FILED
United States Court of Appeals
Tenth Circuit
April 29, 2009
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
TENTH CIRCUIT Clerk of Court
WAYNE T. PALMER,
Plaintiff - Appellant,
No. 05-1075
v.
(D.C. No. 04-cv-638-PSF-OES)
(D. Colo.)
KEN SALAZAR, Secretary of the
Department of the Interior, *
Defendant - Appellee.
ORDER AND JUDGMENT **
Before HENRY, Chief Judge, BRISCOE, and HOLMES, Circuit Judges.
The district court held that it did not have subject matter jurisdiction over
Wayne T. Palmer’s claim to rescind his settlement contract with his former
employer, the U.S. Department of the Interior (“Department”). Mr. Palmer argues
on appeal that the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C.
§§ 621 et seq., Title VII, 42 U.S.C. §§ 2000e et seq., and the Americans with
Disabilities Act (“ADA”), 42 U.S.C. §§ 12101 et seq., provide the federal court
*
Pursuant to Fed. R. App. P. 43(c)(2), Ken Salazar is substituted for
Dirk Kempthorne as the defendant-appellee in this action.
**
This Order and Judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
with subject matter jurisdiction over his rescission claim.
We hold that the district court erred in concluding that it did not have
subject matter jurisdiction over Mr. Palmer’s claim to rescind his settlement
agreement under the ADEA. Accordingly, we REVERSE and REMAND to the
district court for further proceedings consistent with this order.
BACKGROUND
Mr. Palmer’s claims arise from acts of alleged age, sex and disability
discrimination and retaliation by the Department. In response to the
Department’s alleged conduct, Mr. Palmer filed Equal Employment Opportunity
Commission (“EEOC”) claims in November 1993. In September 1996, Mr.
Palmer and the Department executed a settlement agreement, and he withdrew his
claims.
Mr. Palmer began efforts to reopen his EEOC case in February 1999,
claiming that he was mentally incompetent at the time of the settlement. The
EEOC eventually issued a decision refusing to invalidate his settlement agreement
because he had “submitted no persuasive evidence of coercion” or “improper
threat.” Aplt. Opening Br. at 17. The EEOC denied Mr. Palmer’s motion for
reconsideration in January 2004. Mr. Palmer filed a three-count complaint in
federal district court in March 2004, claiming that the Department had
discriminated against him and retaliated against him for engaging in protected
activity. Mr. Palmer also requested that his settlement agreement be set aside and
-2-
his case reopened. Specifically, Count 1 of his complaint alleged gender, age,
and disability discrimination; Count 2 alleged retaliation; and Count 3 sought to
invalidate the settlement agreement due to Mr. Palmer’s alleged incompetency.
The Department moved to dismiss Mr. Palmer’s complaint for (1) failure to
state a claim, (2) failure to exhaust administrative remedies as to Counts 1 and 2,
(3) lack of subject matter jurisdiction, and (4) laches. The magistrate judge
agreed that Mr. Palmer had failed to exhaust his administrative remedies as to
Counts 1 and 2. The magistrate judge also determined that Mr. Palmer had failed
to allege a federal question since resolution of his rescission claim raised state-
law contract issues. Accordingly, the magistrate judge recommended that the
Department’s motion to dismiss be granted.
Noting that it had “reviewed de novo the record in th[e] case,” the district
court accepted and adopted the magistrate judge’s recommendation. 1 R.,
1
The Department contends that Mr. Palmer withdrew his rescission
claim from the district court’s consideration by not objecting to the magistrate
judge’s recommendation that no subject matter jurisdiction existed, and also by
affirmatively abandoning the claim. Mr. Palmer counters that the district court
did not accept his attempt to withdraw the issue, and because Mr. Palmer—who
was litigating the case before the district court pro se—did not know the
consequences of withdrawing the rescission claim, his abandonment was not
knowing and voluntary. Indeed, Mr. Palmer contends that he was operating under
a “basic misunderstanding” in that he “was essentially requesting that the court
disregard his third claim if that claim gave rise to a jurisdictional defect.” Aplt.
