Carroll v. Primerica Financial Services Insurance Marketing
1992 U.S. Dist. LEXIS 20717, 61 Empl. Prac. Dec. (CCH) 42,204, 811 F.Supp. 1558 (1992)
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Rule of Law:
A covenant not to sue within a release agreement is presumed to be for defensive purposes only and does not create a cause of action for breach of contract if the employee later files a good faith lawsuit, unless the agreement expressly provides for damages upon breach or the lawsuit is brought in bad faith.
Facts:
- PFS Primerica Corporation's employee handbook contained a severance pay policy but also a disclaimer reserving the company's right to modify policies at any time without notice.
- On August 27 and 28, 1990, PFS Primerica Corporation terminated the employment of John P. Carroll, Tom Adair, Rhea Crowe, Joan Holt, and George Tlapa.
- At the time of their terminations, company representatives presented each employee with a release-of-liability agreement.
- Company representatives told the employees that they would not receive any termination benefits unless they signed the releases.
- Within a few days of their termination, all five employees signed the releases.
- In exchange for signing, the employees received their full formula-based severance pay plus additional consideration, such as lump-sum cash payments or company-paid health insurance premiums, to which they were not previously entitled.
Procedural Posture:
- Plaintiffs (Carroll, et al.) filed a complaint against Defendant (PFS Primerica Corp.) in U.S. District Court, alleging violations of the Age Discrimination in Employment Act (ADEA).
- Defendant filed a counterclaim against Plaintiffs for breach of contract, based on their violation of the release agreements they had signed.
- Plaintiffs filed a Motion to Dismiss Defendant's Counterclaim.
- Defendant filed a Cross-Motion for Summary Judgment on Plaintiffs' ADEA claims and its own counterclaim.
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Issue:
Does an employee's good faith filing of an Age Discrimination in Employment Act (ADEA) lawsuit, in violation of a signed release agreement that includes a covenant not to sue, give the employer a cause of action for breach of contract?
Opinions:
Majority - Hall, J.
No. A covenant not to sue contained within a release of liability serves as a defensive shield for an employer against a lawsuit, not as an offensive sword to bring a separate action for damages. The court adopted the reasoning from Isaacs v. Caterpillar, Inc., holding that unless a release expressly provides for damages in the event of a breach, it is presumed to be intended for defensive use only. An employer cannot successfully counterclaim for breach of contract when an employee files a suit in the good faith belief that the release was invalid, as was the case here. Because the plaintiffs brought their ADEA claims based on a good faith belief that the releases were signed unknowingly and involuntarily, the employer's counterclaim for breach of contract fails.
Analysis:
This decision establishes the 'shield, not a sword' doctrine for release agreements in the Eleventh Circuit's purview, limiting an employer's remedies when a former employee challenges a release's validity. By preventing employers from using the threat of a breach of contract counterclaim, the ruling protects employees' access to the courts to pursue good faith discrimination claims. This precedent solidifies the release agreement's role as an affirmative defense for the employer rather than a tool to penalize employees for seeking legal recourse.
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