Romero v. Allstate Ins. Co., CIVIL ACTION NO. 01-3894

• Decision Date: 27 February 2014
• Docket Number: CIVIL ACTION NO. 01-3894,C/W NO. 01-7042,C/W NO. 01-6764
• Parties: GENE R. ROMERO, et al., Plaintiffs, v. ALLSTATE INSURANCE COMPANY, et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

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

CIVIL ACTION NO. 01-3894

C/W NO. 01-6764

C/W NO. 01-7042

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

February 27, 2014

TABLE OF CONTENTS FOR CROSS-MOTIONS FOR SUMMARY JUDGMENT

AS TO THE VALIDITY OF THE RELEASE

I. FACTUAL BACKGROUND.............................................. 1

A. Allstate's Agency Programs Prior to 1999..............................2

1. The NOA Program............................................ 3

2. R830 and R1500 Contracts.....................................5

3. Allstate's Exclusive Agent Independent Contractor Program...........9

4. Allstate's Litigation with the IRS...............................11

B. The Preparing for the Future Group Reorganization Program...........15

1. The Sales Organization of the Future Initiative.....................15

2. Background Behind the Preparing for the Future Program............17

3. The Announcement of the Preparing for the Future Program.......... 21

4. Program Information Provided After the Program Announcement...... 23

5. The Release................................................ 256. The OWBPA Disclosure......................................28

7. State-Specific Issues.........................................30

a. New Jersey...........................................30

b. Montana.............................................31

c. West Virginia.........................................31

d. Delaware............................................ 31

8. Alleged Misrepresentations by Allstate about the Program............ 31

a. Confidentiality and Non-Compete Restrictions............... 31

b. Rehire Policy......................................... 32

c. Commission Rates.....................................34

d. Expected Results for R3001 Agents.......................35

e. Allstate's Level of Control Over Exclusive Agents............36

C. The Romero Plaintiffs.............................................37

1. General Information..........................................37

2. Plaintiffs' Consultations Regarding the Program and Release......... 41

3. Plaintiffs' Program Option Selections............................42

a. The EA Option........................................ 42

b. The Sale Option....................................... 43

c. The Enhanced Severance Option.......................... 43

d. The Base Severance Option.............................. 44

4. Rationales' for Plaintiffs' Program Selections...................... 44

5. EEOC Charges.............................................. 45D. Procedural History................................................46

III. SUMMARY JUDGMENT STANDARD OF REVIEW........................50

IV. DISCUSSION..........................................................51

A. Whether the Release Reaches All of The Claims Asserted in Romero I and Count II of Romero II.............................................52

1. Romero I Claims and Count II of Romero II........................2

2. Counts I and III of Romero II...................................56

a. Whether the Language of the Release Excepts Out the Claims or Is Ambiguous and Should Be Construed in Plaintiffs' Favor.....................................59

(i) "Claim . . . to Benefits"...........................61

(ii) "Benefits to which I am entitled"....................66

b. Whether Counts I and III Arose After the Execution of the Release...........................................70

c. Whether Plaintiffs' ERISA Claims Are Protected by ERISA's Anti-Alienation Provision...............................72

3. Conclusion Regarding the Scope of the Release....................75

B. Whether the Release Is Valid....................................... 75

1. Compliance with the OWBPA Disclosure Requirements.............76

a. The Disclosure Requirements............................78

(i) Voluntary and Involuntary Terminations.................80

(ii) Montana Agents.................................85

(iii) Exclusion of R3000 Agents from the List of Those Not Eligible or Selected.............................. 89

(iv) Inclusion of New Jersey Agents.....................92b. The "Understandability" Requirement......................97

(i) Complex Language..............................98

(ii) Whether the Release Created the False Impression that Agents Could Not Challenge Its Validity or File EEOC Charges......................................103

c. The Consideration Requirement.........................112

(i) Whether Plaintiffs Were Entitled to Continued Employment and Employment Benefits............. 113

(ii) Whether Allstate Provided Plaintiffs With Any Consideration in Addition to That to Which They Were Already Entitled................................ 117

(iii) Conclusion as to Consideration....................124

d. Conclusion as to the OWBPA Requirements...............125

2. Whether the Release Was Knowingly and Voluntarily Executed Under the Totality of the Circumstances......................... 125

a. Whether the Release Was Voluntarily Signed............... 127

b. Whether the Release Was Knowingly Signed............... 139

c. Conclusion as to Knowing and Voluntary Execution of the Release........................................ 147

3. Whether the Release Was Unconscionable....................... 148

a. Procedural Unconscionability........................... 148

b. Substantive Unconscionability........................... 150

V. CONCLUSION.......................................................151

GENE R. ROMERO, et al., Plaintiffs,

v.

ALLSTATE INSURANCE COMPANY,

et al., Defendants.

CIVIL ACTION

NO. 01-3894

CONSOLIDATED WITH

NO. 01-6764

NO. 01-7042

MEMORANDUM

RONALD L. BUCKWALTER, S.J.

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 litigation¹ and will deal with thedisputed 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 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 workedas 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 clericaland solicitor support staff they hired through a 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...