Amicus Curiae Brief — Reichhold Chemicals, Inc. v. Cassino

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* Counsel of Record

No. 87-900

IN THE

«Supreme Court uf the Uniteh States

OCTOBER TERM, 1987

REICHHOLD CHEMICALS, INC.,

Petitioner,

Vv.

GERARD A. CASSINO and SALLY CASSINO,

Respondents.

On Petition for Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

BRIEF AMICUS CURIAE OF THE

EQUAL EMPLOYMENT ADVISORY COUNCIL

IN SUPPORT OF THE PETITIONER

ROBERT FE. WILLIAMS

DouGcLas 8S. MCDOWELL *

ANN ELIZABETH REESMAN

McGUINESS & WILLIAMS

1015 Fifteenth Street, N.W.

Suite 1200

Washington, D.C. 20005

(202) 789-8600

Attorneys for Amicus Curiae

Equal Employment Advisory

Council

WILSON - Epes PrintiNG Co., INc. - 789-0096 - WASHINGTON, D.C. 20001

o\3 \

TABLE OF CONTENTS

TABLE OF CONTENTS ___________________---__--

py PR Rs ye i yl ee

INTEREST OF THE AMICUS CURIAE._----------

DEALS OF BEA URGE 4202 cce nn ccsmscnncan

SUMMARY OF REASONS FOR GRANTING THE

WRIT

REASONS FOR GRANTING THE WRIT ----------

REVIEW BY THIS COURT IS NECESSARY BE-

CAUSE THE NINTH CIRCUIT’S DECISION

CONTRAVENES THE POLICY OF ENCOURAG-

ING SETTLEMENT OF CLAIMS, CONFLICTS

DIRECTLY WITH AN APPLICABLE DECISION

OF THIS COURT AND WILL HAVE A CHILL-

ING EFFECT ON BONA FIDE SEVERANCE

PE RE nb ak biccndnnenamadendaetin su

Il.

THE NINTH CIRCUIT’S RULING ALLOW-

ING THE ADMISSION OF AN UNSIGNED

SETTLEMENT AGREEMENT TO PROVE

LIABILITY CONFLICTS WITH THE SOUND

PUBLIC POLICY ENCOURAGING SETTLE-

MENT OF CLAIMS REFLECTED IN EVI-

SE SE GR bc cddn dons betndacnkw mena

A. Public Policy Supports Compromise of

a a sh a i a as

B. Evidence Rule 408, Which Precludes the Use

of Settlement Offers to Prove Liability, Pro-

tects Attempts to Resolve Disputes Amicably_

THE NINTH CIRCUIT DECISION CON-

FLICTS WITH THIS COURT’S HOLDING IN

TRANS WORLD AIRLINES V. THURSTON

THAT A “WILLFUL” VIOLATION’ RE-

QUIRES KNOWLEDGE OR RECKLESS DIS-

Ream OF THe ADGA ..............-..-

TABLE OF CONTENTS—Continued

III. THE NINTH CIRCUIT’S DECISION COULD

JEOPARDIZE BONA FIDE SEVERANCE

PROGRAMS, TO THE DETRIMENT OF EM-

PLOYEES, EMPLOYERS, AND THE GEN-

ERAL PUBLIC POLICY FAVORING SETTLE-

Page

iii

TABLE OF AUTHORITIES

Cases: Page

Adcock v. Firestone Tire and Rubber Company, 822

fe 8 cee 16

Air Line Pilots Association, International v. Trans

World Airlines, Inc., 713 F.2d 940 (2d Cir.

ST EP a ae 5, 14

Alexander v. Gardner-Denver Company, 415 U.S.

8 ESTATE TALS IS a a a a ce ae 7

Branch v. Fidelity & Casualty Co. of New York,

783 F.2d 1289 (5th Cir. 1986) ._._.....__..---- 10

Brock v. Richland Shoe Company, 799 F.2d 80 (3rd

Cir. 1986) (cert. granted, No. 86-1520, October

I a terine cadlininlcshidid andbdlc min hee amine ane ds mien 14

Burns v. City of Des Peres, 534 F.2d 103 (8th Cir.

aN ale at icc uh iben awh iad phi ennai wn 10

Burns v. Equitable Life Assurance Societu of the

United States, 696 F.2d 21 (2d Cir. 1982), cert.

