Schneider v. Allstate Ins. Co., Nos. 04-2310 & 04-2365 Brief as amicus Jan. 6, 2005 Nos. 04-2310 & 04-2365 __________________________________________ IN THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT __________________________________________ DORIS ISBELL, Plaintiff-Appellant, and JAMES SCHNEIDER, Plaintiff-Cross-Appellee, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellee/Cross-Appellant. ________________________________________________________ On Appeal from the United States District Court for the Southern District of Illinois Hon. David R. Herndon, Judge ________________________________________________________ BRIEF OF AMICUS CURIAE THE U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION IN SUPPORT OF PLAINTIFF-CROSS-APPELLEE JAMES SCHNEIDER AND IN SUPPORT OF AFFIRMANCE OF THE DISTRICT COURT'S DECISION AS TO HIS CLAIM ________________________________________________________ ERIC S. DREIBAND U. S. EQUAL EMPLOYMENT General Counsel OPPORTUNITY COMMISSION Office of General Counsel LORRAINE C. DAVIS 1801 L Street, N.W., Room 7024 Acting Associate General Counsel Washington, D.C. 20507 (202) 663-4870 VINCENT J. BLACKWOOD James.Tucker@EEOC.gov Assistant General Counsel PAUL D. RAMSHAW Attorney JAMES M. TUCKER Attorney TABLE OF CONTENTS Table of Authorities . . . . . . . . . . . . . . . . . . . . . ii Statement of Interest. . . . . . . . . . . . . . . . . . . . . .1 Statement of the Issues on Appeal. . . . . . . . . . . . . . . .2 Statement of the Case. . . . . . . . . . . . . . . . . . . . . .2 A. Proceedings Below. . . . . . . . . . . . . . . . . . .2 B. Statement of Facts . . . . . . . . . . . . . . . . . .3 C. District Court Decisions . . . . . . . . . . . . . . .5 Argument . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 ALLSTATE IS NOT ENTITLED TO DAMAGES MERELY BECAUSE SCHNEIDER FILED SUIT CHALLENGING THE VALIDITY OF THE WAIVER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . .7 A. By Signing The Agreement Schneider Did Not Promise Not To Test the Validity Of The Agreement By Filing Suit.. . . . . . . . . . . .7 B. Even If Schneider Had Breached His Agreement With Allstate, The District Court Correctly Ruled That Allstate Is Not Entitled To Damages. . . . . . . . . . . . . . . . . . . . 10 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Certificate of Compliance Certificate of Service TABLE OF AUTHORITIES CASES Page(s) Alyeska Pipeline Svc. Co. v. Wilderness Soc'y, 421 U.S. 240 (1975)11 Artvale v. Rugby Fabrics Corp., 363 F.2d 1002 (2d Cir. 1966) . .7 Bunnett v. Smallwood, 793 P.2d 157 (Colo. 1990). . . . . . . . 15 Chevron v. Natural Res. Def. Council, 467 U.S. 837 (1984). . . 12 Eco Mfg. LLC v. Honeywell Int'l, Inc., 357 F.3d 649 (7th Cir. 2003)12 EEOC v. O & G Spring & Wire Forms Specialty Co., 38 F.3d 872 (7th Cir. 1994)11 Isaacs v. Caterpillar, Inc., 702 F. Supp. 711 (C.D. Ill. 1988) .9 Isbell v. Allstate Ins. Co., No. 01-cv-252, amended slip op. (S.D. Ill. Dec. 16, 2003)3, 4, 5, 6 Isbell v. Allstate Ins. Co., No. 01-cv-252, slip op. (S.D. Ill. April 14, 2004)4, 5, 6, 7, 10, 12 Long v. Sears, Roebuck & Co., 105 F.3d 1529 (3d Cir. 1997) . . 13 Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995).9 Midwest Federal Sav. & Loan Ass'n of Minneapolis v. Green Tree Acceptance, Inc., No. 3-88- 0669, 1989 WL 411604 (D.Minn. Aug. 17, 1989) . . . . . . . . 8, 9 Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998) . . .5, 13 Romero & EEOC v. Allstate Ins. Co., Nos. 01-cv-3894, 01-cv-6764, 01-cv-7042, 2004 WL 692231 (E.D. Pa. Mar. 30, 2004). . . . . . . . . . . . . 4, 5, 14 U.S. Freightways Corp v. C.I.R., 270 F.3d 1137, 1141 (7th Cir. 2000)12 STATUTES, REGULATIONS and RULES The Age Discrimination in Employment Act, 29 U.S.C. 621 et seq.. . . . . . . . . . . . . . . . . .1 29 U.S.C. 626(f). . . . . . . . . . . . . . . . . . .5, 13 29 U.S.C. 626(f)(1)(D). . . . . . . . . . . . . . . . . 15 29 U.S.C. 626(f)(3) . . . . . . . . . . . . . . . . . . 14 29 U.S.C. 628 . . . . . . . . . . . . . . . . . . . . . 12 29 C.F.R. 1625.23(b) . . . . . . . . . . . . . . . . . . 10, 11 29 C.F.R. 1625.23(c) . . . . . . . . . . . . . . . . . . 11, 15 OTHER AUTHORITY 64 Fed. Reg. 19,952 (Apr. 23, 1999). . . . . . . . . . . . 11, 12 65 Fed. Reg. 77,438 (Dec. 11, 2000). . . . . . . . . . 