate further explained this statement to agents in the November 1999 Agent Presentation by stating that "EAs have greater tax planning flexibility," and EAs have "total freedom to decide who to hire, how many people to hire, and what type of relationship to have with them." (Id.) In comparison, "NOAs have limitations on deductibility of unreimbursed employee business expenses," NOA "[s]upport staff and rent expenses must be within available OEA," and "NOAs may only secure support staff through an approved staffing vendor." (Id.) Moreover, Exclusive Agents had some control over their office hours. Indeed, when the EA Program was first introduced, R3001 agents had significantly more control over their hours.
The EA contract after the announcement of the Program was somewhat different. Via letter dated January 17, 2000, Allstate expressly informed agents that, effective March 20, 2000, agencies would
Plaintiffs, in this case, were all Allstate employee agents as of June 30, 2000. Plaintiff Gene R. Romero was, on that date, fifty-one years of age and had been employed by Allstate for more than thirteen years under an R1500 contract. Plaintiff Joseph L. Benoit was forty-eight years old and had been employed by Allstate for more than eighteen years under an R830 contract. Plaintiff James T. Beer was forty-one years old and had been employed by Allstate for more than nineteen years under an R830 contract. Plaintiff Roger T. Boyd was fifty-five years old and had been employed by Allstate for more than twelve years under an R1500 contract. Plaintiff Richard A. Carrier was forty-two years old and had been employed by Allstate for more than nineteen years under an R830 contract. Plaintiff Paul R. Cobb was fifty-two years old and had been employed by Allstate for more than fifteen years under an R1500 contract. Plaintiff Craig K. Crease was forty-eight years old and had been employed by Allstate for more than seventeen years under an R830 contract. Plaintiff Sylvia Kelly was fifty-four years old and had been employed by Allstate for more than nineteen years under an R830 contract. Plaintiff Dwight English was fifty-three years old and had been employed by Allstate for more than eleven years under an R1500 contract. Plaintiff Ronald Harper was forty-eight years old and had been employed by Allstate for more than ten years under an R 1500 contract. Plaintiff Michael Kearney was forty-five years old and had been employed by Allstate for more than sixteen years under an R830 contract. Plaintiff Thomas A. Kearney was forty-nine years old and had been employed by Allstate for more than twenty-one years under an R830 contract. Plaintiff Larry H. Lankford, Sr. Was fifty-three years old and had been employed by Allstate for more than twenty-eight years under an R830 contract. Plaintiff David C. Lawson was fifty-seven years old and had been employed by Allstate for more than fourteen years under an R1500 contract. Plaintiff Nathan R. Littlejohn was fifty-one years old and had been employed by Allstate for more than nine years under an R1500 contract. Plaintiff Rebecca R. Maslowski was fifty years old and had been employed by Allstate for more than sixteen years under an R830 contract. Plaintiff Craig A. Millison was fifty-two years old and had been employed by Allstate for more than thirteen years under an R1500 contract. Plaintiff James E. Moorehead was fifty-three years old and had been employed by Allstate for more than sixteen years under an R830 contract. Plaintiff Edwin T. Murray, III was forty-four years old and had been employed by Allstate for more than fifteen years under an R1500 contract. Plaintiff Carolyn Penzo was fifty-three years old and had been
Many of the Plaintiffs mortgaged their homes, depleted their savings and 401(k)s and invested significant amounts of money into their agencies. In addition, many Plaintiffs had their family members working in their agencies for little to no compensation. Multiple Plaintiffs contend that they did so at Allstate's urging and under a belief that they had a proprietary interest and the job security to realize long-term returns on those investments. Allstate, on the other hand, contends that Plaintiffs' expenditures of out-of-pocket funds were to increase sales and income from commission, not because of any vested interest in the business they wrote as agents.
A multitude of Plaintiffs believed that they had no other job to fall back on, given their age and length of service with Allstate. Moreover, during their tenure, Plaintiffs were contractually barred from doing any work other than for Allstate without Allstate's written consent. As employee agents, Plaintiffs also had contractual non-compete covenants that barred them for soliciting or selling insurance in certain areas and to certain people. Specifically, the R830 contract provided:
(Heinz Decl., Ex. 10 ("R830 Agreement"), Part Four, § XIII.) The R1500 contract stated:
(Heinz Decl., Ex. 11 ("R1500 Agreement"), ¶ 13.) These restrictions posed a problem for the many Plaintiffs who had leased the office in their own name, or even purchased the building in which their office was located, since the non-compete provisions precluded them from selling insurance in those buildings. Although Allstate had originally told agents that if they refused to sign the Release, then they would be responsible for the remaining lease payments on their offices, Allstate modified that requirement in February 2000 and agreed to stand in for an agent's lease payment obligations if the agent chose the Base Severance Option. Nonetheless, Allstate maintained that it owned the employee agents' phone numbers and that it would preclude agents from using those numbers if they left Allstate without signing the Release, even though the phone number was in the agent's name and paid for by the agent.
A majority of the Plaintiffs consulted with an attorney prior to selecting an Option under the Program and entering into the Release, and numerous Plaintiffs discussed the Release with attorneys at the EEOC. Certain Plaintiffs did not consult an attorney regarding the Program and Release, several of whom indicated that they believed it was futile and would not do any good to consult an attorney because they felt that they had no choice but to sign the Release. It is undisputed that the terms of the Release were non-negotiable and Allstate would not accept any Release that was modified in any way. Many Plaintiffs also consulted with accountants prior to signing the Release or making a selection among the Program Options, including Plaintiffs Bever, Carrier, Crews-Kelly, English, Michael Kearney, Thomas Kearney, Maslowski, Millison, Moorehead, Reinerio, Schott, Shirley, Trgovich, Wandner, and Wiktor, although they did not necessarily discuss the precise Program Options with their accountant.
Thirty-one of the Romero I and Romero II Plaintiffs signed the Release upon electing one of the first three Program Options. One named Plaintiff, Joseph Benoit, chose the Base Severance Option, declined to sign the Release, and left Allstate's service.
Seventeen of the Plaintiffs took the first option, the EA Option, including Plaintiffs Bever, Carrier, Cobb, Crease, Harper, Michael
Plaintiffs who took this option and converted to the R3001 contract for independent contractors acquired a transferable economic interest in the books of business they serviced that could be sold to an Allstate approved buyer after two years as an EA. Thirteen of the Plaintiffs who selected the EA Option later sold the economic interest in the books of business they produced and serviced, and kept the sales proceeds. The sales, which occurred between 2002 and 2012, ranged in amounts from $100,000 to $910,000.
Allstate forgave Plaintiffs who selected the EA Option for any outstanding OEA advance they owed to Plaintiff. The greatest amount forgiven was $1,250 and the mean among the seventeen Plaintiffs was about $250. For seven of the Plaintiffs who converted to the EA Program, there were no OEA advances to forgive.
Twelve Plaintiffs signed the Release and elected the second Option of the Program—the Sale Option. These individuals included Plaintiffs Crews-Kelly, English, Thomas Kearney, Lankford, Moorehead, Perkins, James Pilchak, Romero, Schott, Shirley, Trgovich, and Wandner. These agents acquired a transferable economic interest in the books of business they had produced and serviced as R830 and R1500 agents after serving as Exclusive Agents for only thirty days. The sales proceeds ranged in amounts from $75,000 to $435,000. Several of those sales agreements included non-compete agreements and other restrictive covenants with the purchasing entity.
Plaintiffs who selected the Sale Option received at least a $5,000 conversion bonus in connection with their transition to independent contractor status. Allstate also forgave these Plaintiffs for an outstanding OEA advance they owed to Allstate. The greatest amount forgiven was $42,000 and nothing was forgiven for six Plaintiffs.
Two Plaintiffs signed the Release and elected the Enhanced Severance Option following the announcement of the Program: Roger Boyd and Paula Reinerio. Boyd received an enhanced severance payment of $42,462 and Reinerio received an enhanced severance payment of $68,315, each of those payable over the course of twenty-four equal monthly installments. Plaintiffs also assumed a two-year non-compete restriction, as well as an ongoing non-solicitation obligation.
For these Plaintiffs, Allstate forgave any outstanding OEA advance they owed Allstate. The value of each agent's OEA advance was then included as taxable compensation in the agent's final employee payment. Although Plaintiffs were permitted to submit unreimbursed business expenses to Allstate in order to offset all or a portion of the advance that would be counted as taxable income, Plaintiffs dispute
Overall, less than twenty-five agents elected not to enter into a Release. The only Plaintiff included among that group is Joseph Benoit. Benoit declined to sign the Release, elected the Base Severance Option, and received a thirteen-week severance payment of approximately $23,200, paid out in six equal monthly installments. Had the other Plaintiffs taken this option, their base severance would have ranged anywhere from approximately $7,600 to approximately $116,000, with a mean figure of about $29,000.
Allstate characterizes Plaintiffs' various Program option selections as rationally-based, calculated choices depending on their financial needs at the time and what worked best for themselves and their families. In support of these allegations, Allstate cites to various portions of Plaintiffs' deposition testimony. In response, however, Plaintiffs cite to other portions of their testimony to demonstrate that although none of the options were optimal, they were forced into making an election and taking the option that would best provide for their families. Indeed, it is agreed that many Plaintiffs simply did not have the money to start over or support their families if they opted to leave Allstate under the Base Severance Option.
What remains undisputed is that many Plaintiffs spent their careers building up their customer base and that many of Plaintiffs' customers were people whom they had brought to Allstate because of their pre-existing relationships with them or because of their efforts to develop them as clients. These customers included family members, neighbors, business associates, church members, parents of friends of his/her children, parents of children on sports teams that the employee agent had sponsored, and other friends and associates developed from many years spent in the communities they served. Plaintiffs who left Allstate could have no business contact, even to sell non-insurance products, with these former customers unless the customer initiated contact with the former agent or the customer responded to general advertising that was not considered a solicitation. Allstate advised all agents eligible for the Program that it intended to enforce the non-compete and non-solicitation provisions if a violation occurred.
As a legal matter, agents could file EEOC charges against Allstate regardless of whether they entered into the Release. Nothing in the Release, however, explicitly instructs that employee agents who signed it could file a charge with the EEOC related to the termination of their employment or challenge the validity and enforceability of the Release. At least one Plaintiff—Plaintiff Kelly—withdrew an EEOC Charge that she filed on June 5, 2000 because she believed the Release barred it, but she re-filed on August 25, 2000. Allstate did, however, advise Plaintiff Gene R. Romero that he could file EEOC charges. Ultimately, all Plaintiffs filed charges against Allstate with the EEOC. Those agents were still given the full benefits of their chosen Program Option.
Plaintiff Romero filed his charge of discrimination with the EEOC on March 24, 2000. In a May 2, 2000 letter directed to Defendants Allstate and Liddy, the EEOC preliminarily ruled that Allstate's Release requirement was unlawful and requested that Allstate suspend its use under the
In light of the EEOC's finding, Plaintiffs initiated the action in federal court on August 1, 2001, and, on October 18, 2001, Plaintiffs filed their First Amended Complaint ("Romero I"). The First Amended Complaint set forth seven Counts, as follows:
(Am. Compl. No. Civ.A.01-3894 ("Romero I"), ¶¶ 132-189.)
About four months later, the Romero I Plaintiffs, joined by four other Plaintiffs, brought a separate ERISA action against Allstate and the Administrator of the Agents Pension Plan ("Romero II"). In Romero II, Plaintiffs sought the recovery of retirement benefits that they were improperly denied because Allstate and the Administrator: (a) violated the "anti-cut-back" provisions of ERISA by improperly phasing out the beefed-up early retirement benefits and amending the requirements for retirement benefits under the Agents Pension Plan; and (b) violated the fiduciary duty requirements of ERISA by making material representations and omissions about Plaintiffs' eligibility for retirement benefits. (Am. Compl., No. Civ.A.01-6746 ("Romero II").)
Lastly, on December 27, 2001, the United States Equal Employment Opportunity Commission brought its own action against Allstate alleging that Allstate unlawfully retaliated against all employee agents, in violation of the ADEA and other federal employment statutes, by refusing to permit them to continue as Allstate employees unless they signed the Release ("EEOC v. Allstate"). Like Plaintiffs, the EEOC seeks a declaratory judgment that the Release is invalid. (Am. Compl., No. Civ.A. 01-7042 ("EEOC v. Allstate").)
On November 26, 2007, Plaintiffs appealed this ruling to the United States Court of Appeals for the Third Circuit. Reviewing the history of this case, the Third Circuit noted that Plaintiffs had not received the benefit of full discovery as to issues regarding the validity of the Releases, and determined that these issues were dispositive as to the rest of Plaintiffs' claims. Romero v. Allstate Ins. Co., 344 Fed.Appx. 785, 793 (3d Cir.2009) ("The plaintiffs had a relative short period of class discovery, and . . . are entitled to discovery that is responsive to their requests related to the specific release-related issues the plaintiffs raised with the district court in their response to its March 21, 2007 Order."). The court went on to order that the District Court allow additional discovery and briefing, fully address whether the Releases are valid, and if the Releases are deemed valid, decide all of the underlying claims and issues. Id. at 794.
On January 29, 2010, after remand from the Court of Appeals in Romero I, the three cases were reassigned to the docket of the undersigned. Plaintiffs filed a Motion to Amend the Complaint in Romero I and, on July 28, 2010, this Court granted the requested leave, resulting in the filing of the Second Amended Complaint. This document set forth seven claims, as follows: (1) a request for a declaratory judgment on the invalidity of the Release under ERISA, the ADEA, and common law; (2) interference with employment and retaliation in violation of Section 510 on behalf of all Plaintiffs; (3) retaliation in violation of Section 510 on behalf of Plaintiffs who did not sign the Release; (4) discriminatory termination and retaliation in violation of 29 U.S.C. § 623(a) and (d); (5) breach of the R830 contract; (6) breach of the R1500 contract; and (7) breach of fiduciary duty. (§ Am. Compl., Romero I, No. Civ.A. 01-3894.)
Consistent with the Third Circuit's mandate, this Court then permitted discovery to proceed in bifurcated fashion, with the parties limited to discovery only on the
Summary judgment is proper "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c)(2). A factual dispute is "material" only if it might affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). For an issue to be "genuine," a reasonable fact-finder must be able to return a verdict in favor of the non-moving party. Id.
On summary judgment, the moving party has the initial burden of identifying evidence that it believes shows an absence of a genuine issue of material fact. Conoshenti v. Pub. Serv. Elec. & Gas Co., 364 F.3d 135, 145-46 (3d Cir.2004). It is not the court's role to weigh the disputed evidence and decide which is more probative, or to make credibility determinations. Boyle v. Cnty. of Allegheny, 139 F.3d 386, 393 (3d Cir.1998) (citing Petruzzi's IGA Supermkts., Inc. v. Darling-Del. Co. Inc., 998 F.2d 1224, 1230 (3d Cir.1993)). Rather, the court must consider the evidence, and all reasonable inferences which may be drawn from it, in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962)); Tigg Corp. v. Dow Corning Corp., 822 F.2d 358, 361 (3d Cir. 1987).
Although the moving party must establish an absence of a genuine issue of material fact, it need not "support its motion with affidavits or other similar materials negating the opponent's claim." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). It can meet its burden by "pointing out . . . that there is an absence of evidence to support the nonmoving party's claims." Id. at 325, 106 S.Ct. 2548. If the non-moving party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden at trial," summary judgment is appropriate. Celotex, 477 U.S. at 322, 106 S.Ct. 2548. Moreover, the mere existence of some evidence in support of the non-movant will not be adequate to support a denial of a motion for summary judgment; there must be enough evidence to enable a jury to reasonably find for the non-movant on that issue. Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505.
