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Romero v. Allstate Insurance Co.

United States District Court, E.D. Pennsylvania

September 5, 2017

GENE R. ROMERO, et al., Plaintiffs,


          KEARNEY, J.

         Citizens petitioning the court for redress are immune from being sued for filing their claim unless it is objectively baseless. This well-established expansive principle arising from two Supreme Court cases decided over fifty years ago allows citizens to file claims and protect their interests in good faith. When, as here, we have no evidence withdrawn counterclaims based on state law theories are objectively baseless, the defendants are immune from liability arising the filing of their counterclaim. We must enter the accompanying Order granting the Defendants' motion for summary judgment dismissing Plaintiffs' claim the Defendants filed state law counterclaims in retaliation for Plaintiffs filing their complaint.

         I. Undisputed Facts[1]

         Allstate Insurance Company sells insurance and related products and services.[2] Craig A. Millison is a former Allstate insurance agent who worked for Allstate as a captive sales agent under an employee agreement for more than thirteen years.[3] In November 1999, Allstate announced the Preparing for the Future Program reorganizing its sales force.[4] Under the Program, Allstate represented it would transition approximately 6, 500 of its captive sales agents to one independent contractor exclusive agency program.[5]

         Allstate told its agents they would have four options going forward.[6] First, agents could sign a release (the "Release") and continue as an Exclusive Agent independent contractor with no benefits or job security.[7] Second, agents could sign the Release, continue as an Exclusive Agent independent contractor for thirty days, and afterward they could sell their book of business to an Allstate-approved buyer.[8] Under the first and second options, agents had to agree to work for Allstate under independent contractor exclusive agent contracts.[9] Third, agents could sign the Release, leave Allstate, and receive an enhanced severance of a year's worth of salary.[10] Fourth, agents could leave Allstate without signing the Release and receive a base severance of up to thirteen weeks' commission.[11]

         Under the Release, agents waived all claims relating to termination under their earlier employment agreements and their transition to Exclusive Agents under the Program:

In return for the consideration that I am receiving under the Program, I hereby release, waive, and forever discharge Allstate Insurance Company, its agents, parent, subsidiaries, affiliates, employees, officers, shareholders, successors, assigns, benefit plans, plan administrators, representatives, trustees and plan agents ("Allstate"), from any and all liability, actions, charges, causes of action, demands, damages, entitlements or claims for relief or remuneration of any kind whatsoever, whether known or unknown, or whether previously asserted or unasserted, stated or unstated, arising out of, connected with, or related to, my employment and/or the termination of my employment and my R830 or R1500 Agent Agreement with Allstate, or my transition to independent contractor status, including, but not limited to, all matters in law, in equity, in contract, or in tort, or pursuant to statute, including any claim for age or other types of discrimination prohibited under the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Employee Retirement Income Security Act ("ERISA"), the Illinois Human Rights Act, and the West Virginia Human Rights Act as those acts have been amended, or any other federal, state, or local law or ordinance or the common law. I further agree that if any claim is made in my behalf with respect to any matter released and waived above, I hereby waive any rights I may have with respect thereto and agree not to take any payments or other benefits from such claim. I understand that this release and waiver does not apply to any future claims that may arise after I sign this Release or to any benefits to which I am entitled in accordance with any Allstate plan subject to ERISA by virtue of my employment with Allstate prior to my employment termination date.[12]

         The Release acknowledged the agent both executed the Release voluntarily after having the opportunity to seek legal advice and understood its legal and binding effect.[13] The Release did not expressly contain a covenant not to sue. Allstate gave agents until June 2000 - six months - to decide their preferred option.[14]

         On May 15, 2000, Mr. Millison signed the Release with Allstate, after which he served as an Exclusive Agent with Allstate from July 1, 2000 until 2004.[15] In exchange for signing the Release, Allstate paid Mr. Millison a $5, 000 conversion bonus and forgave his office expense allowance of $136.95.[16] Despite Mr. Millison's representation by signing the Release he understood its legal and binding effect, he later testified when he signed the Release he "just knew that this had to be something that wasn't legal or binding."[17]

         On August 1, 2001, twenty-seven Plaintiffs including Mr. Millison sued Allstate, alleging the Program violated the Age Discrimination in Employment Act ("ADEA")[18] and the Employee Retirement Income Security Act ("ERISA"), [19] and sought a declaratory judgment invalidating the Release.[20] On October 18, 2001, Plaintiffs filed an Amended Complaint adding two more Plaintiffs but retaining the core claims.[21] Plaintiffs alleged many agents executed the Release believing it to be unlawful and not having the effect of waiving their rights.[22]

         Allstate pleaded the affirmative defense of release, arguing Mr. Millison's and most of the remaining Plaintiffs' claims were barred.[23] Allstate also counterclaimed against Plaintiffs for unjust enrichment, fraud, negligent misrepresentation, and breach of the duty of good faith and fair dealing.[24] Allstate based its unjust enrichment counterclaim on Plaintiffs' retaining the benefits of signing the Release "[d]espite plaintiffs' breach of the release."[25] Allstate based its remaining counterclaims on Plaintiffs' purported representation they would not sue Allstate for the released claims.[26] Allstate based each of its counterclaims on state law.