11, 12, 14 Nos. 04-2310 & 04-2365 __________________________________________ IN THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT __________________________________________ DORIS ISBELL, Plaintiff-Appellant, and JAMES SCHNEIDER, Plaintiff-Cross-Appellee, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellee/Cross-Appellant. ________________________________________________________ On Appeal from the United States District Court for the Southern District of Illinois Hon. David R. Herndon, Judge ________________________________________________________ BRIEF OF AMICUS CURIAE THE U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION IN SUPPORT OF PLAINTIFF-CROSS-APPELLEE JAMES SCHNEIDER AND IN SUPPORT OF AFFIRMANCE OF THE DISTRICT COURT'S DECISION AS TO HIS CLAIM ________________________________________________________ STATEMENT OF INTEREST The Equal Employment Opportunity Commission ("Commission") is the agency charged by Congress with interpreting and enforcing the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. 621 et seq., and other federal employment discrimination laws. This appeal presents the question of whether an employer may penalize individuals who bring ADEA suits challenging the validity of purported waivers of ADEA claims. Because the imposition of such a penalty would deter individuals from testing the validity of waivers of ADEA claims, the Commission has adopted a regulation providing that a valid ADEA waiver agreement may not impose any penalty on an individual merely because he challenges the validity of the agreement in court. In rejecting the defendant's claim for damages in this case, the district court relied in part on the rationale of the Commission's regulation. We believe the district court's decision denying an award of damages to the defendant in this case is consistent with the ADEA and the Commission's regulation, and for this reason the Commission respectfully offers its views to this Court. STATEMENT OF THE ISSUES ON APPEAL 1. Whether the plaintiff breached his agreement waiving and releasing claims under the ADEA by filing suit challenging the validity of the agreement. 2. Whether, even if plaintiff breached the agreement by challenging its validity, the district court correctly held that the defendant may not recover damages from the plaintiff merely for bringing such a challenge. STATEMENT OF THE CASE A. Proceedings Below This is an appeal from a final judgment dismissing Allstate's counterclaim in its entirety. Schneider alleged in his complaint that Allstate violated the ADEA and other federal laws by requiring him to absolve Allstate of liability for all employment-related claims, including employment discrimination claims, in exchange for allowing him the opportunity to continue selling Allstate insurance. District court docket number ("R.")1. Allstate replied by filing a counterclaim against Schneider alleging breach of contract. On March 15, 2002, the district court consolidated Schneider's suit with a suit brought against Allstate by Doris Isbell. R.76. On March 28, 2003, the court granted Allstate's motion for partial summary judgment against Isbell, dismissing her retaliation claims, and on November 25, 2003, the court issued a Memorandum and Order in which it granted summary judgment against both plaintiffs on all their remaining claims. R.177, 281; see also R.286 (Amended Memorandum and Order). In its November 25 Memorandum and Order, the court also denied, without prejudice, Allstate's motion for summary judgment on its counterclaim, noting that Allstate had established liability but had failed to show any damages. Allstate subsequently renewed its motion for summary judgment on the damages question, and Schneider filed a cross-motion for summary judgment on the same issue. R.290, 295. In a Memorandum and Order issued April 13, 2004, the court denied Allstate's motion and granted the motion by Schneider. R.302. Final judgment was entered on May 5, 2004. R.305. On May 20, 2004. Allstate filed a notice of appeal of the court's April 13, 2004 order. R.315. B. Statement of Facts In November 1999, Allstate Insurance Company announced that it was terminating the employment contracts of its employee-agents, effective June 30, 2000, as part of its "Preparing for the Future" Group Reorganization Program. Isbell v. Allstate Ins. Co., No. 01-cv-252, amended slip op., at 4-5 (S.D. Ill. Dec. 16, 2003) ("Isbell I"). However, Allstate offered all its employee-agents the opportunity to continue selling Allstate insurance as independent contractors. Id. at 5. Alternatively, agents could leave the company after selling their "book of business" to another agent or could receive enhanced severance pay. Id. at 6. As a prerequisite to accepting any of these options, however, Allstate required that its former employee-agents sign a "General Release and Waiver" of claims under the ADEA, Title VII, the ADA, and other state and federal laws. Id. at 5-7. In pertinent part, the release states: In return for the consideration that I am receiving under the Program, I hereby release, waive and forever discharge Allstate Insurance Company . . . from any and all liability . . . entitlements or claims for relief or remuneration of any kind whatsoever, whether known or unknown, . . . arising out of, connected with, or related to my employment and/or the termination of my employment . . . or my transition to independent contractor status . . . . 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. Joint Appendix at 1334. The agreement contains neither an express covenant not to sue nor any provision entitling Allstate to damages or attorney's fees in the event an employee who has signed the waiver and release later files a lawsuit. Schneider had worked as an employee-agent at Allstate since 1984. Isbell I, at 4. Schneider signed the waiver and release and sold his book of business to another agent for $120,000; he also received a $5,000 signing bonus and forgiveness of a $1,000 advance. Id. at 8. See also Isbell v. Allstate Ins. Co., No. 01-cv-252, slip op. at 1 (S.D. Ill. April 14, 2004) ("Isbell II"). Schneider left the company in the summer of 2000 and later filed a charge with the Commission. All but about 20 of the over 6,000 employee-agents at the time the program was implemented also opted to sign the waiver and release. Romero & EEOC v. Allstate Ins. Co., Nos. 01-cv-3894, 01-cv-6764, 01-cv-7042, 2004 WL 692231, at *1-*2 (E.D. Pa. Mar. 30, 2004). Like Schneider, a number of other former employee-agents subsequently filed charges with the Commission challenging the program. Id. at *1-*2. During the Commission's investigation of the charges, Allstate sent the Commission a letter in which it assured the Commission that even if an employee-agent signed the waiver and release, he or she could nevertheless challenge its validity and pursue a "claim of discrimination." Isbell II, at 4. Most of the former employee-agents are included in a representative action pending in the United States District Court for the Eastern District of Pennsylvania, which has been consolidated with a Commission enforcement action. See Romero, 2004 WL 692231, at *1-*2. Schneider, however, brought a separate suit alleging that the release was invalid and that the reorganization program and release requirement violated the ADEA and other state and federal laws. Despite Allstate's statement in its letter to the Commission recognizing its former employee-agents' right to challenge the validity of the waiver and release, Allstate filed a counterclaim against Schneider seeking damages on the ground that, by filing suit, he breached the waiver and release. After discovery, Allstate moved for summary judgment. C. District Court Decisions The district court determined that Schneider's waiver and release was valid. Isbell I, at 19. Noting that he did not dispute that the agreement met the listed requirements of the Older Workers Benefit Protection Act ("OWBPA"), as codified at 29 U.S.C. 626(f), the court held that Schneider's decision to sign the document was knowing and voluntary. Id. at 16. Despite this ruling, the court went on to consider and dismiss the underlying substantive claims, finding no direct or persuasive circumstantial evidence that the conversion program violated state or federal law. Id. at 19-26. Turning to Allstate's counterclaim, the court held that Allstate had proven liability. Without quoting from the document, the court asserted that the "plain language of the Release prevented Schneider