denied, 464 U.S. 988 (1983) ..............--- 3

Cassino v. Reichhold Chemicals, Inc., 817 F.2d 1338

(9th Cir. 1987) (petition for cert. filed) __4, 8, 10, 11, 14

Florida Trailer and Equipment Co. v. Deal, 284

ee ee SO Ge SSO) nic cvinnvacdccoecane 17

Henn v. National Geographic Society, 819 F.2d 824

(7th Cir. 1987), cert. denied, November 30, 1987,

SE SERRE SE SE ae oe ee a 8

Lancaster v. Buerkle Buick Honda Co., 809 F.2d

539 (8th Cir. 1987), cert. denied, 107 S.Ct. 3212

i mnetiinen 8,12

Lorillard v. Pons, 434 U.S. 575 (1978) ._--------- 3

Moore v. McGraw Edison Company, 804 F.2d 1026

ERE SR FS ees Wg ee 12

Pilon v. University of Minnesota, 710 F.2d 466

i oe beune 7

Pruet Production Co. v. Ayles, 784 F.2d 1275 (5th

i ns tech inthe a tek i A aiaapi dh eves 12

Ramada Development Company v. Rauch, 644 F.2d

I i na sien since dibs die gsi 10

Runyan v. National Cash Register Corp., 787 F.2d

1039 (6th Cir. 1986), cert. denied, 107 S.Ct. 178

er a is i carci ah cceeploneneb-ebanunetion 3,7

TABLE OF AUTHORITIES—Continued

Page

Sherrod v. Sears, Roebuck & Co., 785 F.2d 1312

I, I sini tcciicts ici cachansasiashtedeihiinaltn dc hakemaiias 12

Sullivan v. Boron Oil Company, F.2d ‘

No. 202 Daily Labor Report (BNA), October 21,

1987 at D-1 (3rd Cir. September 30, 1987)_--- 7,8

Trans World Airlines, Inc. v. Thurston, 469 U.S.

SEE cv ccnchbnny denne wiabbenan 2, 3, 5, 18, 14

United States v. Armour & Co., 402 U.S. 673

I i laa aid ceed tdci ch PLT tia a ea 17

United States v. Contra Costa County Water Dis-

trict, 678 F.2d 90 (9th Cir. 1982) .__._--------- 4,9, 10

Statutes:

Age Discrimination in Employment Act, 29 U.S.C.

AI I a Si as oO all Tal Sicilia eeieilina tee 2,4

Section 7(b), 29 U.S.C. § 626(b) ________---- 13

Section 7(d), 29 U.S.C. § 626(d) __--_____-__- 6

Fair Labor Standards Act, 29 U.S.C. § 201 et seq._ 13

Section 16(b), 29 U.S.C. § 216(b) --_-------- 13

Title VII of the Civil Rights Act of 1964, 42 U.S.C.

pe fe RP hres eRe S Sy ee ok ee 2

Section 706(b), 42 U.S.C. § 2000e-5 (b) ._____- 6

Regulations:

Administrative Exemptions

Be I ei iii ih ciciemennnmns 7

Be ae EO CEP venacntacduccones 15

52 Fed. Reg. 32,293 (1987) (to be codified at

SMT TSI sisecdn tide evista dal ch cinblincs aaron S

Federal Rules of Evidence:

Compromise and Offers to Compromise, Fed. R.

TABLE OF AUTHORITIES—Continued

Miscellaneous: Page

H.R. 2763, 100th Cong., Ist Sess., 133 Cong. Rec.

eG ee Cee Be EF cn ecncmancccnane 8

10 J. Moore and H. Bendix, Moore’s Federal Prac-

tien, 3 GGGGs Cine O68. 1907) ...2 ec nninnx 10

R. Silberman and C. Bolick, The EEOC’s Proposed

Rule on Releases of Claims under the ADEA,37 —

7 ee ERR Lee ie 7, 8, 12, 14, 16

IN THE

Supreme Court of the United States

OCTOBER TERM, 1987

No. 87-900

REICHHOLD CHEMICALS, INC.,

7 Petitioner,

GERARD A. CASSINO and SALLY CASSINO,

Respondents.

On Petition for Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

BRIEF AMICUS CURIAE OF THE

EQUAL EMPLOYMENT ADVISORY COUNCIL

IN SUPPORT OF THE PETITIONER

The Equal Employment Advisory Council (“EEAC’’)

respectfully submits this brief as amicus curiae in sup-

port of the petition for a writ of certiorari in this case

filed by Reichhold Chemicals, Inc. Statements-ef-eonsent

heve been submitted te the Clerk of the Court.

INTEREST OF THE AMICUS CURIAE

EEAC is a voluntary nonprofit association organized

to promote sound approaches to the elimination of dis-

criminatory employment practices. Its membership con-

sists of a broad segment of the eriployer community in

the United States, including individual employers as well

as several trade associations which themselves have hun-

dreds of corporate members. The members of EEAC are

firmly committed to the principles of nondiscrimination

and equa! opportunity in employment.

Substantially all of the Council’s members, and the

constituents of its trade association members, are em-

ployers subject to the Age Discrimination in Employment

Act (ADEA), 29 U.S.C. § 621 et seg. and Title VII of

the Civil Rights Act of 1964, as amended, 42 U.S.C.

$ 2000e, et seg., as well as other equal employment stat-

utes and regulations. As employers, many of EEAC’s

members maintain severance pay programs providing

funds to terminated employees. Also, as potential re-

spondents to civil rights charges and other employment-

related claims, they are interested in encouraging the

voluntary resolution of such claims.

The issues presented in the petition for certiorari are

extremely important to the nationwide constituency which

EEAC represents. The Ninth Circuit held that an unex-

ecuted release of claims requested in exchange for sever-

ance pay is admissible to prove liability and to prove a

willful violation of the ADEA. The lower court’s holding

frustrates the policy of encouraging settlements without

litigation and undercuts the voluntary resolution of

charges under the ADEA and other civil rights statutes,

such as Title VII, Equal Pay Act, or wrongful discharge

claims. Moreover, the holding conflicts with this Court’s

decision in Trans World Airlines v. Thurston, 469 U.S.

