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Romero v. Allstate Insurance Co.

July 28, 2010


The opinion of the court was delivered by: Ronald L Buckwalter, S.J.


Currently pending before the Court are the Motion of Plaintiffs, Gene R. Romero, et al., for Leave to File a Second Amended Complaint, the Response of Defendants Edward M. Liddy, Allstate Insurance Company, and The Allstate Corporation (collectively, "Allstate"), Plaintiffs' Reply Brief, and Defendants' Sur-reply Brief. For the following reasons, the Motion is granted


Plaintiffs' putative class action, which has been pending since August 1, 2001, alleges that Allstate had originally employed a substantial number of insurance sales agents with the promise that they would have a "guaranteed income" and lifetime "financial security" through a compensation package that included a pension, profit sharing, and other employee benefit plans. (Am. Compl. ¶ 1.) In the 1990s, Allstate sought to get out from under the financial burden of this promise by attempting to persuade these employee agents to convert to independent contractor status, under the pretext that this status would give them more "entrepreneurial freedom" and a capacity for greater earning power. (Id. ¶ 2.) When only a few of the employee agents voluntarily relinquished their benefits, Allstate's President and Chief Executive Officer, Edward M. Liddy, announced, in November 1999, that Allstate was instituting a "group reorganization program," under which approximately 6,300 employee agents would have their employment contracts terminated by June 30, 2000. (Id. ¶ 3.) These employee agents and would be permitted to remain with Allstate as independent contractors only if they signed a release waiving their statutory and common law rights (the "Mass Termination Program"). (Id.) Allstate also imposed a moratorium on rehiring the employee agents to fill sales and customer service positions for the company. (Id.) This Mass Termination Program, either intentionally or in effect, allowed Allstate to replace older employee agents with younger hires. (Id. ¶ 6.) To further evade legal accountability, Allstate presented the employee agents with an choice: (a) sign a prepared General Release and Waiver Agreement ("Release") that waived the employee agents' right to challenge the legality of Allstate's conduct, and be permitted to either remain with Allstate as an independent contractor or leave Allstate and receive certain specified payments; or (b) not sign the Release and have their long-term relationship with Allstate severed entirely with none of the specified payments. (Id. ¶ 11.) Given these limited alternatives, over ninety-nine percent of the 6,300 employee agents signed the Release. (Id.)

Several hundred of these employee agents, however, subsequently put Allstate on notice of allegations of class-wide age discrimination and/or retaliation by filing timely charges with the Equal Employment Opportunity Commission ("EEOC") and equivalent state agencies. (Id. ¶ 20.) The EEOC issued a ruling in which it characterized Allstate's conduct as "threats, coercion, and intimidation" and concluded that the Release was in violation of the ADEA. (Id. ¶ 12.) In light of the EEOC's finding, Plaintiffs initiated the action in federal court on August 1, 2001, and, on October 18, 2001, Plaintiffs filed their First Amended Complaint, which has been the operative complaint ever since. The First Amended Complaint set forth seven Counts, as follows:

Count I sought a declaratory judgment (both individually and for the class) declaring the Release invalid under Section 510 of the Employee Retirement and Income Security Act ("ERISA"), 29 U.S.C. § 1140, the Age Discrimination in Employment Act, 29 U.S.C. § 623, and common law.

Count II alleged individual and class claims of interference with employment and retaliation in violation of Section 510 of ERISA with respect to the Plaintiffs' attainment and receipt of pensions and benefits under various employee benefit plans.

Count III alleged individual and class claims for retaliation in violation of Section 510 of ERISA.

Count IV claimed "Discriminatory Termination and Retaliation in Violation of 29 U.S.C. § 623(a) and (d)" for both individuals and the class.

Count V asserted individual and class claims for breach of the R830 contract, which governed the employment relationship between Allstate and a subclass of Plaintiffs.

Count VI alleged individual and class claims for breach of the R1500 contract, which governed the employment relationship between Allstate and a different subclass of Plaintiffs.

Count VII set forth individual and class claims for breach of fiduciary duty. (Id. ¶¶ 132-189.)

Discovery began in April 2002 and, over the course of the next several years, the parties engaged in extensive motion practice, including the filing of cross-motions for summary judgment and the debate over class certification issues. On March 30, 2004, the Honorable John Fullam, of the United States District Court for the Eastern District of Pennsylvania, entered a Declaratory Judgment holding, in part, that the Releases signed by the employee agents were voidable so long as the employee agents tendered back all benefits received in connection with signing those Releases (the "tender back" requirement). Romero v. Allstate Ins. Co., Nos. CIV.A. 01-3894, 01-6764, 01-7042, 2004 WL 692231, at *3-4 (E.D. Pa. Mar. 30, 2004). Plaintiffs filed a timely motion for reconsideration challenging only the propriety of the "tender back" requirement imposed by the Court. While that reconsideration motion was still pending, Defendants filed a second motion for summary judgment in December of 2005, as to all of Plaintiffs' underlying causes of action. That motion remained undecided until March 2007, when Judge Fullam announced his intentions to reverse his original finding as to the validity of the Releases. Romero v. Allstate Ins. Co., Nos. CIV.A.01-3894, 01-6764, 01-7042, 2007 WL 906158, at *1 (E.D. Pa. Mar. 21, 2007). Ultimately, on June 20, 2007, Judge Fullam held that he erred in his 2004 Declaratory Judgment and vacated that decision. Romero v. Allstate Ins. Co., 01-3894, 01-6764, 01-7042, 2007 WL 1811197, at *1 (E.D. Pa. Jun. 20, 2007). He further granted summary judgment in Allstate's favor on the entirety of Plaintiffs' Amended Complaint. Id.

