filed: September 22, 1992; As Corrected October 16, 1992. Second Correction October 21, 1992.
On Appeal From the United States District Court For the Middle District of Pennsylvania. (D.C. Civil Action No. 83-0321)
Before: Becker, Cowen and Roth, Circuit Judges
This appeal requires us to assess the provisions of a settlement agreement designed to make whole a class of police officers forced into early retirement in violation of the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C.A. §§ 621 et seq. The appeal also forces us to address the circumstances under which an individual may challenge a settlement agreement negotiated on his behalf by the Equal Employment Opportunity Commission ("EEOC"). Using their individual awards as test cases, appellants George K. McCloskey, George Evan and Roy L. Titler challenge the overall fairness of an agreement EEOC negotiated with their employer, appellee Pennsylvania State Police ("PSP"), on behalf of the class of officers affected by the policy. The district court approved the settlement agreement. We will affirm.
Pennsylvania law requires all state police officers to retire at age 60. 71 P.S. § 65(d) (1990). In March 1983, Otto J. Binker challenged this policy as his mandatory retirement neared, alleging that the requirement violated both the ADEA and the Equal Protection Clause of the Fourteenth Amendment. Binker named as defendants PSP, its Commissioner, and the Commonwealth of Pennsylvania. EEOC, which declined to represent Binker, eventually initiated a separate suit against the same defendants on behalf of all other adversely-affected PSP officers. The two actions were consolidated in May 1983.
PSP defended the age limitation as a measure necessary to ensure that an officer was able to perform his physical duties. The district court initially agreed, finding that substantially all PSP officers over age 60 could not efficiently perform the physical requirements of the job. In 1987, however, on this case's second trip to this court,*fn1 the issue of liability was resolved in favor of the officers. In vacating the order of the district court which denied EEOC's motion for injunctive relief, we concluded that the record did not establish age as a bona fide occupational qualification reasonably necessary to the position of state police officer in Pennsylvania. In reaching this Conclusion, the panel found it significant that at the time of the suit PSP employees were not required to meet minimum standards of health and physical fitness. EEOC v. Pennsylvania, 829 F.2d 392, 395 (3d Cir. 1987), cert. denied, 485 U.S. 935, 99 L. Ed. 2d 271, 108 S. Ct. 1109 (1988).*fn2
Rather than litigate the issue of damages, the parties decided to settle. After several years of negotiations, EEOC reached an agreement with PSP, awarding over $2.6 million to 83 former police employees.*fn3
At the beginning of the negotiation process, each potential participant was asked to fill out a questionnaire supplying the reason for his*fn4 early retirement. EEOC determined that officers who voluntarily retired before turning 60 were ineligible to participate in the settlement.
Three men, including appellant McCloskey, objected to their exclusion from the settlement because EEOC determined that they had retired voluntarily before age 60.*fn5 McCloskey retired on July 29, 1981, approximately four months before his sixtieth birthday. In the EEOC questionnaire, he stated that his retirement was "involuntary." At two spots in the questionnaire he noted that his decision to retire was "mandatory." In giving the "reasons for retiring when [he] did," he referred as well to accumulated personal leave and sick time.
EEOC deposed many of the officers in connection with the settlement. McCloskey was questioned in March 1991. He was not represented by independent counsel at this proceeding. At the deposition, McCloskey stated that, while he viewed his retirement as mandatory, he also based his decision to retire on his wish to avoid increased income taxes and, in part, on a blood clot condition in his leg.
Based on the deposition and the questionnaire, EEOC determined that McCloskey's decision to retire before he turned 60 was voluntary. He was excluded from the benefit pool on April 19, 1991.
For the remaining eligible candidates, damage calculations under the settlement were broken into two parts. The first, "pre-1987 period," estimates harm from the individual's date of forced retirement through December 31, 1986, the date after which recent Congressional amendments to the ADEA permitted mandatory retirement for law enforcement personnel.*fn6 This calculation incorporates back pay and sick leave, reduced by retirement benefits--annuities--the men have already received.
