ROMERO, et al v. ALLSTATE INSURANCE, et al
MEMORANDUM AND ORDER THAT ROMERO PLAINTIFFS MOTION FOR RECONSIDERATION OF THE 11/12/15 ORDER OR ALTERNATIVELY FOR CERTIFICATION OF ORDER FOR IMMEDIATE APPEAL ARE GRANTED; ETC.. SIGNED BY HONORABLE GERALD J. PAPPERT ON 3/17/16. 3/17/16 ENTERED AND COPIES MAILED, E-MAILED.(jl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
GENE R. ROMERO, et al.,
ALLSTATE INSURANCE COMPANY,
March 17, 2016
Before the Court are (1) the Romero Plaintiffs’ Motion for Reconsideration of the Court’s
November 12, 2015 Order, or Alternatively, for Certification of the Order for Immediate Appeal1
and (2) the McLaughlin and Harris Plaintiffs-Intervenors’ Motion for Reconsideration of the
Court’s November 12, 2015 Order, or Alternatively, for Certification of the Order for Immediate
Appeal.2 The Court grants both motions for reconsideration.
These Plaintiffs’ include the original thirty Romero Plaintiffs, as well as the additional
Plaintiffs added by way of the Third Amended Complaint.
These Plaintiffs include the following: James Archer, John Cherup, William Cotton,
Bruce Denlinger, Mary Digiulio, Maryalice Doyle, Kenneth Franck, Janet Haggerty, Ann W.
Harris, John Junkniewitz, William Lee, Leonard Lichty, Victoria Lichty, Paul Long, Robert
McCarrel, William McLaughlin, Warren Miller, Lawrence O’Hara, William Quairoli, Robert
Rebb, Joseph Rosati, William Shover, Gary Sigler, Phillip Singer, Deborah L. Spedding, Bradley
Steckel, Paul, Trimborn, Athena Wagner, Eugene Weller, Robert Weller, and Gail Wolfe.
The underlying facts are well known to the parties, have been repeatedly summarized, and
will not be restated at length here. The Court will focus on the facts most relevant to
consideration of the current Motions.
On August 1, 2001, following the Allstate Defendants’ (“Allstate” or “Defendants”)
implementation of the Preparing for the Future Group Reorganization Program (the “Program”),
thirty-two Allstate employee agents (the “Romero Plaintiffs”) filed a lawsuit against Allstate and
its CEO Edward M. Liddy (“Liddy”). After several years of litigation before Judge John R.
Fullam in our Court and an appeal to the Third Circuit Court of Appeals, the case was remanded
to the District Court in January 2010, and re-assigned to Judge Ronald L. Buckwalter. In its
remand opinion, the Third Circuit instructed the District Court to resolve the validity of a release
(the “Release”) signed by most of the Plaintiffs in connection with the Program. If that Release
was deemed to be invalid, the District Court was directed to then allow discovery on the merits
of the substantive claims raised in the First Amended Complaint.
The Romero Plaintiffs subsequently filed a Second Amended Complaint on July 28,
2010. The parties proceeded through an extensive and litigious period of discovery on the issue
of the validity of the Release, culminating in cross-motions for summary judgment at the end of
2013. On February 27, 2014, Judge Buckwalter ruled on those motions, holding that a genuine
issue of fact remained as to whether the Release was knowingly and voluntarily signed.
Plaintiffs thereafter sought class certification solely as to Release-related issues. Following
denial of that motion, the Court determined that the statute of limitations for the non-named
Plaintiffs had resumed running, and that any non-named Plaintiffs who had signed the Release
were required to file a lawsuit or join the existing one in order to challenge the Release and
pursue their substantive claims.
On February 26, 2015, the original Romero Plaintiffs moved for leave to file a Third
Amended Complaint in order to add as Plaintiffs 368 former employee-agents who signed the
Release as part of the Program. The following day, the same 368 agents filed their own
complaint, but did not move to intervene. (See Compl., Abell v. Allstate Ins. Co., No. Civ.A.151049.) Shortly thereafter, thirty other Release-signers (“McLaughlin Plaintiffs” and “Harris
Plaintiffs”), filed two separate complaints containing factual and legal allegations identical to
those in the Third Amended Complaint, and subsequently moved to intervene in the Romero
litigation. (See Compl., McLaughlin v. Allstate Ins. Co., No. Civ.A.15-1017 (“McLaughlin
Compl.”); Compl., Harris v. Allstate Ins. Co., No. Civ.A.15-1190 (“Harris Compl.”).) All of
these complaints alleged (1) the invalidity of the Releases signed by each Plaintiff and
Intervenor; (2) violation of section 510 of the Employee Retirement Income Security Act
(“ERISA”), 29 U.S.C. § 1001, et seq.; (3) violation of the Age Discrimination in Employment
Act (“ADEA”), 29 U.S.C. § 621, et seq.; (4) breach of contract; and (5) breach of fiduciary duty.
On April 21, 2015, the Court granted Plaintiffs’ Motion for Leave to File a Third Amended
Complaint, as well as both Motions to Intervene.
On July 28, 2015, Defendants Allstate and Liddy filed Motions to Dismiss the Romero
Plaintiffs’ Third Amended Complaint and the Harris and McLaughlin Plaintiffs’ Intervenor
Complaints. On November 12, 2015, Judge Buckwalter held that these Plaintiffs’ state law
claims were barred by the doctrines of tender-back and ratification. The Romero Plaintiffs
immediately filed the current Motion for Reconsideration, or Alternatively, for Certification for
Immediate Appeal on November 27, 2015, and the Harris and McLaughlin Plaintiffs filed an
identical Motion on November 30, 2015. Defendants responded to both Motions on December
14, 2015, and the Romero, Harris, and McLaughlin Plaintiffs (collectively, “Plaintiffs”) filed
their Reply Briefs on December 30, 2015. This case was reassigned to this Court on February 1,
STANDARD OF REVIEW
A motion for reconsideration may be granted if the moving party shows: (1) an
intervening change in the controlling law; (2) the availability of new evidence that was not
available when the court issued its order; or (3) the need to correct a clear error of law or fact or
to prevent manifest injustice. Max’s Seafood Café v. Quinteros, 176 F.3d 669, 677 (3d Cir.
1999). Motions for reconsideration are granted sparingly. Cont’l Cas. Co. v. Diversified Indus.,
Inc., 884 F. Supp. 937, 943 (E.D. Pa. 1995). The grant of such a motion is not proper where it
simply asks the court to “rethink what [it] had already thought through—rightly or wrongly.”
Glendon Energy Co. v. Borough of Glendon, 836 F. Supp. 1109, 1122 (E.D. Pa. 1993) (internal
quotations omitted). Motions for reconsideration may not be used “as a means to argue new facts
or issues that inexcusably were not presented to the court in the matter previously decided.”
Brambles USA, Inc. v. Blocker, 735 F. Supp. 1239, 1240 (D. Del. 1990). “Nor may a motion for
reconsideration be used to revisit or raise new issues with the benefit of ‘the hindsight provided
by the court’s analysis.’” Marshak v. Treadwell, No. Civ.A.95-3794, 2008 WL 413312, at *7
(D.N.J. Feb. 13, 2008) (quoting United States v. Jones, 158 F.R.D. 309, 314 (D.N.J. 1994)), aff’d
in part and remanded by 595 F.3d 478 (3d Cir. 2009).
The current Motions for Reconsideration present a somewhat unique set of
circumstances. Plaintiffs’ Motions improperly raise new arguments that were never previously
submitted for the Court’s consideration. The Motions, however, also identify new facts that bear
on the arguments previously raised in response to Allstate’s Motion to Dismiss—facts which
compel the Court to rethink the original ruling as to the state law claims.
Whether Plaintiffs’ Request for Reconsideration is Procedurally Improper
Allstate first asserts that the Motions are procedurally improper. In particular, it alleges
that none of the allegations in the Motions fit within the allowable parameters of a motion for
reconsideration as defined by Third Circuit jurisprudence.