from filing a lawsuit against Allstate pursuant to the ADEA, ERISA, ADA and Title VII" and that he had "breached the agreement by bringing the instant suit." Id. at 31. Concluding that Allstate failed to offer any proof of damages, however, the court reserved ruling on that issue. Id. Allstate then filed a supplemental motion requesting damages for the breach of contract found by the court. Allstate conceded that it had not proffered any evidence on attorney's fees but argued that a proper measure of damages would be reimbursement of the $6,000 it had given Schneider when he signed the agreement and payment of $120,000, the amount Schneider received when he sold his book of business. The district court denied the motion. The court held that Allstate was "not entitled to damages for breach of contract as a matter of law." Isbell II, at 2. The court noted that, in the wake of Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998), the Commission promulgated regulations that "flatly reject[] arrangements that allow[] an employer to recover costs, attorneys' fees and/or damages for breach of any covenant not to sue the employer." Id. at 3. The court noted that the Commission reasoned "such an arrangement would thwart the remedial purposes of the ADEA and have a chilling effect on valid challenges to unlawful conduct by employers"; moreover, an employer "'does not need to bring a valid counterclaim to obtain what it purchased with the waiver [since with] a valid waiver, an employer receives an affirmative defense against ADEA claims.'" Id. (citation omitted). The court then concluded that, although the Commission's regulations were published after Allstate's waiver and release was drafted and, so, would "typically" not "have retroactive effect," the "logic behind the regulations should apply with equal force here to bar recovery of the damages sought by Allstate." Id. at 4. Thus, the court concluded, "an employee like Schneider should have the right to pursue his challenge without fear of the benefit of his chosen option being taken away from him." Id. The court also noted that, in a letter to the Commission, "Allstate's counsel represented to the EEOC that an employee could sign the release, but still challenge its validity and pursue a claim of discrimination." Id. In the court's view, this letter "weighs strongly against Allstate's request for damages." Id. In light of the representation, the court concluded, Allstate "should be estopped at this point from recovering damages from Schneider" for any alleged breach of the release. Id. ARGUMENT ALLSTATE IS NOT ENTITLED TO DAMAGES MERELY BECAUSE SCHNEIDER FILED SUIT CHALLENGING THE VALIDITY OF THE WAIVER AGREEMENT. A. By Signing The Agreement Schneider Did Not Promise Not To Test The Validity Of The Agreement By Filing Suit. The district court erred in holding that Schneider breached the waiver and release by bringing suit against Allstate challenging the agreement as well as the conversion program. Notwithstanding the court's assertion that the "plain language of the Release prevented Schneider from filing a lawsuit against Allstate," the agreement contains neither an express promise not to sue nor a provision allowing for damages if suit is filed. Since, in drafting the agreement, Allstate included no provisions prohibiting Schneider's ability to sue nor providing for damages if he did so, and only attempted to draft itself a defense against any ADEA claims, the agreement can only be fairly considered a defensive release upon which no claim for breach may attach. Cf. Artvale v. Rugby Fabrics Corp., 363 F.2d 1002, 1008 (2d Cir. 1966) (describing an express covenant not to sue, without an accompanying damages provision, as akin to a release, and that its "primary function is to serve as a shield rather than as a sword"). The few courts which have addressed the distinction between a covenant not to sue and a release have consistently held that the latter does not permit a defendant to counterclaim for damages under a theory of breach. In Midwest Federal Sav. & Loan Ass'n of Minneapolis v. Green Tree Acceptance, Inc., No. 3-88-0669, 1989 WL 411604 (D.Minn. Aug. 17, 1989), the court held that an agreement in which one of the parties "releases and forever