111 (1985), that a “willful” violation of the ADEA can

be proven only by showing knowledge or reckless disre-

gard of the ADEA, and adopts a minimal standard pre-

viously rejected by this court. |

The lower court’s decision could also have a chilling |

effect on bona fide severance pay programs designed to

provide employees with increased economic security dur-

ing the often difficult transition to new employment.

Because of its interest in the application of the nation’s

civil rights laws, EEAC has filed over 220 briefs as ami-

cus curiae in cases before the United States Supreme

Court, the United States Circuit Courts of Appeals and

various state supreme courts. A number of the cases in

eS a

which EEAC has participated have involved the proper

interpretation of the ADEA. See, e.g., Trans World Air-

lines, supra; Lorillard v. Pons, 434 U.S. 575 (1978);

Shell Oil Co. v. Dartt, 484 U.S. 99 (1977); Burns v.

Equitable Life Assurance Society of the United States,

696 F.2d 21 (2d Cir. 1982), cert. denied, 464 U.S. 933

(1983). EEAC also has participated in several cases in-

volving the validity of releases of ADEA claims. See,

e.g., Lancaster v. Buerkle Buick Honda Co., 809 F.2d 539

(8th Cir. 1987), cert. denied, 107 S. Ct. 3212 (1987);

Runyan v. National Cash Register Corp., 787 F.2d 1039

(6th Cir. 1986), ceri. denied, 107 S. Ct. 178 (1986).!

STATEMENT OF THE CASE

In mid-1982, Reichhold Chemicals, Inc. (‘Reichhold’’)

began a corporate reorganization which resulted in the

sale or closure of several Reichhold facilities and a sub-

stantial reduction in force. Prior te the reorganization,

Gerard Cassino was responsible for assisting in the nego-

tiation and administration of collective bargaining agree-

ments at several Reichhold facilities in the western United

States. Most of these facilities were closed, sold or trans-

ferred as part of the reorganization, virtually eliminating

Cassino’s duties.

Cassino was advised in December 1982 to begin look-

ing for another job. His position was terminated in June

1983. Cassino received formal notice of his termination

at a meeting with Reichhold officials. At this meeting,

Cassino was offered a separation payment of $18,000 cal-

1 EEAC has sought and received permission from this Court to

file briefs in other cases concerning non-discrimination in employ-

ment. See, e.g., State of Florida v. Long, No. 86-1685, cert. granted,

56 U.S.L.W. 3206 (1987); Marino v. Ortiz, No. 86-1415 (decision

pending) ; Zipes v. Trans World Airlines, Inc., 455 U.S. 385 (1982) ;

Furnco Construction Corp. v. Waters, 438 U.S. 567 (1978) ; Gardner

v. Westinghouse Broadcasting Co., 437 U.S. 478 (1978); and Shell

Oil Co., supra.

culated according to his age, salary and length of service.

In return, Reichhold asked Cassino to sign a “Settlement

Agreement and General Release” waiving claims arising

out of his employment. Cassino refused.

Cassino, who was then 52 years old, sued Reichhold

under the Age Discrimination in Employment Act

(ADEA), 29 U.S.C. § 621 et seg. Over Reichhold’s ob-

jection, the trial court admitted the unsigned “Settlement

Agreement and General Release” into the record as evi-

dence relevant to the substance of the underlying claim

of age discrimination. The jury awarded Cassino $81,000

in back pay, $150,000 in front pay, $246,000 in liqui-

dated damages, and $15,000 on state law claims.

The Ninth Circuit found no abuse of discretion in the

admission of the unsigned agreement into evidence, re-

jecting Reichhold’s argument that the release was an in-

admissible offer of compromise under Fed. R. Evid. 408.

The court concluded that while offers of settlement made

after termination are inadmissible to prove liability, of-

fers made contemporaneously are “probative on the issue

of discrimination.” Cassino v. Reichhold Chemicals, Inc.,

817 F.2d 1338, 1342 (9th Cir. 1987) (petition for cert.

filed, No. 87-900).

The court then affirmed the jury’s award of liquidated

damages, citing to the unsigned release as part of the

“substantial evidence” supporting the jury’s finding of a

“willful” violation of the ADEA. 817 F.2d at 1348.

SUMMARY OF REASONS FOR GRANTING THE WRIT

Review by this Court is necessary because the opinion

below conflicts directly with well-established policy en-

couraging the settlement of claims without litigation.

See, e.g. United States v. Contra Costa County Water Dis-

trict, 678 F.2d 90 (9th Cir. 1982). Instead of excluding

the proposed ‘Release and Settlement Agreement” from

evidence, as required by Fed. R. Evid. 408, the Ninth Cir-

cuit admitted it as evidence of liability and of a willful

violation of the ADEA. The lower court’s position is like-

wise contrary to the position taken by the Equal Employ-

ment Opportunity Commission, which has endorsed the

use of releases of ADEA claims.