The Court agrees in large part. Allstate originally filed a broad Motion to Dismiss
alleging, inter alia, that all of Plaintiffs’ state law claims were barred under the state law tenderback and ratification doctrines. In response, Plaintiffs contended that: (1) Allstate waived the
ratification defense; (2) the tender-back/ratification principles are inapplicable to Plaintiffs’
challenges to the Release on the grounds of unconscionability, unclean hands, and the part and
parcel doctrine; (3) dismissing Plaintiffs’ claims pursuant to the tender-back rule would be
inequitable under the circumstances of this case; and (4) since at least 2003, Plaintiffs have been
offering to return the consideration received for the Release through an offset to any damage
award. The Court considered and discussed each of these arguments, but ultimately disagreed.
Faced with an unfavorable decision on that Motion, Plaintiffs’ Motions for
Reconsideration now advance new arguments as to why dismissal based on tenderback/ratification principles is improper, including that: (1) the facts of record establish that
multiple Plaintiffs offered to tender back consideration prior to and during the course of this
litigation; (2) the Court disregarded the well-established exceptions to the tender-back rule found
in the various states’ laws; (3) Plaintiffs should be allowed to amend their Complaints to plead an
offer to tender back; (4) Allstate waived ratification by its post-2010 conduct;3 and (5) the
parties’ stipulation as to the duress argument during the first Release trial precludes ratification
of the eight Releases the jury found not knowing and voluntary.
The Court will not address either these new arguments or any attempts to re-argue issues
already decided. Two issues in the Motions, however, warrant further discussion. First,
Plaintiffs assert that in dismissing their state law claims, the Court improperly looked outside the
Third Amended Complaint and presumed that Plaintiffs never offered to tender back
consideration. Second, Plaintiffs raise the possibility of a clear error of fact in the Court’s
holding that Plaintiffs’ failed to preserve the issue of the “consideration conundrum.” In doing
so, Plaintiffs have presented many new facts—facts not raised in their Response to the Motion to
Dismiss—which suggest that reconsideration may be warranted. As a general rule, “new
evidence” for purposes of reconsideration “does not refer to evidence that a party obtains or
submits to the court after an adverse ruling,” but rather means “evidence that a party could not
earlier submit to the court because that evidence was not previously available.” Howard Hess
Dental Labs. Inc. v. Dentsply Int’l Inc., 602 F.3d 237, 251 (3d Cir. 2000). The new facts now
offered by Plaintiffs undoubtedly were available and could have been presented earlier.
Plaintiffs fault the Court for not addressing whether Allstate waived the issue of tenderback/ratification through its post-2010 conduct. Notably, however, the only issue before the
Court in connection with the Motion to Dismiss was whether Allstate waived its ratification
defense by not raising it in its appeal of the June 2007 Order.
Nonetheless, the combination of both the complex procedural background and the multiple
reassignments of this case require that this Court address this portion of the Motions.
Whether the Court’s Decision Erroneously Presumed that None of the
Plaintiffs Ever Offered to Tender Back Any Portion of the Consideration
Plaintiffs contend that the Court erred in finding that each Plaintiff failed to return or
offer to return the consideration they received in exchange for signing the Release. They claim
that nothing in the Third Amended Complaint indicates that they failed to tender back the proper
consideration prior to or during the course of this litigation. They accordingly assert that the
Court must have looked outside the corners of the Third Amended Complaint, contrary to the
well-settled Rule 12(b)(6) principle that a court may consider only “the facts alleged in the
complaint and its attachments without reference to other parts of the record.” Jordan v. Fox,
Rothschild, O’Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994). According to Plaintiffs, the
Court should have treated the motion as one for summary judgment under Rule 56 after giving
Plaintiffs “a reasonable opportunity to present” all pertinent material. Fed. R. Civ. P. 12(d). Had
the Court allowed that opportunity, they would have offered trial testimony to demonstrate that
they offered to tender back the consideration received, but that Allstate rejected such offers.
Plaintiffs’ theory disregards the general rule that tender or offer of tender is a condition
precedent to initiation, if not maintenance, of a lawsuit otherwise barred by a Release.4 See 76
C.J.S. Release § 39 (2015).5 A plaintiff may not maintain an attack on a release in the absence of
In light of the vast number of Plaintiffs from multiple states, the Court relies on general
principles of law common to the various states and samplings of cases from those states.
“A person who executes a release and afterward seeks to avoid its effect on any ground
which will entitle him or her to avoid it generally must first restore the status quo by restoring,
tendering, or offering to restore what he or she has received in return for the release, at least
proper allegations in the complaint and/or an offer prior to the commencement of the suit to
tender back consideration. See Gascho v. Scheurer Hosp., 589 F. Supp. 2d 884, 890 (E.D. Mich.
2008) (“Before a plaintiff may proceed with litigation, the plaintiff must tender back ‘the amount
paid,’ so as to return the parties to the pre-settlement agreement status quo. . . . A plaintiff does
not have a ‘grace period’ in which to tender back the consideration . . . and an offer of tender in
an amended complaint does not ‘relate back to the filing of [the] original complaint.’”); Roberts
v. S. Ry. Co., 38 S.E.2d 48, 50 (Ga. Ct. App. 1946) (“It has been held that in no event could a
plaintiff maintain an attack on a release pleaded as an accord and satisfaction by the defendant, in
the absence of proper allegations in his petition, and an offer on his part prior to the
commencement of the suit, to rescind, and a tender back to the defendant of the amount which it
had paid in order to obtain such release.” (emphasis in original)); see also Callahan v. Fluhr, 103
S.W.2d 109, 110 (Ky. Ct. App. 1937); Rue v. Helmkampf, 657 S.W.2d 76, 78 (Mo. Ct. App.
1983); Kamerman v. Curtis, 33 N.E.2d 530, 532–33 (N.Y. 1941); Haller v. Borror Corp., 552
N.E.2d 207, 210 (Ohio 1990).
Here, Plaintiffs never affirmatively pled tender-back or offer of tender-back despite the
fact that both the Release and the issue of tender-back have been at the forefront of this case
since its inception. Repeatedly, Allstate has asserted that Plaintiffs’ claims are barred by the
Release, and Plaintiffs have responded, in part, that the Release is voidable on fraud and
misrepresentation grounds. Such arguments triggered Plaintiffs’ tender-back obligations. In
where it appears that it is of value. Otherwise, such a person cannot challenge the validity of the
release, and suit on the underlying claim will be barred. In other words, the releasor must place
the parties in their former position, or as near such position as the circumstances of the case will
permit, unless this primary duty is excused for reasons recognized by law.” 76 C.J.S. Release §
addition, through at least 2007, Allstate explicitly sought tender-back of consideration.
Nonetheless, over the course of three amendments to the Complaint, Plaintiffs never pled that
any employee-agent has tendered or offered to tender back consideration. Plaintiffs now attempt
to rely on testimony, from the June 2015 trial and from depositions never previously presented to
this Court, that some Plaintiffs offered to return the consideration given. To acknowledge such
testimony would have required the Court to go beyond the four corners of the pleadings, which is
not permitted on a motion to dismiss.6 The Motions for Reconsideration on this ground are
Whether the Court Improperly Found that Plaintiffs Failed to Previously
Raise the “Consideration Conundrum”
In originally opposing Allstate’s Motion to Dismiss, Plaintiffs argued that the tender-back
rule presented a “consideration conundrum” that deprived them of their ability to tender back or
In a short footnote, Plaintiffs argue that they were not required to plead tender-back
because the Third Circuit has recognized “the rule that a plaintiff is not required to plead, in a
complaint, facts sufficient to overcome an affirmative defense.” Schmidt v. Skolas, 770 F.3d
241, 251 (3d Cir. 2014). That case, however, has consistently been cited in the sole context of
statute of limitations defenses, wherein the courts have not required the plaintiff to anticipate
such a defense and plead facts that demonstrate why the complaint was within the requisite
statute of limitations. See, e.g., Stephens v. Clash, 796 F.3d 281, 288 (3d Cir. 2015); Pruco Life
Ins. Co. v. Koslowsky, No. Civ.A.14-03976, 2015 WL 4606985, at *5 (D.N.J. July 31, 2015);
Germinaro v. Fid. Nat’l Title Ins. Co., 107 F. Supp. 3d 439, 452 (W.D. Pa. 2015); Clark v. Phila.