Notably, these summary judgment rules do not apply any differently where there are cross-motions pending. Lawrence v. City of Phila., 527 F.3d 299, 310 (3d Cir.2008). As stated by the Third Circuit, "`[c]ross-motions are no more than a claim by each side that it alone is
The key issue before the Court in the present Cross-Motions for Summary Judgment is whether the Release signed by the Plaintiffs bars the substantive claims raised by the Second Amended Complaint in Romero I and the Amended Complaint in Romero II. This issue gives rise to two separate inquiries. The first question is whether the Release, if valid, would bar all of the claims raised by the two cases. Second, the Court must then consider whether the Release constitutes a valid and enforceable contract. The Court will address each issue separately.
The parties initially dispute the scope of the Release and whether it is applicable to all of the claims at issue in Romero I and Romero II. Allstate argues that the Release covers all of Plaintiffs' claims in both cases. Plaintiffs, on the other hand, contend that the Release does not extend to ERISA claims in Romero I or Romero II. The Court finds that Allstate's interpretation is correct and all asserted claims fall within the bounds of the Release.
As a preliminary matter, the Release's coverage of the claims in Romero I and Count II of Romero II is dictated by the law of the case doctrine. In Romero v. Allstate Ins. Co., 344 Fed.Appx. 785 (3d Cir.2009), the United States Court of Appeals for the Third Circuit overruled the decision by the District Court judge originally assigned to this matter, which found that the Release signed by the Plaintiffs was valid and barred all substantive claims. Id. at 794. In making this ruling, the Third Circuit stated:
Id. at 790 (emphasis added) (footnote omitted). Later on in the opinion, the Third Circuit explained its holding on the scope of the Release as follows:
Id. at 793. Towards the end of its ruling, the appellate court again re-emphasized its position on the scope of the Release:
Id. at 794 (emphasis added). Via a footnote, the Third Circuit then made clear that it was not ruling on whether the Release covered Counts I and III of Romero II. Specifically, it held:
Id. at 793 n. 11.
Reading this language as a whole, the Court finds that the Third Circuit intentionally and explicitly dictated that the broad language of the Release at issue covers all but Counts I and III of Romero II. Little is left to interpretation by the Third Circuit's express statement that all common law, ADEA, and ERISA claims are "covered by the broad language of the release, which specifically mentions both those statutes and common law claims." Id. at 793.
In both their Response to Allstate's Motion for Summary Judgment and their Reply Brief in support of their Motion for Summary Judgment, Plaintiffs contend that the Third Circuit's ruling is dicta and, thus, not the law of the case. They reason that the Third Circuit merely held that this Court "`should reexamine the validity of the release, after [first] allowing further discovery into the facts surrounding the signing of the releases.'" (Pls.' Resp. Opp'n Mot. Summ. J. 98 (quoting Romero, 344 Fed.Appx. at 793).) In addition, they assert that "any statements by the Third Circuit about the scope of the Release and what claims it may and may not cover were not essential to this holding that Plaintiffs are first entitled to additional discovery. And the Third Circuit's statements about whether the Release covers
The Court finds no merit to this argument. The law of the case doctrine provides that "when a court decides upon a rule of law, that rule should continue to govern the same issues in subsequent stages in the litigation." In the Matter of Resyn Corp., 945 F.2d 1279, 1281 (3d Cir. 1991) (quotations omitted). In other words, "once an issue has been decided, parties may not relitigate that issue in the same case." Waldorf v. Shuta, 142 F.3d 601, 616 n. 4 (3d Cir.1998). It is equally well-established, however, that "[t]he doctrine does not apply to dicta." United Artists Theatre Circuit, Inc. v. Twp. of Warrington, Pa., 316 F.3d 392, 397 n. 4 (3d Cir.2003).
The Third Circuit's ruling as to the scope of the Release in this matter was clearly not dicta. On three separate occasions in the opinion, the court made the unequivocal and definitive ruling that the Release covered all the claims in Romero I and Count II of Romero II. Moreover, it went on explain the basis for its ruling by noting that the language of the Release was broad and specifically named the statutory and common law claims raised in the barred counts. The court then took care to expressly except out from its ruling Counts I and III of Romero II — an unnecessary step if the court did not intend to issue an express ruling on the scope of the Release.
To the extent that Plaintiffs contend that this conclusion was not essential to the Third Circuit's ultimate holding, they are mistaken. The Third Circuit remanded the case with express instructions of what the District Court was required to do. Further discovery was ordered only as to the validity of the Release — nothing more. If the Release was ultimately deemed valid, then the District Court was only to decide whether Counts I and III of Romero II were covered since the other claims were clearly barred. Moreover, to the extent that Plaintiffs contend that the ruling was based on an incomplete factual record and incomplete briefing, Plaintiffs fail to recognize that interpretation of unambiguous contracts are a matter of law for the court. Panther Mountain Lodge, Inc. v. Waymart Windfarm, L.P., No. Civ. A.08-755, 2010 WL 4942262, at *3 (M.D.Pa. June 23, 2010). Thus, the Third Circuit acted well within its province when ruling on the scope of the Release.
In short, the Third Circuit unequivocally held that the Release at issue barred all but Counts I and III of Romero II. The appellate court remanded only for further consideration of whether the Release itself was valid and, if it was not, for substantive consideration of the underlying claims. Nothing in the Third Circuit opinion suggests that this holding was dicta or that it did not intend for its ruling on the scope of the Release to have precedential value. Bound by this ruling and by the law-of-the-case doctrine, this Court deems that if the Release is valid, it bars all the claims of Romero I and Count II of Romero II.
As noted above, the Third Circuit explicitly declined to decide whether or not the
(Am. Compl., No. Civ.A.01-6764, ¶¶ 100-08.) Count III provides:
(Id. ¶¶ 124-26.) In other words, these claims seek to "repeal or set aside" both a 1994 amendment and a 1991 amendment to the Allstate Agents Pension Plan ("Pension Plan") wherein Allstate (a) purported to amend the Pension Plan to redefine "service" and then denied early retirement benefits to Plaintiffs who continued to work for Allstate after the Program under the R3001 contract; and (b) amended the Pension Plan to phase out "beefed up" early retirement benefits for employees who completed twenty years of service. Allstate now contends that these claims are barred by the Release, whereas Plaintiffs assert that (1) these claims are exempted by the unambiguous language of the Release; (2) to the extent that the Release is ambiguous, it should be interpreted against Allstate; (3) the ERISA claims in Romero II arose after the execution of the Release and, thus, are not covered; and (4) Plaintiffs cannot waive their claims for ERISA pension entitlements. The Court considers each argument individually.
It is well settled that a claim for benefits under ERISA § 502(a)(1)(B) is an assertion of a contractual right under the
In construing the terms of a release, like any contract, the court must read the document in its entirety, giving effect to all of the contractual language if at all possible. Whole Enchilada, Inc. v. Travelers Prop. Cas. Co. of Am., 581 F.Supp.2d 677, 689-90 (W.D.Pa.2008). "The Court should not consider individual terms unmoored from their context, but should instead consider the entire contractual provision to determine the intent of the parties." NorFab Corp. v. Travelers Indem. Co., 555 F.Supp.2d 505, 509 (E.D.Pa.2008). In addition, "`[n]o provision within a contract is to be treated as surplusage or redundant if any reasonable meaning consistent with the other parts can be given to it.'" J.C. Penney Life Ins. Co. v. Pilosi, 393 F.3d 356, 364 (3d Cir. 2004) (quoting Sparler v. Fireman's Ins. Co. of Newark, N.J., 360 Pa.Super. 597, 521 A.2d 433, 438 n. 1 (1987)).
In the present case, the relevant language of the Release at issue states:
(Heinz Decl., Ex. 186 ("Release") (emphasis added).)
Plaintiffs contend that the anti-cutback claims in Romero II seek equitable relief sufficient to cover their lost early retirement benefits. Such claims are based upon Allstate's amendments to the Pension Plan that took place prior to the Program's "employment termination date" and either made it more difficult to meet the eligibility requirements for obtaining early retirement benefits or eliminated certain retirement benefits. According to Plaintiffs, because these cutback claims merely seek benefits to which Plaintiffs are entitled, they are not subject to the Release.
Allstate, on the other hand, contends that the phrase "any benefits to which I am entitled in accordance with an Allstate plan subject to ERISA" refers only to vested benefits as opposed to accrued benefits. It goes on to reason that Counts I and III of Romero II do not seek "benefits" to which Plaintiffs are "entitled." Rather, those claims seek to "repeal or set aside" a 1994 amendment and a 1991 amendment to the Pension Plan and, at best, attempt to recover accrued, not vested, benefits.
Based on a plain interpretation of the Release, the Court finds that Plaintiffs' claims in Counts I and III do not fall within the scope of the carve-out provision for two reasons. First, Counts I and III are not claims for "benefits" because the ERISA provision under which Plaintiffs bring these claims cannot be used for benefits claims. Second, even if Counts I and III can be construed as seeking "benefits," they do not seek benefits "to which [the Plaintiffs are] entitled."
Both Counts I and II set forth violations of 29 U.S.C. § 1054(g), which provides that:
29 U.S.C.A. § 1054(g).
Consistent with this statute, Plaintiffs' Prayer for Relief in Romero II seeks the following:
(Am. Compl., Romero II, No. Civ.A.01-6764, Prayer for Relief.)
Notably, in this Prayer for Relief, Plaintiffs rely primarily on 29 U.S.C. § 1132(a)(3). This section provides that a civil action may be brought "by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan." 29 U.S.C. § 1132(a)(3). It is well established that this section is limited to "traditional equitable relief" and may not be used to award "traditional legal relief (i.e., money damages)." Graden v. Conexant Sys., Inc., 496 F.3d 291, 300 (3d Cir.2007); see also Mertens v. Hewitt Assoc., 508 U.S. 248, 256-63, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993). A request for plain money damages — i.e., benefits — under § 1132(a)(3) is inappropriate and must be dismissed. See Varity Corp. v. Howe, 516 U.S. 489, 490, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996); Eichorn v. AT & T Corp., 484 F.3d 644, 655-56 (3d Cir.2007). Thus, to the extent that Plaintiffs seek relief under § 1132(a)(3), they have not asserted a "claim . . . to benefits"
Plaintiffs offer two responses. First, they contend that the phrase "claims . . . to any benefits" in the Release's carve-out does not confine the carve-out to only claims for monetary damages under
Alternatively, Plaintiffs contend that, in their Prayer for Relief, they also specifically request damages under § 1132(a)(1)(B) "after the Court has provided the relief set forth in paragraph C above." (Am. Compl., Prayer for Relief ¶ C.) Such requested relief, however, is improper under § 1132(a)(1)(B). As the Supreme Court explained in CIGNA Corp. v. Amara, ___ U.S. ___, 131 S.Ct. 1866, 179 L.Ed.2d 843 (2011), section 1132(a)(1)(B) may provide relief when a plan participant or beneficiary seeks to "enforce" the "terms of the plan," but will not provide relief when a participant or beneficiary seeks to change those terms. See 131 S.Ct. at 1876-77. The district court in CIGNA found that changes to a retirement plan violated various ERISA provisions, including § 1054(h). See 131 S.Ct. at 1874-75. The district court then "ordered relief in two steps," relying entirely on § 1132(a)(1)(B). Id. at 1875-76. In "Step 1" it "ordered the terms of the plan reformed." Id. at 1876. In "Step 2" it "ordered the plan administrator . . . to enforce the plan as reformed." Id. The Supreme Court reversed, holding that § 1132(a)(1)(B) did not authorize the two-step relief that the district court had ordered:
Id. at 1876-77 (emphasis in original) (citations omitted). Instead, the Court suggested that the remedies ordered by the district court likely fit under § 1132(a)(3) because they resembled traditional equitable remedies. Id. at 1878-80. The Court concluded that although "this relief takes the form of a money payment, [that fact] does not remove it from the category of traditionally equitable relief." Id. at 1880; see also Virtue v. Int'l Bhd. of Teamsters Ret. & Family Protection Plan, 886 F.Supp.2d 32, 36 (D.D.C.2012) (holding that "remedying a violation of § 1054(g) requires changing — not simply enforcing — the terms of the plan," meaning that a plaintiff seeking to amend the terms of a plan and then enforce the plan as amended must proceed under § 1132(a)(3) and not § 1132(a)(1)).
Likewise, in the present case, Plaintiffs seek a two-step remedy. In step one, they seek to repeal the November 1991 and December 1994 plan amendments that they allege violate the anti-cutback provisions of ERISA. In step two, they seek to enforce the plans as reformed and obtain any monetary benefits to which they are entitled under such reformed plans. According to CIGNA and its progeny, both steps of such relief are properly pursued under § 1132(a)(3) as equitable relief, not under § 1132(a)(1) as benefits. See Clark v. Feder, Semo & Bard, P.C., 808 F.Supp.2d 219, 226 (D.D.C.2011) (holding that a plaintiff "may proceed only under § 1132(a)(1)(B) or § 1132(a)(3), not under both provisions."). Accordingly, any relief sought by Plaintiffs is equitable relief and not a claim "for benefits." In turn, Counts I and III of Romero II cannot fall within the carve-out provision of the Release.
Even if the Court were to find that Counts I and III of Romero II constituted claims for "benefits," such claims would still not fall within the "carve-out" provision of the Release as they are not benefits to which Plaintiffs are "entitled." As argued by Defendants, Counts I and III of Romero II seek to repeal a November 1991 and December 1994 Plan amendment based on purported violations of ERISA § 204(g) — ERISA's anti-cutback provision. The anti-cutback provision states that "[t]he accrued benefit of a participant under a plan may not be decreased by an amendment of the plan." 29 U.S.C. § 1054(g)(1). The Release, however, refers to a carve-out to a claim for benefits to which the employee is "entitled." As "entitled" refers to vested, not accrued, benefits, Allstate asserts that the anti-cutback claims do not fall within the carve-out and, in turn, are subject to the Release. Plaintiffs, on the other hand, assert that the distinction between vested and accrued benefits appears nowhere in the Release, which applies to "any benefits" to which Plaintiffs are "entitled," without defining the term "entitled."
At first blush, the parties' competing arguments as to the interpretation of the carve-out provision seem to suggest a contractual ambiguity. Upon closer scrutiny, however, the Court must agree with Allstate. As noted above, it is well established that the Court is required to interpret the Release so as to give meaning to
This conclusion, however, begs the question of what constitutes "benefits to which I am entitled." The Court finds guidance in general ERISA case law. One of the purposes of ERISA is to protect pension rights by ensuring "that if a worker has been promised a defined pension benefit upon retirement — and if he has fulfilled whatever conditions are required to obtain a vested benefit — he actually will receive it." Nachman Corp. v. Pension Ben. Guar. Corp., 446 U.S. 359, 375, 100 S.Ct. 1723, 64 L.Ed.2d 354 (1980). In the ERISA context, "`accrued benefits refer to those normal retirement benefits that an employee has earned at any given time during the course of employment.'" McClain v. Retail Food Emp'rs Joint Pension Plan, 413 F.3d 582, 584 (7th Cir.2005) (quoting Vallone v. CNA Fin. Corp., 375 F.3d 623, 635 n. 5 (7th Cir.2004)). By contrast, "`[v]ested benefits . . . refer to those normal retirement benefits to which an employee has a nonforfeitable claim.'" Id. (quoting Vallone, 375 F.3d at 635). "In short, an employee's vested benefits are the accrued benefits that the employee is actually
In Stargel v. SunTrust Banks, Inc., 968 F.Supp.2d 1215 (N.D.Ga.2013), the court faced the interpretation of a broad release that waived "all Claims under [ERISA], and Claims under any SunTrust employee benefit plan," but preserved "Claims related to Stargel's entitlement to receive any vested benefits earned under any SunTrust employee benefit plan." Id. at 1223. The court agreed with Defendants' interpretation that the release "merely preserve[d] Stargel's right the benefits
In short, while Allstate could have avoided some dispute by using the term "vested benefits" in lieu of "benefits to which I am entitled,"
In an alternative argument, Plaintiffs seek to invoke the "future claims" carve-out in the Release. This provision states, "I understand that this release and waiver does not apply to any future claims that may arise after I sign this Release . . ." (Heinz Decl., Ex. 186 ("Release"), at ARI 04101 (emphasis added).) Plaintiffs contend that their rights to early retirement benefits did not arise until they turned fifty-five and had twenty years of continuous service. Thus, they could not know that the amendments adopted in the 1990s affected them adversely under § 1054(g)'s anti-cutback protections until either they had reached fifty-five and had at least twenty years of continuous service or they had reached fifty-five and had acted in a manner that prevented them from reaching the twenty-year milestone.