Review by this Court also is necessary because the

Ninth Circuit has sanctioned an abrupt departure from

the usual course of judicial proceedings. By accepting the

unsigned release as evidence of a willful ADEA violation,

the lower court in essence has revived the minimal “in the

picture” standard expressly rejected by this Court in

Trans World Airlines, Inc. v. Thurston, 469 U.S. 111

(1985). The Ninth Circuit’s decision thus conflicts di-

rectly with this Court’s holding in Trans World Airlines

that proof of a “willful” ADEA violation requires a show-

ing that “‘. . . the employer either knew or showed reck-

less disregard for the matter of whether its conduct was

prohibited by the ADEA.’” 469 U.S. 111, 128 (1985)

(quoting Air Line Pilots Association, International v.

Trans World Airlines, Inc., '718 F.2d 940, 956 (2d Cir.

1983) ). A request for a release is not an admission of

liability; it merely shows that the employer was protect-

ing itself from a suit on those grounds. Accordingly, the

court below has significantly lowered this Court’s stand-

ard of proof necessary to show a willful violation of the

ADEA.

Further, the Ninth Circuit’s decision is likely to have

a chilling effect on employer severance pay programs,

particularly those arising from reductions in force. The

lower court’s holding can be applied not only to ADEA

claims, but also to Title VII, wrongful discharge, and

other causes of action arising out of employment rela-

tionships. If an unsigned release is admissible to prove

liability, then employers will have to consider not asking

employees to release potential claims. As a result, how-

ever, employers will be much less willing to offer gratui-

tous severance payments without any security against

suits by former employees who have received the benefit

without having incurred any countervailing obligation.

Thus, employees who have no dispute with the employer

and who would be more than willing to execute releases

will nevertheless be denied the opportunity to receive sev-

erance payments to ease the transition to new employ-

ment.

REASONS FOR GRANTING THE WRIT

REVIEW BY THIS COURT IS NECESSARY BECAUSE

THE NINTH CIRCUIT’S DECISION CONTRAVENES

THE POLICY OF ENCOURAGING SETTLEMENT OF

CLAIMS, CONFLICTS DIRECTLY WITH AN APPLI-

CABLE DECISION OF THIS COURT AND WILL HAVE

A CHILLING EFFECT ON BONA FIDE SEVERANCE

PAY PROGRAMS.

I. THE NINTH CIRCUIT’S RULING ALLOWING THE

ADMISSION OF AN UNSIGNED SETTLEMENT

AGREEMENT TO PROVE LIABILITY CONFLICTS

WITH THE SOUND PUBLIC POLICY ENCOURAG-

ING SETTLEMENT OF CLAIMS REFLECTED IN

EVIDENCE RULE 408.

A. Public Policy Supports Compromise of Claims.

The decision below disregards sound public policy en-

couraging the compromise of claims without litigation.

Amicable settlements reduce unnecessary costs for all

parties and avoid overcrowding of judicial calendars and

delays in disposition of cases. In furtherance of this

policy, a number of procedures and safeguards have been

created to encourage and facilitate the settlement of

claims. For example, both Title VII of the Civil Rights

Act of 1964 and the ADEA provide for informal resolu-

tion through conciliation, conference und persuasion. 42

U.S.C. § 2000e-5 (b) ; 29 U.S.C. § 626(d).

Many employers, when implementing reductions in

force, offer terminated employees “severance pay” to ease

the transition to new employment. In exchange, employ-

ers often ask for written waivers of all potential legal

claims against them. Such a waiver usually includes a

release of claims of discriminatory conduct during the

employment relationship. See generally R. Silberman and

C. Bolick, The EEOC’s Proposed Rule on Releases of

Claims under the ADEA, 37 Lab.L.J. 195, 195-6 (1986)

(discussion of releases in the context of employment dis-

crimination). Releases of this type have been enforced

repeatedly as consistent with public policy and the pur-

poses of both Title VII and the ADEA. Alexander v.

Gardner-Denver Company, 415 U.S. 36, 52 (1974) (au-

thorizing voluntary waiver of Title VII claims); Pilon

v. University of Minnesota, 710 F.2d 466 (8th Cir. 1983)

(Title VII age and sex discrimination claims waived by

general release); Runyan v. National Cash Register

Corp., 787 F.2d 1039 (6th Cir.), cert. denied, 107 S. Ct.

178 (1986) (unsupervised release of ADEA claim valid) ;

Suilivan v. Boron Oil Company, F.2d , No. 202

Daily Labor Report (BNA), October 21, 1987 at D-1 (3rd

Cir. September 30, 1987) (general release barred ADEA

claims).

Further, the EEOC endorses knowing and voluntary re-

leases of ADEA claims made in exchange for valuable

consideration. Agency regulaticns at 29 C.F.R. § 1627.16

list three safeguards it considers to be indicia of a know-

ing and voluntary waiver:

(1) The agreement was in writing, in understandable

language, and clearly waived the employee’s rights

under the ADEA;

(2) A reasonable period of time was provided for

employee deliberation; .

(3) The employee was encouraged to consult with an

attorney.