Hous. Auth., No. Civ.A.14-5460, 2015 WL 1822528, at *2 (E.D. Pa. Apr. 21, 2015), appeal
docketed No.15-2311 (3d Cir. May 28, 2015); Tate v. City of Phila., No. Civ.A.13-5404, 2015
WL 437432, at *6 n.2 (E.D. Pa. Feb. 3, 2015).
This case falls outside that rule for two reasons. First, this involves a Release of which
Plaintiffs were well aware prior to filing suit. The general rule is that a plaintiff, as a condition
precedent to bringing or maintaining suit, must tender back or offer to tender back the
consideration. Second, this case began in 2001, and the tender-back issue was raised at the outset
of litigation. Even assuming Plaintiffs could not have possibly anticipated the Release and
ratification defenses when filing their initial Complaint, Plaintiffs have since filed three more
versions of the Complaint, with the latest occurring on April 21, 2015.
offer to tender back consideration, since there was no available method of getting the parties to
agree on the appropriate amount of tender-back. For the terminated agents who took the
Enhanced Severance Option, the severance pay they received was consideration not just for the
Release, but also for the new restrictive covenants contained in the Agent Transition Severance
Plan. Moreover, for the other Release options, the consideration included the ability of the agent
to convert to the R3001 contract and the right of the agent to sell the agency to an Allstateapproved third party. Such consideration, according to Plaintiffs, was incapable of being
tendered back and made it impossible to restore the parties to the status quo ante.
The Court found that this argument had been effectively waived at this late stage of the
litigation. Specifically, the Court held as follows:
While this argument would have had significantly more merit had it been
raised previously, it does not hold muster at this juncture. This case clearly raises
complex issues of consideration. Depending on which Program option a Plaintiff
took, he or she received consideration in one or more of the following forms:
enhanced severance payments, conversion bonuses, an economic interest in a book
of business which could be sold, an opportunity to convert to an R3001 contract, and
forgiveness of OEA advances. Nonetheless, “[w]hether the tender must always
precede the institution of the suit, or whether, as courts now hold in equity cases . .
. it is enough that the complaint contains an offer to restore the consideration, an
offer that the court could enforce by a conditional judgment,[ . . . is a detail of no
importance in this case.”] Fleming v. U.S. Postal Serv. AMF O’Hare, 27 F.3d 259,
261 (7th Cir. 1994) (citing 1 E. Allan Farnsworth, Farnsworth on Contracts § 4.15,
429–30 (1990)). . . . [A]t no point did Plaintiffs make any offer to tender back any
portion of the consideration. Had they done so, the Court could have either obtained
an agreement between the parties regarding what portion of the foregoing
consideration would be sufficient to satisfy tender-back or, alternatively, determined
that pre-judgment tender-back was unworkable in the context of the case. Plaintiffs,
however, deprived both Defendants and the Court of that opportunity.
Romero v. Allstate Ins. Co.,
F. Supp. 3d
, 2015 WL 7014578, at *13 (E.D. Pa. Nov. 12,
2015). This conclusion rested, in large part, on the fact that Plaintiffs never identified any
pleading where they acknowledged their obligation to tender back consideration or questioned
how to accomplish tender-back given the unusual interaction between the Release and the
Program. As the Court understood that Plaintiffs were first offering tender-back in response to
the Motion to Dismiss—an offer occurring almost fifteen years into the litigation—the Court was
unwilling to allow either such a belated offer, or a fourth amendment of the Complaint to plead
such an offer. In turn, having waited so long before raising this “consideration conundrum,”
Plaintiffs were deemed to have ratified the Release.
Plaintiffs now argue that they raised the “consideration conundrum” years earlier—while
the case was pending before a different judge—but were thwarted in their efforts to have it
resolved.7 Specifically, right after initiation of the litigation in 2001, Allstate made the same
tender-back/ratification argument. (See Mem. Supp. Defs.’ Mot. to Dismiss Am. Compl., ECF
No. 13, at 25 n.14 (Nov. 1, 2001).) In response, Plaintiffs disputed the applicability of the
tender-back rule and further argued that a complete tender-back that returned the parties to status
quo ante was not possible because of the consideration conundrum. (See Pls.’ Opp’n to Defs.’
Mot. to Dismiss Am. Compl., ECF No. 23, at 50–51 (Dec. 18, 2001).) Judge Fullam denied the
motion to dismiss without prejudice to the filing of a subsequent motion for summary judgment,
but offered no explanation of his ruling, thereby allowing Plaintiffs to plausibly infer that tenderback was not required at that time. (Order, ECF No. 48 (Feb. 28, 2002).) Subsequently, in its
2003 motion for summary judgment, Allstate again argued that the Release had been ratified by
This case has been proceeding for almost fifteen years, almost nine of which were
before Judge Fullam and the Third Circuit, and almost six of which were before Judge
Buckwalter. In addition, the case has over 800 docket entries, many of which are not readily
accessible on the electronic docketing system in light of their age. In ruling on the Motion to
Dismiss, the Court could not be expected to comb through briefs filed years before in order to
sua sponte identify arguments that Plaintiffs may or may not have previously raised.
Plaintiffs’ failure to tender back the consideration they received. (Mem. Supp. Defs.’ Mot.
Summ. J. as to Released Claims, ECF No. 113, at 24–25 (Aug. 1, 2003).) Plaintiffs repeated
their argument that compliance with the tender-back rule was impossible due to the nature of the
consideration most plaintiffs received, and offered tender-back as an offset to judgment. (Pls.’
Opp’n Defs.’ Mot. Summ. J. as to Released Claims, ECF No. 121, at 70–71 (Sept. 5, 2003).) On
March 30, 2004, Judge Fullam issued a Memorandum and Order indicating, in part, that the
Releases were voidable at the option of the Release-signer, for violation of § 626 of the Older
Workers Benefit Protection Act.8 The Memorandum stated that the Court would “certify a class
under 23(b)(2) with respect to the voidable releases, so that any former employee-agent who
signed such a release may, by notifying Allstate in writing within 90 days, effectively rescind the
release (including, of course, repayment of all sums received in exchange for the release).”
(Mem. & Order, ECF No. 135, at 9 (Mar. 30, 2004).) The Memorandum did not address the
substance of any of Plaintiffs’ claims regarding tender-back and its “impossibility.”
On April 15, 2004, Plaintiffs filed a motion for reconsideration of the repayment
requirement, again arguing that they could not return the alleged consideration given in exchange
for the Release, and thus could not restore Allstate to status quo ante. Alternatively, Plaintiffs
requested, in the event their motion was denied, that the Court provide guidance on how to
inform potential class members what benefits should be tendered back in order to rescind the
Release. Specifically, Plaintiffs asserted as follows:
The Court directed plaintiffs’ counsel to submit a proposed form of notice informing
each class member of his or her right to notify Allstate “in writing, of his or her wish
The Memorandum also dismissed Plaintiffs’ ADEA and ERISA claims, but left intact
the breach of contract claims.
to rescind the release, and, within 30 days thereafter, tendering to Allstate Insurance
Company repayment of any and all benefits received by the signer in exchange for
signing the release.” (Declaratory Judgment ¶ 2.) Plaintiffs believe that any such
notice must as precisely and accurately as possible inform prospective class members
as to what benefits, if any, they would have to repay in order to permit them to make
an informed decision about rescinding the Release. Until the Court clarifies what
“benefits,” if any, must be repaid to Allstate, plaintiffs may not be able to prepare a
notice satisfactory to the Court because, even under common law principles, they
believe there is nothing to tender back.
(Pls.’ Mem. Supp. Mot. for Reconsideration, ECF No. 136, at 7 (Apr. 15, 2004).) Plaintiffs thus
expressly raised the consideration conundrum and asked for guidance on what must be tendered
back in order to rescind the Release.