This argument is misplaced. Counts I and III of Romero II seek to repeal amendments to the Pension Plan that were adopted in December 1994 and November 1991 respectively. Whether Plaintiffs' rights under those Plans had yet accrued is irrelevant. Rather, the relevant question is when "the plaintiff discovers, or with due diligence should have discovered, the injury that forms the basis for the
In this case, Plaintiffs knew that the 1991 and 1994 amendments to the Pension Plan repudiated rights that they had under the Plan, at the latest, in 1999 when they signed the Release and converted to independent contractors. As noted above, with respect to Count I, the Program Information Booklet advised Plaintiffs, in November 1999, that their service under the R3001 contract would not count toward obtaining early retirement benefits and that they would cease accruing future benefits under the Plan as of their date of their termination. Similarly, as to Count III, the 1991 amendment eliminated the "beefed-up" benefits at year end of 1999, meaning that Plaintiffs knew, prior to or by the time they signed the Release, that they would not be entitled to such benefits. Accordingly, the Court finds that these claims did not arise after the Releases were executed and, thus, do not fall with the Release's carve-out provision.
In a final effort to argue that Counts I and III of Romero II (as well as
The relevant provision of ERISA states that, "Each pension plan shall provide that benefits provided under the plan may not be assigned or alienated." 29 U.S.C. § 1056(d)(1). "Pension entitlements are, without exception, subject to the anti-alienation provision of ERISA." Lynn v. CSX Transp., Inc., 84 F.3d 970, 975 (7th Cir. 1996) (citing Patterson v. Shumate, 504 U.S. 753, 760, 112 S.Ct. 2242, 119 L.Ed.2d 519 (1992)).
Crucially, however, "an entitlement, as its name would suggest, refers to vested benefits to which a plaintiff is entitled under the terms of the pension plan itself." Hakim v. Accenture U.S. Pension Plan, 718 F.3d 675, 681 (7th Cir.2013). Repeatedly, the term "[p]ension entitlements" has repeatedly been interpreted to mean vested benefits. See, e.g., Kickham Hanley P.C. v. Kodak Ret. Income Plan, 558 F.3d 204, 213 (2nd Cir.2009) (noting that ERISA's anti-alienation provision is irrelevant to claims regarding non-vested pension benefits); Lumpkin v. Envirodyne Indus., Inc., 933 F.2d 449, 455 (7th Cir.1991) ("The anti-alienation provision . . . clearly manifest[s] Congress's intent to protect workers from unknowingly signing away their vested pension benefits. . . .") (emphasis added).
Plaintiffs now contend that ERISA's anti-alienation provision does not distinguish between vested pension entitlements and accrued pension entitlements, but rather prohibits waiver of any ERISA claims. To accept this interpretation, however, would mean that ERISA claims may never be waived by a release — a result contrary to well-settled jurisprudence. Indeed, a general release of all claims has been held to include all ERISA claims even if ERISA is not specifically mentioned See, e.g., Howell v. Motorola, Inc., 633 F.3d 552, 559 (7th Cir.2011) (holding that severance agreement barred plaintiff's claim that his pension account would have been worth more but for defendant's breach of ERISA fiduciary duties); Calvitti v. Anthony & Sylvan Pools Corp., 351 Fed.Appx. 651, 654-55 (3d Cir.2009) (upholding waiver of ERISA claims under a release); Taylor v. Visteon Corp., 149 Fed. Appx. 422, 426 (6th Cir.2005) (upholding dismissal of ERISA claim waived by release agreement given in exchange for enhanced severance package); Chaplin v. NationsCredit Corp., 307 F.3d 368, 372-73 (5th Cir.2002) (holding that a general release bars claims for ERISA benefits even if ERISA is not specifically mentioned); Smart v. Gillette Co. Long-Term Disability Plan, 70 F.3d 173, 181-82 (1st Cir.1995) (upholding finding that ERISA claims were waived under general release signed by plaintiff).
Having engaged in a lengthy analysis regarding the interpretation of the Release, the Court finds that all claims in Romero I and Romero II are encompassed by the Release's broad waiver provision. As to all claims in Romero I and Count II of Romero II, the Third Circuit unequivocally and affirmatively held that they were covered by the Release. As such a holding constitutes the precedential law of the case, the Court may not deviate from this finding. As to Counts I and III of Romero II, the Court determines that these claims do not fall within the specific carve-out provision of the Release since (a) they are not claims for benefits, let alone vested benefits; (b) they arose prior to the signing of the Release; and (c) they are not encompassed by ERISA's anti-alienation provision. In turn, they are covered by the Release's broad waiver provision.
Having found that the language of the Release covers all of Plaintiffs' claims in Romero I and Romero II, the Court must now consider the validity of the Release. Plaintiffs offer two broad arguments in support of their claim of invalidity. First, they contend that the Release is invalid as to all of their ADEA claims because Allstate failed to comply with the requirements under the Older Workers Benefit Protection Act. Second, they claim that the Release is invalid as to all of their federal law claims under ADEA and ERISA because Allstate cannot show that it was executed knowingly and voluntarily. Finally, Plaintiffs assert that the Release is unconscionable and therefore does not bar Plaintiffs' common law claims such as breach of contract and breach of fiduciary duty.
In 1990, Congress amended the ADEA by passing the Older Workers Benefit Protection Act ("OWBPA"). OWBPA provides that:
29 U.S.C. § 626(f)(1). The United States Supreme Court has interpreted this statute to impose rigid requirements: "Congress imposed specific duties on employers who seek releases of certain claims created by statute. Congress delineated these duties and without qualification: An employee `may not waive' an ADEA claim unless the employer complies with the statute. Courts cannot with ease presume ratification of that which Congress forbids." Oubre v. Entergy Operations, Inc., 522 U.S. 422, 427, 118 S.Ct. 838, 139 L.Ed.2d 849 (1998). It went on to note that "[t]he statute creates a series of prerequisites for knowing and voluntary waivers and imposes affirmative duties of disclosure and waiting periods." Id. Moreover, it remarked that "[t]he OWBPA governs the effect under federal law of waivers or releases on ADEA claims and incorporates no exceptions or qualifications. The text of the OWBPA forecloses the employer's defense, notwithstanding how general contract principles would apply to non-ADEA claims." Id. Notably, "[t]he party asserting the validity of a waiver shall have the burden of proving . . . that a waiver was knowing and voluntary . . ." 29 U.S.C. § 626(f)(3).
Allstate asserts that the Release fully complies with all of OWBPA's dictates. In response, Plaintiffs contend that Allstate failed to comply with at least three OWBPA requirements: (1) the requirement for the minimum of what must be disclosed ("disclosure requirements") provided at 29 U.S.C. § 626(f)(1)(H); (2) the requirement that the release be understandable to the average employee subject to the Program ("understandability requirement") provided at 29 U.S.C. § 626(f)(1)(A); and (3) the requirement that the release be supported by consideration in addition to anything of value to which the individual is already entitled ("consideration requirement"), provided at 29 U.S.C. § 626(f)(1)(D).
As set forth above, the disclosure requirements mandate that when an employer seeks a waiver of ADEA claims in connection with an "employment termination program," it must inform affected employees as to (1) "any class, unit, or group of individuals covered by such program, any eligibility factors for such program, and any time limits applicable to such program;" and (2) "the job titles and ages of all individuals eligible or selected for the program, and the ages of all individuals in the same job classification or organizational unit who are not eligible or selected for the program." 29 U.S.C. § 626(f)(1)(H). An "employment termination program" takes place when a group or class of employees are involuntarily terminated and "offered additional consideration for their decision to sign a waiver." 29 C.F.R. § 1625.22(f)(1)(iii)(A). "Typically, an involuntary termination program is a standardized formula or package of benefits that is available to two or more employees. . . ." Id. § 1625.22(f)(1)(iii)(B).
"The terms `class,' `unit,' or `group' in section 7(f)(1)(H)(i) of the ADEA and `job classification or organizational unit' in section 7(f)(1)(H)(ii) of the ADEA refer to examples of categories or groupings of employees affected by a program within an employer's particular organizational structure." 29 C.F.R. § 1625.22(f)(3)(i)(A). Thus, "[w]hen identifying the scope of the `class, unit, or group,' and `job classification or organization unit,' an employer should consider its organizational structure and decision-making process." Id. § 1625.22(f)(3)(i)(B). The "decisional unit" for purposes of section 7(f)(1)(H)(i) is "that portion of the employer's organizational structure from which the employer chose the persons who would be offered consideration for the signing of a waiver and those who would not be offered consideration for the signing of a waiver." Id. When identifying the decisional unit for purposes of the statute, the employer must act on a case-by-case basis. Id. § 1625.22(f)(3)(ii)(A).
The OWBPA Disclosure in this case defined its decisional unit as follows:
(Heinz Decl., Ex. 74 ("Age Discrimination in Employment Waiver Information"), at ARI 003839.) It went on to list ages and job titles for the various agents who were eligible and selected and not eligible and not selected for the Program. Plaintiffs now contend that Allstate cannot show that its OWBPA Disclosure strictly complied with § 626(f)(1)(H) for four reasons. The Court addresses each separately.
First, the EEOC regulations provide that, "[i]f an employer in its disclosure combines information concerning both voluntary and involuntary terminations, the employer shall present the information in a manner that distinguishes between involuntary and involuntary terminations." 29 C.F.R. § 1625.22(f)(4)(iv). According to Plaintiffs, however, Allstate did not comply with this requirement, but rather, using a category of "eligible and selected," the OWBPA disclosure lumped together (a) R830 and R1500 agents who were involuntarily terminated as part of the Program; and (b) the West Virginia and the other R830 agents of Allstate who were not terminated, but had the choice to remain in their contracts or voluntarily participate in the Program. Thus, Plaintiffs contend they could not discern how many R830 and R1500 agents were not being terminated and what their ages were.
The Court agrees that Allstate's disclosure does not precisely follow the letter of this requirement. A review of the undisputed facts of record reveals that, of the more than 6,300 employee agents listed as "eligible and selected" for the Program, (a) fourteen of them were from West Virginia and were offered incentives to sign the Release, but did not have their contracts involuntarily terminated, and (b) four of them were R830 agents that did not have their contracts involuntarily terminated, but were also offered incentives to sign the Release. In the OWBPA disclosure itself, Allstate did not indicate that these eighteen agents were not having their agreements terminated as of the date specified by the Program.
Allstate responds that the Informational Notice distributed to all agents as part of the Program specified the date by which Allstate terminated its employee agent contracts, and informed all agents that "[t]his does not apply to R830 or R1500 agents whose agreements were executed in the State of West Virginia on or after June 8, 1984." (Zolner Decl., Ex. 68 ("Informational Notice"), at ARI 003845.) This statement, however, did not clearly inform Plaintiffs that these approximately eighteen agents were not having their contracts terminated. Primarily, the disclosure was in the Program Information Booklet, not in the OWBPA disclosure. Second, the disclosure was couched within a small footnote in small print. Third, the statement to which the footnote was appended stated, "Your employment as an Allstate Agent and your R830 Agent Compensation Agreement or R1500 Agent Employment Agreement shall terminate no later than the close business on June 30, 2000 (or if in Delaware, no later than close of business on December 31, 2000)." (Id.) A plain reading of this text does not indicate to a reasonable reader that the West Virginian agents were never having their contracts terminated, only that their contracts were not terminating on the date specified above. Moreover, it did not reference the four other agents who were exempted from termination.
Notwithstanding this failure, Allstate argues that its disclosures complied with the spirit of the regulations in that Plaintiffs were not deprived of any information needed to decide whether to sign the Release or to accurately assess whether they had a possibly valid discrimination claim. This is particularly true in that the eighteen agents who were not terminated "represent an infinitesimal percentage of the total number of agents eligible for the Program" and that fourteen of those agents were over the age of forty. (Allstate's Resp. Opp'n Mot. Summ. J. 39-40.)
The Court must agree. While the Supreme Court has made clear OWBPA is a "strict, unqualified statutory stricture on waivers" and that "[a]n employee `may not waive' an ADEA claim unless the employer complies with the statute," Oubre, 522 U.S. at 426-27, 118 S.Ct. 838, the Supreme Court did not address the standard for determining whether an employer's attempted compliance meets the requirements of OWBPA. Indeed, courts have noted that the disclosure required under § 626(f)(1)(H) is "so imprecise, it cannot possibly require strict application." Ribble v. Kimberly-Clark Corp., No. Civ.A.09-643, 2012 WL 589252, at *5 (E.D.Wis. Feb. 22, 2012). "In light of the OWBPA's imprecise terms, some violations may be so technical as to be de minimis, and thus may not invalidate an otherwise valid release of ADEA claims." Am. Airlines, Inc. v. Cardoza-Rodriguez, 133 F.3d 111, 118 n. 6 (1st Cir.1998). "Holding an employer strictly accountable for what might
In this case, the OWBPA requirements as to employee ages and decisional units have a defined purpose. They are intended to "permit older workers," who might otherwise "have no information at all regarding the scope of the [employment termination] program or its eligibility criteria [,] . . . to determine whether the program gives rise to a valid claim under the ADEA." S.Rep. No. 101-263, at 32 (1990), reprinted in part in 1990 U.S.C.C.A.N. 1509, 1537-38; see also Burlison v. McDonald's Corp., 455 F.3d 1242, 1247 (11th Cir.2006) (holding that the purpose of this provision is "to ensure that older employees are provided with information necessary to evaluate any potential ADEA claims they may have before deciding to release them."). Thus, in evaluating whether the employer's § 626(f)(1)(H) disclosure was sufficient, the relevant question is whether the employees were "provided with the age and job-title information that would be relevant if the employees were to bring an age discrimination claim arising out of their termination." Adams v. Moore Bus. Forms, Inc., 224 F.3d 324, 329 (4th Cir. 2000).
Under the particular facts of this case, Allstate has complied with the spirit of this requirement. Allstate informed Plaintiffs that over 6,300 agents were "eligible and selected" for the Program and gave the ages and job titles for each of these agents. The undisputed evidence shows that many Plaintiffs easily understood that approximately ninety percent of those agents were over forty years of age, thus allowing the Plaintiffs to evaluate whether they had a potential age discrimination claim against Allstate. The mere fact that eighteen agents (fourteen from West Virginia and four other R830 agents from other states) were not having their contracts involuntarily terminated, but were merely offered the same Program options, did not affect the calculus, as this group made up less than one percent of the total number of agents "eligible and selected" for the Program. Moreover, as noted by Allstate, a disclosure of the fact that these agents were not having their contracts terminated would not have affected the analysis of whether an ADEA claim was possible, given that fourteen of the eighteen agents were over forty years old. To completely invalidate the Release based on such a de minimis violation of ambiguous OWBPA standards would elevate form over substance with no indication that stricter compliance would have further advanced OWBPA's purpose.
