BLAKENEY v. LOMAS INFORMATION SYSTEMS, INC., 65 F.3d 482 (5th Cir. 1995)
TOM BLAKENEY; MICHAEL BLOHM; ROBERT S. HUFFER; ERIN PHELPS; JAMES RUSKA;
LINN MADSEN; KATHY HOWELL; AND MIKE SWEET, PLAINTIFFS-APPELLANTS, v. LOMAS
INFORMATION SYSTEMS, INC., DEFENDANT-APPELLEE.
No. 95-10319
Summary Calendar.
United States Court of Appeals, Fifth Circuit.
October 4, 1995.
Page 483
Durwood Douglas Crawford, Goins, Underkofler, Crawford and Langdon,
Dallas, TX, for plaintiffs-appellants.
Franklin Eastwood Wright, Christopher Mitchell Ashby, Winstead
Sechrest & Minick, Dallas, TX, for Lomas Information Systems, Inc.
Appeal from the United States District Court for the Northern
District of Texas.
Before KING, SMITH and BENAVIDES, Circuit Judges.
BENAVIDES, Circuit Judge:
[1] The central issue of this summary judgment appeal is whether former
employees ratified a release waiving all discrimination claims against
their former employer thereby precluding later suit for age
discrimination. Concluding that they have, we affirm the summary
judgment.
[2] FACTUAL AND PROCEDURAL BACKGROUND
[3] On May 3, 1993, appellee Lomas Information Systems, Inc. ("Lomas")
terminated appellants Tom Blakeney, Michael Blohm, Robert S. Huffer, Erin
Phelps, James Ruska, Linn Madsen, Kathy Howell, and Mike Sweet
(collectively "the employees"). In accordance with Lomas's 1993
Reduction in Force Program, each employee was entitled to severance
benefits as consideration for signing a document entitled "General
Release." This
Page 484
release included a broad waiver of all discrimination claims.[fn1] Each
employee voluntarily signed the release and received the appropriate
severance pay.
[4] Despite having signed the release specifically waiving all
discrimination claims, the employees subsequently filed charges of
unlawful age discrimination with the Equal Employment Opportunity
Commission. On July 18, 1994, the former employees sued Lomas alleging
that they were victims of age discrimination when Lomas terminated them
and when the company failed to rehire them. To escape the effect of the
release, the employees alleged that it had no force because it failed to
comply with the provisions of the Older Workers Benefit Protection Act,
Pub.L. No. 101-433, 104 Stat. 978 (codified at 29 U.S.C. § 626(f))
("OWBPA").
[5] In the district court, Lomas moved for summary judgment on the ground
that the employees waived their right to sue by signing the release and
retaining their severance benefits. The district court agreed and
granted summary judgment for Lomas on that basis. The court concluded
that the release, while failing to meet the requirements of the OWBPA,
created a voidable contract which the employees ratified by retention of
the severance pay. The employees appeal contending primarily that
failure to comply with the OWBPA precludes ratification of the release.
[6] DISCUSSION
[7] We review the granting of a summary judgment de novo under
well-established standards. See Celotex Corp. v. Catrett, 477 U.S. 317,
323-24, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); Sterling Property
Management, Inc. v. Texas Commerce Bank, Nat'l Ass'n, 32 F.3d 964, 966
(5th Cir. 1994).
[8] The OWBPA amended the Age Discrimination in Employment Act ("ADEA")
to enable an employer to enforce a waiver of age discrimination claims.
See 29 U.S.C. § 626(f)(1). Section 626(f)(1) provides that an
individual may not waive rights under the statute unless the waiver is
"knowing and voluntary." To constitute a knowing and voluntary waiver,
the release must meet specific statutory requirements such as
specifically referring to the ADEA, advising the individual to consult
with an attorney, and providing a grace period to consider signing the
agreement. See 29 U.S.C. §§ 626(f)(1)(B), (E), (F).
[9] It is undisputed that the release signed by the employees failed to
meet these statutory requirements. The parties, however, disagree about
the effect of this deficiency. Relying on our decision in Wamsley v.
Champlin Refining & Chemicals, Inc., 11 F.3d 534 (5th Cir. 1993), cert.
denied, ___ U.S. ____, 115 S.Ct. 1403, 131 L.Ed.2d 290 (1995), Lomas
contends that the defective release was not void, but merely voidable at
the employees' election. As such, the release could be subsequently
ratified by failing to timely tender the consideration on which the
initial voidable contract was based. Confronted with this authority, the
employees argue that Wamsley does not control because Lomas made no
attempt to comply with the statutory requirements of section 626(f)(1).