That request somehow went unanswered for an extended period of time, during which
Allstate sought summary judgment on the remaining claims. On January 16, 2007, the Court
denied the motion for reconsideration without explanation. (Order, ECF No. 169 (Jan. 16,
2007).) On June 20, 2007, the Court granted summary judgment. (Mem. & Order, ECF No. 183
(June 20, 2007).) The Court also held that the March 3, 2004 Order declaring the releases
voidable was incorrect and should be vacated. Id. At that juncture, it was not unreasonable for
the Plaintiffs to interpret the Order as vacating any requirement of tender-back. Plaintiffs then
re-raised this issue on appeal, but the Third Circuit stated that, “[a]fter the District Court issued
its declaratory judgment, the plaintiffs filed a motion for reconsideration, arguing that the tenderback requirement was inappropriate. They raise this argument on appeal, but we need not
address that issue here.” Romero v. Allstate Ins. Co., 344 F. App’x 785, 792 n.10 (3d Cir. 2009).
Plaintiffs’ prior failure to explain this history would normally be grounds for denying
their Motions for Reconsideration, but the Court should not disregard the clear mistake in the
previous ruling. The record shows that when faced with a court order in 2004 requiring them to
tender back consideration, Plaintiffs sought guidance on how to do so in order to satisfy their
legal obligations. The subsequent procedural twists in this case thwarted their efforts, leaving
them unable to tender back consideration and avoid ratification of the Release.
This conclusion creates a new dilemma: how to handle the tender-back issue going
forward, particularly since eight Plaintiffs have already voided their Releases following a jury
trial. Rescission of a contract by tender-back generally requires that the parties be restored to the
status quo ante, i.e., their positions existing when the contract was made. See, e.g., Putnam
Constr. & Realty Co., Inc. v. Byrd, 632 So.2d 961, 967 (Ala. 1992); Jennings v. Lee, 461 P.2d
161, 166 (Ariz. 1969); EarthInfo, Inc. v. Hydrosphere Res. Consultants, Inc., 900 P.2d 113, 118
(Colo. 1995); Hegarty v. Am. Commwealths Power Corp., 163 A. 616, 619 (Del. Ch. 1932);
2010-1 SFG Venture LLC v. Lee Bank & Trust Co., 775 S.E.2d 243, 252 (Ga. App. 2015); Int’l
Ins. Co. v. Sargent & Lundy, 609 N.E.2d 842, 852 (Ill. App. Ct. 1993); Ledbetter v. Webb, 711
P.2d 874, 877–78 (N.M. 1985); Ellie, Inc. v. Micchichi, 594 S.E.2d 485, 494 (S.C. Ct. App.
2004); Sabbagh v. Prof’l & Bus. Men’s Life Ins. Co., 116 N.W.2d 513, 520 (S.D. 1962). This
restoration of status quo ante is the foundation of Allstate’s tender-back argument; it contends
that even if Plaintiffs had offered to tender back some consideration, “it does not matter because
a partial tender is inadequate as a matter of law to avoid ratification.” (Defs.’ Resp. Opp’n Mot.
for Reconsideration 13 (emphasis added).)
The Court cannot disregard the impracticability, if not impossibility, of restoring the
parties to the status quo ante. Depending on which Program option a Plaintiff took, he or she
received consideration in one or more of the following forms: enhanced severance payments,
conversion bonuses, an economic interest in a book of business which could eventually be sold,
an opportunity to convert to an R3001 contract and forgiveness of OEA advances. For the large
number of Plaintiffs who converted to independent contractors and spent additional years
working for Allstate in that capacity, it would be nearly impossible for them to return that
consideration. As for those Plaintiffs who accepted the sale option and sold their books of
business to an approved third-party buyer, the agreements of sale cannot be undone so that their
interest in their books of business is ultimately returned to Allstate. Finally, for those Plaintiffs
who took the enhanced severance, they cannot erase the years of being subject to the restrictive
covenants in the Agent Transition Severance Plan in connection with that severance payment.
While some of the monetary aspects of the consideration could have been tendered back, Allstate
has made it abundantly clear that it will accept nothing less than full return to the status quo ante.
Where tender-back is impractical or impossible, the various states’ laws generally
recognize an exception to the rule that tender-back must be made prior to or at the outset of
litigation. See, e.g., Jennings, 461 P.2d at 166 (“Patently, rescission appears harsh in the case at
bar inasmuch as the defendant cannot possibly be returned to the position occupied by him prior
to the agreement in question.”) (quotations omitted); Braman Dodge, Inc. v. Smith, 515 So. 2d
1053, 1054 (Fl. Dist. Ct. App. 1987) (“Where restoration to the status quo is impossible,
however, a court may still grant rescission, provided the equities between the parties can be
balanced.”); 2010-1 SFG Venture LLC, 775 S.E.2d at 252 (same); Int’l Ins. Co., 609 N.E.2d at
853 (same); Burke v. Grand Mobile Home Sales, Inc., 149 N.W.2d 236, 239 (Mich. Ct. App.
1967) (same); Register v. Roberson Constr. Co., Inc., 741 P.2d 1364, 1367 (N.M. 1987) (same).
Given the parties’ divergent positions on what must be tendered back for Plaintiffs to
continue challenging the Release, not to mention the torturous and convoluted history of this
litigation, the Court should determine now the form of tender-back. Allstate wants nothing less
than the full amount of consideration paid for the Release, while Plaintiffs contend that return of
the full consideration—as opposed to just the concrete monetary aspects—is impossible. The
Court concludes that Plaintiffs’ current offer of tender-back is sufficient9 to avoid ratification.
Tender-back will operate as a set-off to any monetary damages that Plaintiffs may receive. This
ruling applies not only to the eight Plaintiffs whose Releases have already been invalidated, but
also to the remaining Plaintiffs who have not yet had the opportunity to individually challenge
the validity of their Releases.10 In turn, all state law claims dismissed under the ratification and
tender-back doctrines are reinstated.11
Unaddressed Claims in Allstate’s Original Motion to Dismiss
In its original Motion to Dismiss, Allstate raised several other substantive challenges to
Plaintiffs’ state law claims. As those state law claims were dismissed on the tender-back and
ratification doctrines, the Court did not address those arguments at the time. Having now
reinstated Plaintiffs’ state law claims, the Court will consider Allstate’s remaining challenges.
Plaintiffs need not file a fourth Amended Complaint simply to place their offer of
tender-back into the pleadings.
The Court previously dismissed Plaintiffs’ state law claims, including those of the few
Plaintiffs who did not sign the Release. Having not signed the Release and accepted any
consideration, those Plaintiffs have nothing to tender back. Accordingly, dismissal of the state
law claims of those non-signing Plaintiffs was erroneous. Should the non-signing Plaintiffs
obtain a final monetary judgment on their state law claims, that judgment will not be subject to
any set-off to satisfy the tender-back obligations.
Having granted Plaintiffs’ Motions for Reconsideration, the Court need not address
Plaintiffs’ Motions for Certification of Order for Immediate Appeal.
Whether Plaintiffs’ Breach-of-Contract Claims Fail Because Plaintiffs
Were At-Will Employees
Allstate first contends that under all relevant states’ laws, Plaintiffs’ breach of contract
claims must fail because the Plaintiffs were at-will employees. Allstate cites the plain language
of the R830 and R1500 agreements, as well as to cases from within and outside the Third Circuit
holding that similar contracts are terminable at will. Plaintiffs respond that (1) the law-of-thecase doctrine bars reconsideration of the legal sufficiency of Plaintiffs’ breach of contract claims;
(2) contrary to Allstate’s assertion, the Third Circuit never explicitly held that the R830 and
R1500 contracts were terminable at-will; and (3) the breach of contract claims cannot be
disposed of on a motion to dismiss.
The Law of the Case Doctrine
Plaintiffs assert that Allstate previously argued—both in support of its 2001 motion to
dismiss, and again before the Third Circuit in 2008—that the terms of the R830 and R1500
contracts allowed Allstate to terminate the employee agents at will. Although the Third Circuit
did not expressly address the argument, Plaintiffs claim that it was rejected by “implication,”
thus barring that issue from being re-argued at this juncture.
