Romero v. Allstate Ins. Co.

• Decision Date: 07 April 2014
• Docket Number: 01–6764,01–7042.,Civil Action Nos. 01–3894
• Citation: 1 F.Supp.3d 319
• Parties: Gene R. ROMERO, et al., Plaintiffs, v. ALLSTATE INSURANCE COMPANY, et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

1 F.Supp.3d 319

Gene R. ROMERO, et al., Plaintiffs,
v.
ALLSTATE INSURANCE COMPANY, et al., Defendants.

Civil Action Nos. 01–3894, 01–6764, 01–7042.

United States District Court,
E.D. Pennsylvania.

Signed Feb. 27, 2014.
Memorandum Clarifying Denial of Reconsideration April 7, 2014.

[1 F.Supp.3d 330]

John V. Gorman, Coleen M. Meehan, Jacqueline C. Gorbey, James P. Walsh, Jr., K. Catherine Roney, Marisel Acosta, Paul Anton Zevnik, Morgan Lewis & Bockius LLP, Philadelphia, PA, Michael D. Lieder, Sprenger & Lang, Michael Wilson, Morgan Lewis & Bockius LLP, Mary Ellen Signorille, Thomas W. Osborne, Aarp Foundation Lit., Washington, DC, Steven H. Doto, Lauletta, Birnbaum, LLC, Turnersville, NJ, Brian M. Ercole, Morgan Lewis, Miami, FL, for Plaintiffs.

Richard C. Godfrey, Sallie G. Smylie, Erica Zolner, Jordan Heinz, Tia Trout-Perez, Kirkland & Ellis LLP, Chicago, IL, Peter Bellacosa, Kirkland & Ellis LLP, New York, NY, Donald Livingston, Akin Gump, Washington, DC, for Defendants.

TABLE OF CONTENTS FOR CROSS–MOTIONS FOR SUMMARY JUDGMENT AS TO THE VALIDITY OF THE RELEASE
RONALD L. BUCKWALTER, Senior District Judge.

I.
FACTUAL BACKGROUND
332

A.
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	338

B.
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	352

C.
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 EA 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	357

D.
Procedural History
358

II.
SUMMARY JUDGMENT STANDARD OF REVIEW
360

III.
DISCUSSION
361

A.
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
375

B.
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

[1 F.Supp.3d 332]

MEMORANDUM

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.

I. FACTUAL BACKGROUND

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 ¹ and will deal with the disputed issues of fact regarding the Release in the course of the legal discussion.

A. Allstate's Agency Programs Prior to 1999²

Defendant Allstate Insurance Company is an Illinois Corporation that sells insurance

[1 F.Supp.3d 333]

and related products and services. Defendant Edward M. Liddy is the former President, Chief Executive Officer, and Chairman of Allstate. He served as Chief Operating Officer from August 1994 to January 1999, as Chief Executive Officer from January 1999 to May 2005, and as Chairman of the Board of Directors from January 1999 to April 2008.

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.

1. The NOA Program

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.³ The R830 and R1500 Agreements were employee contracts.

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

[1 F.Supp.3d 334]

temporary agency and could choose their locations and officer partners. To market the NOA Program to its existing agents, Allstate represented that if “you” wanted to have “a proprietary interest in a business,” “choose your own office site,” “select your own clerical help,” “have unlimited income potential,” and still “have job security,” then “you” should become an Allstate NOA. (Declaration of Coleen M. Meehan (“Meehan Decl.”), Ex. 92 (“NOA Brochure”), at RH05112.) Plaintiffs, on the other hand, believe that the NOA Program was designed to shift costs from the company to the employee agents and grant the agents a clear “proprietary interest” in the business.

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...