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BUTCHER v. GERBER PRODS. CO.

June 2, 1998

ROBERT A. BUTCHER, THOMAS H. JOHNSON, JAMES THOMAS and DANIEL J. VELKOVICH, individually and as Class Representatives, Plaintiffs,
v.
GERBER PRODUCTS COMPANY, Defendant.


ROBERT W. SWEET, U.S.D.J.


The opinion of the court was delivered by: SWEET

OPINION

Sweet, D.J.

 Plaintiffs have moved for a preliminary injunction pursuant to Fed. R. Civ. P. Rule 65 prohibiting Defendant Gerber Products Company ("Gerber") from discontinuing any severance benefits to Plaintiff Daniel J. Velkovich ("Velkovich") and from seeking repayment of severance benefits which have already been paid to him. Plaintiffs have also moved pursuant to Fed. R. Civ. P. 12(f) to strike Gerber's Third Separate Defense, which asserts a defense of waiver. For the reasons set forth below, the motion for preliminary injunction is converted to a motion for summary judgment which is granted in favor of the Plaintiffs with leave granted for further submissions.

 The issue presented is whether Plaintiffs have waived their right to assert a claim under the Age Discrimination in Employment Act, as amended, 29 U.S.C. § 621 et seq. (the "ADEA"), by signing the Release and Waiver Agreement provided to them by Gerber ("Release"). Because the Release does not comply with the statutory requirements of the Older Workers Benefit Program Act, 29 U.S.C. § 626(f) (the "OWBPA"), and such noncompliance may not later be cured, the Plaintiffs are entitled to appropriate relief, including striking Gerber's defense of waiver.

 The Parties

 The Plaintiffs are former employees of Gerber. They are all forty years of age and older. The four named Plaintiffs bring this suit on behalf of themselves and a class of approximately 325 former Gerber employees whom Gerber discharged by Notice of Termination dated January 9, 1998.

 Plaintiff Robert A. Butcher ("Butcher") is a resident of Centereach, New York, and was employed as a National Account Manager for Gerber prior to his termination. Butcher was 53 years old when he was terminated and had been employed by Gerber for 33 years.

 Plaintiff Thomas H. Johnson ("Johnson") is a resident of Mesquite, Texas, and was employed as a National Account Manager for Gerber prior to his termination. Johnson was 49 years old when he was terminated and had been employed by Gerber for more than 27 years.

 Plaintiff James H. Thomas ("Thomas") is a resident of Shreveport, Louisiana, and was employed as a Senior Sales Representative for Gerber prior to his termination. Thomas was 47 years old when he was terminated and had been employed by Gerber for more than 18 years.

 Plaintiff Velkovich is a resident of Allentown, New Jersey, and was employed as a National Account Manager for Gerber prior to his termination. Velkovich was 55 years old when he was terminated and had been employed by Gerber for more than 34 years.

 Gerber, a subsidiary of Novartis, a Swiss-based company, is a Michigan corporation which maintains its headquarters in Fremont, Michigan. Gerber manufactures and distributes baby and infant food products, licenses and distributes branded apparel for children, manufactures sundry nursery accessories and infant care items, and licenses the manufacture of baby food products internationally.

 Prior Proceedings

 On February 23, 1998, the named Plaintiffs, Butcher, Johnson, Thomas, and Velkovich, filed charges with the Equal Employment Opportunity Commission (the "EEOC"), alleging that their termination from Gerber was the result of age discrimination in violation of the ADEA. On March 11, 1998, they received their Notices of Right to Sue from the EEOC. On March 13, 1998, the named Plaintiffs filed this class action under the ADEA, seeking declaratory and injunctive relief, compensatory and liquidated damages, attorneys fees and other appropriate legal and equitable relief.

 On April 24, 1998, Plaintiffs filed the motion for preliminary injunction by Order to Show Cause. Oral arguments were heard on May 14, 1998, at which time the Court invited the parties to submit any additional information they wished regarding whether a release and waiver that is defective under the OWBPA could be cured. Pursuant to the Court's request, Plaintiffs filed a supplemental memorandum of law on May 21, 1998, and Gerber delivered its supplemental memorandum to the Court on May 29, 1998, at which time the motion was deemed fully submitted.

 On May 19, 1998, an Order was issued by the Court to maintain the status quo until June 3, 1998; that is, Gerber was ordered not to terminate the severance benefits of any former Gerber sales associates before that date, and Gerber was to continue payment of Velkovich's COBRA health insurance premiums through that date or upon further Order of the Court.

 Facts

 I. The January Discharge and the Notice of Termination

 In January 1998, Gerber, citing the ongoing consolidation of accounts, the increasing role of technology, and the move toward centralized buying decisions which diminished Gerber's opportunity for selling to accounts locally, announced its decision to convert from a direct sales force to a broker sales force. As a result of this change, Gerber eliminated almost all of its direct sales positions and engaged the services of independent food and drug outlet brokers to undertake most of its sales and merchandising activities. Plaintiffs were discharged pursuant to this plan of reorganization of the sales force. According to Plaintiffs, the "reorganization" discriminated against older employees by intentionally and disproportionately targeting them for termination.

 The sales associates whose positions were being eliminated received a package of materials which included, among other things, a Notice of Termination, dated January 9, 1998, explaining that if the associate signed the Release, the associate would receive a package of severance benefits for a minimum of three months, including severance pay and health insurance, and some associates would receive up to six months severance benefits, depending on their salary grade. Additionally, an associate could receive outplacement services or professional retirement planning, at the associate's choice, continuation of medical and dental coverage, spending accounts, basic life insurance, optional life insurance, and voluntary personal accident insurance coverage for a period coincident with the receipt of severance pay, pro rata vacation, and a special sales incentive payment plan developed specifically for the months of January and February 1998.