Reply Br. at 19-20 (emphasis added). “We have adopted a ‘firm waiver rule’
whereby the failure to timely object to a ‘magistrate’s findings or
recommendations waives appellate review of both factual and legal questions.’”
Jones v. Salt Lake County, 503 F.3d 1147, 1152 (10th Cir. 2007) (quoting Moore
(continued...)
-3-
(...continued)
v. United States, 950 F.2d 656, 659 (10th Cir. 1991)). We do not apply the rule in
two situations: (1) when a pro se litigant was not properly informed of the time
period in which to object and the consequences of failing to do so, and (2) where
the interests of justice require review. Id. (citing Morales-Fernandez v. INS, 418
F.3d 1116, 1119 (10th Cir. 2005)). The first exception is not at issue here: Mr.
Palmer received the appropriate advisements. We conclude, however, under the
unique circumstances of this case, that the second exception does apply. The
district court conducted a de novo review of the record and squarely addressed
Mr. Palmer’s arguments for rescission. Consequently, there is some force to the
idea that the purposes of the firm waiver rule are outweighed by our institutional
interests in resolving on the merits the dispute before us. Cf. In re Key Energy
Res. Inc., 230 F.3d 1197, 1200 (10th Cir. 2000) (concluding that the district court
did not conduct “a de novo review of the magistrate judge’s report and
recommendation in light of appellant’s objections” and, consequently, rejecting
the contention that “the purposes behind the waiver rule are outweighed by the
judicial system’s interest in resolving cases on the merits”); United States v. 2121
E. 30th St., 73 F.3d 1057, 1059 (10th Cir. 1996) (with regard to the purposes for
the firm waiver rule, noting that “‘[t]he filing of objections to a magistrate’s
report enables the district judge to focus attention on those issues—factual and
legal—that are at the heart of the parties’ dispute’ and gives the district court an
opportunity ‘to correct any errors immediately’” (citation omitted) (quoting,
respectively, Thomas v. Arn, 474 U.S. 140, 147 (1985), and United States v.
Walters, 638 F.2d 947, 950 (6th Cir.1981))).
To be sure, the district court’s de novo adjudication of Mr. Palmer’s claim
does not require us to address it. See In re Key Energy Res. Inc., 230 F.3d at
1201 n.3 (“[E]ven had the district court performed the de novo review normally
triggered only by timely and specific objections to the magistrate judge’s report
and recommendation, that fact would not preclude application of the waiver rule .
. . .” (emphasis added)); 2121 E. 30th St., 73 F.3d at 1060-61 (applying the firm
waiver rule “[a]fter reviewing the record” notwithstanding the district court’s
decision to conduct a de novo review of appellants’ nonspecific objections
(emphasis added)). However, on these facts, where inter alia the record does
reveal a fundamental error related to the district court’s de novo resolution of Mr.
Palmer’s rescission claim, we conclude that the interests of justice would be
served by reaching his appellate challenge. Cf. Morales-Fernandez, 418 F.3d at
1122 (“At a minimum, then, our ‘interest of justice’ standard for determining
whether we should excuse a defendant’s failure to object to a magistrate judge’s
(continued...)
-4-
Vol. I., Doc. 23, at 1 (Order Accepting & Adopting Recommendation of U.S.
Mag. J., dated Feb. 4, 2005). The court observed that since Mr. Palmer’s
allegations of discrimination and retaliation had been resolved by the September
1996 settlement, Counts 1 and 2 were moot. Moreover, the court determined that
it did not have jurisdiction “to invalidate the fully executed and completed
settlement” in the absence of evidence that the Department acted in bad faith in
procuring the settlement. Id. at 2.
Mr. Palmer appeals the district court’s order dismissing his complaint with
prejudice.
DISCUSSION
I. The District Court Erred in Finding It Lacked Subject Matter
Jurisdiction
We review a district court’s ruling on a jurisdictional question de novo.
FDIC v. Hulsey, 22 F.3d 1472, 1479 (10th Cir. 1994).