acquits and discharges [the other party] . . . of and from any and all manner of actions and causes of action, suits, damages, accountings, warranties, agreements, judgments, claims and demands whatsoever in law or in equity" constituted a defensive release, and not a covenant not to sue which "may entitle a party to an offensive cause of action for breach." Midwest, 1989 WL 411604, at *12- *13 (alteration added; omission in original). The court, relying on a decision of the Minnesota Supreme Court, stated that "a party to a covenant not to sue agrees to take no action whatsoever to vindicate any rights it may have," while "[a] party to a release does not refrain from taking any action." Id. at *13 (citing Gronquist v. Olson, 64 N.W.2d 159 (Minn. 1954)). The court continued: Instead, by entering into a release, the party relinquishes any underlying rights that it might possess. Taking this analysis a step further, breach of a covenant not to sue may entitle the nonbreaching party to a counterclaim for damages. Since a release does not include a promise not to take any action, the mere filing of a lawsuit operates neither as a breach of the release, nor as the basis for a damages claim. Id. The court held that "[t]he intention of the parties, as manifested by the terms of the agreement, is clear and unambiguous; they intended the document to be a release and not a covenant not to sue." Id. at *14. The court based this conclusion on several factors, all of which are equally true with respect to the agreement between Schneider and Allstate: the heading of the provision in the agreement at issue designated it as a release (the heading of the provision in Allstate's agreement includes the descriptive term "General Release"); the term "release" was used throughout the agreement (as it is in Allstate's agreement); and the plaintiff expressly agreed to "discharge" the defendant from liability (as Schneider did in the agreement he signed). Id. at *14; Joint Appendix at 1334-36. Similarly, in Isaacs v. Caterpillar, Inc., 702 F. Supp. 711 (C.D. Ill. Sept. 27, 1988), the court addressed an agreement in which the plaintiff "release[d] and forever discharge[d] [the defendant] from any and all claims, causes of action, damages and liabilities." 702 F. Supp. at 712. While it was not assessing the validity of the agreement itself, the court noted that the agreement did not include any provision "specifically promising not to file a lawsuit, or providing for damages if a lawsuit is filed that is found to be barred by the release," and concluded, as a matter of fact, that "[a] release of this type, which merely states that claims are discharged and released, will hereinafter be referred to as a 'defensive release.'" Id. at 713. The court further stated that "[t]he filing of a good-faith lawsuit does not constitute a breach of the agreement evidenced by that release." Id. Because the agreement Schneider signed characterizes the provision at issue as a "release," and does not contain a covenant not to sue, Schneider did not breach the agreement by challenging the validity of the agreement in this lawsuit. Even if the agreement were ambiguous on this point, the waiver and release agreement should be construed against the interest of the drafter. See, e.g., Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62 (1995) (applying "common-law rule of contract interpretation that a court should construe ambiguous language against the interest of the party that drafted it" and explaining that rule is designed to "protect the party who did not choose the language from an unintended or unfair result"). Application of this common-law rule is especially appropriate here since, without an express covenant or damages provision, Schneider would reasonably not have expected that he could be forced to pay the company $126,000 for simply challenging the validity of the agreement in court. B. Even If Schneider Had Breached His Agreement With Allstate, The District Court Correctly Ruled That Allstate Is Not Entitled To Damages. Regardless of whether or not Schneider is considered to have breached the agreement, the district court correctly held that Allstate should not recover any damages on its counterclaim. As the district court recognized, permitting