Blakeney v. Lomas Information Systems, Inc.

United States Court of Appeals,

Fifth Circuit.

No. 95-10319.

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.

Oct. 4, 1995.

Appeal from the United States District Court for the Northern District of Texas.

Before KING, SMITH and BENAVIDES, Circuit Judges.

BENAVIDES, Circuit Judge:

The central issue o f 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.

FACTUAL AND PROCEDURAL BACKGROUND

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 release included a broad waiver of all discrimination

claims.1 Each employee voluntarily signed the release and received the appropriate severance pay.

1
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
 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").

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.

DISCUSSION

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).

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

[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.
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).

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).

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 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 pro mise 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.

The employees, however, did not exercise this option. Instead, they chose to keep the benefit
of their bargain, the severance pay. Ret aining 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.2 This offer
3
not only fails to return the status quo, but by any standard is untimely. See Id. at 220-21. As a

result, the employees have ratified the release.

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.

CONCLUSION

We conclude that the district court properly granted summary judgment because no genuine

2
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.
3
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.
issue of material fact exists and Lomas is entitled to a judgment as a matter of law.4 As a matter of

law, the employees ratified the release thereby waiving all claims of age discrimination. The summary

judgment is AFFIRMED.

4
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.