“The ‘law of the case’ doctrine reflects courts’ general reluctance to reconsider matters
soundly decided.” Falor v. G & S Billboard, No. Civ.A.04-2373, 2008 WL 5190860, at *2
(D.N.J. Dec. 10, 2008). “The doctrine is designed to protect traditional ideals such as finality,
judicial economy and jurisprudential integrity.” In re City of Phila. Litig., 158 F.3d 711, 717–18
(3d Cir. 1998). It provides that “when a court decides upon a rule of law, that rule should
continue to govern the same issues in subsequent stages in the litigation.” In the Matter of Resyn
Corp., 945 F.2d 1279, 1281 (3d Cir. 1991) (quotations omitted). In other words, “once an issue
has been decided, parties may not relitigate that issue in the same case.” Waldorf v. Shuta, 142
F.3d 601, 616 n.4 (3d Cir. 1998).
A trial court, however, “may consider, as a matter of first impression, those issues not
expressly or implicitly disposed of by the appellate decision.” Bankers Trust Co. v. Bethlehem
Steel Corp., 761 F.2d 943, 950 (3d Cir. 1985). Thus, the trial court is “free to make any order or
direction in further progress of the case, not inconsistent with the decision of the appellate court,
as to any question not settled by the decision.” Id.; see also Resyn Corp., 945 F.2d at 1282
(noting that issues raised but not reached on a prior appeal are not within the law of the case
doctrine). Moreover, it is abundantly clear that “[t]he doctrine does not apply to dicta.” United
Artists Theatre Circuit, Inc. v. Twp. of Warrington, Pa., 316 F.3d 392, 397 n.4 (3d Cir.), reh’g
denied, 324 F.3d 133 (3d Cir. 2003). “Gratuitous statements in an opinion that do not implicate
the adjudicative facts of the case’s specific holding do not have the bite of precedent. They bind
neither coordinate nor inferior courts in the judicial hierarchy. They are classic obiter dicta:
‘statement[s] of law in the opinion which could not logically be a major premise of the selected
facts of the decision.’” U.S. v. Warren, 338 F.3d 258, 265 (3d Cir. 2003) (quotations omitted).
The law of the case is inapplicable here. First, as to the Third Circuit’s decision in 2008,
that opinion did not include any implied rejection of Allstate’s argument. The entire case,
including the state law claims of breach of contract, was originally dismissed on summary
judgment in a cursory and ambiguous order by Judge Fullam. Allstate raised the same arguments
regarding the breach of contract claims on appeal to the Third Circuit in 2008. Plaintiffs now
contend that although the Third Circuit did not expressly address these arguments, it rejected
them “by implication” because “if Plaintiffs’ contract claims were legally insufficient on the face
of the Complaint, the court ‘could not have reversed the judgment granted’ in Defendants’ favor
on those particular claims, as the court did.” (Pls.’ Resp. Opp. Mot. to Dismiss 18–19
(quotations omitted).) The Court of Appeals, however, explicitly deferred ruling on the merits of
any of the substantive claims as follows:
We believe the District Court should reexamine the validity of the release, after
allowing further discovery into the facts surrounding the signing of the releases. The
plaintiffs had a relatively short period of class discovery, and approximately half of
the documents Allstate produced were documents from the Isbell litigation. While
Isbell is certainly relevant to the plaintiffs’ cases here, the plaintiffs 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: that the releases were part of an illegal scheme; that they were not
signed knowingly or voluntarily; and that they were unconscionable.
If, after discovery and briefing on these issues, the District Court determines that the
releases are valid, then the claims in Romero I, Count II of Romero II, and EEOC are
barred. If, however, the District Court determines that the releases are not valid, the
District Court needs to address all of the underlying claims and issues that it did not
decide in its June 20, 2007, Order, some of which we referred to above, namely, the
common law claims of breach of contract and breach of fiduciary duty and all the
claims in Romero II. We are confident that on remand the parties can spell these out
for the District Court, as they have done for us on appeal, including the plaintiffs’
claim that discovery as to these issues and the release should be permitted.
Romero v. Allstate Ins. Co., 344 F. App’x 785, 793–94 (3d Cir. 2009) (emphasis added). The
Third Circuit did not decide the validity of the breach of contract claims to which the law-of-thecase doctrine would apply.
The same holds true with Judge Buckwalter’s ruling in 2014. In deciding the parties’
cross-motions for summary judgment on the validity of the Release, the Court stated that “the
R830 and R1500, by their express terms, were at-will contracts.” Romero v. Allstate Ins. Co., 1
F. Supp. 3d 319, 397 (E.D. Pa. 2014). Plaintiffs subsequently moved for clarification of the
Court’s ruling, requesting that that statement be deemed to not foreclose further consideration of
the breach of contract issue at the merits stage. The Court granted that motion, noting that the
statement was nothing more than dicta for several reasons: (1) the substantive breach of contract
claim was not before the Court; (2) the statement that the R830/R1500 contracts were at-will
agreements was not necessary to the Court’s conclusion on the questions before it; (3) the Court
expressly recognized that a breach of contract claim still exists; and (4) the Court’s ruling was
premature because there had been no discovery on the matter or choice of law analysis. Id. at
431–32. The Court’s ruling that the Memorandum did not “operate to adjudicate any aspect of
Plaintiffs’ underlying breach of contract claims on the merits,” id. at 432, indicated that a motion
to dismiss, such as the one brought by Allstate in 2015, was not improper.
The law of the case doctrine is therefore inapplicable on this issue and the Court may
consider Allstate’s current argument that the breach of contract claims fail as a matter of law.
The Third Circuit’s Characterization of the R1500 and R830
The parties next dispute the applicability of the Third Circuit’s characterization of the
R1500 and R830 contracts in its opinion in EEOC v. Allstate, 778 F.3d 444 (3d Cir. 2015). The
Court finds that opinion not controlling on the at-will issue.
That case involved an appeal from this Court’s rejection of the EEOC’s theories that: (a)
Allstate’s requirement that agents choosing the Conversion Option waive their claims was
facially retaliatory and (b) Allstate specifically retaliated against agents who spurned the Release.
In the course of affirming the District Court’s decision, the Third Circuit used the term “at-will”
on three separate occasions. First, it stated that “[i]n 1999, Allstate decided to reorganize its
business and terminate the at-will employment contracts of some 6,200 sales agents, offering
them the opportunity to work as independent contractors.” Id. at 446. In reciting the facts of the
case, the Third Circuit stated that “[u]nder both the R830 and R1500 contracts, Allstate agents
were at-will employees and were not entitled to any severance pay in the event that they were
‘terminated under the terms of any group reorganization/restructuring benefit plan or
program[.]’” Id. (quoting Romero v. Allstate Ins. Co., 1 F. Supp. 3d 319, 397–98 (E.D. Pa.
2014)). Finally, in discussing whether Allstate offered sufficient consideration for the Release,
the Third Circuit made the singular remark that “[t]he agents were entitled to neither continued
employment (because they were at-will employees under the R830 and R1500 contracts) nor
severance pay (because they were terminated pursuant to a group reorganization program).” Id.
These statements are nothing more than dicta for purposes of the present motions.
“[D]ictum [is] ‘a statement in a judicial opinion that could have been deleted without seriously
impairing the analytical foundations of the holding—that, being peripheral, may not have
received the full and careful consideration of the court that uttered it.’” In re McDonald, 205
F.3d 606, 612 (3d Cir. 2000) (quoting Sarnoff v. Am. Home Prods. Corp., 798 F.2d 1075, 1084
(7th Cir. 1986)). Dicta in a decision of the court of appeals is not binding on lower courts or on a
subsequent panel of the court of appeals. See, e.g., Kool, Mann, Coffee & Co. v. Coffey, 300
F.3d 340, 355 (3d Cir. 2002); U.S. v. Outram, 445 F. App’x 509, 514 n.6 (3d Cir. 2011). As one
court has explained:
Though stare decisis is fundamental to our jurisprudence, and the governing power
of precedent is absolute, not every rumination of a higher court is to be awarded
equal weight by a lower court. The doctrine of stare decisis focuses on the decision
of the court and the rule the decision adopts . . . . “[A] case is important only for
what it decides: for ‘the what,’ not for ‘the why,’ and not for ‘the how.’ It is
important only for the decision not for the detailed legal consequence following a
detailed set of facts.” . . . “[S]tare decisis means what the court did, not what it said.”
