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ROMERO v. ALLSTATE INSURANCE CO.

March 30, 2004.

GENE R. ROMERO, et al.
v.
ALLSTATE INSURANCE COMPANY, et al. GENE R. ROMERO, et al. v. THE ALLSTATE CORPORATION, et al.; EQUAL EMPLOYMENT OPPORTUNITY COMMISSION v. ALLSTATE INSURANCE COMPANY, et al.



The opinion of the court was delivered by: JOHN FULLAM, Senior District Judge

MEMORANDUM AND ORDER

The three above-captioned actions arise from a common set of facts, and have, in effect, been consolidated. Civil action 01-3894 will be referred to herein as "Romero I"; civil action 01-6764 will be referred to as "Romero II," and civil action 01-7042 will be referred to as "EEOC." This opinion deals with pending motions in all three cases. Page 2

I. FACTUAL BACKGROUND

  For many years, Allstate Insurance Company hired, as its employees, all of the agents who sold its insurance policies, handled claims, etc. Management apparently came to believe that its interests would be better served by agents who were independent contractors, rather than employees. All newly-retained agents thereafter were deemed to be independent contractors. The employee-agents operated under one or the other of two types of employment contracts, designated the R830 and the R1500. The independent-contractor agents operated under R3001 contracts (after a brief period of actual employment, as trainees, under an R3000 contract).

  Beginning in 1991, Allstate amended its pension plan, allegedly in order to comply with the Tax Reform Act of 1986 and implementing IRS regulations, to make clear that service as an independent-contractor agent under an R3001 contract would not be credited toward pension entitlements or calculations. The amendments also made it more difficult for covered employees to qualify for early retirement benefits and phased-out certain particularly favorable features of the early retirement benefits (which had enabled some employees to retire at age 55, but have their retirement benefits calculated as if they had continued to work until age 63). Page 3

  After having adopted the policy of hiring only independent contractors in the future, Allstate also embarked upon a plan to persuade employee agents to switch to independent-contractor status, by offering financial inducements (e.g., a payment of $5,000, and more generous commissions on sales). Although some employee-agents made the switch, many others did not.

  By 1999, the situation was as follows: of the approximately 15,000 agents nationwide, approximately 6,200 continued as employee-agents, under either the R830 or the R1500 contract. In November 1999, Allstate announced its "Preparing for the Future" Reorganization Plan, under which the employment of all employee-agents would be terminated as of June 30, 2000. Each such employee-agent was offered a choice: if the agent signed a comprehensive release, he or she could (1) sign an R3001 contract and continue in the service of Allstate, (2) serve as an R3001 independent-contractor for a brief period, and then sell his or her interest in their book of business to a buyer approved by Allstate (frequently, another Allstate agent), or (3) sign an R3001 contract but then immediately resign, in exchange for severance pay amounting to one year's earnings, to be paid monthly over a period of two years. Agents who refused to sign the release were simply discharged as of June 30, 2000, with little or no severance pay. Page 4

  Confronted with these choices, most of the employee-agents (99.7%) signed releases. Only 19 agents did not sign, and several of their cases have been disposed of in the interim. As of the present date, the parties estimate that there are 16 potential claimants who did not sign releases.

  In Romero I, the 29 named plaintiffs seek to represent a class which includes the 6,200 former employee-agents, to nullify all of the releases, and to pursue a wide range of claims: for breach of contract, for violations of the ADEA, ADA, Title VII and ERISA. As can readily be seen from the foregoing recital, the proposed class includes persons who did not sign the release, persons who signed the release and continue in the service of Allstate as independent contractors, persons who sold their blocks of business to other agents and then resigned, and persons who not only continue in the service of Allstate as independent contractors, but who have purchased blocks of business from retiring former agents. The class-action issues will be addressed below.

  In Romero II, plaintiffs seek to represent a class of persons whose rights under ERISA were allegedly violated by the changes in the pension plan, and by their changes in status.

  In its case, the EEOC contends that requiring the employee-agents to release all their claims under the ADEA, the Page 5 ADA and Title VII in order to continue working as sales agents constituted retaliation in violation of § 4d of the ADEA, § 503a of the ADA, and § 704a of Title VII, and also constituted interference, coercion, and intimidation in violation of § 503b of the ADA. Attached to the EEOC complaint is a list of the 300-odd persons who filed charges with the EEOC — on whose behalf, presumably, the EEOC brought its lawsuit.

  II. DISCUSSION

  A. Validity of the Releases

  An overarching issue in all of these cases is the validity and enforceability of the releases signed by most of the affected employee-agents. Obviously, if the releases are enforceable, only the 16 remaining agents who did not sign the releases could possibly prevail in this litigation. Defendants contend that this issue is not appropriate for class treatment, because of the conflicting interests of the putative class members, many of whom have no desire to be restored to the status quo ante. I believe, however, that the issue can properly be addressed on a class-wide basis by way of a declaratory judgment. That is, if the releases are found to be unenforceable, a declaratory ...


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