         In December 2003, twenty-five Plaintiffs filed a separate lawsuit alleging Allstate's counterclaims constituted unlawful retaliation under the ADEA and ERISA.[27] Years later, Plaintiffs filed a Second Amended Complaint.[28] In its Answer to the Second Amended Complaint, Allstate did not replead its counterclaims.[29] Following our May 5, 2016 Order consolidating the parties' lawsuits, Plaintiffs filed a Consolidated Amended Complaint maintaining their ADEA and ERISA retaliation claims in Counts XI and XII.[30] Allstate again did not file counterclaims. We are now preparing for two First Quarter 2018 trials on the individual claims for the agents domiciled in this District, including Mr. Millison who continued to proceed on his ADEA and ERISA retaliation claims.[31]

         II. Analysis

         Allstate moves for partial summary judgment, arguing Mr. Millison's retaliation claims fail as a matter of law.[32] We agree and grant summary judgment in favor of Allstate and against Mr. Millison on the retaliation claims because Mr. Millison fails to meet his burden of showing Allstate's withdrawn counterclaims are objectively baseless.

         In the 1960s, the Supreme Court decided two cases recognizing a First Amendment immunity to petition government entities including the courts, commonly referred to as Noerr-Pennington immunity.[33] Although the two decisions involved antitrust claims, the Supreme Court and our court of appeals have extended Noerr-Pennington immunity to other contexts, including state law tort claims.[34] "The immunity conferred by the Noerr-Pennington doctrine embraces all forms of government petitioning, and expressly reaches the petitioning activity of filing, pursuing and participating in a civil lawsuit. Thus, '[a]s a general matter, ..., the filing of a lawsuit is itself petitioning conduct protected by the First Amendment and may not be the basis for liability under the Noerr-Pennington doctrine.'"[35]

         But this immunity is not absolute. Under the Noerr-Pennington doctrine, individuals shed their immunity if the litigation is a sham.[36] The "sham" exception strips away immunity where the claim is (1) "objectively baseless, " meaning "no reasonable litigant could realistically expect success on the merits, " and (2) "subjectively motivated by an unlawful purpose."[37] As to the first element, a claim is objectively baseless if controlling case law clearly prohibits the claim.[38]

         Allstate argues Mr. Millison's ADEA and ERISA retaliation claims based on its counterclaims should be dismissed because Mr. Millison cannot prove Allstate's 2001 counterclaims are a sham. The parties agree Mr. Millison has the burden of proving Allstate's counterclaims are a sham.[39]

         a. Allstate mischaracterizes its withdrawn counterclaims.

         Mr. Millison correctly points out Allstate, in its briefing, mischaracterizes its counterclaims. Allstate's counterclaims for fraud, negligent misrepresentation, and breach of duty of good faith and fair dealing were predicated upon Mr. Millison's purported representation, in signing the Release, he would not sue Allstate for the released claims. Allstate's unjust enrichment counterclaim, however, appears to be predicated upon Mr. Millison's breach of the Release. In its briefing, however, Allstate describes its counterclaims as seeking "to recover the consideration Allstate provided Millison in exchange for a Release in the event that Millison prevailed in his efforts to invalidate the release."[40] Allstate also describes its counterclaims as being based on Mr. Millison's misrepresentation the Release was "legal and binding."[41] Allstate is bound by its pleaded characterization of its counterclaims; it may not change the substance of its claims through briefing.[42]

         b. Mr. Millison fails to meet his burden of showing Allstate's counterclaims are objectively baseless.

         Upon review of Allstate's pleaded characterization of its withdrawn counterclaims which are largely based on Ms. Millison's false representation he would not sue for the released claims, we find Mr. Millison fails to satisfy his burden Allstate's counterclaims are objectively baseless. We begin by noting Mr. Millison fails to cite case law specifically prohibiting Allstate's counterclaims. Nor does Mr. Millison identify which state's law applies to Allstate's state-law counterclaims. These deficiencies alone suggest Mr. Millison fails to meet his burden.

         The thrust of Mr. Millison's arguments is Allstate's counterclaims are shams because they are based on his purported agreement or covenant not to sue Allstate, yet the rRelease, he contends, does not constitute a covenant not to sue. While we agree the Release does not expressly contain a covenant not to sue, Mr. Millison fails to demonstrate the Release does not implicitly contain a covenant not to sue.

         i. There is a nonfrivolous argument suggesting the Release includes a covenant not to sue.

         Mr. Millison makes five core arguments. First, Mr. Millison argues the court of appeals for the Seventh Circuit in Isbell v. Allstate Insurance Company found the same Release we review today does not contain a covenant not to sue.[43] Despite this finding, the court in Isbell did not discuss the governing body of law requiring such a construction of the Release, and we are not bound by the Seventh Circuit's decision. The district court in Isbell construed the Release as a covenant not to sue, which at least suggests Allstate's counterclaims might not be objectively baseless.[44]

         While the Release does not expressly contain a covenant not to sue, we believe this omission does not end the analysis. There is persuasive authority suggesting a release may implicitly contain a covenant not to sue when the release relates to a future right. For example, Pennsylvania Supreme Court cited a treatise by contract law scholar Samuel Williston stating: "[T]here is no doubt in modern times that an attempted release of a future right must be construed as amounting at least to a covenant not to enforce the right whenever it arises."[45]Similarly, the Ohio and Georgia Court ...

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