 The severance benefits were available only to associates who signed the Release, and none of the benefits would otherwise have been provided to those associates whose employment was terminated. The Notice of Termination further explained that some benefits were available regardless of whether the Release was executed, such as unused vacation, the associate's vested Gerber Retirement Investment Plan account, and vested pension benefits. Gerber also notified each associate that he or she might be eligible for unemployment compensation, depending upon applicable state law, and that federal COBRA law provided the opportunity to continue medical and dental coverage for specified periods. The Notice of Termination further recommended that each associate should obtain legal advice from an attorney concerning the severance package and the Release during the 45-day period that each associate had to decide whether or not to sign the Release.

 II. The Release and Waiver Agreement Provided to Discharged Employees

 The Release distributed to the terminated employees as part of their severance packages, provides, in relevant part:

 
Releasor agrees that the benefits provided pursuant to this Agreement are in full settlement of any and all claims, demands and actions, and causes of action whatsoever, which Releasor has or may have had as a result of employment and/or separation from employment with [Gerber] including, but not limited to, all claims asserted in, or which could have been asserted in a lawsuit, including but not limited to wrongful discharge, negligent evaluation and employment discrimination and any claims under the Age Discrimination in Employment Act of 1967, as amended, Title VII of the 1984 Civil Rights Act, as amended, the Americans with Disabilities Act, or any other federal, state or local laws or ordinances, including but not limited to those dealing with disability employment.

 The Release further states that "the invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect." In addition, the Release purports that

 
all monies received under this Agreement will become immediately due and payable to [Gerber] if Releasor should ever breach any term of this Agreement. If the Releasor should ever file a lawsuit based on any legal claims Releasor has released, Releasor will pay for all costs and expenses incurred by the Company, including reasonable attorneys' fees, in defending such suit.

 Velkovich was the only named Plaintiff in this action who signed the Release. Upon execution, he became entitled to six months of severance benefits beginning March 1, 1998. He subsequently accepted some of those benefits.

 III. Plaintiffs' Filing of This Lawsuit and Gerber's Actions Against Velkovich

 On March 13, 1998, after receiving Notices of Right to Sue from the EEOC, the four named Plaintiffs filed this action. On March 31, 1998, Kristina Kiley ("Kiley"), Gerber's Vice President of Human Resources, notified Velkovich in writing that Gerber considered his filing of this action to be in violation of the Release, and that Gerber was suspending any further payments to him pursuant to the Release and was discontinuing other benefits provided under the Release, effective as of February 28, 1998. Gerber demanded that Velkovich return the severance monies already paid to him between March 1 and 15, 1998, and informed him that he would be receiving a formal notice of his rights under COBRA to secure health insurance. The reason given by Gerber for taking this action was that Gerber had been informed that Velkovich was a plaintiff in an age discrimination suit against it.

 IV. Gerber's April 2, 1998, Letter to Discharged Employees

 On April 2, 1998, Gerber sent a letter to each of the discharged employees over the age of forty (the "April 2 Letter" or "Letter"). In the Letter, Gerber notified its former associates of the pendency of this action and the allegation that Gerber's decision to convert to a broker sales force violated the ADEA. The April 2 Letter provided information as to who was and was not separated from Gerber and offered a severance package pursuant to the sales force conversion. The information revealed that 265 of the 389 set forth on Gerber's list of those terminated were age forty or older and more than 165 were at least 50 years old at the time they were discharged.

 The April 2 Letter provided the discharged employees with two options: either "reaffirm" their prior acceptance of the Release, or "revoke" it. Gerber attached a form entitled "Reaffirmation or Revocation of Acceptance of Release and Waiver Agreement" to be filled out and returned to Gerber. The Letter explained that:

 
If, after reviewing this information, you decide that you want to continue to receive the additional benefits being provided to you, pursuant to the Release and Waiver Agreement, you should sign and date the "Reaffirmation of Acceptance" . . . . If you decide not to reaffirm your earlier acceptance, you should sign and date the "Revocation of Acceptance" . . . . If you revoke your acceptance, we will then discontinue any remaining benefits or payments that you would have otherwise received pursuant to the Agreement. Moreover, you will note that the Release and Waiver Agreement you previously signed states that you agree to repay to [Gerber] all money or other value you have received under the Agreement if you later seek to challenge the Agreement's enforceability. This would include any severance payments made to you and the value of all other benefits received or paid on your behalf. The Release and Waiver Agreement also says that you will have to reimburse [Gerber] for its costs and expenses, including its reasonable attorney fees, if you ever file a lawsuit against Gerber for any claims you released.

 Finally, Gerber wrote:

 
While Gerber believes that your initial acceptance of the separation package is binding on both you and [Gerber], we believe that everyone who signed the Release and Waiver Agreement previously should have access to the information shared with other associates and be given the same opportunity to reconsider his or her decision in light of the enclosed information. We will respect your decision based on your own sense of what is right and wrong, whether you decide to reaffirm or revoke your previous acceptance.

 Gerber claims that the April 2 Letter simply quotes the language of the Release and says nothing about terminating severance benefits to anyone who does not either reaffirm or revoke the Release. It further states that it does not intend to terminate severance benefits to former associates who neither revoke nor reaffirm, but only to those who join this action. However, as Plaintiffs point out, there is confusion regarding the rights of the discharged employees vis-a-vis the April 2 Letter, consequences of reaffirming the Release or not, and the rights of former employees to join this action. Since the parties, as well as the Court, discerned the existence of confusion during oral arguments on March ...


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