Id* These concepts were recapitulated by the Third Cir-

cuit in Sullivan v. Boron Oil Company, supra, holding

2 The EEOC’s list of circumstances indicating a knowing and

voluntary waiver are part of the final rule published August 27,

1987 adopting an administrative exemption allowing for the en-

that a general release “from all claims of employment

discrimination” barred ADEA claims. Sullivan, supra, at

D-2. One reason for asking for a release, of course, is to

avoid the very real possibility that employees who receive

these enhanced benefits will nevertheless breach their

bargain and sue their employer.

The “Settlement Agreement and General Release” of-

fered by Reichhold meets these qualifications. It was writ-

ten in comprehensible terms and included a specific

waiver of age discrimination claims. Reichhold advised

Cassino to take the document home and to review it with

an attorney. See Petition for Writ of Certiorari, p. 3.

The Ninth Circuit based its holding in part on its ob-

servation that settlement agreements offered at the time

of termination “. .. may also tend to be coercive rather

than conciliatory.” 817 F.2d at 13843. However, since

Cassino rejected the offer and refused to sign the release,

it can hardly be said that he was coerced. The issue of

coercion arises only after a claimant has executed a re-

lease and seeks to have it set aside on the grounds that it

was involuntary. Moreover, neither the need to make a

choice quickly nor the difficulty of electing between op-

tions necessarily renders a decision involuntary. Henn v.

National Geographic Society, 819 F.2d 824 (7th Cir.

1987), cert. denied, November 30, 1987, No. 87-558.°

forcement of non-EEOC supervised waivers under the ADEA. 52

Fed. Reg. 32,293 (1987) (to be codified at 29 C.F.R. § 1627.16).

A pending amendment to H.R. 27638, 100th Cong., 1st Sess., which

provides budget authorization for the EEOC and other agencies

will, if adopted by Congress, suspend the final rule during fiscal

1988. 133 Cong. Reg. $14,383 (daily ed. October 15, 1987). But

see, e.g., Runyan and Lancaster, which endorsed the EEOC’s pro-

posed rule.

3 Observing that ‘releases are frequently offered at severance,

EEOC Commissioner Silberman has said that “...a release should

not be voided solely because the releasor was motivated by eco-

norzic necessities.” Silberman, supra, at 202.

The public policy encouraging settlement of disputes

without litigation is furthered by the offer of severance

pay in exchange for a general release of claims at the

termination of an employment relationship. Several of the

courts of appeals as well as the agency having responsi-

bility for enforcement of Title VII and the ADEA have

authorized the use of voluntary releases to resolve claims.

The Ninth Circuit’s decision to allow such a release to be

admitted into evidence as proof of a willful violation of

the ADEA frustrates this policy.

B. Evidence Rule 408, Which Precludes the Use of

Settlement Offers to Prove Liability, Protects At-

tempts to Resolve Disputes Amicably.

The public policy favoring amicable resolution of dis-

putes also is furthered by Rule 408 of the Federal Rules

of Evidence, which precludes the use of settlement offers

to prove liability. United States v. Contra Costa County

Water District, 678 F.2d 90 (9th Cir. 1982). The Ad-

visory Committee’s Note on Rule 408 explains that the

rule is based on two grounds: (1) that the evidence is

irrelevant because it may reflect an attempt to buy peace

rather than an admission of liability, and (2) that ex-

4 The rule states:

Evidence of (1) furnishing or offering or promising to fur-

nish, or (2) accepting or offering or promising to accept, a

valuable consideration in compromising or attempting to com-

promise a claim which was disputed as to either validity or

amount, is not admissible to prove liability for or invalidity of

the claim or its amount. Evidence of conduct cr statements

made in compromise negotiations is likewise not admissible.

This rule does not require the exclusion of any evidence other-

wise discoverable merely because it is presented in the course

of compromise negotiations. This rule also does not require

exclusion when the evidence is offered for another purpose,

such as proving bias or prejudice of a witness, negativing a

contention of undue delay, or proving an effort to obstruct a

criminal investigation or prosecution.

Fed. R. Evid. 408.

clusion of such evidence promotes the public policy to en-

courage compromise and settlement. 10 J. Moore & H.

Bendix, Moore’s Federal Practice, § 408.01 (2d ed. 1987).

Rule 408 covers not only the offer itself, Burns v. City

of Des Peres, 534 F.2d 103 (8th Cir. 1976), but also

documents prepared in furtherance of compromise.

Ramada Development Company v. Rauch, 644 F.2d 1097

(5th Cir. 1981). Settlement negotiations with third par-

ties are likewise protected. Branch v. Fidelity & Casualty

Co. of New York, 788 F.2d 1289 (5th Cir. 1986) (settle-

ment with co-defendant inadmissible to show liability) ;

United States v. Contra Costa County Water District, 678

F.2d 90 (9th Cir. 1982) (settlement negotiations between

plaintiff and third party inadmissible).

The Ninth Circuit sought to avoid Rule 408 by distin-

guishing between a settlement offer made after an ADEA

claim has been articulated and one made at termination

before the terminated employee chooses to pursue a claim,

saying “. . . the protections of Rule 408 were designed to

encourage the compromise and settlement of existing dis-

putes.” 817 F.2d at 1343 (emphasis supplied).