Coregis Ins. Co. v. Law Offices of Carole F. Kafrissen, 186 F. Supp. 2d 567, 573 (E.D. Pa. 2002)
(quotations and citations omitted). The Third Circuit has clarified that “[l]itigants should not
totally disregard dicta, of course, because it indicates the direction or framework of an opinion
writer’s thought, and thereby serves as a tool for predicting what the court might do when the
issue is properly presented.” Chowdury v. Reading Hosp. & Med. Ctr., 677 F.2d 317, 324 (3d
Cir. 1982). Nonetheless, “dictum, unlike holding, does not have the strength of a decision
‘forged from actual experience by the hammer and anvil of litigation,’ a fact to be considered
when assessing its utility in the context of an actual controversy. Similarly, appellate courts must
be cautious to avoid promulgating unnecessarily broad rules of law.” Id. (quotations omitted).
Here, the Third Circuit’s comments about the R830 and R1500 contracts are dicta for two
reasons. First, the Third Circuit never actually reviewed the language of the contracts before
concluding they were at-will. The Circuit Court simply cited to the District Court’s statement in
the Romero v. Allstate opinion that the contracts were at-will. See EEOC, 778 F.3d at 446
(citing Romero, 1 F. Supp. 3d at 336, 397–98). The District Court, however, subsequently
clarified that its own statement about the at-will nature of the contracts was dicta that was not
meant to foreclose further litigation on the breach of contract claims. The Third Circuit never
referenced that clarifying statement.
Second, the issue before the Third Circuit was whether the requirement of the Release
constituted a form of retaliation. The EEOC argued that the Conversion Option of the Program
(which allowed terminated employee-agents to convert to independent contractors in exchange
for signing the Release) offered insufficient consideration. Again, without reviewing the specific
contractual language, the Third Circuit held that because the employees could be terminated at
any time under their at-will contracts, the Conversion Option provided sufficient consideration
for the Release. In doing so, however, the court relied not only on the fact that this Option
allowed the employee agents to convert to independent contractor status, but also on the fact that
the Option came with a host of other forms of consideration, including guaranteed conversion,
bonus, excused repayment of outstanding office expense advances, and the right to a transferable
interest in the business after two years. The at-will reference could have been deleted from the
opinion without impairing the holding’s foundation.
The Third Circuit’s comments about the at-will nature of the contracts were peripheral to
the court’s holding and do not require this Court to conclude that Plaintiff’s breach of contract
claims must be dismissed.
Whether the Breach of Contract Claims Must Be Dismissed on
Finally, the parties dispute whether the employment contracts at issue are, on their face,
terminable at-will. Under Allstate’s theory, the obvious at-will nature of these contracts requires
that any breach of contract claim based on Plaintiffs’ termination from Allstate’s employment
must be dismissed.
An employment contract that does not specify the term of employment is terminable atwill, and the employer may terminate the employee at any time without incurring liability. See,
e.g., Foley v. Interactive Data Corp., 765 P.2d 373, 385 (Cal. 1988) (holding that there is a
presumption of at-will employment if the parties have made no express oral or written agreement
specifying the length of employment or the grounds for termination); Jenkins v. Boise Cascade
Corp., 108 P.3d 380, 387 (Idaho 2005) (“Unless an employee is hired pursuant to a contract that
specifies the duration of the employment or limits the reasons for which an employee may be
discharged, the employment is at the will of either party and the employer may terminate the
relationship at any time for any reason without incurring liability.”); Ross v. May Co., 880
N.E.2d 210, 213 (Ill. App. Ct. 2007) (same); Whitley v. Rite Aid of Kentucky, Inc., No. 20140167, 2015 WL 1303639, at *2 (Ky. Ct. App. Mar. 20, 2015) (same); Vancheri v. GNLV Corp.,
777 P.2d 366, 369 (Nev. 1989); Sabetay v. Sterling Drug, Inc., 497 N.Y.S.2d 655, 656, 114
A.D.2d 6, 8 (N.Y. App. Div. 1986) (same); Ford v. Trendwest Resorts, Inc., 43 P.3d 1223, 1226
(Wash. 2002) (same).
The two employment contracts at issue in this case—the R830 and the R1500—were
fully integrated contracts that stated as follows:
This agreement will automatically terminate upon your death. Either
you or Allstate have the right to terminate this agreement upon
mailing to the other, at his or its last known address, written notice of
termination. After such termination you agree not to act or represent
yourself in any way as our agent. The Company will not terminate
your employment because of unsatisfactory work unless you have
been notified that your work is unsatisfactory and that your job is in
jeopardy and unless you have been given a reasonable opportunity to
bring your performance up to satisfactory standards. . . . In no event
shall an employee be released for any reason without the following
review and approval procedure having been adhered to . . . [defining
procedure for termination]
Your employment and this Agreement will automatically terminate
upon your death, retirement, loss or relinquishment of your insurance
agent license, or failure to return to work upon expiration of a leave
of absence. In addition, your employment and this Agreement may
be terminated at will by either party, subject only to such limitations
and restrictions as may be imposed by law, and in accordance with
Company rules and procedures. Termination shall be effective upon
giving notice of termination orally or in writing, delivered personally
or mailed to the last known address of the other. Upon termination,
you agree not to act or represent yourself in any way as an employee,
agent or representative of the Company, except as otherwise agreed
to in writing by you and the Company.
Allstate now argues that (1) all courts which have considered the R1500 contract and most of the
courts which have considered the R830 contract have deemed them terminable at-will; and (2)
the plain language of these contracts mandates that this Court do the same.
While many courts have found that the contracts at issue here are at-will, almost all of
decisions were at summary judgment after a full consideration of the factual background. See
Parrish v. Allstate Ins. Co., 46 F.3d 1143 (9th Cir. 1995) (affirming grant of summary judgment);
Hudson v. Allstate Ins. Co., 93 F.3d 296 (7th Cir. 1996) (affirming grant of summary judgment);
Szot v. Allstate Ins. Co., 161 F. Supp. 2d 596 (D. Md. 2001) (summary judgment motion);
Almada v. Allstate Ins. Co., 153 F. Supp. 2d 1108 (D. Ariz. 2000) (summary judgment motion),
aff’d, 285 F.3d 798 (9th Cir. 2002); Olsen v. Allstate Ins. Co., 759 F. Supp. 782 (M.D. Fla. 1991)
(summary judgment motion); Stack v. Allstate Ins. Co., 606 F. Supp. 472 (S.D. Ind. 1985)
(summary judgment motion). Here, Plaintiffs have had no opportunity to take discovery on their
substantive claims, including the breach of contract claim, let alone fully brief the issue for the
Second, other courts have decided this issue differently. For example, in Morales v.
Allstate Ins. Co., No. Civ.A.95-2308, 1995 WL 616654 (N.D. Cal. Oct. 13, 1995), the plaintiff
was party to a contract identical to the R830. Id. at *3. The court found that the language of that
contract “indicates that Allstate may not terminate an employee for any reason, at any time.
There must be unsatisfactory work, notice and opportunity to cure. Hence, good cause is
required to terminate an employee.” Id. at *3. Under the contract, the plaintiff was “entitled to
the highest level of review” prior to termination, and the procedure specified in the contract was
more than a rubber stamp and must protect an employee from wrongful discharge. Id. at *4.
Similarly, in Linker v. Allstate Ins. Co., 794 N.E.2d 945 (Ill. App. Ct. 2003), the court construed
the R830 contract and found that “[i]f the contract was truly at will, all defendant would have to
say is, ‘There’s the door, you’re gone.’ However, the contract does not allow this. Defendant
has provided for a review procedure; in fact, it appears that there may be two different forms of
review procedures. In any event, based on the fact that employees are given some sort of review
for termination for ‘any reason,’ it must therefore be concluded that the contract is not an at-will
contract.” Id. at 956–57 (emphasis in original).