Allstate to recover damages in this case would be inconsistent with the Commission's regulations interpreting the OWBPA. Isbell II, at 3-4 (discussing the proposed and final versions of the Commission's tender-back regulation and concluding that the "logic behind the regulations should apply with equal force here to bar recovery of the damages sought by Allstate"). The Commission's regulation provides: No ADEA waiver agreement, covenant not to sue, or other equivalent arrangement may impose . . . any penalty, or other limitation adversely affecting any individual's right to challenge the agreement. This prohibition includes, but is not limited to . . . provisions allowing employers to recover . . . damages because of the filing of an ADEA suit. 29 C.F.R. 1625.23(b). The regulation permits an employer to obtain restitution only where the employee "successfully challenges a waiver agreement . . . and prevails on the merits on an ADEA claim," and even then such a recovery "never can exceed the amount recovered by the employee, or the consideration the employee received for signing the waiver agreement . . . , whichever is less." 29 C.F.R. 1625.23(c). The regulation further provides that it is "not intended to preclude employers from recovering attorneys' fees or costs specifically authorized under federal law," 29 C.F.R. 1625.23(b), such as attorneys' fees and costs incurred in litigation brought in bad faith. See Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 258-59 (1975) (recognizing "inherent power of the [federal] courts to allow attorneys' fees in particular situations" such as when the losing party has litigated in bad faith); EEOC v. O & G Spring & Wire Forms Specialty Co., 38 F.3d 872, 883 (7th Cir. 1994) (noting that the ADEA does not preclude a prevailing defendant from recovering attorney's fees and costs if the plaintiff litigated in bad faith). The commentary accompanying publication of the final rule explains that the Commission adopted this rule prohibiting the imposition of penalties on individuals for challenging waivers or covenants not to sue because of "the chilling effect that the potential for attorneys' fees [other than those "specifically authorized under federal law"] and damages would have on good faith OWBPA challenges." 65 Fed. Reg. 77,438, 77,442 (Dec. 11, 2000). In the OWBPA, Congress authorized waivers of ADEA rights only if the specific conditions enumerated in the statute are met. Compliance with these conditions can be achieved only if persons who sign such waivers are not deterred from testing their compliance with the statute. Furthermore, the commentary accompanying the notice of proposed rulemaking notes, "[a]n employer does not need to bring a counterclaim to obtain what it purchased with the waiver. With a valid waiver, an employer receives an affirmative defense against ADEA claims." 64 Fed. Reg. 19,952, 19,955 (Apr. 23, 1999). As the district court recognized, Allstate's claim for damages is flatly inconsistent with this regulation. Isbell II, at 3-4. The Commission promulgated this substantive regulation through notice and comment rulemaking, pursuant to its substantive rulemaking authority under the ADEA. See 29 U.S.C. 628 (empowering the Commission to "issue such rules and regulations as it may consider necessary or appropriate for carrying out [the ADEA]"); 64 Fed. Reg. 19,952 (Apr. 23, 1999); 65 Fed. Reg. 77,438 (Dec. 11, 2000). Accordingly, under Chevron v. Natural Res. Def. Council, 467 U.S. 837 (1984), the Commission's tender-back regulation should be given "controlling weight unless [it is] arbitrary, capricious, or manifestly contrary top the statute." 