ROMERO, et al v. ALLSTATE INSURANCE, et al

Filing 1218

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE MARK A. KEARNEY ON 9/5/2017. 9/5/2017 ENTERED AND COPIES MAILED, E-MAILED.(kp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
GENE R. ROMERO, et al.,
CIVIL ACTION

Plaintiffs,

v.

NO. 01-3894
CONSOLIDATED WITH

ALLSTATE INSURANCE COMPANY,
et al.,
Defendants.

NO.
NO.
NO.
NO.
NO.

01-6764 (Romero II)
03-6872 (Romero III)
15-1049 (Abell)
15-2602 (Tabor)
15-3047 (Anzivine)

MEMORANDUM
KEARNEY,J.

September 5, 2017

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 When, as here, we have no evidence withdrawn counterclaims based on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'

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 reorgamzmg 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. 1 Fourth,
agents could leave Allstate without signing the Release and receive a base severance of up to
· ·
.
th irteen wee k, comm1ss1on. II
s
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 Rl 500
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
2

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
.
. .
pnor to my emp1
oyment termmat10n 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 Amend.ed 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

3

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 NoerrPennington immunity. 33 Although the two decisions involved antitrust claims, the Supreme

4

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

5

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.

6

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 modem 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 of Appeals explained a release could imply a covenant not
to sue if the release "speaks in terms of a future or contingent claim. " 46
Mr. Millison's Release could be construed as releasing a future claim. His Release
applies to claims related to Mr. Millison's termination as captive agent and transition to an
independent contractor. Both of these events occurred after Mr. Millison signed the Release,
meaning the Release had the practical effect of releasing future claims. Without deciding the
ultimate question of whether the Release constituted a covenant not to sue for the released
claims, we find there is at least a nonfrivolous argument the Release implicitly contained a
covenant not to sue to enforce a future right. We cannot conclude no reasonable litigant could
realistically expect success on the merits of Allstate's counterclaims.
ii. Allstate did not admit its counterclaims are objectively baseless when
it suggested Plaintiffs could challenge the validity of the Release.

Mr. Millison's second argument is Allstate admitted the Release did not bar him from
suing Allstate. Although Allstate represented on several occasions the Release does not bar an
agent from challenging its validity, this admission does not go so far as to constitute an
admission its counterclaims are objectively baseless. To the extent the Release constitutes a
7

covenant not to sue, such an agreement would only prohibit an agent from suing for the claims
purportedly released. It would not bar an agent from suing to challenge the Release's validity.
As Judge Buckwalter found, "[t]he Release does not purport to bar claims challenging the
validity of the Release itself."47
We reject Mr. Millison's third argument for the same reason. Mr. Millison argues EEOC
regulations prohibited Allstate from precluding the agents from challenging the validity of the
· Release. But even assuming the regulations contain such a prohibition, Allstate does not argue
the Release barred challenges to its validity. This argument is meritless.
iii. Mr. Millison's remaining arguments lack merit.

Mr. Millison' s fourth argument is Allstate's counterclaims "are not the type of claims
courts allow to recover the consideration provided in exchange for a challenged release." 48 Mr.
Millison appears to suggest the only appropriate claims in this context are for restitution,
recoupment, or set-off. He fails, however, to cite applicable authority specifically prohibiting
Allstate's counterclaims. While restitution, recoupment, or set-off may be appropriate
counterclaims, we lack authority enabling us to conclude as a matter of law these are the only
permissible claims in this context.
Mr. Millison's fifth argument is the case law cited by Allstate does not establish an
objective basis. Even if this is true, this argument ignores the allocation of the burden of proof.
While the cases cited by Allstate may not affirmatively demonstrate its counterclaims have an
objective basis, it is Mr. Millison's burden to demonstrate Allstate's counterclaims are
objectively baseless. He has failed to do so.

8

III.

Conclusion

In the accompanying Order, we grant Allstate's motion for summary judgment as to Mr.
Millison's ADEA and ERISA retaliation claims based on Allstate's allegedly retaliatory state
law counterclaims because Mr. Millison does not satisfy his burden of showing Allstate's
withdrawn counterclaims are objectively baseless.
1

Our Policies require a Statement of Undisputed Material Facts be filed in support of a Rule 56
motion, as well as an appendix of exhibits. Allstate filed its Statement of Undisputed Material
Facts at ECF Doc. No. 1173. Allstate filed an appendix at ECF Doc. Nos. 1173-1 through 117352. Mr. Millison responded to Allstate's Statement of Undisputed Material Facts at ECF Doc.
No. 1181. Mr. Millison added documents to the Appendix at ECF Doc. Nos. 1181-1 through
1181-45. Mr. Millison provided its own Statement of Additional Facts at ECF Doc. No. 1181
(starting on page 48). Allstate responded to Mr. Millison's Statement of Additional Facts at ECF
Doc. No. 1191. References to the exhibits in the appendices shall be referred to by bates number,
for example, "Appx. 1."
2

ECF Doc. No. 1181at~1.

3

Id. at~~ 3-4. The employee agreement is also referred to as an Rl 500 contract.

4

Appx. 1202, at pp. 9:07-11 :02.

5

Appx. 811.

6

Appx. 1202, at pp. 9:07-11 :02. Mr. Millison disputes whether he had a free, meaningful, viable
choice.
Appx. 1202, at pp. 9:07-11 :02; ECF Doc. No. 1181 at~ 10. Mr. Millison disputes Allstate's
characterization of Exclusive Agents as independent contractors.
7

8

Appx. 1202, at pp. 9:07-11 :02; ECF Doc. No. 1181 at~ 11.