[10] We believe Wamsley, which is binding on this Court, does control the
outcome of this appeal. In Wamsley, we held that failure to meet the
requirements outlined in
Page 485
section 626(f)(1)(A)-(H) did not create a void contract, but merely a
voidable one. 11 F.3d at 539. Failure to tender back the consideration
for the promise not to sue, manifests an intention to be bound by the
terms of the waiver. Id. at 540. This ratification creates a new
promise and a new obligation that is enforceable despite the waiver's
failure to meet the statutory requirements. Id. at 540 n. 11. While it
is true that the Wamsley release contained the bulk of the requirements
outlined in section 626(f)(1), our discussion of the voidability of the
release did not hinge on substantial compliance with the OWBPA. Rather,
it was rooted in the fact that failure to comply with any of the waiver
requirements merely renders the release not "knowing and voluntary" as
required by the statute. Such defective waivers "are subject to being
avoided at the election of the employee." Id. at 539; see Wittorf v.
Shell Oil Co., 37 F.3d 1151, 1154 (5th Cir. 1994). Substantial
compliance is not a prerequisite. A waiver either meets all the
requirements of section 626(f)(1) and is valid under the OWBPA, or it
fails to meet the requirements and is voidable. In this case, the
release failed to meet the statutory requirements and was therefore
voidable.
[11] The employees, however, did not exercise this option. Instead, they
chose to keep the benefit of their bargain, the severance pay. Retaining
the consideration after learning that the release is voidable constitutes
a ratification of the release. Wittorf, 37 F.3d at 1154; Grillet v.
Sears, Roebuck & Co., 927 F.2d 217, 220 (5th Cir. 1991). To properly
rescind the contract, the employees had to meet two burdens. Initially,
they had to restore the status quo ante. Grillet, 927 F.2d at 220.
Secondly, their rescission had to occur shortly after the discovery of
the alleged deficiency. Id. at 221. In this case, the employees did
neither. They made only a belated tender, after suit was filed, to
return that part of the severance pay that was attributable to age
discrimination claims.[fn2] This offer not only fails to return the
status quo, but by any standard is untimely.[fn3] See Id. at 220-21. As
a result, the employees have ratified the release.
[12] In an attempt to revive their lawsuit, the employees argue that the
ratification of the release only applies to their termination claims and
not their rehiring claims. According to the employees, because they
cannot prospectively waive age discrimination claims, summary judgment
was improper on the rehiring claim. This argument, however, is
unpersuasive because the rehiring claim is not a future claim. In the
release, the employees waived all rights to suit arising out of their
termination. The employees' cause of action for failure to rehire is
simply an attempt to revive claims they were paid to release. Any claim
concerning failure to rehire certainly arises out of their termination
and was extant when the release was ratified.
[13] CONCLUSION
[14] We conclude that the district court properly granted summary
judgment because no genuine issue of material fact exists and Lomas is
entitled to a judgment as a matter of law.[fn4] As a matter of law, the
employees
Page 486
ratified the release thereby waiving all claims of age discrimination.
The summary judgment is AFFIRMED.
[fn1] The release provided as follows:
As a material inducement to Lomas . . . to enter
into this General Release, [this employee] hereby
irrevocably and unconditionally releases, acquits
and forever discharges the Company . . . from any
and all charges, complaints, claims, liabilities,
obligations, promises, agreements, controversies,
damages, actions, causes of action, suits, rights,
demands, losses, debts and expenses . . . of any
nature whatsoever, known or unknown, suspected or
unsuspected, including, but not limited to, rights
under federal, state or local laws prohibiting
discrimination, claims growing out of any legal
restrictions on the Company's right to terminate its
employees . . . which . . . [this employee] now
has, owns or holds, or claims to have owned or
held, or which . . . at any time heretofore had
owned or held, or which [this employee] at any time
hereinafter may have owned or held or claimed to
have owned or held against each of any of the
Releases. As consideration for this General
Release, the Company agrees to pay [this employee]
the sum of [payment amount] (less deductions) as
severance pay . . . . The employee enters into this
General Release with full knowledge of its contents
and enters into this agreement voluntarily.
[fn2] In their complaint, the employees requested a declaratory judgment
as to what part of the severance pay is attributable to the age
discrimination claims. On appeal, the employees allege the district
court erred by "refus[ing] to focus on this request." As we noted in
Grillet, the employees had to tender the entire severance pay to properly
rescind the waiver. 927 F.2d at 220. Based upon Grillet, there is no
declaratory relief to which the employees are entitled.
[fn3] It is undisputed that to this day the employees have not returned
the severance benefits to Lomas. Instead, the employees indicated to the
district court that they were willing to tender only the amount
judicially determined to be related to age claims. This incomplete
tender offer came nearly twenty-two months after termination, eight
months after filing suit, and seven months after Lomas's motion for
summary judgment alerted them to the waiver defense. While we decline to
prescribe a precise timetable for tender, we agree with the district
court, relying on Grillet, that "[t]his offer is simply too little, too
late." 927 F.2d at 220.
[fn4] The employees also contend that there is a fact issue regarding
whether their waiver was "knowing and voluntary." This assertion is
based upon a hearsay statement contained in an employee affidavit that a
personnel officer of Lomas told the employee, who was terminated in 1992
unrelated to the reduction in force, that the release did not cover age
discrimination claims. Since Lomas already concedes for purposes of
summary judgment that the waivers were not knowing and voluntary, this
alleged fact issue is immaterial.