Third, even where courts have construed the R830 and R1500 contracts to be at-will,
many of those courts recognized that the contracts contained other provisions, including
limitations on the parties’ right to terminate the contract at will, that required further factual
inquiry. See Hudson, 93 F.3d at 300 (“[T]he contract gives extra protection for employees who
are charged with unsatisfactory work, [so] it would be possible in a different case to have a
genuine issue of fact relating to the ground of dismissal, where the employee argued it was
actually for unsatisfactory work and the company claimed it was for another reason.”); Szot, 161
F. Supp. 2d at 603 (holding that the contracts were subject only to such limitations and
restrictions as may be imposed by law, and in accordance with Company rules and procedures,
but finding, on the facts of the case, that there was no indication that any of those limitations
applied); Almada, 153 F. Supp. 2d at 1111 (“Policy manuals, oral representations, and employee
handbooks may transform an at-will employment contract by adding implied-in-fact contract
terms. . . . Determining whether an employment contract is transformed by an employee
handbook or policy manual from an at-will arrangement is generally a question of fact.”); Stack,
606 F. Supp. at 477 (stating that because “Allstate’s right to discharge Stack was restricted by the
prior notice and opportunity to improve performance clause,” genuine issues of material fact
remained on breach of contract claim).
Finally, the Court cannot conclude at this juncture that the contracts here did not impose
some type of limitation on Allstate’s ability to terminate the Plaintiffs. Allstate contends that: (1)
the job-in-jeopardy notices and opportunity to cure were only in the R830 contract; (2) the
notices and opportunity to cure provisions were only applicable to agents terminated for
unsatisfactory work, which did not apply to the agents here; and (3) any review and approval
procedures required by the contracts were met or rendered superfluous by the approval of the
terminations by individuals at the highest levels at Allstate.
Under many states’ laws, “[p]olicy manuals, oral representations, and employee
handbooks may transform an at-will employment contract by adding implied-in-fact contract
terms.”12 See, e.g., Almada, 153 F. Supp. 2d at 1111; Pine River State Bank v. Mettile, 333
N.W.2d 622, 629–30 (Minn. 1983) (holding that where employee was at-will, but employee
handbook contained procedural restraints on termination of employees, breach of contract claim
presented a factual issue for jury); Morris v. Lutheran Med. Ctr., 340 N.W.2d 388, 391 (Neb.
1983) (“[W]here an employment contract is for an indefinite duration, such indefiniteness by
itself does not preclude job security provisions in an employee handbook from becoming part of
the employment contract.”); Sowards v. Norbar, Inc., 605 N.E.2d 468, 471 (Ohio Ct. App. 1992)
(“As an exception to the general [at-will] rule, employee handbooks, company policy, and oral
representations have been recognized in some situations as comprising components or evidence
Plaintiffs invite the Court to engage in a choice of law analysis without a full briefing
of this issue. The Court declines to do so.
of employment contracts.”); Johnson v. Morton Thiokol, Inc., 818 P.2d 997, 1000 (Utah 1991)
(“[T]he terms of an employee manual can operate as implied-in-fact contract terms rebutting the
presumption of at-will employment and fixing the terms of the employee relationship.”); Worley
v. Wyoming Bottling Co., Inc., 1 P.3d 615, 620 (Wyo. 2000) (“Although employment for an
indefinite period of time is presumed to be at will, that presumption can be overcome by either an
implied-in-fact contract or an express contract.”).
In the present case, the Third Amended Complaint alleges, in pertinent part, as follows:
553. The employment relationship between Allstate and the R830 subclass members
is governed by Allstate’s standardized R830 contracts, all or almost all of which were
entered into on or before September 30, 1984.
554. The R830 subclass members fully performed all of their obligations under their
R830 contracts with Allstate.
555. Under the express and implied terms of the R830 contract, Allstate could not
terminate the R830 subclass members except for “good cause” and in accordance
with the procedures governing termination that are set forth in the R830 contract.
556. In order to minimize its costs and maximize its profits, Allstate compelled,
encouraged and otherwise induced the R830 subclass members to invest substantial
personal resources in Allstate’s insurance business since at least October 1, 1984, and
continuing for the duration of their employment relationship.
557. In accepting the financial and other benefits of such investments, Allstate
obligated itself, as a matter of law, to continue its employment relationship with the
R830 subclass members for at least a reasonable period of time for them to make
good on their continuing investment in light of all the circumstances. These
circumstances include, but are not limited to, the amount of the investments the R830
subclass members made in Allstate’s insurance business and the duration of the
period over which such investments were made.
558. In implementing the Mass Termination Program, Allstate terminated the
employment status of each of the R830 subclass members without “good cause,”
without regard to the procedural safeguards set forth in the R830 contract, and
without affording them a reasonable period of time to make good on their
investments. Such termination was in material breach of Allstate’s express and
implied obligations under the R830 agreement.
561. The employment relationship between Allstate and the R1500 subclass members
is governed by Allstate’s standardized R1500 contracts, which were entered into
between the approximate dates of October 1, 1984 through September 30, 1990.
562. The R1500 subclass members fully performed all of their obligations under their
R1500 contracts with Allstate.
563. Under the express and implied terms of the R1500 contract, Allstate could not
terminate the R1500 subclass members except for “good cause” and in accordance
with the procedures governing termination that are expressly or impliedly
incorporated into the R1500 contract.
564. In order to minimize its costs and maximize its profits, Allstate compelled,
encouraged and otherwise induced the R1500 subclass members to invest substantial
personal resources in Allstate’s insurance business throughout the duration of the
existence of their employment relationship.
565. In accepting the financial and other benefits of such investments, Allstate
obligated itself, as a matter of law, to continue its employment relationship with the
R1500 subclass members for at least a reasonable period of time for them to make
good on their continuing investments in light of all the circumstances. These
circumstances include, but are not limited to, the amount of the investments made by
the R1500 subclass members and the duration of the period over which such
investments were made.
566. In implementing the Mass Termination Program, Allstate terminated the
employment status of each of the R1500 subclass members without “good cause,”
without regard to the procedural safeguards governing termination that are
expressly or impliedly incorporated into the R1500 contract, and without affording
them a reasonable period of time to make good on their continuing investments. Such
termination was in material breach of Allstate’s express and implied obligations
under the R1500 contract.
(Third Am. Compl. ¶¶ 553–58, 561–66 (emphasis added).) In other words, the Third Amended
Complaint alleges an express employment contract, as well as “procedures governing termination
that are expressly or impliedly incorporated” into the two contracts. Moreover, Plaintiffs allege
that their investments of personal resources into Allstate’s insurance business constitutes
additional consideration which supports those added procedures. Whether or not Plaintiffs have
rebutted the presumption of an at-will contract is a question of fact not appropriate for resolution
on a motion to dismiss.
Plaintiffs have not yet had the opportunity to conduct any discovery on these issues due to
this litigation’s focus on the validity of the Release. Dismissing these claims at this stage is
unwarranted and Allstate’s motion is denied.
Whether the Arizona Statute of Limitations Bars the Arizona
Plaintiffs’ Breach of Contract Claims
Allstate contends that the breach of contract claims of the new Arizona Plaintiffs should
be dismissed because they are barred by that state’s one-year statute of limitations.
Four of the newly-added Plaintiffs in this case allege that they are residents of Arizona.13
Federal courts exercising supplemental jurisdiction over state law claims must look to the forum
state’s choice-of-law principles to determine the applicable statute of limitations for such claims.
Chin v. Chrysler LLC, 538 F.3d 272, 278 (3d Cir. 2008). Pursuant to Pennsylvania’s borrowing
statute, “[t]he period of limitation applicable to a claim accruing outside this Commonwealth
shall be either that provided or prescribed by the law of the place where the claim accrued or by
the law of this Commonwealth, whichever first bars the claim.” 42 Pa. Const. Stat. § 5521(b)
(1978). Under Arizona law, breach of oral or written employment contract claims must be filed
within one year of the alleged breach. Ariz Rev. Stat. Ann. § 12-541 (1996). As this period is
shorter than the four-year limitations period under Pennsylvania law, 42 Pa.C.S. § 5525, Arizona
law would govern the breach of contract claims for the four new Arizona Plaintiffs.
According to the Third Amended Complaint, Allstate breached Plaintiffs’ R830 and
These individuals are Dwight Bondy, John Heasley, Rick Jahns, and Barbara Oxner.
(Third Am. Compl. 4, 15, 17, 24.)