467 U.S. at 844. See also U.S. Freightways Corp v. C.I.R., 270 F.3d 1137, 1141 (7th Cir. 2000) ("[W]e give full deference under [Chevron] only to regulations that were promulgated with full notice-and-comment or comparable formalities."). The district court, however, concluded that this case was not governed by the regulation because the regulation went into effect after Allstate drafted its waiver and release and the regulation should not be given retroactive effect. We believe, however, that application of the regulation to this case would not amount to a retroactive application because the conduct in question Schneider's filing of this lawsuit occurred after the effective date of the regulation. At the time Schneider was considering whether to file suit against Allstate, the Commission's regulation provided that he could not be penalized for taking that step. Accordingly, using the regulation to determine the legal consequences of his decision to file suit is not a retroactive application of the regulation because it does not "alter the legal consequences of completed acts." Eco Mfg. LLC v. Honeywell Int'l, Inc., 357 F.3d 649, 652 (7th Cir. 2003). Allstate's explicit representation to the Commission that an employee-agent's signing of the release, becoming an independent contractor, and selling his book of business "will not prevent him from challenging the validity of the release and pursuing his claim of discrimination" further shows that Allstate's settled expectations regarding the release are not disrupted by the Commission's regulation. Plaintiff-Cross- Appellee's Required Short Appendix at 1422. In any event, as the district court concluded, even if the Commission's regulation does not control in this case, the "logic behind" the regulation compels a finding that damages are unavailable to Allstate. The OWBPA was intended "to 'ensure[] that older workers are not coerced or manipulated into waiving their rights to seek legal relief under the ADEA.'" Long v. Sears Roebuck & Co., 105 F.3d 1529, 1534 (3d Cir. 1997) (alteration in original) (quoting S. Rep. No. 263, at 2 (2d Sess. 1990)). To achieve these goals, Congress specified that employees "may not waive" rights or claims unless the waiver is knowing and voluntary and complies with a number of very explicit requirements. 29 U.S.C. 626(f) (listing minimum requirements for an ADEA waiver to be considered knowing and voluntary). In Oubre, the Supreme Court held that, contrary to the common law rule, employees could not be required to tender back the consideration they received for signing a waiver and release before filing suit under the ADEA. 511 U.S. at 427. The Court concluded that application of the common law rule would "frustrate the statute's practical operation as well as its formal command." Id.; see also Long, 105 F.3d at 1542 (the choice between requiring tender back or enforcing the agreement "amounts to no choice at all: pursue your claim at the risk of your livelihood"). Limiting suits to cases where the plaintiff had tendered back consideration would, the Court reasoned, "tempt employers to risk noncompliance with the OWBPA's waiver provisions." Oubre, 511 U.S. at 427. The Court refused to adopt a rule that could "open the door to an evasion of the statute." Id. The same reasoning applies to Allstate's claim for damages in this case. Congress clearly intended that persons who have signed waivers would be able to ask a court to determine whether the waivers complied with the statutory requirements since Congress explicitly provided that "the party defending the validity of a waiver shall have the burden of proving in a court of competent jurisdiction" that a particular waiver is compliant. 29 U.S.C. 626(f)(3). However, such persons would be strongly deterred from seeking a judicial determination of the validity of a waiver, if they could do so only by risking a penalty totaling everything received from any source as a result of signing the agreement. Like a tender-back requirement, a rule permitting employers to pursue a claim for damages would open the door to evasion of the statute. See 65 Fed. Reg. 77,438, 77,442-44 (Dec. 11, 2000) (discussing the "chilling effect" the potential for attorney's fees other than those already permitted and damages would have on good faith OWBPA challenges, and the corresponding risk of "giv[ing] life to waiver agreements which were not compliant with the OWBPA"). A rule requiring a plaintiff to pay damages whenever he unsuccessfully challenges an ADEA waiver would create an unacceptable risk for many potential plaintiffs since it is often not apparent whether a waiver meets OWBPA's requirements. This point is graphically illustrated by litigation over the waiver at issue in this case. Although the district court here held that the waiver complied with OWBPA, in the parallel Pennsylvania case, the