Thus, the court below distinguished between two typical

situations involving releases of ADEA claims by termi-

nated employees in exchange for consideration. The first

involves negotiated settlement of an ADEA claim asserted

after termination. The second situation, and that which

occurred in the instant case, entails a release offered at

termination contemporaneously with a severance pay

package. 817 F.2d at 1342. In the lower court’s view, a

settlement offer made after filing an ADEA claim is

shielded by Rule 408 while one made at termination is

admissible to prove not only liability but also a willful

violation.

The Ninth Circuit inexplicably observed that in the

second situation, “[s]uch termination agreements are

generally made a part of the record in the case and are

considered relevant to the circumstances surrounding the

alleged discriminatory discharge itself. The termination

agreements, therefore, are probative on the issue of dis-

crimination.” 817 F.2d at 1342. Apparently, the Ninth

Circuit bases its departure from accepted procedure on

the difference between a settlement agreement offered

after an ADEA claim has been asserted, and one offered

at the time of termination when no ADEA claim has yet

been made.

The court’s artificial distinction places an unreasonable

burden on employers and employees alike. Under its ap-

proach, if an employer wishes to avoid having its offer

of severance pay used as evidence of liability on a later

claim because it asks for a release in return, it must wait

until each of the employees involved in a reduction in

force files a lawsuit before it can make the offer. Like-

wise, terminated employees cannot expect a gratuitous

severance payment unless they first file a claim for every

conceivable right and remedy arising out of their employ-

ment. Thus, the Ninth Circuit’s decision actually encour-

ages litigation by forcing employers to require all em-

ployees to file unnecessary or spurious claims so that their

request for a release in return for severance pay can be

characterized as an inadmissible settlement offer instead

of an admissible termination agreement.

In addition to being unrealistic, as well as out of touch

with the purposes of Rule 408, the authority cited by the

Ninth Circuit in fact is directly opposite to the conclusion

reached below. For example, the Ninth Circuit opinion at

page 1342 cites four cases as authority for its unprece-

dented position. Those cases conflict with, rather than

support the Ninth Circuit’s novel approach.

All four cases cited arose under the ADEA and involve

releases. In three of those cases the releases were intro-

duced not by the plaintiff to prove discrimination but by

the defendant to bar the claim successfully. Thus, in

VAILABLE COPY

Lancaster v. Buerkle Buick Honda Co., 809 F.2d 539 (8th

Cir. 1987), cert. denied, 107 S.Ct. 3212 (1987), and

Moore v. McGraw Edison Company, 804 F.2d 1026 (8th

Cir. 1986), waivers signed in exchange for severance pay

were offered into evidence by the employers and admitted

as proof of valid releases which barred the ADEA ac-

tions. An alleged oral release was offered by the employer

in support of a breach of contract claim in Pruet Produc-

tion Co. v. Ayles, 784 F.2d 1275 (5th Cir. 1986), and the

employee raised the ADEA in a counterclaim.

In the fourth case cited by the Ninth Circuit, Sherrod

v. Sears, Roebuck & Co., 785 F.2d 1312 (5th Cir. 1986),

an employee terminated as part of a reduction in forre

refused to sign a release in exchange for accrued vacation

and severance pay. As in the instant case, the release

was a general waiver of claims requested from all em-

ployees receiving severance pay. Holding that Sherrod

had produced insufficient evidence of age discrimination,

the Fifth Circuit observed that Sherrod failed to show a

connection between the release and Sears’ alleged dis-

criminatory intent. 785 F.2d at 1315.

Also, the court inappropriately relies on EEOC Com-

missioner R. Gaull Silberman’s observation that releases

of ADEA claims usually arise after assertion of an

ADEA claim or at termination in conjunction with an

offer of severance pay. R. Silberman and C. Bolick, The

EEOC’s Proposed Rule on Releases of Claims under the

ADEA, 37 Lab.L.J. 195, 195-196 (1986). In explaining

the EEOC’s position that voluntary waivers of ADEA

claims need not be supervised by the EEOC, Commis-

sioner Silberman specifically refused to limit her en-

dorsement to settlements of asserted claims, stating,

“Limiting releases in this manner would eliminate

the use of releases in reduction in force situations,

where employers offer consideration in exchange for

releases of claims, thereby inhibiting amicable agree-

ments and limiting the options available to older em-

ployees. Such an arbitrary approach does not serve

the objectives of the Act....

Id, at 202. There is no reason to distinguish the two

situations. In each, an employee gives up a potential

right in return for consideration.

Accordingly, the writ should be granted to review the

decision below which is contrary to Rule 408 and other

court decisions.

Il. THE NINTH CIRCUIT DECISION CONFLICTS

WITH THIS COURT’S HOLDING IN TRANS

WORLD AIRLINES V. THURSTON THAT A “WILL-

FUL” VIOLATION REQUIRES KNOWLEDGE OR

RECKLESS DISREGARD OF THE AREA.