The second error in Allstate's OWBPA disclosure identified by Plaintiffs is the alleged inaccurate statement that Allstate's Montana R830 and R1500 were not subject to the Program but were covered by a "separate program[ ]" with "different options." Plaintiffs contend that from the start, Allstate wanted to terminate these agents as part of the Program and ultimately did so, rolling out the same Program in Montana in February 2000. All Plaintiffs and non-employee Montana agents had until June 1, 2000 to sign the Release. Although Allstate provided the Montana agents with an OWBPA disclosure showing all agents eligible and selected for the Program, it failed to provide all other agents, including Plaintiffs, with an updated disclosure reflecting the selection of its Montana agents for termination as part of the Program. According to Plaintiffs, this failure constituted a violation of § 626(f)(1)(H), which, if condoned, would encourage employers seeking to get rid of older employees to intentionally delay announcing the group termination of many of its oldest employees until after announcing a first wave of terminations. In turn, this would prevent the employees who received the initial disclosure from discerning if they had an age discrimination claim.
In response, Allstate argues that when it announced the Program in November 1999, it was faced with uncertainty about the Program's application in Montana because of unique circumstances brought about by Montana state laws. As a result, in the November 16, 1999 ADEA Waiver Information sheet, Allstate stated that "[a]ll Allstate R830 and R1500 are eligible for the options described in the `Preparing for the Future' — R830 and R1500 Agent Information Booklet For the Group Reorganization Program (`Program Information Booklet'), except Montana and New Jersey Agents who will be covered in separate programs with different options available to them." (Heinz Decl., Ex. 74, ("Age Discrimination in Employment Waiver Information"), at ARI 003839.) Allstate subsequently offered its Montana agents a "separate program" wherein they were given Montana-specific materials and did not become eligible until February. Although, according to Allstate, the Program as implemented in Montana was largely the same as the Program announced in November 1999, the Montana Program had different options. For example, agents selecting the EA Option in Montana could only enter into the R3001C contract, which was designed for corporations, whereas agents in the other states could enter into either an R3001S contract as sole proprietors or the R3001C contract. (Zolner Decl., Ex. 124 ("Preparing for the Future R830 and R1500 Agent Information Booklet for Montana Agents"), at ARI 195088-ARI 195089; Zolner Decl., Ex. 65 ("Preparing for the Future R830 and R1500 Agent Information Booklet").) Moreover, Allstate asserts that it had no duty to redistribute the Montana ADEA Waiver Information to agents in other states who had been eligible for the Program since November 1999. Even if it had, the February 2000 Montana ADEA Waiver Information did not provide new information that agents eligible for the Program did not already have, since the
The parties now dispute whether the Montana program was a "separate program" or simply a continuation of the same Program, whether the Montana agents were part of the same decisional unit as the original terminated agents, and whether the original agents were entitled to updated disclosure when the Montana agents were added to the Program. This dispute may be easily resolved by reference to the EEOC regulations. Under 29 C.F.R. § 1625.22(f)(4)(vi):
Id. (emphasis added).
Parsing the language of this regulation, the Court finds that Allstate acted within the confines of OWBPA. Allstate structured its Program to take place in successive increments over a period of time. The original stage of the Program that affected approximately 6,200 agents was announced in November 1999, required the affected agents sign the Release as of June 30, 2000, and stated that their contracts would terminate as of that date. Allstate fully informed those agents not only as to the ages and job categories for that group, but also informed them as to the ages and job categories of the Montana agents, whom Allstate defined as being subject to a "separate program."
Plaintiffs offer two arguments to undermine reliance on this regulation. First, they note that 29 C.F.R. § 1625.22(f)(4)(vi) provides that there is no duty to supplement an earlier disclosure "so long as the disclosure, at the time it is given, conforms to the requirements of this section." Plaintiffs now claim that the OWBPA Disclosure did not otherwise satisfy § 626(f)(1)(H), for the reasons set forth elsewhere in their brief. The Court deals with those arguments separately and, to the extent there is a violation of
Second, Plaintiffs devote substantial, but unwarranted, attention to the word "terminees." They contend that "the approximately 5,600 agents who were subject to the Program, but had not yet decided their fate as of February 2000, were not `terminees' — they were still active Allstate employees with at least four months to go before the Release-signing deadline. Without complete and accurate information, these agents' waivers of ADEA claims were not knowing." (Pls.' Reply Supp. Summ. J. 13.) This interpretation misunderstands the regulation. As of February 2000, the remaining 5,600 agents were still "terminees" in that they were expressly informed that their employment contracts were to be terminated, irrespective of whether or not they signed the Release or what option they chose under the Program. The mere fact that the terminations had not officially taken place as of February 2000 is irrelevant. To interpret the word "terminee" as Plaintiffs suggest would result in an inconsistent meaning being given to the term "later terminees." In other words, if "terminee" is defined as one already terminated, then the "later terminees" would have also had to have been terminated — albeit at a later time — prior to their ever receiving their requisite disclosures. The more appropriate interpretation of this term is that once an employee is expressly told that their contract will be terminated under the Program, he/she becomes a "terminee" for purposes of OWBPA.
In short, the Court finds no error in the failure to disclose to the original participants in the Program, via an amended document, that the Montana agents later became eligible and selected for the Program, so long as the Montana agents were provided with a cumulative disclosure. Accordingly, the Court declines to invalidate the Release on this ground.
Next, Plaintiffs argue that Allstate's OWBPA Disclosure did not identify the proper decisional unit for the Program because it excluded associate and R3000 agents from the list of those not eligible or selected. Plaintiffs claim that the proper decisional unit for the Program was Allstate Insurance Company's captive employee agency force, which included not only R830 and R1500 agents, but also associate and R3000 agents who had the same role, same job, and same managers. Thus, according to Plaintiffs, Allstate's exclusion of associate and R3000 agents from its OWBPA Disclosure left Plaintiffs in the dark about the total number and ages of employee agents spared from termination.
As noted above, section 1625.22 explains that the terms "class," "unit," "group," "job classification," and "organizational unit" refer to examples of categories affected by a program within an employer's particular organizational structure, and that the scope of such terms is "determined by examining the `decisional unit' at issue." 29 C.F.R. § 1625.22(f)(1)(iii)(C). The regulation goes on to state:
Id. § 1625.22(f)(3)(i)(B). Notably, "if an employer seeks to terminate employees by exclusively considering a particular portion or subgroup of its operations as a specific facility, then that subgroup or portion of the workforce at that facility will be considered the decision unit." 29 C.F.R. § 1625.22(f)(3)(ii)(D). Nonetheless, "[e]ach information disclosure must be structured based upon the individual case, taking into account the corporate structure, the population of the decisional unit, and requirements of section 7(f)(1)(H) of the ADEA." 29 C.F.R. § 1625.22(f)(4)(vii)
Plaintiffs dispute the appropriate decisional unit in this case. They vigorously contend that the appropriate unit was Allstate's entire captive employee agency force. In turn, they assert that the R3000 and associate agents should have been included within this decisional unit and their information should have been disclosed in the OWBPA Disclosure.
The Court, however, does not find this argument persuasive. As noted above, a "decisional unit" is that portion of the employer's organizational structure from which the employer chose the persons who would be offered consideration for the signing of a waiver and those who would not be offered consideration for the signing of a waiver. To accept Plaintiffs' argument that the decisional unit was the entire captive agent workforce, Allstate would have had to include all R3001 independent contractors who were part of the Exclusive Agency Program. Yet, as all parties agree, the Program sought to either convert the employee agents to an R3001 contract, allow them to sell their book of business, or otherwise take an enhanced severance in return for signing a Release. To include agents who were already under R3001 contracts in the decisional unit would make little sense as such agents were already independent contractors and already had the right to sell their book of business. Accordingly, the Court finds no evidentiary support for a finding that the appropriate decisional unit was anything other than what Allstate says it was — all employee agents of Allstate.
This finding then raises the question of whether R3000 and associate agents were appropriately part of the employee agent force and, thus, a part of the decisional unit for which Allstate was required to disclose information. The Court finds that they were not. Both the associate agents and the R3000 agents were employee agents whose contracts automatically terminated after eighteen months, after which they could apply to become R3001 independent contractors. They did not have the option to then enter into an R830 or R1500 contract. Accordingly, they would not have been part of any decision as to which employees would be terminated under the Program and offered the opportunity to become R3001 agents along with the signing of a Release. While Plaintiffs make much of the fact that the R3000 and associate agents were part of the captive employee agent force, Plaintiffs disregard that such agents were only temporary employees with no entitlement to any of the same long-term benefits available to the R830 and R1500 contracts. Section 626(f)(1)(H) applies only if a waiver is requested in connection with an exit incentive or other employment termination program offered to a group or class of employees the employer. As the R3000 and associate agent contracts were subject to automatic termination with no further action, there was no logical reason for them to be considered for participation in the Program. Therefore, the Court finds no basis for requiring that Allstate reveal
The final alleged failure in the OWBPA disclosure identified by Plaintiffs is Allstate's inclusion of New Jersey agents in the Program decisional unit. Specifically, the OWBPA Disclosure aggregated the employee agents of Allstate New Jersey and Allstate Insurance Company into one decisional unit. According to Plaintiffs, nothing in OWBPA or its governing regulations suggests that multiple corporations can be combined into one decisional unit for disclosure purposes. As Allstate New Jersey was a "separate company" from Allstate Insurance Company and had a different compensation agreement with its employee agents than Allstate Insurance Company did in the rest of the country, it was improper for Allstate to treat the New Jersey agents as part of its decisional unit for the Program. Because the New Jersey agents were not subject to the Program and were, on average, several years older than the R830 and R1500 agents subject to the Program, their inclusion as part of the same decisional unit artificially reduced the apparent adverse impact on older agents.
Relying on Allstate's definition of the decisional unit — all R830 and R500 agents in the United States — the inclusion of the Allstate New Jersey Agents subject to those contracts was correct. At its core, the term "decisional unit" is intended to reflect the reality of "the process by which an employer chose certain employees for an exit incentive or termination program and ruled out others." 29 C.F.R. § 1625.22(f)(3)(i)(B). Although the Court cannot always take an employer's description of decisional units at face value since it may be self-serving, Ribble v. Kimberly-Clark Corp., 717 F.Supp.2d 820, 822 (E.D.Wis.2010), "[t]he plain language of the regulations indicates the decision belongs to the employer." Ribble v. Kimberly-Clark Corp., No. Civ.A.09-643, 2012 WL 589252, at *12 (E.D.Wis. Feb. 22, 2012). "Assuming that the employer's identification of class, unit or group of employees from which the employees selected for separation were chosen reasonably describes an existing organizational unit within the company, the employer's designation should stand." Id. at *13. This is particularly true when a an employer chooses relevant and reasonable objective bases — such as geography, education level, job title, seniority, and current job focus — as opposed to "[s]quishy, manipulable, subjective criteria." Id. Here, the use of a nationwide geographic location together with the specific employment contracts constituted an objective description from which Allstate selected its employees for separation.
Plaintiffs, however, contend that Allstate New Jersey was a "separate company" and had "a different compensation arrangement" than Allstate Insurance Company did with the rest of the country. As such, they claim that it was improper for Allstate to treat the New Jersey agents as part of its decisional unit for the Program. In support of this argument, they cite to the case of Pagliolo v. Guidant Corp., 483 F.Supp.2d 847 (D.Minn.2007) where the court found that "OWBPA requires employees to provide information about only those workers within a departing employee's `decisional unit' and not job titles and ages of all employees nationwide who were terminated." Id. at 859. In that case, the defendants were Guidant Corporation and several of its subsidiaries throughout the United States. Id. at 851. The Guidant employees worked at eighty-four different facilities; the plaintiffs worked at nine of those facilities. Id. A centralized senior management committee decided to implement
The court determined that there were six separate employers and each one should have been a separate decisional unit. Id. at 859. Further, it determined that the decisional unit should have been limited by facility, given that there were eighty-four domestic facilities. Id. It noted that because local vice presidents and managers played a key role in the termination decisions, the various facilities constituted the appropriate decisional levels. Id.
Pagliolo is distinguishable on several levels. First, the RIF in that case involved six separate companies at eighty-four separate locations. This case involves only a parent company and a single subsidiary, with all employee agents doing the same type of work. Second, in Pagliolo, multiple local managers were used to make decisions regarding the RIF, whereas in the present case, the parties do not dispute that there was a single task force — the Channel Integration Team — who, along with the Board of Directors, formulated and implemented the Program. The sole evidence of record reveals that Ed Liddy and Rick Cohen were responsible for ultimately making the termination decision and choosing to exclude Allstate New Jersey employees.
Finally, the Court must again return to the principle discussed earlier that this provision of OWBPA is so ambiguous that requiring hypertechnical compliance could undermine its fundamental purpose, which is to "permit older workers," who might otherwise "have no information at all regarding the scope of the [employment termination] program or its eligibility criteria[,] . . . to determine whether the program gives rise to a valid claim under the ADEA." S.Rep. No. 101-263, at 32 (1990), 1990 U.S.C.C.A.N. 1509, 1540. Undoubtedly, the inclusion of the New Jersey agents satisfied that purpose. Plaintiffs were clearly informed that all R830 and R1500 agents were considered for the Program and, with minimal exceptions discussed above, all of them (more than 6,000 agents) were being involuntarily terminated. Any reasonable person of average knowledge would recognize that the largest group of R830 and R1500 agents that were not being terminated (175 in total) came from a single state, thereby signaling that circumstances other than age were at play. Their inclusion neither created confusion about eligibility criteria nor undermined the fundamental purpose underlying the OWBPA disclosure.
Plaintiffs' second broad challenge to the OWBPA disclosure focuses on the understandability requirement set forth at 29 U.S.C. § 626(f)(1)(A). This section states that: "Except as provided in paragraph (2), a waiver may not be considered knowing and voluntary unless at a minimum . . . (A) the waiver is part of an agreement between the individual and the employer that is written in a manner calculated to be understood by such individual, or by the average individual eligible to participate." Id. The regulations go on to clarify as follows:
29 C.F.R. § 1625.22(b)(3-4).
Plaintiffs' understandability challenge takes two forms. First, Plaintiffs contend that the "Release and Waiver" section is a complex, run-on sentence comprised of incomprehensible legal jargon. Second, they assert that the waiver purports both to prohibit an individual from filing a challenge to the validity of the waiver and to interfere with the employees' rights to file a charge with the EEOC.
Plaintiffs first contend that the "Release and Waiver" section of the Release is "largely comprised of one complex, run-on sentence of over 200 words." (Pls.' Mem. Supp. Mot. Summ. J. 53.) In addition, Plaintiffs argue that uses extensive legal jargon, which Allstate never explained or clarified to agents. For this reason, Plaintiffs claim to not have fully understood the waiver language in the Release.
In interpreting any release, a court must begin with the release's plain language. Wastak v. Lehigh Valley Health Network, 342 F.3d 281, 289 (3d Cir.2003). As set forth above, the relevant Release language stated:
(Heinz Decl., Ex. 186 ("Release"), at ARI 00424 (emphasis added).) Undoubtedly, the Release's use of one long sentence, consisting of 203 words, is hardly the model of clarity and certainly is less preferable to the use of several shorter sentences. Nevertheless, the Court finds nothing in that language deprives it of its requisite understandability. The cited language is not buried at the bottom of a contract, but rather is highlighted for the employee. Moreover, the provision says what it means — the employee releases Allstate from any type of suit or claim related to his/her employment and/or the termination of employment and conversion to independent contractor status. The meaning was further clarified by the Informational Notice provided to each employee agent that stated:
(Heinz Decl., Ex. 62 ("Informational Notice"), at ARI 003845.) Thus, the mere fact that the Release was long and contained legalese does not, in and of itself, render it incomprehensible. See Ridinger v. Dow Jones & Co., Inc., 717 F.Supp.2d 369, 374 (S.D.N.Y.2010) ("While the Agreement is nevertheless scarcely a model of `plain English' draftsmanship, it adequately conveys the limitations that Ridinger accepted in exchange for enhanced severance pay. There also is no indication that any of the undertakings set forth in the Agreement were couched in terms too complicated for Ridinger to understand."), aff'd, 651 F.3d 309 (2d Cir.2011).