On November 26, 2007, Plaintiffs appealed this ruling to the United States Court of Appeals for the Third Circuit. Reviewing the history of this case, the Third Circuit noted that Plaintiff had not received the benefit of full discovery as to issues regarding the validity of the Releases, and determined that these issues were dispositive as to the rest of Plaintiffs' claims. Romero v. Allstate Ins. Co., 344 Fed. Appx. 785, 793 (3d Cir. 2009) ("plaintiffs had a relative short period of class discovery, and . . . are entitled to discovery that is responsive to their requests related to the specific release-related issues the plaintiffs raised with the district court in their response to its March 21, 2007 Order."). The court went on to order that the District Court allow additional discovery and briefing, fully address whether the Releases are valid, and if the Releases are deemed valid, decide all of the underlying claims and issues. Id. at 794.

On January 29, 2010, after remand from the Court of Appeals, this case was reassigned to the docket of the undersigned. Plaintiffs filed their current Motion to Amend the Complaint on April 23, 2010, and Defendants responded on May 21, 2010. Both parties submitted supplemental briefing, making the Motion now ripe for this Court's consideration.


At issue is Plaintiffs' Motion for Leave to File a Second Amended Complaint, which seeks to include three discrete amendments, as follows: (1) the substitution of Joseph L. Benoit for "holdout" plaintiff Douglas F. Gafner, Sr., who is now deceased and whose claims against Defendants were settled on a confidential basis while the matter was on appeal; (2) clarification that Plaintiffs assert a disparate impact claim under the ADEA insofar as they have alleged that over ninety percent of the employee agents subject to the Mass Termination Program were age forty or older as of November 16, 1999; and (3) amplification and correction of certain factual averments to specifically include allegations that Defendants made misrepresentations to induce Plaintiffs and other employee agents to sign the Release.

Federal Rule of Civil Procedure 15(a) sets out the standard for granting leave to amend a complaint when, as is the case here, a responsive pleading has been served: "a party may amend the party's pleading only by leave of court or by written consent of the adverse party." FED. R. CIV. P. 15(a). The Rule clearly states that "leave shall be freely given when justice so requires." Id. Nonetheless, the policy favoring liberal amendments is not unlimited. Dole v. Arco Chem. Co., 921 F.2d 484, 487 (3d Cir. 1990). A district court may deny leave to amend a complaint where "it is apparent from the record that (1) the moving party has demonstrated undue delay, bad faith or dilatory motives, (2) the amendment would be futile, or (3) the amendment would prejudice the other party." Lake v. Arnold, 232 F.3d 360, 373 (3d Cir. 2000) (citingFoman v. Davis, 371 U.S. 178, 182 (1962)). "While a District Court has substantial leeway in deciding whether to grant leave to amend, when it refuses this type of request without justifying its decision, this action is 'not an exercise of its discretion but an abuse of its discretion.'" Id. (quoting Foman, 371 U.S. at 182).

Defendants rely on each of these bases for seeking denial of the Motion for Leave to Amend. Specifically, they argue that: (1) it is futile to allow Joseph Benoit to be substituted for the late Mr. Gafner as the proposed representative of the "holdout" subclass since the numerosity requirement of Federal Rule of Civil Procedure 23 cannot be met for that class; (2) Plaintiffs unreasonably delayed, without explanation, in seeking to add both the disparate impact claim and the misrepresentation allegations; and (3) permitting the proposed amendments at this stage is prejudicial to Defendants. Alternatively, Defendants contend that Plaintiffs' have failed to meet their burden due to the sheer volume of amendments coupled with their lack of explanation for the vast scope of the changes. The Court addresses each of Defendants' arguments individually.

A. Futility

Defendants' challenge to Plaintiffs' first proposed change relies on an allegation of futility. The court may deny leave to amend, among other reasons, on the basis of the futility of the amendment. SeeFoman, 371 U.S. at 182. "Futility" means that the complaint, as amended, would fail to state a claim upon which relief could be granted. Holst v. Oxman, 290 Fed. Appx. 508, 510 (3d Cir. 2008). The futility analysis on a motion to amend is essentially the same as a Rule 12(b)(6) motion. Id. The trial court may thus deny leave to amend where the amendment would not withstand a motion to dismiss. Massarsky v. Gen. Motors Corp., 706 F.2d 111, 125 (3d Cir. 1983). Given the liberal standard for the amendment of pleadings, however, "courts place a heavy burden on opponents who wish to declare a proposed amendment futile." Aruanno v. New Jersey, No. CIV.A.06-296, 2009 WL 114556, at *2 (D.N.J. Jan. 15, 2009). "If a proposed amendment is not clearly futile, then denial of leave to amend is improper." 6 WRIGHT, MILLER & KANE, FEDERAL PRACTICE AND PROCEDURE § 1487 (2d ed. 1990) (emphasis added).

The First Amended Complaint, in this case, originally proposed a subclass of employee agents who did not sign the Release presented by Allstate and who, as a result, were terminated, on June 30, 2000 as part of the Mass Termination Program. The named representative of that class was Douglas F. Gafner, who is now deceased and whose heirs settled his case on a confidential basis during the pendency of the recent appeal to the Third Circuit. Accordingly, Plaintiffs seek to substitute in Joseph L. Benoit, another employee agent who was terminated and not permitted to continue in the service of Allstate because he would not sign the Release.

Defendants oppose this amendment on grounds of futility, arguing that the putative subclass of non-release signers that Mr. Benoit would represent will fail to meet the numerosity requirement for a Rule 23 certification given Plaintiffs' allegation in the Second Amended Complaint that over 99 percent of employee agents signed the Release and "only a handful" did not. (§ Am. Compl. ¶ 11-12.) Defendants' argument, however, asks this Court to prematurely decide class certification issues without either providing a substantive showing as to precisely how many people might be involved in this class or citing any legal ...

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