This Court has determinec that in order to find a

“willful” violation of the ADEA and thus award double

damages, the employee must show that the employer ei-

ther knew its conduct violated the ADEA or showed a

reckless disregard for the Act’s prohibitions. T'rans

World Airlines v. Thurston, 469 U.S. 111 (1985). The

Ninth Circuit considered the “General Release and Set-

tlement Agreement” to be part of the “substantial evi-

dence” supporting the jury’s finding of a “willful” viola-

tion. The Ninth Circuit’s analysis conflicts directly with

this Court’s reasoning in Trans World Airlines.

Section 7(b) of the ADEA, regarding enforcement,

incorporates by reference certain provisions of the Fair

Labor Standards Act, 29 U.S.C. § 201 et seqg., including

$ 16(b) which mandates an award of an additional sum

equal to the back pay award as “liquidated damages.” 29

U.S.C. § 216(b). The ADEA specifically restricts liabil-

ity for liquidated damages to “cases of willful violations”

of the ADEA. 29 U.S.C. § 626(b).

This Court addressed the appropriate construction of

“willful violation” in Trans World Airlines v. Thurston,

469 U.S. 111 (1985), for purposes of awarding liqui-

dated damages under the ADEA and held that “a viola-

tion is ‘willful’ if ‘. . . the employer either knew or showed

reckless disregard for the matter of whether its conduct

was prohibited by the ADEA.’” 469 U.S. 111, 128

(1985) (quoting Air Line Pilots Association, Interna-

tional v. Trans World Airlines, Inc., 713 F.2d 940, 956

(2d Cir. 1983)). In so doing, this Court specifically re-

jected the standard which would find a willful violation

if the employer knew the statute was “in the picture.”

This Court has now granted certiorari in Brock v. Rich-

land Shoe Company, 799 F.2d 80 (3rd Cir. 1986) (cert.

granted, No. 86-1520, October 5, 1987) to determine

whether the “in the picture” standard should be used in

determining the appropriate statute of limitations under

the ADEA.

The court below listed the “Settlement Agreement and

General Release” as part of the “substantial evidence”

supporting the jury’s finding of willful age discrimina-

tion simply because “the termination agreement . . . spe-

cifically required Cassino to waive his right to sue for

age discrimination in return for severance pay.” 817

F.2d at 1348. This conclusion is tantamount to use of

the “in the picture” standard rejected by this Court in

Trans World Airlines, because to be enforceable against

age suits, any valid release either will expressly refer to

age discrimination or will be relied upon later as implic-

itly including ADEA claims.

This Court realized that the “in the picture” standard

“would result in an award of double damages in almost

every case,” because “[a]s employers are required to

post ADEA notices, it would be virtually impossible for

an employer to show that he was unaware of the Act and

its potential applicability.” Trans World Airlines, 469

U.S. 111, 128, (1985). Similarly, employers seeking to

obtain releases of all potential claims in exchange for

consideration as part of a reduction in force commonly

include language waiving age-based discrimination claims.

See R. Silberman and C. Bolick, The EEOC’s Proposed

Rule on Releases of Claims under the ADEA, 37 Lab.

L.J. 195, 195-196 (1986). Under the Ninth Circuit’s

decision, any release which specifically called for a waiver

of claims based on age would be evidence of a “willful”

violation of the ADEA. This result makes no legal or

logical sense. The fact that an employer tenders a re-

lease does not necessarily mean that the employer has

committed age discrimination; it merely shows that the

employer was protecting itself from the possibility of a

suit on those grounds.

The “Settlement Agreement and General Release”

which Reichhold presented to Cassino with an offer of

consideration does not prove that Reichhold terminated

Cassino in violation of the ADEA. On the contrary, it is

in keeping with a widely used practice of companies im-

plementing reductions in force. Indeed, the inclusion of a

specific waiver of ADEA claims conforms to the EEOC’s

requirement that waivers be “knowing and voluntary.” ®

At best, it shows that Reichhold knew that the ADEA

was “in the picture,” but not that Reichhold willfully

violated the ADEA.

Accordingly, it is clear that review on the writ of

certiorari herein is appropriate because of the Ninth

Cireuit’s unsubstantiated and unprecedented sanction of

the admission of a settlement offer into evidence as pro-

bative of age discrimination and a willful violation of

the ADEA in conflict with this court’s decision in Trans

World Airlines.

5 One of the factors listed by the EEOC as indicating a “know-

ing and voluntary” waiver of ADEA claims is that “The agreement

... Clearly waived the employee’s rights or claims under the ADEA.”

29 C.F.R. § 1627.16(c) (1). Thus, in order to obtain a valid un-

supervised waiver of ADEA claims, the employer must include in

the release language which clearly waives age discrimination claims.

This language in Reichhold’s release, however, was found to be

evidence of a “willful” violation.”

Ill. THE NINTH CIRCUIT’S DECISION COULD JEOP-

ARDIZE BONA FIDE SEVERANCE PROGRAMS,

TO THE DETRIMENT OF EMPLOYEES, EMPLOY-

ERS, AND THE GENERAL PUBLIC POLICY FA-

VORING SETTLEMENTS.