Plaintiffs' efforts to inject confusion into this language are unavailing.
(Meehan Decl., Ex. 85 ("Rule 30(b)(6) Deposition of Barry Hutton, Jan. 22, 2003"), 498:21-501:21.) Based on this testimony, Plaintiffs contend that if Allstate's corporate designee could not understand the Release language, then the language was not written in a manner to be understood by the average agent.
Hutton's understanding, while perhaps informative as to how the "average individual eligible to participate" would have understood the Release, bears little on the analysis and is certainly not controlling. "OWBPA's understandability requirement is couched in objective terms (the agreement between the parties must be `written in a manner calculated to be understood by such individual, or by the average individual eligible to participate.'[)]." Rupert v. PPG Indus., Inc., Nos. Civ.A.07-705, 08-616, 2009 WL 596014, at *43 n. 8 (W.D.Pa. Feb. 26, 2009) (quoting 29 U.S.C. § 626(f)(1)(A)). Thus, "it is unnecessary to consider extrinsic evidence as to how the Releases allegedly were in fact understood."
The Plaintiffs, in this case, were all businesspeople. They were agents for Allstate, handling complicated insurance contracts for anywhere from nine to thirty-one years. Many had attended at least some college and some had business or professional degrees. Allstate was not dealing with individuals of below average intelligence or who were inexperienced with contractual language. Certainly, the language of the Release was not so complicated as to be not understandable to the average signee.
In short, the Court deems the language of the Release to be understandable as a whole and typical of an enforceable waiver. As such, Plaintiff's argument in this regard is rejected.
Alternatively, Plaintiffs allege that the Release impinges on another of the OWBPA regulations. Specifically, 29 U.S.C. § 626(f)(4) states, "[n]o waiver agreement may affect the [EEOC's] rights and responsibilities to enforce this chapter. No waiver may be used to justify interfering with the protected right of an employee to file a charge or participate in an investigation or proceeding conducted by the [EEOC]." This provision is clarified by the regulations, which state that "[n]o waiver agreement may include any provision prohibiting any individual from: (i) Filing a charge or complaint, including a challenge to the validity of the waiver agreement, with EEOC, or (ii) Participating in any investigation or proceeding conducted by EEOC." 29 C.F.R. § 1625.22(i)(2). Yet, according to Plaintiffs, this is exactly what the Release purports to do since it to "release[s]" and "waive[s]" any "charges," without any corresponding language informing employee agents of their non-waivable right to challenge the validity of the Release as to ADEA claims and to bring EEOC charges.
The assessment of this argument is not a simple one in light of the somewhat conflicting jurisprudence on the matter. Allstate relies heavily on the Third Circuit decision in Wastak v. Lehigh Valley Health Network, 342 F.3d 281, 284 (3d Cir.2003). In that matter, the release stated that:
Id. at 284 (emphasis added). The Third Circuit found that the release did not violate § 626(f)(4)'s dictates, reasoning that "[a]t most, the statutory language [of § 626(f)(4)] can be read to mean only that a provision that purports to, for example, alter the EEOC's rights to pursue and investigate a claim that is filed, is unenforceable." Id. at 289. It went on to find that "the statute is clear that any attempt by an employer to enforce a contractual provision prohibiting an employee from filing a charge or participating in an EEOC investigation would be ineffectual, but there is no indication that the mere presence of that contractual language would void an otherwise knowing and voluntary waiver." Id. at 290 (emphasis in original). Relying on that interpretation of the statute, the Third Circuit remarked that "[a]lthough the [plaintiff] is clearly correct to the extent it asserts that the agreement purports to deny [the employee] a right he actually had, it has not offered a convincing rationale as to how that misstatement renders the agreement not understandable." Id. at 292.
This Court does not deem Wastak controlling, however, as it was based on an interpretation of the statute without the benefit of the subsequently enacted 29 C.F.R. § 1625.22(i)(2). Indeed, the Third Circuit acknowledged that that regulation would alter its statutory interpretation and would clearly preclude the inclusion of provisions that prohibit resort to the administrative process. Id. at 293 n. 6 (citing 29 C.F.R. § 1625.22(i)(2) ("No waiver agreement may include any provision prohibiting any individual from . . . [f]iling a charge or complaint, including a challenge to the validity of the waiver agreement, with [the] EEOC.")). The Court further opined that "[t]he presence of such a prohibition in a waiver agreement that is subject to this regulation could certainly lead a court to find, under proper circumstances, that the waiver `ha[d] the effect of misleading, misinforming, or failing to inform' the plaintiff, 29 C.F.R. § 1625.22(b)(4), thus rendering the waiver not `knowing and voluntary,' and, therefore, invalid." Wastak, 342 F.3d at 293 n. 6.
More recent district court decisions have dealt with the impact of this newer regulation on the issue of whether the inclusion of a provision precluding an individual from challenging the validity of the waiver runs afoul of the understandability requirement. In Rupert v. PPG Industries, Inc., Nos. Civ.A.07-705, 08-616, 2009 WL 596014 (W.D.Pa. Feb. 26, 2009), the district court construed the aforementioned regulations and observed that a release written in a manner that reasonably could be understood to bar a challenge to its validity fails to satisfy the understandability requirement of the OWBPA and would be ineffective as a waiver of ADEA claims. Id. at *49. In reaching this conclusion, the court considered the agency commentary accompanying 29 C.F.R. § 1625.23 and concluded that two comments published in the Federal Register controlled the interpretation. Id. at *47. The first comment stated that:
Id. (quoting Waiver of Rights and Claims: Tender Back of Consideration, 65 Fed. Reg. 77438, 77443-44 (Dec. 11, 2000) (emphasis in original)). The second comment provided:
Id. at *47 (quoting Waiver of Rights and Claims: Tender Back of Consideration, 65 Fed.Reg. at 77441). The court reasoned that these comments supported the invalidation of the entire agreement rather than just the specific provisions that purported to bar EEOC claims.
The Rupert court then turned to the language of the specific release at issue, which stated that:
Id. at *41 (emphasis in original). "Significantly," in addition to the broad claims release provision, the releases also contained, in the next subparagraph, a separate covenant not to sue stating that "Employee agrees never to file a lawsuit or become a member of a class asserting any claims that are released by Employee in this Agreement." Id. As such, the court remarked that,
Id. at *42. It thus concluded that, "the challenging of the effectiveness under the OWBPA of the Releases and the bringing of an ADEA claim lawsuit are, or reasonably could have been understood under the circumstances by the average eligible participant as being, intertwined and interconnected as a practical matter and included within the scope of the paragraph 6(a) broad affirmative claims release, of the paragraph 6(b) covenant not to sue, and/or of both in their combination." Id. Hence, "reading in conjunction the paragraph 6(a) claims release and the paragraph 6(b) covenant not to sue, the average eligible participant reasonably could have understood that the Release barred a challenge to the effectiveness or enforceability under the OWBPA of his or her Release." Id.
The same issue was reached in Bogacz v. MTD Products, Inc., 694 F.Supp.2d 400 (W.D.Pa.2010). The release in that matter stated that the plaintiff must, among other things:
Id. at 402-03. Following the reasoning of Rupert and acknowledging the inapplicability of Wastak, the Bogacz court remarked that "[t]he first sentence of [the waiver provision] reads very broadly and extends to any claims that `you have or might have against the Company . . . arising from or related to your employment and/or the termination of your employment.'" Id. at 411. It noted that "[t]he Release obviously related to the termination of plaintiff's employment. This first sentence taken together with the later clause proposing to bar `any and all claims arising under federal, state and/or local statutory, or common law, such as. . . . the Age discrimination in Employment Act of 1967, [and] the Older Workers Benefit Protection Act' could cause confusion about whether an enforceability action was barred." Id. The court went on to conclude that:
Id. (footnote omitted). Although the court acknowledged that the plaintiff in that case had "acquired a belief that the release was invalid from an individual at the EEOC, determined to sign the agreement despite this belief, and planned to sue defendants," the court deemed that to be of no moment since OWBPA "does [not] contain an exception to the eight statutory requirements. A release must meet the minimum statutory requirements to be a valid waiver of ADEA rights." Id. at 408-09.
By contrast, the district court, in Ribble v. Kimberly-Clark Corp., No. Civ.A.09-643, 2012 WL 589252 (E.D.Wis. Feb. 22, 2012), found that a broad release, while using the word "charges," did not violate OWBPA's prohibitions. The plaintiff in that matter argued that the release language equated to an improper attempt to bar the filing of EEOC charges. Id. at *6. The court remarked that "unlike the other information § 626(f)(1) requires the employer to convey to the employee, there is no requirement that the ban against waivers of EEOC charges be set forth in the waiver agreement." Id. at *7. It went on to note that "simply because the language could have been clearer [regarding the right to pursue a charge with the EEOC] does not mean that the language impermissibly prohibited a signing employee from later filing a charge with the EEOC. Indeed, many of the plaintiffs in this action both signed the waivers with the disputed language and still filed EEOC charges; over seventy-five percent of plaintiffs signed waivers and later filed EEOC charges." Id. (emphasis in original). The court commented that "[t]his fact demonstrates that even many plaintiffs themselves did not believe the waiver prohibited them from filing a charge with the EEOC. It also undermines any argument plaintiffs may have that [defendant's] waiver language was not written in such a manner calculated to be understood by the average individual eligible to participate." Id. In fact, the waiver included the language, "the above release . . . excludes any other claim which cannot be released by private agreement"—"[n]othing in the regulations or controlling law requires a separation agreement to list, by name, each of the non-waivable claims." Id. at *8.
In the present case, the Release language is not quite akin to Rupert and Bogacz. The releases in those cases contained both releases of claims and covenants not to sue.
Upon closer scrutiny, the Court does not find such language misleading for several reasons. First, while the term "charges" standing alone could potentially be read as meaning administrative charges, when taken in context of the phrase "actions, charges, causes of action, demands, damages, entitlements or claims for relief or remuneration of any kind," it is easily understood, particularly by businesspeople in Plaintiffs' positions, to constitute legal charges filed in a court of law. Second, the Release goes on to note that these "actions, charges, etc." include "all matters in law, in equity, in contract, or in tort, or pursuant to statute, including [under the ADEA, Title VII, the ADA, ERISA and several state statutes], or any other federal, state, or local law or ordinance or the common law." No mention is made of any prohibition on filing any administrative action, nor does the Release contain language similar to that found problematic in Bogacz barring claims under the Older Workers Benefit Protection Act—which is the logical means by which a plaintiff would bring a challenge to the validity of a Release. Third, the prohibited claims are those "arising out of, connected with, or related to, my employment and/or the termination of my employment and my R830 or R1500 Agent Agreement with Allstate, or my transition to independent contractor status." The Release does not purport to bar claims challenging the validity of the Release itself. Fourth, unlike the language in Rupert, the Release at issue here does not contain an covenant not to sue, thereby eliminating the heightened "risk of misunderstanding" identified by the Rupert court. Finally, the proper standard of review for such language is whether the "average individual eligible to participate" would have misunderstood or been misled by the language. While this is an objective standard, the Court would be remiss to disregard the fact that all thirty Plaintiffs in this case filed an EEOC charge—eight of whom filed prior to signing the Release—and Allstate did not interfere with or retaliate against any such Plaintiffs.
In sum, OWBPA contains no requirement that the ban against waivers of EEOC charges or challenges to the validity of the Release be expressly set forth in the waiver agreement. Ribble, 2012 WL 589252 at *7. The simple fact that the language of the Release at issue could have been made clearer by eliminating the single word "charges" does not render the entire Release misleading regarding the right to bring EEOC charges or claims challenging the validity of the Release. Overall, the Court finds that the average individual eligible to participate in this Release would not have been misled or misinformed as to the right to pursue these various causes of action. Therefore, the
OWBPA states that a release is valid only if "the individual waives rights or claims only in exchange for consideration in addition to anything of value to which the individual is already entitled." 29 U.S.C. § 626(f)(1)(D). As defined by the corresponding regulations, "`[c]onsideration in addition' means anything of value in addition to that to which the individual is already entitled in the absence of a waiver." 29 C.F.R. § 1625.22(d)(2). Plaintiffs now contend that they did not receive the requisite consideration for several reasons. First, they assert that they were not at-will employees and, therefore were entitled to continued commissions and benefits without having to sign a release. Second, even if they were at-will employees, a reasonable factfinder could conclude that nothing received by those who signed the Release exceeded that to which they were already entitled. With some hesitation, the Court must disagree.
Plaintiffs first aver that Allstate breached their R830 and R1500 agreements when it involuntarily terminated them as part of the Program. They reason that the R830 and R1500 contracts allow only for termination for cause and after an employee agent has had the opportunity to cure the unsatisfactory work performance and have any involuntary termination reviewed by an Agent Review Board. Moreover, Plaintiffs argue that they provided extra consideration to Allstate—in the form of personal investments in the business, a preclusion on selling other insurance products, and covering office expenses—that was more valuable than anything offered through the Program and prevented them from being terminated at will.
This argument is mistaken on several points. First, the R830 and R1500, by their express terms, were at-will contracts. The R1500 Agreement contained the following termination provision:
(Heinz Decl., Ex. 11 ("R1500 Agreement"), at 3 ¶ 11 (emphasis added).) The R1500 contract does not require any review procedures upon termination.
(Heinz Decl., Ex. 10 ("R830 Agreement"), at Part Four ¶ XI (emphasis added).)
Undisputedly, employees who signed the R830 contract had the right to have any involuntary termination reviewed by the Agent Review Board. Notably, however, courts have repeatedly interpreted this contract to provide only for at-will employment. Hudson v. Allstate Ins. Co., 93 F.3d 296, 300 (7th Cir.1996) (interpreting Allstate's R830 contract to conclude that "[w]e find nothing in the contract that limits Allstate's underlying right to terminate for any reason at all except the unsatisfactory performance ground listed at the beginning of Section XI. The fact that the agreement goes out of its way to specify that notice is not required if the basis of termination is a criminal or dishonest act (as opposed to any myriad of other reasons that do not amount to `unsatisfactory work,' but are neither criminal nor dishonest) cannot be transformed into a general rule requiring Allstate to demonstrate that its reason for termination qualified as `good cause' in all cases"); Gonzalez v. Allstate Ins. Co., No. 87-6101, 862 F.2d 877 (11th Cir. November 7, 1988) (unpublished order) (same); Stack v. Allstate Ins. Co., 606 F.Supp. 472, 477 (S.D.Ind.1985) (finding that R830 contract was at-will contract); Almada v. Allstate Ins. Co., 153 F.Supp.2d 1108, 1113 (D.Ariz.2000) (holding that R830 was at-will contract terminable for any reason), aff'd, 285 F.3d 798 (9th Cir.2002).
More importantly, even if the R830 and R1500 contracts were not at-will contracts, that fact would not lend support to Plaintiffs' consideration argument. Had the Program and Release purported to offer Plaintiffs a return to their R830 and R1500 contracts in exchange for signing the Release, Plaintiffs' claims may have held more weight. The Program and Release, however, did not offer such an option. Rather, the Program offered Plaintiffs continued employment under an R3001
Even assuming that they were not entitled to continued employment and benefits, Plaintiffs argue that the Release still fails for lack of consideration because Allstate did not give Plaintiffs anything of value beyond that to which they were otherwise entitled in exchange for signing the Release. Allstate, on the other hand, asserts that it offered the following to signing employee agents:
(Allstate's Mem. Supp. Summ. J. 17-18.) Plaintiffs dispute that any of these items suffice as consideration for the Release.