PSP and EEOC negotiated the second part of the award formula as a compromise to their disagreement over whether claimants were entitled to relief after December 31, 1986.*fn7 Defined as "prospective relief," this segment runs from January 1, 1987, the effective date of the ADEA amendments, to December 31, 1989, the date serious settlement negotiation began, and consists of a fraction of between 30 and 40 percent of the individual's back pay for the three-year period. Back pay is based on December 31, 1986, earnings. The size of the multiplier depends on whether the claimant tried to find alternative employment during the pre-1987 period, and whether he incurred medical expenses that would have been covered had he continued working for PSP until the end of 1986. EEOC added the results of the pre-1987 and prospective relief periods to reach each claimant's preliminary entitlement.
All awards were then mitigated by post-retirement earnings. For some claimants, including appellant Evan, post-retirement earnings completely offset their benefits under the settlement agreement. Where straight application of the settlement formula would have eliminated these claimants' awards, EEOC and PSP agreed to award the individuals the additional pension benefits they would have received had they retired at the end of 1986, discounted to present value.*fn8
In early 1991, claimants determined to be eligible for settlement funds received a notice from the EEOC, informing them of the agreement and explaining that EEOC would meet with each claimant to discuss proposed individual awards. Those choosing to take part in the settlement were asked to sign a general release in favor of PSP before March 15, 1991; according to the letter, failure to execute the release would result in PSP's retention of the officer's award. Neither the release nor the notice from EEOC contained the specific terms of the agreement. Titler and Evan did not execute the release before the March deadline.*fn9 In a March letter to EEOC, Titler expressed concern about his right to challenge the settlement calculation if he rejected EEOC's negotiated amount. The appellate record does not contain EEOC's response.
On April 25, 1991, EEOC and PSP notified all claimants that they intended to submit the proposed settlement to the district court and that all objections to the settlement would be heard and considered by that body. Titler and Evan submitted written objections contesting several aspects of the general formula and its individual application. Specifically, the two men asserted that the district court, in addition to its duty to review the reasonableness of the entire agreement, should have reviewed for fairness the claimants' individual awards. Evan and Titler objected as well to PSP's use of 1986 earnings to calculate relief for the prospective period (1987-89), mitigation of settlement benefits by post-retirement earnings, and reduction of the net annuity payments to present value. McCloskey challenged EEOC's decision to exclude him from the settlement.*fn10
The district court held a fairness hearing regarding the proposed settlement on June 3, 1991. McCloskey submitted additional testimony regarding the voluntariness of his decision to retire, arguing that the explanation given in his March deposition was tainted by fatigue and his failure to take his diabetes medication that morning. Evan and Titler entered no new testimony. On August 13, 1991, the court issued a memorandum and order approving the settlement agreement subject to one minor adjustment in Titler's award.*fn11 The court also found EEOC's decision to exclude McCloskey reasonable at the time it was made.*fn12 Titler and Evan appealed the court's order of approval on August 29, 1991. On September 9, 1991, McCloskey appealed the court's affirmance of his exclusion.
On August 30, 1991, in accordance with the district court's order, Titler was provided with a revised settlement calculation and a revised release by EEOC.*fn13 Titler refused to sign the release pending his appeal before this court. Evan similarly refused to sign. PSP then asserted that, under the terms of the settlement agreement, neither man was entitled to receive any proceeds. Paragraph 7 of the agreement provides:
Any portion of the $2,643,036.33 which was not disbursed because of an individual's failure to sign an individual release within the time frame set by the EEOC, which shall in no event be later than the date of court approval of this agreement, will be retained by the State Police.
PSP contends that this paragraph requires execution of the release prior to court approval as a condition precedent to an award. EEOC, as the other party to the negotiations, does not recall drafting paragraph 7 with the intent to cause forfeiture. Rather, EEOC understands the provision to permit PSP to hold an officer's award in trust until a release is negotiated. Notably, neither Titler nor Evan has sought distribution of the funds, pending the resolution of the ...