R1500 employment contracts when it notified them about the Preparing for the Future Program
and terminated the contracts on November 10, 1999. (Third Am. Compl. ¶¶ 558, 566.) Allstate
argues that in the ensuing time period, the statute of limitations tolled, if at all, on two separate
occasions: (1) from the filing of the initial Romero Complaint on August 1, 2001, to the denial of
class certification on October 6, 2014; and (2) from December 22, 2014 to March 2, 2015, when
the Court explicitly tolled the statute of limitations. Taking out these two periods of tolling, a
total of one year and 342 days elapsed between the notification of termination on November 10,
1999, and the filing of the Abell Complaint on February 27, 2015, which included the four
Arizona Plaintiffs. As such, according to Allstate, the Arizona plaintiffs’ breach of contract
claims are time-barred.
Plaintiffs respond that Allstate issued its notification of termination on November 10,
1999 from its headquarters in Illinois and that the breach of contract claims accrued in Illinois,
which has a ten-year statute of limitations. 735 Ill. Compl. Stat. ILCS 5/13-206 (2007). Under
Pennsylvania law, however, a cause of action arises and the statute of limitations begins to run
“as determined by the final significant event necessary to make the claim suable.” Mack Trucks,
Inc. v. Bendix–Westinghouse Automotive Air Brake Co., 372 F.2d 18, 20 (3d Cir. 1967)
(citations omitted). The Pennsylvania Supreme Court has explained that “a right of action
accrues only when injury is sustained by the plaintiff—not when the causes are set in motion
which ultimately produce injury as a consequence.” Foley v. Pittsburgh–Des Moines Co., 68
A.2d 517, 535 (Pa. 1949); see also Hamid v. Stock & Grimes, LLP, No. Civ.A.11-2349, 2011
WL 3803792, at *2 (E.D. Pa. Aug. 26, 2011) (holding that breach of contract claim accrued in
Delaware when the plaintiff did not receive the payment due on August 12, 2006 at its post office
in Delaware, not when the defendant failed to mail the payment from Pennsylvania). In this case,
the final significant event arose when each Plaintiff received his or her notification of
termination, not when the termination was mailed. Prior to that time, Plaintiffs would not have
known about any alleged breach and would not have sustained any injury. See Lincoln Gen. Ins.
Co. v. Kingsway Am. Agency, Inc., No. Civ.A.11-1195, 2012 WL 1598120, at *6 (M.D. Pa. May
7, 2012) (holding that final significant event in breach of contract claim was when the plaintiff
learned of the breach). Illinois law therefore does not apply unless the Plaintiff received his or
her notice in that state.
Alternatively, Plaintiffs argue that Defendants have not demonstrated that any of
Plaintiffs’ breach of contract claims accrued in Arizona since the Third Amended Complaint only
lists the current residences of each of the Plaintiffs without revealing where each worked as an
employee-agent or where each received their notices of termination. Allstate, in turn, asserts that
because the Complaint is deficient insofar as it fails to clarify where each Plaintiff received
notice of the Program, the Court may presume that the Plaintiffs who now reside in Arizona also
operated their agencies in Arizona.
The Court declines to assume facts which may or may not be true. The absence of these
facts precludes any ruling on this issue in the context of a motion to dismiss. In lieu of allowing
yet another amendment of the Complaint, the Court will permit Allstate to make this argument
again at summary judgment.
Whether the Tennessee Statute of Limitations Bars the Tennessee
Plaintiffs’ Breach of Fiduciary Duty Claims
Finally, Allstate asserts that the Tennessee statute of limitations bars the breach of
fiduciary duty claims brought by the nine Plaintiffs who reside in Tennessee.14 Tennessee
requires breach of fiduciary duty claims to be filed within one year of the alleged breach. (Defs.’
Mem. Supp. Mot. Dismiss. 19 (citing Tenn. Code Ann. § 48-18-601 (2013)).)15 Under the
Pennsylvania borrowing statute, this shorter statute of limitations—as opposed to Pennsylvania’s
two-year limitations period under 42 Pa.C.S. § 5524(7)—governs. Relying on the same accrual
and tolling calculations described above, Allstate now asserts that the breach of fiduciary duty
claims were filed well outside the one-year period and are thus time-barred.
Plaintiffs contend that the Tennessee statute applies only to claims against corporate
“directors and officers,” not to corporations like Allstate, and therefore the limitations period for
Plaintiffs’ breach of fiduciary duty claims against Allstate would not be one year, but either three
or six years. (Pls.’ Resp. Opp’n Mot. Dismiss 6–7.) Plaintiffs also re-assert that the Third
Amended Complaint does not clearly indicate where these causes of action accrued because the
states listed for the Plaintiffs only represent their current residences, not where they operated
Gary Baumgardner, Richard Earl, Larry Gentry, Coni Heidle, Steve Howell, Sandra
Inman, Thomas O’Dell, Dennis Powers, and Woodrow Shelton. (Third Am. Compl. 3, 11, 13,
15–17, 23, 25, 28.)
Any action alleging breach of fiduciary duties by directors or officers, including alleged
violations of the standards established in § 48-18-301, § 48-18-403 or part 7 of this chapter, must
be brought within one (1) year from the date of such breach or violation; provided, that in the
event the alleged breach or violation is not discovered nor reasonably should have been
discovered within the one-year period, the period of limitation shall be one (1) year from the date
such was discovered or reasonably should have been discovered. In no event shall any such
action be brought more than three (3) years after the date on which the breach or violation
occurred, except where there is fraudulent concealment on the part of the defendant, in which
case the action shall be commenced within one (1) year after the alleged breach or violation is, or
should have been, discovered.
Tenn. Code Ann.
§ 48-18-601 (2013).
their Allstate agencies.
While these claims may end up being be time-barred against both Allstate and Defendant
Liddy,16 the Court need not resolve the issue at this time. As noted above, the Third Amended
Complaint does not yet disclose the precise location of each Plaintiff’s Allstate insurance agency
or where the claims for breach of fiduciary duty accrued. Allstate may seek dismissal of these
claims, if appropriate, at summary judgment.
The Court grants Plaintiffs’ Motions for Reconsideration and reverses the dismissal of
Plaintiffs’ state law claims on the grounds of tender-back/ratification. In doing so, the Court reemphasizes that, due to the convoluted history of this case, the parties must timely raise all
relevant arguments and identify all pertinent procedural background and facts. Moreover, the
Court finds that Allstate’s remaining arguments for dismissal of the state law claims cannot be
decided on the comparatively limited standard of review governing motions to dismiss.
Accordingly, the Court will reinstate Plaintiffs’ state law claims and deny the remainder of
The three-year statute of limitations, as found in Tenn. Code Ann. § 28-3-105, applies
if the suit seeks to recover damages for injuries to the plaintiff’s property. Keller v. Colgems
EMI Music, Inc., 924 S.W.2d 357, 359 (Tenn. Ct. App. 1996). Plaintiffs allege no such injury to
property in this case. The six-year statute of limitations, as found in Tenn. Code Ann. § 28-3109, applies for breach of contract actions not otherwise provided for in another statute. Kirby
Farms Homeowners Ass’n v. Citicorp, Citibank, N.A., 773 S.W.2d 249, 250 (Tenn. Ct. App.
1989). The breach of fiduciary duty claim in this case, however, appears to be clearly provided
for by Tenn. Code Ann. § 48-18-601, which sets forth a one-year limitations period. At a
minimum, it would cover the breach of fiduciary claims against Defendant Liddy since he was a
“director or officer within the meaning of that statute. Moreover, it appears that Tennessee
courts would apply Section 48-18-601 to breach of fiduciary duty actions against corporations.
See Fite ex. rel. H&M Constr. v. Fite, No. 02A01-9710-00266, 1999 WL 317102, at *7 (Tenn.
Ct. App. May 19, 1999) (applying one-year statute of limitations to breach of fiduciary claims
against officer and director of corporation, corporation itself, and majority shareholders as an
alter ego of the corporation).
Allstate’s previously-filed Motion to Dismiss. An appropriate Order follows.
/s/ Gerald J. Pappert
GERALD J. PAPPERT, J.
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