Allstate responds that the test is not whether Plaintiffs may have received greater consideration by converting to the EA Program at an earlier time, but whether, at the time of termination, they were entitled to conversion without signing the Release. In support they rely on the case of Davis v. Eastman Kodak Co., No. Civ. A.04-6098, 2007 WL 952042 (S.D.N.Y. Mar. 29, 2007), wherein the court held that it was within the employer's discretion to modify the termination assistance plan to require a release before dispensing severance benefits, even though it had previously given those benefits without requiring a release. Id. at *10. The court reasoned that, "[s]imply put, at the time of their separation from Kodak, plaintiffs were no longer entitled to the severance benefits that were in effect at the time they were hired and the fact that during their employment [defendant] implemented a release requirement does not establish that
In the present case, the record reveals that up until the time of the Program announcement, employee agents had the right to convert to the EA Program without signing a Release.
The Court finds partial merit to both parties' positions. To the extent that any employee agents elected the first option, the Court agrees with Plaintiffs. As noted above, both the R830 and R1500 Agreements provided that employee agents had no vested interested in any business produced under the terms of those agreements. For those R830 or R1500 agents who converted to the EA Program, prior to November 1999, the economic interest in the book of business serviced while an employee agent became transferable after five years, subject to Allstate's approval. As of November 1, 1999, however, Allstate shortened the transferability waiting period for all R3001 agents, including those who converted prior to the Program without signing the Release and those who converted in connection with the Program with the Release-signing requirement. (Meehan Decl., Ex. 331 ("Exclusive Agency Independent Contractor Manual"), at ARI 54903, ARI 154905.) Those who executed the Release did not have any special vested interest beyond the typical R3001 employee. Accordingly, the Court finds that the shortened waiting period was not given in consideration for signing the Release, but rather was attendant to the ability to become an Exclusive Agent.
To the extent an employee agent elected the second option—the sale option—the Court finds that the inheritance of an economic interest in the book of business did indeed provide consideration. In exchange for signing the Release, Option Two individuals would convert to the EA contract and, after only thirty days, could immediately transfer that book of business to an Allstate-approved buyer, with the agent retaining the sale proceeds. This option was not available to any EA agent who converted prior to the Program and was clearly not available unless a Release was signed. As such, it constituted a benefit greater than that to which those agents were already entitled.
Plaintiffs engage in an incorrect analysis on this point. The relevant comparison is not what an employee agent would have received under either the conversion option or sale option versus the base severance option. The comparison is what the employee agent would have received under either the conversion option or sale option versus a complete refusal to participate in the Program at all. Under the former comparison, an employee agent may have potentially received more liquid cash under the base severance option and would have been able to avoid signing the Release, but would have made the choice to forego any possibility of continuing employment with Allstate and realizing an economic interest in his or her book of business, and would have undertaken additional non-compete restrictions. Under the latter comparison—the relevant comparison for purposes of the consideration analysis—an R830/R1500 employee agent choosing to not participate in the Program and retain his/her rights under the Release would have received nothing.
While many of Plaintiffs' consideration arguments raise valid concerns about the structuring of the Program, the Court finds that Allstate nonetheless provided adequate consideration for the Release. "[C]onsideration is relatively easy to show. As long as the person receives something of value in exchange for her own promise or detriment, the courts will not inquire into the adequacy of the consideration." Wagner v. NutraSweet Co., 95 F.3d 527, 532 (7th Cir.1996). Allstate's offer of transition to Exclusive Agency, as well as its provision of conversion bonuses and OEA waivers, however minimal, constituted something more than what Plaintiffs were entitled to without signature of the Release and participation in the Program.
The statutory dictates of OWBPA, as explicitly interpreted by the United States Supreme Court, require that a release that purports to waive ADEA claims meet all eight of the statutorily-enumerated requirements. Allstate has satisfied its burden of affirmatively demonstrating that the Release at issue meets all eight of these requirements. As Plaintiffs have failed to create any contrary issue of material fact, the Court denies Plaintiffs' Motion for Summary Judgment on this ground.
Having determined that the Release satisfies the OWBPA provisions, the Court turns to Plaintiffs' next claim that Allstate cannot show that the Release was executed knowingly and voluntarily. The Court finds that a genuine issue of material fact exists on this point.
An employee may validly waive claims of discrimination against an employer if the waiver is made knowingly and willfully. Coventry v. U.S. Steel Corp., 856 F.2d 514, 521-22 (3d Cir.1988) (citing Alexander v. Gardner-Denver Co., 415 U.S. 36, 52, 94 S.Ct. 1011, 39 L.Ed.2d 147 (1974)); Potoski v. Wilkes Univ., No. Civ. A.06-2057, 2010 WL 3811973, at *13 (M.D.Pa. Sept. 22, 2010). In determining the validity of a waiver, courts consider general principles of contract construction; however, "[i]n light of the strong policy concerns to eradicate discrimination in employment, a review of the totality of the circumstances, considerate of the particular individual who has executed the release, is also necessary." Coventry, 856 F.2d at 522-23. This totality of the circumstances inquiry is made considering the following factors:
Cirillo v. Arco Chem. Co., 862 F.2d 448, 451 (3d Cir.1988) (citing Coventry, 856 F.2d at 523), superseded by statute as stated in Long v. Sears Roebuck & Co., 105 F.3d 1529, 1539 (3d Cir.1997) (holding that the Older Workers Benefit Protection Act supersedes Cirillo with respect to the Age Discrimination in Employment Act of 1967). "This list, however, is intended to be illustrative rather than exhaustive." Caban Hernandez v. Philip Morris USA, Inc., 486 F.3d 1, 8 (1st Cir.2007). The court "may also consider `whether there is evidence of fraud or undue influence, or whether enforcement of the agreement would be against the public interest.'" Cuchara v. Gai-Tronics Corp., 129 Fed.Appx. 728, 731 (3d Cir.2005) (quoting W.B. v. Matula, 67 F.3d 484, 497 (3d Cir.1995)). These considerations are in addition to OWBPA's requirements for "knowing and voluntary" waiver of ADEA claims. See Long v. Sears Roebuck and Co., 105 F.3d 1529, 1539 (3d Cir.1997) (holding that OWBPA was enacted to "establish[] a floor, not a ceiling") (quotations omitted); see also Bennett v. Coors Brewing Co., 189 F.3d 1221, 1228 (10th Cir.1999) (holding that the statutory factors of the OWBPA are not exclusive and other circumstances, in addition to the express statutory requirements, may impact whether a waiver under the OWBPA is knowing and voluntary); 29 C.F.R. § 1625.22(3) (2010) (noting that in addition to the minimum requirements set out by the OWBPA, "other facts and circumstances may bear on the question of whether the waiver is knowing and voluntary."). Notably, "as the issue of the release is an affirmative defense, the burden of proving that it was knowingly accepted is on [the party seeking to enforce it.]" Jakimas v. Hoffmann-La Roche, Inc., 485 F.3d 770, 782 (3d Cir. 2007).
Plaintiffs allege that the Release was not signed either knowingly or voluntarily. Accordingly, they assert that, under the totality of the circumstances test, the Release does not bar any of their federal claims. The Court takes each of Plaintiffs' challenges separately.
Plaintiffs first contend that the voluntariness of the Release is in question because (1) the Release was not the product of any negotiation and they were placed in a "take it or leave it" predicament; (2) Allstate gave Plaintiffs' the ultimate "Hobson's choice"—either sign the Release or lose your livelihood; (3) Allstate's wrongful acts and threats left Plaintiffs with no reasonable alternative but to sign the Release. As a result, they request that the Court invalidate the Release under the totality of the circumstances test.
While, at first blush, these six factors, considered collectively, seem to suggest that the Release was signed voluntarily, limiting the analysis to such factors results in a myopic view of what may have actually occurred in this case. Initially, it is notable that the remaining enumerated factor in the totality of the circumstances test—opportunity for negotiation—weighs in Plaintiffs' favor. Defendants do not contest the fact that there was no opportunity for negotiation of the terms of the Release. The Release was drafted by Allstate
Moreover, and perhaps more importantly, the Court finds that Plaintiffs faced a proverbial "Hobson's choice"
On review, the Third Circuit deemed the release invalid under a totality of the circumstances test. It reasoned as follows:
Id. at 524 (footnotes omitted). The court also found significant the lack of any indication that the plaintiff was encouraged by the defendant to consult an attorney prior to the execution of the release, or that the plaintiff did in fact consult with an attorney. Id. The court remarked that "[w]e view this omission as particularly salient to this case in light of the fact that the release that [the plaintiff] signed was determined to be per se violative of the ADEA in a separate proceeding." Id. at 524-25. "On this record, the absence of assistance by an attorney makes the certainty that Hallas had that meaningful comprehension too doubtful for us to conclude that his waiver was knowingly executed." Id. Ultimately, the Third Circuit concluded that, "the record contains significant indicia that [the plaintiff's] decision to execute the waiver did not result from a volitional choice between real options, and that, for him, the absence of counsel resulted in a decision the legal significance of which he did not understand completely." Id. at 525.
Likewise, in Torrez v. Public Service Company of New Mexico, 908 F.2d 687, 690 (10th Cir.1990), the plaintiff had been employed by the defendant for eight years and eleven months before he was notified that his position was being impacted as part of a downsizing of the company's workforce. Id. at 688. The notification letter also informed him that he had until April 30, 1986, to select early retirement, voluntary separation, or involuntary separation. Id. Because he had been employed by defendant for less than nine and one-half years, he did not qualify for early retirement. Id. His election therefore was limited to either voluntary or involuntary separation. Both of these packages provided for full salary until July 31, 1986, plus one week of salary for each year of service, career counseling, and health, life, and dental insurance coverage until November 30, 1986. Id. The primary difference between the two packages was that the voluntary package also provided for vesting of retirement benefits for an employee with five years of service. Id. The plaintiff chose the voluntary separation package to obtain the additional retirement benefits and, at that time, he signed a release which provided that he waived all claims against defendant as a result of the termination.
"In assessing the totality of the circumstances in this case," the Tenth Circuit concluded that "there are material issues of fact precluding summary judgment. The language of the release, although clear and unambiguous, failed to mention specifically waiver of employment discrimination claims." Id. at 690. "Moreover, [the plaintiff] neither consulted with an attorney nor received encouragement from defendant to do so before he signed the release." Id. Additionally, plaintiff "did not have the opportunity to negotiate the terms of the release, which was a standard form." Id. Finally, "[w]hen [the plaintiff] chose the voluntary separation package, he
While not precisely equivalent, the undisputed facts of record in this case present a similar scenario. Specifically, Allstate surely knew that many of the R830 and R1500 agents, including Plaintiffs, had spent their lives building Allstate and had invested substantial sums of their own money and resources into their agencies based on promises of financial and job security. Indeed, the Allstate compensation structure required up-front financial and time investments, which Plaintiffs expected to yield substantial returns in the form of renewal commissions and significant retirement benefits. As such, Plaintiffs were heavily reliant on their continuation of employment or ability to obtain some financial remuneration for their years of efforts and investments. Yet, Allstate purposefully structured the Program so that the only way Plaintiffs could either continue as Allstate agents—albeit under the Exclusive Agency program, which resulted in a substantial loss of benefits and pension options—or salvage some of their agency investments—by converting, selling their books, or taking half a year's pay in severance—was by signing the Release. For those who did not sign the Release, Allstate offered nothing more than a base severance option (thirteen weeks' pay, payable over six weeks) that made agents worse off than if they had been terminated for poor performance under Allstate's Service Allowance Plan (thirteen weeks' pay, payable in one lump sum). Moreover, even though the Program effectively terminated agents' employment with Allstate in a manner similar to a reduction in force, Allstate labeled the Program a "group reorganization." By doing so, it invoked the exception of the Allstate Severance Payment Plan—an exception that was included in an amended version of the Plan only two days prior to the Program's announcement—that precluded terminated employees from receiving severance pay if they were part of a group reorganization plan,
Ultimately, this combination of factors appears to have created a true Hobson's choice. Plaintiffs essentially had two options: (1) execute the Release in order to either continue as Exclusive Agents, be able to sell their book of business, or receive enhanced severance; or (2) refuse to sign the Release, give up an agency into which they had heavily invested time and money, face certain termination with no retirement or health benefits, receive inconsequential
At the core of this analysis, the Court is left with the task of drawing inferences from the evidence, weighing the credibility of witnesses, and affixing a characterization to the events that occurred. On one hand, a methodical analysis under a strict application of the enumerated totality of the circumstances factors yields a finding that the Release, while not necessarily desirable, was supported by some consideration
The totality of the circumstances inquiry does not end at this juncture, as the ultimate question is whether the Release was voluntarily and knowingly signed. It is well settled that a material representation may affect whether a release was knowingly signed and may, in turn, invalidate the release if there is evidence that the signers would have acted differently. Jakimas v. Hoffmann-La Roche, Inc., 485 F.3d 770, 781-82 (3d Cir. 2007). Plaintiffs now contend that the Release was not knowingly signed due to at least five material misrepresentations by Allstate concerning the consequences of signing and not signing the Release.
(Zolner Decl., Ex. 102 ("Preparing for the Future Questions & Answers # 8"), Q20 at ARI 0094111.) A subsequent Q & A, issued on June 7, 2000, stated:
(Zolner Decl., Ex. 156 ("Preparing for the Future Questions & Answers # 10"), Q1, at ARI 090472.) Plaintiffs now contend that nothing within any contract between themselves and Allstate supported a lifetime ban on contacting former customers for any purpose.
Allstate does not dispute that it made these representations or that it told agents that it would enforce them. Rather, in response, Allstate cites to three pieces of evidence to establish that these representations were accurate. First, it references the R830 and R1500 Agreements which provided that records pertaining to Allstate policyholders are the property of Allstate. (See Heinz Decl, Ex. 10 ("R830 Agreement"), Part Four ¶ VII ("All supplies furnished to you and all records which you have pertaining to Allstate policyholders are the property of the Company and will upon demand be promptly returned to us."); Heinz Decl., Ex. 3, ("R1500 Agreement") ¶ 9 ("You understand that all materials furnished to you
Remarkably, however, nothing in the contractual provisions cited by Allstate supports the broad prohibition on contacting former customers. Undoubtedly, Allstate customer lists were confidential, particularly because they contained extensive information about the particular policyholders. Certainly, agents were precluded from using such "lists" to sell other products. Nonetheless, this confidentiality provision did not create a lifetime ban on employee agents ever contacting any former customer "for any purpose." Indeed, stretching Allstate's theory to its limits, a former agent, who had signed his or her mother to an Allstate policy, would be prohibited from initiating contact with his/her mother several years later, for the purposes of selling, for example, heating and air conditioning systems through a new business venture. Nothing in the Allstate confidentiality provision could possibly be construed, under any reasonable interpretation, as reaching that far. Yet, this is the representation that Allstate effectively made to its agents.
The inquiry, however, does not end at this point. The Court must next discern whether this misrepresentation precluded Plaintiffs from "knowingly" signing the Release. Both parties offer citations from Plaintiffs' depositions and declarations reflecting, on one hand, that this misrepresentation bore heavily on their decision to sign the Release and continue in Allstate's employ and, on the other hand, that Allstate's statements did not change their understanding of the Release and the Program. As the Court is unable to resolve whether Plaintiffs would have acted differently had they known of the misrepresentation, a genuine issue of material fact remains. See Jakimas, 485 F.3d at 782 (noting the importance of evidence that the plaintiffs would have acted differently with respect to the release had they known the truth about the misrepresentation).
Allstate responds that the purported new job opportunities referenced non-agent employees who were terminated as part of a reduction in force, rather than R830/R1500 employee agents eligible for the program. Allstate also contends that it did not begin to consider a potential rehire policy related to the Program until September 2000, and it is undisputed that
Again, the evidence on this issue is highly in dispute. A genuine issue of fact remains as to both when Allstate knew it was going to implement the Rehiring Moratorium—which is crucial to determining whether Allstate's statements to employee agents at the time of the Release were accurate—and whether any possible misrepresentations affected the Plaintiffs' knowing signature of the Release. Therefore, the Court cannot resolve the "knowingly" issue on these grounds.