A. Subject Matter Jurisdiction Exists Under the ADEA
Congress passed the Older Workers Benefit Protection Act (“OWBPA”),
Pub. L. 101-433, 104 Stat. 978, as an amendment to the ADEA. Long v. Sears
Roebuck & Co., 105 F.3d 1529, 1534 (3d Cir. 1997). “Its purpose was two-fold:
to ‘make clear that discrimination on the basis of age in virtually all forms of
employee benefits is unlawful,’ and to ‘ensure that older workers are not coerced
(...continued)
recommendation includes plain error.” (emphasis added)).
-5-
or manipulated into waiving their rights to seek legal relief under the ADEA.’”
Id. (alterations omitted) (quoting S. Rep. No. 101-263, at 1510 (1990)).
The OWBPA effectively creates “its own regime for assessing the effect of
ADEA waivers, separate and apart from contract law.” Oubre v. Entergy
Operations, Inc., 522 U.S. 422, 427 (1998) (emphasis added); see also id. (“The
OWBPA implements Congress’ policy via a strict, unqualified statutory stricture
on waivers, and we are bound to take Congress at its word.”). The OWBPA
provides a plaintiff a cause of action for declaratory or injunctive relief to negate
the validity of a waiver as it applies to an ADEA claim. See Whitehead v. Okla.
Gas & Elec. Co., 187 F.3d 1184, 1191 (10th Cir. 1999); 29 U.S.C. § 626(f).
Under the OWBPA, “[a]n individual may not waive any right or claim
under [the ADEA] unless the waiver is knowing and voluntary. . . . [A] waiver
may not be considered knowing and voluntary unless at a minimum” it satisfies
certain enumerated requirements. 29 U.S.C. § 626(f)(1); see Oubre, 522 U.S. at
427. The OWBPA’s factors, however, are not exclusive. See Bennett v. Coors
Brewing Co., 189 F.3d 1221, 1228-29 (10th Cir. 1999). Courts look to the
“totality of the circumstances.” Id. at 1228. In addition to the enumerated
requirements in § 626(f)(1), an ADEA waiver is not knowing and voluntary if
procured by fraud, duress, or mutual mistake. Id. at 1229. Moreover, in applying
Bennett, it follows that, like an ADEA waiver procured by fraud, an ADEA
waiver executed by a mentally incompetent individual may be voidable. See
-6-
Restatement (Second) of Contracts § 15(1) (1981); see also Cundick v. Broadbent,
383 F.2d 157, 160 (10th Cir. 1967) (“[I]n recent times courts have tended away
from the concept of absolutely void contracts toward the notion that even though
a contract be said to be void for lack of capacity to make it, it is nevertheless
ratifiable at the instance of the incompetent party.”); cf. Vaske v. DuCharme,
McMillen & Assocs., Inc., 757 F. Supp. 1158, 1161 (D. Colo. 1990) (“[T]o form a
contract in Colorado, the essential components include competent parties, subject
matter, legal consideration, mutuality of agreement, and mutuality of obligation.”
(emphasis added) (citing Denver Truck Exch. v. Perryman, 307 P.2d 805, 810
(Colo. 1957))); Namoko v. Cognisa Sec., Inc., No. 05-cv-00763-WDM-MEH,
2007 WL 552244, at *5 (D. Colo. Feb. 20, 2007) (“To the extent that this analysis
is governed by Colorado law, under such law the essential elements of a
settlement agreement are a definitive offer and acceptance, consideration, and
parties who have the capacity and authority to agree.” (emphasis added)).
In this case, Mr. Palmer argued that the waiver of his ADEA rights in his
settlement agreement with the Department was not knowing and voluntary
because he was mentally incompetent at the time that he agreed to it. And, based
on this assertion, he has sought to have his settlement agreement rescinded. Mr.
Palmer did not request damages in relation to his rescission claim and, therefore,
seeks only equitable relief.
The ADEA provides a grant of subject matter jurisdiction (and a waiver of
-7-
sovereign immunity) to determine whether Mr. Palmer’s waiver of his ADEA
rights was knowing and voluntary. However, the subject matter jurisdiction
provided by § 626(f) extends solely to his waiver of ADEA rights. Madrid v.