9

Appx. 1097 at~ 19. This contract is also referred to as an R3001 agreement.

10

Appx. 1202, at pp. 9:07-11 :02.

11

ECF Doc. No. 1181 at~ 13.

12

Appx. 14.

13

Id.

9

14

ECF Doc. No. 1181at~17.

15

Id. at ~~ 4, 22.

16

Id. at ~~ 23-24.

17

Id. at ~ 52.

18

29 U.S.C. § 621 et seq.

19

29 U.S.C. § 1001 et seq.

20

ECF Doc. No. 1.

21

ECF Doc. No. 9.

22

ECF Doc. No. 1181at~30.

23

ECF Doc. No. 49at 24.

24

ECF Doc. No. 1181at~33.

25

ECF Doc. No. 49 at 30.

26

Id. at 31-37.

27

ECF Doc. No. 1181at~67.

28

Id. at~ 83.

29

Id. at ~ 84.

30

ECF Doc. Nos. 851, 864.

31

ECF Doc. No. 1156.

32

Summary judgment is proper when there is no genuine dispute of material fact and the movant
is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(a). A dispute as to a material fact is
genuine if "the evidence is such that a reasonable jury could return a verdict for the nonmoving
party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). On a motion for summary
judgment, "we view the underlying facts and all reasonable inferences therefrom in the light
most favorable to the party opposing the motion." Mancini v. Northampton Cnty., 836 F.3d 308,
313 (3d Cir. 2016) (quoting Blunt v. Lower Merion Sch. Dist., 767 F.3d 247, 265 (3d Cir. 2014)).
"The party seeking summary judgment 'has the burden of demonstrating that the evidentiary
record presents no genuine issue of material fact."' Parke!! v. Danberg, 833 F.3d 313, 323 (3d
Cir. 2016) (quoting Willis v. UPMC Children's Hosp. of Pittsburgh, 808 F.3d 638, 643 (3d Cir.
10

2015)). If the movant carries its burden, "the nonmoving party must identify facts in the record
that would enable them to make a sufficient showing on essential elements of their care for
which they have the burden of proof." Willis, 808 F.3d at 643 (citing Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986)). "If, after adequate time for discovery, the nonmoving party has not
met its burden, pursuant to Federal Rule of Civil Procedure 56, the court must enter summary
judgment against the nonmoving party." Willis, 808 F.3d at 643 (citing Celotex Corp., 477 U.S.
at 322-323).
33

Barnes Found. v. Twp. of Lower Merion, 242 F.3d 151, 159 (3d Cir. 2001); see generally
Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), and
United Mine Workers v. Pennington, 381 U.S. 657 (1965).

34

Barnes Found., 242 F.3d at 159.

35

Klatch-Maynard v. Sugarloaf Twp. , No. 06-845, 2010 WL 5789390, at *6 (M.D. Pa. Nov. 8,
2010) (quoting Schneck v. Saucon Valley School District, 340 F.Supp.2d 558, 572-573 (E.D. Pa.
2004) (internal citations omitted)), objections overruled, 2011 WL 532168, at *5 (M.D. Pa. Feb.
8, 2011).

36

Cheminor Drugs, Ltd. v. Ethyl Corp., 168 F.3d 119, 130 (3d Cir. 1999); see also Bill Johnson's
Restaurants, Inc. v. N.L.R.B., 461 U.S. 731, 743 (1983) ("Just as false statements are not
immunized by the First Amendment right to freedom of speech, baseless litigation is not
immunized by the First Amendment right to petition.").
37

BE & K Const. Co. v. N.L.R.B., 536 U.S. 516, 531 (2002); Cheminor Drugs, Ltd., 168 F.3d at
122-23.

38

See Beltran v. Brentwood N. Healthcare Ctr., LLC, 426 F. Supp. 2d 827, 834 (N.D. Ill. 2006).

39

ECF Doc. No. 1172-1 at 13; ECF Doc. No. 1180 at 12.

40

ECF Doc. No. 1172 at 1.

41

ECF Doc. No. 1190 at 7.

42

See Judon v. Travelers Prop. Cas. Co. of Am., 773 F.3d 495, 503 n.6 (3d Cir. 2014) ("A fact
asserted in a pleading, which is both unequivocal and which would normally require evidentiary
proof, constitutes a judicial admission."); cf Com. of Pa. ex rel. Zimmerman v. PepsiCo, Inc.,
836 F.2d 173, 181 (3d Cir. 1988) ("[T]he legal theories set forth in [a claimant's] brief are helpful
only to the extent that they find support in the allegations set forth in the complaint.").

43

Isbell v. Allstate Ins. Co., 418 F.3d 788, 797 (7th Cir. 2005).

44

Id.

11

45

Caplan v. City of Pittsburgh, 100 A.2d 380, 383 (Pa. 1953) (quoting 6 WILLISTON ON
CONTRACTS§ 1823, p. 5164 (undated)).

46

Zivich v. Mentor Soccer Club, Inc., No. 95-L-184, 1997 WL 203646, at *8 (Ohio Ct. App.
Apr. 18, 1997) (citation omitted); Cash v. St. & Trail, Inc., 221 S.E.2d 640, 641 (Ga. App. 1975)
(citation omitted).
47
48

'

Romero v. Allstate Ins. Co., 1 F. Supp. 3d 319, 396 (E.D. Pa. 2014).
ECF Doc. No. 1180 at 15.

12