The Ninth Circuit’s decision could have a chilling ef-

fect on bona fide severance programs. But there are

even broader implications. While the lower court’s opin-

ion arose under the ADEA, its holding clearly could be

extended to other cases involving employment relation-

ships, such as Title VII, the Equal Pay Act or wrongful

discharge claims. Thus, a release offered at termination

could be used later to substantiate nearly any claim

against the employer.

A genuine severance pay program such as that offered

to Cassino by Reichhold provides a gratuitous payment

at termination of employment in exchange for a release

of claims against the employer. As explained, “This

scenario most frequently accompanies reductions in force.”

Silberman, supra, at 196. The usual purpose of severance

pay is to “... tide an employee over while seeking a new

job. . .” Adcock v. Firestone Tire and Rubber Company,

822 F.2d 623, 636 (6th Cir. 1987) (unemployment held

to be prerequisite for termination pay under terms of

plan in question). Unless an employer has willingly obli-

gated itself to a formal severance pay plan, an emptoyee

is not entitled to any more at termination than accrued

wages and benefits due.

Augmented severance pay plans in large part are re-

lated to the employer’s discretion. It is entirely reason-

able to expect employees who are receiving exceptional

payments upon separation, in return, to release any

claims against the employer. As here, those dissatisfied

with the amount of the settlement offer are free to reject

~it and seek a larger amount through litigation. The

many others, however, who have no disagreement with

the employer and are satisfied with the amount of sev-

erance pay may enjoy the increased payment without the

uncertainties of a contested lawsuit.

A request for a release and “settlement agreement” is

not in and of itself an admission of liability. On the

contrary, releases arise from a variety of circumstances.

Obviously, a party may attempt to negotiate a compro-

mise when he knows he has violated the law and now

seeks to minimize the damage. But a settlement can also

spring from the choice of those having opposing view-

points to agree to disagree and end the controversy. The

existence of a release, whether executed or not, also can

indicate uncertainty; when neither party is sure of a

victory at trial, they may compromise on middle ground.

Finally, in some cases, parties having no disagreement re-

duce an agreement to writing and include a release as

protection against breach.

In any of these situations, the usual purpose of a settle-

ment is to avoid the risk of litigation. See, e.g., United

States v. Armour & Co., 402 U.S. 673, 681-82 (1971). It

does not establish that either party was in the right. As

noted by the Fifth Circuit in Florida Trailer and Equip-

ment Co. v. Deal, 284 F.2d 567, 571 (5th Cir. 1960), re-

garding judicial approval of settlements:

Of course, the approval of a proposed settlement

does not depend on establishing as a matter of legal

certainty that the subject claims or counterclaim is

or is not worthless or valuable. The probable out-

come in the event of litigation, the relative advan-

tages and disadvantages are, of course, relevant fac-

tors for evaluation. But the very uncertainty of out-

come in litigation, as well as the avoidance of waste-

ful litigation and expense, lay behind the Congres-

sional infusion of a power to compromise. This is a

recognition of the policy of the law generally to

encourage settlements. This could hardly be achieved

if the test on hearing for approval meant establishing

success or failure to a certainty. Parties would be

hesitant to explore the likelihood of settlement ap-

prehensive as they would be that the application for

approval would necessarily result in a judicial deter-

mination that there was no escape from liability or

no hope of recovery and hence no basis for a com-

promise.

284 F.2d at 571. Thus, it is the fact of uncertainty and

not the firm assurance that one party has violated the law

that often leads to settlements; if both parties are unsure

of the probable outcome, they may be able to reach a

compromise satisfactory to both. Since doubt as to liabil-

ity may be the very source of a proposed release and set-

tlement agreement, it is clearly erroneous to use such an

agreement as an admission of liability. Indeed, even an

employer that is absolutely confident that it has no legal

liability to a discharged employee may conclude that it is

worthwhile to offer valuable consideration in return for

a release of potential claims in order to avoid the prob-

able adverse publicity and inevitable costs of defending

against even a meritless claim. For these numerous rea-

sons, it is most improper to use such a tendered release

as evidence of any violation of the ADEA, much less a

willful one.

Employers are well aware that if no release is obtained,

the occasional disgruntled employee is likely to sue the

employer while at the same time enjoying the enhanced

severance benefit. Employers thus probably will not

gratuitously offer severance pay without asking for a re-

lease in exchange. If an offer with a release is admissible

to show liability, it is more likely that no offer will be

made at all.

If the Ninth Circuit’s decision is allowed to stand, the

potentiai for harm to innocent third parties is great. Em-

ployers will strongly consider no longer offering excep-

tional severance pay based on salary and service to all

employees affected by a reduction in force. Both employ-

ers and employees will have to engage in a charade of

litigation to create a fictitious “existing” claim before the

employer may make a valid settlement offer that will not

be admissible to prove a substantive violation.

The need for this Court’s review is apparent since the

Ninth Circuit’s holding conflicts with the long standing

policy encouraging settlement without litigation and could

have a devastating effect on severance pay programs.

CONCLUSION

For the foregoing reasons, the amicus respectfully

urges this Court to grant the petition herein and issue a

writ of certiorari to the United States Court of Appeals

for the Ninth Circuit.

Respectfully submitted,

ROBERT E. WILLIAMS

DOUGLAS S. MCDOWELL *