Phelps Dodge Corp., 211 F. App’x 676, 680 (10th Cir. 2006) (“The plain
language of the statute . . . indicates that the minimum requirements for a valid
waiver set forth in § 626(f)[] apply only to ADEA claims, not to other federal
claims such as ERISA or Title VII. Consequently, the fact that a waiver is invalid
as to an ADEA claim . . . does not affect its validity as to other types of claims.”
(citing Tung v. Texaco Inc., 150 F.3d 206, 208-09 (2d Cir. 1998))). Therefore,
the district court erred in concluding as a matter of law that it did not have subject
matter jurisdiction over Mr. Palmer’s claim to rescind the waiver of his ADEA
rights.
Because of the district court’s approach in dismissing Mr. Palmer’s
complaint, it did not address the issue of his mental competency as it relates to
the knowing and voluntary nature of the waiver. Thus, we remand for the district
court to consider whether, under the totality of circumstances, the waiver was
valid in light of Mr. Palmer’s allegation of mental incompetency. We also
conclude that, in the first instance, the district court should address the timeliness
of Mr. Palmer’s action to rescind the settlement agreement.
-8-
B. Subject Matter Jurisdiction Does Not Exist Under Title VII and
the ADA
In Lindstrom v. United States, 510 F.3d 1191 (10th Cir. 2007), we affirmed
the district court’s dismissal, for lack of subject matter jurisdiction, of the
federal-sector plaintiff’s action to enforce a settlement agreement he entered with
the Department of the Interior on a disability discrimination claim. Id. at 1194-
95. We observed that Title VII contains specific regulations, which apply equally
to the ADA, that set conditions on the government’s waiver of sovereign
immunity. Id. at 1194; see 29 C.F.R. §§ 1614.501-.505.
These regulations set forth the limited remedies and relief available to a
federal employee regarding discrimination claims. Section 1614.504 addresses
settlement agreements. It allows a federal employee alleging a breach of a Title
VII settlement agreement to notify the EEO Director of a demand of either (1)
specific performance of the agreement or (2) reinstatement of his original
complaint for further processing. Lindstrom, 510 F.3d at 1194 (citing 29 C.F.R. §
1614.504(a)). The regulation only permits notification of the EEO Director, not
suits to enforce the settlement agreement in federal court. Id.; see also id. at 1195
(“Congress has, admittedly, waived sovereign immunity in Title VII suits where
the federal government is the employer. However, this statutory waiver does not
expressly extend to monetary claims [or claims for specific performance] against
the government for breach of a settlement agreement that resolves a Title VII
-9-
dispute.” (emphasis added) (alteration in original) (citation and internal quotation
marks omitted)). Accordingly, we rejected the federal-sector plaintiff’s claim in
Lindstrom that subject matter jurisdiction existed over claims for breaches of
settlement agreements. Id. at 1195.
While Mr. Palmer is not claiming a breach of his settlement agreement,
following our analysis in Lindstrom, we conclude that the regulations—which
address only compliance with a settlement agreement—simply do not address
whether federal-sector employees may bring suits in federal district court on their
Title VII and ADA settlement agreements under the circumstances present here.
Because neither Title VII nor the ADA provides a procedure allowing a federal
employee in Mr. Palmer’s circumstances to challenge the settlement agreement,
neither Title VII nor the ADA provides a grant of subject matter jurisdiction, and
a waiver of sovereign immunity, here. Because Mr. Palmer does not argue that
another waiver of sovereign immunity is presently applicable, we must conclude
that we lack subject matter jurisdiction over his claims related to the Title VII and
ADA settlement agreement.
- 10 -
CONCLUSION
Accordingly, we REVERSE and REMAND to the district court for further
proceedings consistent with this opinion. 2
ENTERED FOR THE COURT
Jerome A. Holmes
Circuit Judge
2
We deny all of Mr. Palmer’s pending motions as moot.
- 11 -