Allstate claims, however, that it did not first begin to consider commission rate changes for Exclusive Agents until October 2001, at which time it announced to all Exclusive Agents that it would begin reviewing agent revenue and compensation. On September 25, 2002, Allstate gave notice to Exclusive Agents that commission changes would take effect on January 1, 2003. Allstate ultimately reduced commission rates for Exclusive Agents on January 1, 2003. At that point, the new property commission rates payable to R3001 agents went from twenty percent to ten percent.
The evidence reveals that Allstate engaged in some discussion regarding a reduction in the commission rates to R3001 agents beginning in the summer of 1999, just prior to the announcement of the Program. Further, it is undisputed that a rate change ultimately was announced in September 2002. The record, however, remains unclear as to whether the early discussions were simply talks that did not lead to any official action or whether the September 2002 rate change announcement was the direct result of these pre-Program discussions. Clearly, if Allstate did not seriously plan on implementing any rate changes until well after it made the alleged representations and after the start date of the Program, such representations could not have been misrepresentations and could not have affected Plaintiffs' knowing signature of the Release. On the other hand, if a jury could make the inference from the evidence that the rate changes were in early planning stages as of 1999, Plaintiffs could establish that Allstate's denials regarding rate changes were misrepresentations that affected their decision in signing the Release. Neither party's evidence conclusively resolves this question, thereby making it a factual issue.
Again, the Court is left with a pure question of fact. Although Allstate clearly disseminated some information regarding the "expected results" to Plaintiffs and other agents, it is unclear when this information was received and to what extent it was contradicted by statements from Allstate's managers. Ultimately, a question of fact remains as to whether Plaintiffs were given sufficient information about what they would be required to do as R3001 Exclusive Agents in order for them to make an informed decision regarding their decision to sign the Release and convert to the R3001 contract.
Allstate again denies that it made any misrepresentations and argue that under the R3001 contract, Exclusive Agents had entrepreneurial freedom that was not available to employee agents, including being able to conduct other business in addition to their insurance agency business and being able to decide the manner and means by which the agency would conduct business. To the extent that Plaintiffs complain about the office hours and telephone forwarding requirements, Allstate contends that Plaintiffs were, or should have been, well aware of these mandates when they signed their R3001 contracts, as the available materials were quite explicit.
Upon consideration of the evidence, the Court agrees with Allstate that the R3001 contracts appear to clearly specify the various requirements about which the Plaintiffs now complain. As such, the Court is inclined to find that this representation was not a "misrepresentation" that affected the validity of the Release. Nevertheless, this factor is only one element in the totality of the circumstances equation. As the Court has already found that a jury
As set forth above, the totality of the circumstances test is taken "[i]n light of the strong policy concerns to eradicate discrimination in employment." Coventry, 856 F.2d at 522-23. Although courts have enumerated various factors, it is well settled that the list is "intended to be illustrative rather than exhaustive." Caban Hernandez v. Philip Morris USA, Inc., 486 F.3d 1, 8 (1st Cir.2007). Reviewing the evidence as a whole in some detail, the Court is left with an unusual dichotomy. On one hand, Allstate seems to have technically abided by its legal duties by complying with OWBPA and satisfying most of the enumerated factors under the totality of the circumstances test. On the other hand, the overall construction of the Program and Release requirement, together with the information—or lack thereof— disseminated by Allstate, seems to have eliminated any real choice or understanding. As repeatedly emphasized above, the true story will only be revealed through live testimony, credibility determinations, and weighing of various pieces of documentary evidence. Both Motions for Summary Judgment are therefore denied on these grounds.
Plaintiffs' last challenge to the Release contends that it is invalid as to all claims—including Plaintiffs' common law claims of breach of contract and breach of fiduciary duty—because it is unconscionable as a matter of law. To prove unconscionability under Pennsylvania law,
"Procedural unconscionability examines the process leading to the formation of the contract and the form and language of the agreement." Porreca v. Rose Grp., No. Civ.A.13-1674, 2013 WL 6498392 (E.D.Pa. Dec. 11, 2013). A procedurally unconscionable contract bears a lack of meaningful choice in the acceptance
Plaintiffs contend that the Release was procedurally unconscionable for three reasons. First, they assert—and Allstate does not deny—that the Release was offered on a take-it-or-leave-it basis. Second, Plaintiffs claim that the Release was a contract of adhesion because Allstate was the stronger contracting party with full control over the terms of the Release, but Allstate held the reins over Plaintiffs' livelihood. Third, Plaintiffs contend that they were in a particularly vulnerable position because they were financially and emotionally committed to their agencies—investments that were made at Allstate's urging.
These arguments, together with Allstate's denials, bear striking similarity to the arguments raised with respect to Plaintiffs' contention that the Release was not voluntarily signed. As set forth in great detail above, these arguments give rise to numerous issues of material fact that are improper for resolution on a motion for summary judgment. As such, for the same reasons described above, the Court will deny both parties' Motions on this issue.
The same holds true for Plaintiffs' allegation of substantive unconscionability. Under Pennsylvania law, procedural unconscionability alone is insufficient to invalidate a contract. Rather, a party must prove substantive unconscionability which "refers to whether the terms of the agreement unreasonably favor the party asserting it." Porreca, 2013 WL 6498392, at *10. "Substantively unconscionable terms are those that are unreasonably or grossly favorable to one side and to which the disfavored party does not assent." Id. (quoting Estate of Hodges, No. Civ.A.12-1698, 2013 WL 1294480, at *6 (E.D.Pa. Mar. 29, 2013)). "To establish substantive unconscionability, the plaintiff must show that the contract terms are unreasonably favorable to the drafter and that the other party had no meaningful choice but to accept those terms." Cronin v. Citifinancial Servs., Inc., No. Civ.A.08-1523, 2008 WL 2944869, at *3 (E.D.Pa. July 25, 2008).
Plaintiffs' claim of substantive unconscionability is, like its procedurally unconscionability claim, marked with disputes of fact. The Court has no doubt that the Plaintiffs lost substantial benefits, to Allstate's gain, when they signed the Release. The Court also notes, however, that Plaintiffs gained in other ways through various options they received in the Program. The question of whether those gains and benefits satisfied the concept of mutuality of obligation cannot be resolved at this juncture. Moreover, any conclusions regarding the import of public policy are necessarily intertwined with the resolution of the multitude of factual issues. Accordingly, the Court also leaves this issue open for review by a factfinder.
In light of the foregoing, the Court must deny the relief requested by both Motions for Summary Judgment as to the Invalidity of the Release. This ultimate conclusion, however, comes with several legal findings that will bear on the remainder of this case. First, the law of the case, as set forth by the Third Circuit, dictates that the Release, if valid, would bar all Romero I claims and Count II of Romero II. Moreover, plain contract interpretation reveals that the Release covers Counts I and III of Romero II. Second, Allstate has met its burden of proving—and Plaintiffs have failed to show a genuine issue of material fact as to—the eight statutory factors set out under OWBPA. Finally, the Court finds itself stymied by the multiple issues of fact surrounding the question of whether the Release was knowingly and voluntarily signed, issues which also bear on the claim of unconscionability. Although, as noted previously, the Court finds itself tempted to invalidate the Release based on the "knowingly and voluntarily" analysis, such a premature finding would involve resolution of issues of credibility, require the Court to discern the appropriate inferences to be drawn from the evidence, and improperly ignore the multiple other factors that weigh in Allstate's favor. Ultimately, the numerous credibility and evidentiary determinations that must be made require that an objective factfinder resolve this matter.
Undoubtedly, the parties are anxious for some resolution of at least this portion of the case, having litigated it for over a decade. Nonetheless, the Court remains bound by Federal Rule of Civil Procedure 56 and its interpretive jurisprudence and, thus, cannot conclusively rule on the validity of the Release. Therefore, the parties shall be directed to contact the Court with respect to setting up a status conference and establishing a firm date for trial on this matter.
It is so
Currently pending are (1) the Motion of Defendants Allstate Insurance Company, et al. (collectively "Allstate") for Reconsideration of the Court's February 27, 2014 Summary Judgment Order and (2) the Motion of Plaintiffs Gene R. Romero, et al. (collectively "Plaintiffs") for Clarification or, in the Alternative, for Reconsideration. For the following reasons, Allstate's Motion is denied and Plaintiffs' Motion for Clarification is granted.
As repeatedly noted in the Court's prior opinions, the factual history of this case is long and convoluted. In lieu of repeating, yet again, the history underlying the present dispute, the Court incorporates by reference the lengthy summary of facts set forth in the Court's opinion of February 27, 2014. 1 F.Supp.3d at 331-58, 2014 WL 796005, *1-27.
On February 27, 2014, the Court issued a more than 150-page opinion ruling on the parties' Cross-Motions for Summary Judgment as to the Validity of the Release. Id. In that Memorandum, the Court found that although the Release at issue satisfied the statutory prerequisites of the Older Workers Benefit Protection Act ("OWBPA"), 29 U.S.C. § 626(f)(1), a genuine issue of material fact existed as to whether Plaintiffs knowingly and voluntarily signed the Release under a totality of the circumstances test. Id. at 417, 2014 WL 796005, *81. Accordingly, the Court denied both parties' Motions and directed that the issue be decided by a jury.
On March 14, 2013, Allstate filed a Motion for Reconsideration and Plaintiffs filed a Motion for Clarification or, in the Alternative, for Reconsideration. The Court received both parties' responses on March 31, 2014, making both Motions ripe for judicial review.
A motion for reconsideration may be granted if the moving party shows: (1) an intervening change in the controlling law; (2) the availability of new evidence that was not available when the court issued its order; or (3) the need to correct a clear error of law or fact or to prevent manifest injustice. Max's Seafood Café v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999). Moreover, motions for reconsideration are granted sparingly. Cont'l Cas. Co. v. Diversified Indus., Inc., 884 F.Supp. 937, 943 (E.D.Pa.1995). The grant of such a motion is not proper where it simply asks the court to "rethink what [it] had already thought through—rightly or wrongly." Glendon Energy Co. v. Borough of Glendon, 836 F.Supp. 1109, 1122 (E.D.Pa.1993) (internal quotations omitted). Motions for reconsideration may not be used "as a means to argue new facts or issues that inexcusably were not presented to the court in the matter previously decided." Brambles USA, Inc. v. Blocker, 735 F.Supp. 1239, 1240 (D.Del.1990). "Nor may a motion for reconsideration be used to revisit or raise new issues with the benefit of `the hindsight provided by the court's analysis.'" Marshak v. Treadwell, No. Civ.A.95-3794, 2008 WL 413312, at *7 (D.N.J. Feb. 13, 2008) (quoting United States v. Jones, 158 F.R.D. 309, 314
Notwithstanding the detailed explanations and legal reasoning set forth in this Court's Memorandum Opinion of February 27, 2014, Allstate now seeks reconsideration of several issues. First, Allstate asserts that the Court failed to consider Allstate's state law defenses to any claims of duress and fraud. Second, Allstate contends that the Court relied upon certain incorrect factual assertions in concluding that Plaintiffs may not have voluntarily signed the Release. Finally, Allstate claims that the Court erred in finding a genuine issue of material fact as to both its procedural and substantive unconscionability arguments. The Court addresses each argument individually.
In its original Motion for Summary Judgment and Response to Plaintiffs' Motion for Summary Judgment, Allstate claimed that Plaintiffs sought to invalidate the Release using the state law theories of fraud and duress. To defend against these purported fraud and duress claims, Allstate contended that the state law elements of fraud and/or duress were not satisfied and, thus, could not be used to invalidate the Release. This Court expressly acknowledged Allstate's contentions, but found them irrelevant as follows:
1 F.Supp.3d at 405 n. 43, 2014 WL 796005, *71 n. 43. Arguing that this reasoning was in error, Allstate now contends that the federal totality of the circumstances test, as defined by the Third Circuit, requires that state fraud and duress law must be "followed to test the sufficiency of Plaintiffs' arguments and to properly evaluate the `circumstances' of the alleged Hobson's choice and claimed misrepresentations." (Allstate's Mot. Reconsideration 11.) It goes on to conclude that "the Court's decision to apply `the federal common law totality of the circumstances test' without also considering the state law duress and
Based on a thorough review of controlling Third Circuit jurisprudence, this Court finds its approach far from "novel" or "inconsistent with judicial authority." In an effort to rebut the Court's reliance on Coventry v. U.S. Steel Corporation, 856 F.2d 514 (3d Cir.1988)—a case which introduced the concept that a release creating a "Hobson's choice" could not be voluntarily signed—Allstate relies heavily on Cirillo v. Arco Chemical Co., 862 F.2d 448 (3d Cir. 1988). By way of a footnote in that opinion, the Third Circuit seemingly stepped back from the notion that the existence of financial pressure alone could invalidate a release, and remarked that the release in Coventry was actually invalidated on the state law ground of duress, as follows:
Id. at 452 n. 2. Based on that holding, Allstate now argues that "Coventry . . . analyzed the employee's `Hobson's choice' under the legal standard of duress supplied by state law, and that economic duress alone will not invalidate a release of claims." (Allstate's Mot. Reconsideration 11.) Allstate goes on to reason that state fraud and duress law should be followed to test the sufficiency of Plaintiffs' arguments and to properly evaluate the circumstances of the alleged Hobson's choice and claimed misrepresentations.
Allstate's argument, however, fails to consider the series of interpretive jurisprudence set forth by the Third Circuit on this precise issue. Crucially, after Cirillo, Congress enacted OWBPA, which set forth basic statutory requirements that must be satisfied by a release that purports to waive ADEA claims. In the post-OWBPA case of Long v. Sears Roebuck & Co., 105 F.3d 1529 (3d Cir.1997), the Third Circuit addressed the state of the law prior to OWBPA:
Long, 105 F.3d at 1538 (footnote omitted).
Subsequently, in Wastak v. Lehigh Valley Health Network, 342 F.3d 281 (3d Cir. 2003), the Third Circuit clarified that its ruling in Long only meant to preempt any use of state contract common law principles, but left intact the federal common law doctrine of "totality of the circumstances" to ensure that a release was enacted knowingly and voluntarily. Id. at 295. Specifically, it stated:
Wastak, 342 F.3d at 295 n. 8 (emphasis added).
The majority of other circuits have followed suit. See, e.g., American Airlines, Inc. v. Cardoza-Rodriguez, 133 F.3d 111, 120 (1st Cir.1998) ("We reject the view adopted by the Fourth and Fifth Circuits and adopt the majority position. At common law, a waiver of rights was simply a contract, subject to defenses like duress or mistake. When Congress enacted the OWBPA, however, it specifically rejected using ordinary contract principles to govern the validity of ADEA waivers.... Instead, Congress enacted a "floor" of specific procedures an employer must follow before an employee's waiver is effective."); O'Hare v. Global Natural Res., 898 F.2d 1015 (5th Cir.1990)
In short, it is well settled in the Third Circuit that state contract law plays no role in a totality of the circumstances test to determine whether a release was knowingly and voluntarily signed.
In a last-ditch effort to undercut the Court's totality of the circumstances analysis, Allstate makes a plea to practicality by arguing that the Court has set forth "no legal framework against which the Court, or the parties, can test the sufficiency of Plaintiffs' fraud and duress evidence, either at the summary judgment stage or at trial." (Allstate's Mot. Reconsideration 11.) According to Allstate, "the parties are left with no guidance going forward as to what properly constitutes fraud or duress or how the `circumstances' of an alleged Hobson's choice and claimed misrepresentations are to be evaluated by the jury in determining the validity of the Release contracts." (Id.)