court concluded that this same waiver did not conform to OWBPA's requirements because it could be read to preclude employees from filing a charge with the Commission. Romero, 2004 WL 692231, at *2-*3. Accordingly, employees acting in good faith should not be required to sue at their peril. An exception for bad faith litigation, as discussed earlier and permitted by the Commission's regulation, adequately protects employers from vexatious litigation, and the district court here did not find Schneider acted in bad faith. In addition, the Commission's regulation also protects employers from unjustly enriching successful plaintiffs by requiring that where the plaintiff wins his underlying suit, the regulation permits restitution, recoupment or setoff, at the district court's discretion, against the amount he has won. 29 C.F.R. 1625.23(c). Allstate asserts that it did not get the benefit of its bargain because Schneider brought suit despite having signed the release. As noted above, however, Allstate bought a defense to a discrimination claim and received exactly that. To get that benefit, Allstate could have simply moved for summary judgment based on the validity of its release, rather than address the merits of the underlying claims. Thus, unlike the employer in Oubre who paid for a waiver that, once it was declared invalid, did not serve its intended purpose of providing an affirmative defense, here, Allstate received exactly what it paid for an affirmative defense to the underlying claim of discrimination. See Bunnett v. Smallwood, 793 P.2d 157, 161 (Colo. 1990) (rejecting argument that defendant received nothing in exchange for agreement since he "obtained a valid release which he has employed as a successful defense"). By seeking a return of all of the consideration that Schneider received for signing the release while also asserting that the agreement bars Schneider's underlying claims, Allstate is attempting to have its cake and eat it, too. As Schneider correctly pointed out below, if successful, Allstate would, in effect, be getting the waiver and release for nothing a clear violation of OWBPA. See 29 U.S.C. 626(f)(1)(D) (to be valid and enforceable a waiver must be "in exchange for consideration in addition to anything of value to which the individual already is entitled"). CONCLUSION For the foregoing reasons, the Commission respectfully requests that this Court affirm the district court's judgment insofar as it denies Allstate's counterclaim for damages from Schneider for bringing suit under the ADEA. Respectfully submitted, ERIC S. DREIBAND General Counsel LORRAINE C. DAVIS Acting Associate General Counsel VINCENT J. BLACKWOOD Assistant General Counsel PAUL D. RAMSHAW Attorney __________________________ JAMES M. TUCKER Attorney U. S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 1801 L Street, N.W., Room 7024 Washington, D.C. 20507 (202) 663-4870 James.Tucker@EEOC.gov CERTIFICATE OF COMPLIANCE I certify that this brief complies with the type-volume limitation set forth in Fed. R. App. P. 32(a)(7)(B) and Seventh Circuit Rule 32(b). This brief contains 4,392 words, from the Statement of Interest through the Conclusion, as determined by the Word Perfect 9.0 word- counting program, and was prepared using the WordPerfect 9.0 word-processing system in 12- point proportionally spaced type for text and 12-point type for footnotes. __________________________ JAMES M. TUCKER Attorney U. S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 1801 L Street, N.W., Room 7024 Washington, D.C. 20507 (202) 663-4870 James.Tucker@EEOC.gov CERTIFICATE OF SERVICE I hereby certify that two physical copies and one electronic copy (on floppy disc) of the foregoing brief were sent this 6th day of January, 2005, by FedEx Next Day Air delivery, postage prepaid, to the following counsel of record: Laura B. Allen, Esq. Mead & Allen LLC 259 North 100 East Kanab, UT 84741 Richard C. Godfrey, Esq. John E. Tangren, Esq. Benjamin D. Stanley, Esq. Kirkland & Ellis 200 E. Randolph Dr. Chicago, IL 60601 __________________________ JAMES M. TUCKER Attorney U. S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Office of General Counsel 1801 L Street, N.W., Room 7024 Washington, D.C. 20507 (202) 663-4870 James.Tucker@EEOC.gov