The Court does not share Allstate's fears. The totality of the circumstances test is a well-known and frequently used legal doctrine applied successfully in many contexts before judges and juries. Using that approach in this case, Plaintiffs shall not be not tasked with proving duress or misrepresentation under a particular state law, which Allstate would then have to rebut under the same state law. Nor will the Release be automatically invalidated by the mere existence of some financial pressure or misstatements by Allstate. Rather, the totality of all relevant circumstances will placed into a proverbial "pot" to be considered and weighed by a trier of fact in determining whether the Plaintiffs acted knowingly and voluntarily when executing the Release at issue. The Court anticipates none of the logistical problems that Allstate now raises. Accordingly, Defendant's request for clarification of this issue is denied.
Alternatively, Allstate argues that even if the possible "Hobson's choice" identified by the Court were a legally sufficient basis to invalidate the Release, the Court's opinion relied on three incorrect factual conclusions to find the existence of a genuine issue of material fact. The Court now considers each alleged error individually.
First, Allstate takes issue with the following statement by the Court in the discussion of voluntariness:
1 F.Supp.3d at 409, 2014 WL 796005, *74 (emphasis in original). Allstate, however, argues that for years prior to the Program, the Allstate Severance Payment Plan excluded employees whose employment was involuntarily terminated "under the terms of any form of group reorganization/restructuring benefit plan or program." (Allstate's Opp'n Pls.' Mot. Summ. J. 12 (citing Zolner Decl., Ex. 38, at A046690).) The amendments to the Plan made just prior to the announcement of the program were ministerial in nature and did not introduce participation in group reorganization program as a new eligibility factor.
The Court does not find that this statement requires reconsideration for two reasons. As a primary matter, it was Allstate itself that represented that, as of October 1999, the Allstate Severance Payment Plan "did not specifically exclude terminees of group reorganizations" and that the November amendments to the Plan "made clear that agents terminated as part of the Program were ineligible for benefits." (Allstate's Reply Br. Supp. Mot. Summ. J. 17-18.) Thus, as aptly noted by Plaintiffs, any confusion on this factual issue was created by Allstate itself. Moreover, and more importantly, the Court did not find that the Plan's exception, or any amendment to that exception, was problematic. Rather, the Court took issue with Allstate's characterization of the Program as a "group reorganization" in order to fit within the Plan's exception, despite the fact that the Program was functionally equivalent to a reduction in force. See 1 F.Supp.3d at 409, 2014 WL 796005, *74 ("[E]ven though the Program effectively terminated agents' employment with Allstate in a manner similar to a reduction in force, Allstate labeled the Program a `group reorganization.' . . . By doing so, it. . . deprived agents of the enhanced severance of up to fifty-two weeks' pay that they would have otherwise received under that Plan."); Id. at 409 n. 47, 2014 WL 796005, *74 n. 47 ("While the Court does not make any ruling as to whether Allstate's characterization of the Program as a `group reorganization' was legally wrongful, the Court notes that this amendment was conveniently self-serving and, from most perspectives, underhanded."); Id. at 403 n. 40, 2014 WL 796005, *69 n. 40 ("As noted later on [in] this Memorandum, the Court does take issue with Allstate's decision to characterize the Program as a `group reorganization,' thereby depriving employee agents of benefits under the Allstate Severance Plan."). Thus, regardless of whether the Court misstated when Allstate's Severance Plan first included the "group reorganization" exception, it was Allstate's apparently deliberate characterization of the Program to fit within that exception that raised a question as to the voluntariness of the Release.
Second, Allstate challenges this Court's statement that the "base severance option (thirteen weeks' pay, payable over six [months]
Allstate's argument misses the basic import of the Court's discussion. First, it remains undisputed that, as a general rule, Allstate employee agents—even those with less than twenty years of service—may have been better off being terminated for poor performance than being forced into the base severance option of the Program because: (1) they would receive all of their severance up front, thereby allowing them to capitalize on the time value of the money; and (2) they were not subject to the additional non-solicitation and non-compete restrictions attached to the base severance option. Next, even taking as true Allstate's representation that some of the Plaintiffs would have received slightly more money (up to seven weeks of pay) under the base severance option than under the Allstate Service Allowance Plan, this fact says little about the voluntariness of the Program. The Court highlighted this comparison to demonstrate the coercive nature of the Program and Release: a poor-performing employee with twenty years' experience, who was fired for an inability to produce, was given a better or only slightly less lucrative severance package than a strong-performing, loyal, and productive employee agent who was terminated under the Program. Under a more relevant comparison between well-performing employees—one of whom was terminated pursuant to a reduction in force and one of whom was terminated under the Program and opted not to sign the Release—the one terminated under the Program would be substantially worse off. Allstate's splitting of hairs to show an insignificant discrepancy in the Court's opinion does not warrant a grant of the Motion for Reconsideration.
Third and finally, Allstate questions the Court's statement that "those who did not sign the Release and opted for the base severance were subject to the additional non-compete obligations in the Agent Transition Severance Plan, which were more stringent than those in the original R830 and R1500 contracts. Failure to comply with those more stringent non-compete arrangements resulted in the loss of even the minimal severance pay." 1 F.Supp.3d at 409, 2014 WL 796005, *74. Allstate contends that the non-compete restrictions in the Agent Transition Severance Plan ("ATSP") were less stringent than those in the original R830 and R100 contracts and were only eligibility requirements for receipt of severance payments.
Again, however, Allstate's argument does not convince this Court to grant reconsideration. Primarily, Allstate fails to note that the ATSP restrictions were, in several respects, more stringent than those in the R830/R1500 Agreements. For example, the R1500 Agreement had only a one-year restriction on soliciting products or services in competition with those sold by Allstate to former customers, whereas the ATSP imposed a two-year restriction on soliciting products or services in competition with those sold by
(Meehan Decl., Ex. 212, at ARI 034917 (emphasis added).) As such, unlike the R830 contract, the ATSP confidentiality provision made clear that a breach results in the loss of the already minimal severance pay. Finally, Allstate disregards the fact that the ATSP restrictions were in addition to those in the R830 and R1500 contracts. (Meehan Decl., Ex. 212, at ARI 034919.) As such, while everyone terminated under the Program was subject to the non-competition and non-solicitation provisions of their contracts, only those who opted to not sign the Release and to take the base severance option faced the added penalty of losing the only severance money they received from Allstate if they violated the ATSP restrictions.
In sum, Allstate's identification of minor factual inconsistencies (some of which are not inconsistencies at all) ignores the forest for the trees. Allstate attempts to poke diminutive holes in the Court's general finding of a potential "Hobson's choice" scenario created by the Program and Release while never addressing the broader and more crucial question of whether, under the totality of the circumstances, Plaintiffs actually signed the Release both knowingly and voluntarily. Accordingly, the Motion for Reconsideration is denied on this ground.
Allstate's third and final basis for seeking reconsideration contends that the Court's ruling on Plaintiffs' unconscionability arguments was flawed. Specifically, with respect to procedural unconscionability, the Court found that Plaintiffs' arguments "together with Allstate's denials, bear striking similarity to the arguments raised with respect to Plaintiffs' contention that the Release was not voluntarily signed. . . . [T]hese arguments give rise to numerous issues of material fact that are improper for resolution on a motion for summary judgment." 1 F.Supp.3d at 418, 2014 WL 796005, *82. As to substantive unconscionability, the Court remarked:
Id. at 418, 2014 WL 796005, *82. Allstate now argues that these findings were flawed because "[t]he Release contracts at issue fail to give rise to any issue of material disputed fact that could support a finding of either procedural or substantive unconscionability." (Allstate's Mot. Reconsideration 20.)
The Court declines to consider the substance of this argument for two reasons. First, as noted by Plaintiffs, Allstate did not seek summary judgment on Plaintiffs' claim of unconscionability. Rather, only Plaintiffs raised unconscionability in their opening brief and sought to have the Release invalidated on that ground. Allstate responded to that argument and contended that it was not a basis for invalidating the Release, but never separately sought a summary judgment ruling on that issue. (See Allstate's Resp. Opp'n Pls.' Mot. Summ. J. 102 ("Plaintiffs cannot demonstrate as a matter of law that they lacked meaningful choice in deciding to sign the Release, nor can they show that the benefits of the bargain were grossly unfavorable to them. Therefore, as a matter of law, summary judgment cannot be granted in Plaintiffs' favor on this claim." (emphasis added) (footnote omitted).) For all practical purposes, the Court sided with Allstate by denying Plaintiffs their requested relief on the unconscionability issue. Allstate may not now seek for the first time, through its current Motion for Reconsideration, a summary judgment ruling that the Release is not unconscionable. See Bhatnagar v. Surrendra Overseas Ltd., 52 F.3d 1220, 1231 (3d Cir.1995) (holding that reargument "should not be used as a means to argue new facts or issues that inexcusably were not presented to the court in the matter previously decided.") (quoting Brambles USA, Inc. v. Blocker, 735 F.Supp. 1239, 1240 (D.Del. 1990)).
Moreover, even had Allstate presented the same argument from its Response in its own Motion for Summary Judgment, the Court would still decline to reconsider the issue. Allstate's current Motion does nothing more than rehash its contention that the Release was neither procedurally nor substantively unconscionable. A motion for reconsideration may not, however, be used to give a litigant a "second bite at the apple" as to an argument on which it previously did not succeed. See Bhatnagar, 52 F.3d at 1231. "A litigant that fails in its first attempt to persuade a court to adopt its position may not use a motion for reconsideration either to attempt a new approach or correct mistakes it made in its previous one." Kennedy Indus., Inc. v. Aparo, No. Civ.A.04-5967, 2006 WL 1892685, at *1 (E.D.Pa. July 6, 2006); see also Rosario v. Chamberlain, No. Civ.A.08-1484, 2009 WL 2707536, at *1 (M.D.Pa. Aug. 25, 2009) ("A losing party may not use a motion for reconsideration to raise new arguments or supporting facts that it could have raised previously, but did not."). Given this standard, together with the well-settled principle that motions for reconsideration should be granted "sparingly," DeMaio v. Bed, Bath & Beyond of King of Prussia, Inc., No. Civ.A.03-5957, 2005 WL 465175, at *1 (E.D.Pa. Feb. 23, 2005) (quotations omitted), the Court declines to reconsider Allstate's substantive argument as to unconscionability.
In sum, the Court finds no merit to any of the arguments raised in Allstate's Motion for Reconsideration. First, as explained in the February 27th Memorandum Opinion, and again in this opinion, state contract law has no part in a federal totality of the circumstances test on the
Plaintiffs' Motion for Clarification or, in the Alternative, for Reconsideration focuses exclusively on the Court's statement in the February 27, 2014 Memorandum that "the R830 and R1500, by their express terms, were at-will contracts." 1 F.Supp.3d at 397, 2014 WL 796005, *65. Plaintiffs now ask this Court to clarify that this Memorandum is not read to preclude Plaintiffs from arguing, at the merits-stage of litigation, that Allstate could not terminate the R830 or R1500 contract at will.
Undoubtedly, Plaintiffs are responsible for the Court's opining on whether the R830/R1500 Agreements were at-will contracts. Plaintiffs repeatedly dangled the "at-will" question before the Court. On frequent occasions both in support of their Motion for Summary Judgment and in response to Allstate's Motion for Summary Judgment, Plaintiffs argued that the R830 and R1500 contracts were not at-will contracts and protected agents under those contracts against termination pursuant to the Program. Certainly, having made such vigorous and repeated arguments, Plaintiffs should have anticipated that the Court would opine on their merits—resulting in a ruling that could subsequently have a profound impact on their substantive breach of contract claims.
Nonetheless, several considerations of fairness compel the Court to find that clarification is warranted. First, the record is clear, and neither party disputes, that the substantive breach of contract claim was not before the Court during summary judgment motions. Indeed, all parties understood that the only issue permissible on summary judgment review was the scope and validity of the Release. To that end, neither Plaintiffs nor Allstate expressly sought a specific ruling on whether the R830/R1500 contracts were at-will, such that Allstate would have breached the contracts by terminating Plaintiffs pursuant to the Program.
Second, the Court's statement that the R830/R1500 contracts were at-will agreements was not necessary to the Court's conclusion on the questions before it. The primary issue was whether the Release was supported by adequate consideration sufficient to satisfy one of the OWBPA requirements. In support of their position that it was not, Plaintiffs asserted that: (1) they were not at-will employees and therefore were entitled to continued commissions and benefits without having to sign a release; and (2) even if they were at-will employees, a reasonable factfinder could conclude that nothing received by those
Third, the Court expressly recognized that a breach of contract claim still exists. Plaintiffs contended that the termination of R830 and R1500 contracts was unlawful because Allstate did not comply with certain notification and review procedures. The Court held that this argument "[gave] rise to a separate breach of contract claim regarding whether Allstate complied with its obligation under the R830 or R1500 contracts prior to the termination." Id. at 399, 2014 WL 796005, *66. At no point did the Court issue a specific ruling on whether Allstate committed a breach of contract through their conduct under the Program.
Fourth, notwithstanding the fact that Plaintiffs placed the nature of the contracts at issue, this Court's ruling on that question was premature for two reasons. Primarily, as Plaintiffs correctly note, discovery has not yet been permitted on the substantive issues in this case. While Allstate now questions what additional discovery would be relevant to a breach of contract issue, that decision is not proper for the Court to make at this time. Without Plaintiffs at least having the opportunity to take discovery on this issue and fully brief it, the matter cannot be given thorough judicial review. Moreover, based on the parties' concessions, the Court assumed— for purposes of summary judgment only— that Pennsylvania law governed the Agreements. The Court conducted no choice of law analysis and did not consider the nuances of any of the potentially applicable state laws. Absent a firm holding as to which state's law governs the contracts, the Court would be misguided in blindly determining that Allstate's termination of the R830 and R1500 contracts was not a state law breach of contract in some manner.
Finally, it is well-established that the law of the case doctrine does not apply to dicta. United Artists Theatre Circuit, Inc. v. Twp. of Warrington, Pa., 316 F.3d 392, 397 n. 4 (3d Cir.2003). The Third Circuit has been clear that "[s]imply labeling a statement in an opinion as a `holding' does not necessarily make it so. Gratuitous statements in an opinion that do not implicate the adjudicative facts of the case's specific holding do not have the
In short, the Court did not intend to foreclose further consideration of the breach of contract question. Therefore, the Court shall grant Plaintiffs' Motion and clarify that the February 27, 2014 Memorandum does not operate to adjudicate any aspect of Plaintiffs' underlying breach of contract claims on the merits, or to bar Plaintiffs from raising each of their breach of contract legal theories at the merits-stage of this litigation.
For all of the foregoing reasons the Court shall deny Allstate's Motion for Reconsideration or, in the Alternative, for Clarification and shall grant Plaintiffs' Motion for Clarification. An appropriate Order follows.
It is so
In the present case, the amendments challenged by the claims occurred years before the Release and did not involve benefits to which the Plaintiffs were already entitled. Moreover, Plaintiffs should have known that these amendments affected them prior to or, at the latest, at the time they signed the Release. Nothing in the record reflects that Plaintiffs could not have been sure of their loss of early retirement and "beefed-up" benefits at the time they converted to the R3001 contract.
The Court does not address this argument in this opinion as we intend to write separately on the cross-motions between Allstate and the EEOC. Those motions deal with entirely different arguments that are best discussed in a separate opinion.
Notably, however, unlike the Program here, the program at issue in Ricciardi did not involve any voluntary terminations. Moreover, Allstate's argument completely disregards the regulations' clear dictate that "[i]f an employer in its disclosure combines information concerning both voluntary and involuntary terminations, the employer
Allstate's effort to minimize the penalties associated with not signing the Release are unconvincing. The fact remained that if an employee agent opted to not sign the Release, he or she was left with either (1) a base severance of thirteen weeks with additional non-compete restrictions or (2) no financial payment and the non-compete restrictions from the R830/R1500 contracts.
