Syverson v. IBM , 461 F.3d 1147 ( 2006 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
WILLIAM SYVERSON, individually, 
and on behalf of others similarly
situated; RUTH ALICE BOYD,
individually, and on behalf of
others similarly situated; DALE
CAHILL, individually, and on behalf
of others similarly situated; JACK
FRIEDMAN, individually, and on
behalf of others similarly situated;
PAUL GROMKOWSKI, individually,
and on behalf of others similarly
situated; SYLVIA JONES,
individually, and on behalf of
others similarly situated; ROLF No. 04-16449
MARSH, individually, and on behalf
of others similarly situated;  D.C. No.
CV-03-04529-RMW
WALTER MASLAK, individually, and
on behalf of others similarly OPINION
situated; JAMES PAYNE,
individually, and on behalf of
others similarly situated; ANTONIO
RIVERA, individually, and on
behalf of others similarly situated,
Plaintiffs-counter-
defendants-Appellants,
v.
INTERNATIONAL BUSINESS MACHINES
CORPORATION,
Defendant-counter-
claimant-Appellee.

10533
10534 SYVERSON v. IBM
Appeal from the United States District Court
for the Northern District of California
Ronald M. Whyte, District Judge, Presiding
Argued and Submitted
April 4, 2006—San Francisco, California
Filed August 31, 2006
Before: Marsha S. Berzon, Johnnie B. Rawlinson, and
Consuelo M. Callahan, Circuit Judges.
Opinion by Judge Berzon
SYVERSON v. IBM 10537
COUNSEL
Jeffrey N. Young and Patrick N. McTeague, McTeague, Hig-
bee, Case, Cohen, Whitney & Toker, Topsham, Maine, for the
appellants.
Jeffrey D. Wohl and Katherine L. Kettler, Paul, Hastings,
Janofsky & Walker LLP, San Francisco, California, for the
appellee.
10538 SYVERSON v. IBM
OPINION
BERZON, Circuit Judge:
Under the Older Workers Benefit Protection Act
(“OWBPA”), employees may not waive rights or claims aris-
ing under the Age Discrimination in Employment Act
(“ADEA”) unless the waiver is “knowing and voluntary.” 29
U.S.C. § 626(f)(1) (2000). To qualify as “knowing and volun-
tary,” a waiver included in an agreement between an
employer and its employees must, among other things, be
“written in a manner calculated to be understood” by the aver-
age employee eligible to participate in the agreement. Id.§ 626(f)(1)(A). This appeal presents the question whether a
waiver form used by International Business Machines Corp.
(“IBM”) in connection with a severance benefit package
meets that standard. We hold that it does not and was there-
fore not “knowing and voluntary.” Id. § 626(f)(1).
I.
In January 2001, IBM began a reduction in its workforce.
As part of its workforce reduction plan, IBM offered each
employee selected for termination severance pay and certain
benefits in exchange for signing a document entitled “Microe-
lectronics Resource Action (MERA) General Release and
Covenant Not To Sue” (“MERA Agreement”).1 Along with
the MERA Agreement, IBM issued each selected employee a
lengthy document entitled “Microelectronics Division
Resource Action Employee Information Package”
(“Information Package”), which details the job titles, ages,
and numbers of those employees selected and those not
selected for termination from various IBM divisions.
1
The record also contains a later-distributed agreement entitled
“Microelectronics Division Resource (MDRA) General Release and Cove-
nant Not To Sue” (“MDRA Agreement”). The MDRA Agreement is, for
the purposes of our analysis, indistinguishable from the earlier-distributed
MERA Agreement.
SYVERSON v. IBM 10539
Appellants (“the employees”)2 are former IBM employees,
each of whom signed the MERA Agreement, or a similar
agreement, receiving in return severance pay and benefits.
Based on the data contained in the Information Package, these
employees filed charges of age discrimination with various
state authorities and with the Equal Employment Opportunity
Commission (“EEOC”). The EEOC dismissed all charges,
issuing each employee a “Notice of Right To Sue” along with
a letter stating that the language of the MERA Agreement sat-
isfies the OWBPA’s minimum requirements for “knowing
and voluntary” waiver of ADEA rights and claims and is
enforceable, thus depriving the employees of their right to
pursue their age discrimination claims. The employees then
filed this putative class action in federal court alleging that the
MERA Agreement violates the waiver requirements of the
OWBPA and that IBM’s layoff program constitutes age dis-
crimination in violation of the ADEA.3 The employees’
OWBPA cause of action challenged the MERA Agreement’s
use of both a release covering ADEA claims and a covenant
not to sue excepting them, the pairing of which allegedly
caused confusion over whether ADEA claims were excepted
from the release.
IBM filed a counterclaim seeking relief for the plaintiffs/
employees’ breach of the agreements and, predicated thereon,
a motion to dismiss pursuant to Federal Rule of Civil Proce-
dure 12(b)(6).
The district court entered an order granting IBM’s motion
to dismiss the complaint with prejudice. The parties then stip-
2
Appellants are the named plaintiffs who filed this putative class action:
William Syverson, Ruth Alice Boyd, Dale Cahill, Jack Friedman, Paul
Gromkowski, Sylvia Jones, Rolf Marsh, Walter Maslak, James Payne, and
Antonio Rivera.
3
The employees also alleged violation of the Employee Retirement
Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001-1461, but
they do not appeal the district court’s dismissal of that cause of action.
10540 SYVERSON v. IBM
ulated to entry of judgment holding the employees jointly and
severally liable on IBM’s counterclaim and awarding IBM
$27,500.
In dismissing the employees’ claims, the district court
determined that the MERA Agreement was “written in a man-
ner calculated to be understood by an average individual
selected by IBM for employment termination,” and was
“knowing and voluntary” under the OWBPA. In so holding,
the district court cited to Thomforde v. International Business
Machines Corp., 304 F. Supp. 2d 1143 (D. Minn. 2004)
(Thomforde I), a single plaintiff action against IBM, in which
the Minnesota district court found on summary judgment that
an IBM contract, the “Server Group Resource Action (SGRA)
General Release and Covenant Not To Sue” (“SGRA Agree-
ment”) — for present purposes, identical to the MERA Agree-
ment — satisfied the OWBPA requirement that waiver of any
ADEA right or claim be “written in a manner calculated to be
understood” by the average individual. See id. at 1144-45.
The employees here now appeal the waiver-based dismissal of
their case.
After this appeal was fully briefed but before oral argu-
ment, the Eighth Circuit reversed the Minnesota district
court’s grant of summary judgment in favor of IBM, holding
that the SGRA Agreement “is not written in a manner calcu-
lated to be understood by the intended participants as required
by the OWBPA.” Thomforde v. Int’l Bus. Machs. Corp., 406
F.3d 500, 504 (8th Cir. 2005) (Thomforde II).4 The employees
maintain (1) that under the doctrine of offensive nonmutual
issue preclusion, the Eighth Circuit’s ruling is preclusive of an
independent determination by this court of the waiver issue
and (2) alternatively, that the MERA Agreement does not sat-
isfy the OWBPA’s “manner calculated” requirement.
4
On June 16, 2005, the Eighth Circuit denied IBM’s request for rehear-
ing and rehearing en banc.
SYVERSON v. IBM 10541
II.
We review de novo a district court’s grant of a Rule
12(b)(6) motion to dismiss. Decker v. Advantage Fund, Ltd.,
362 F.3d 593, 595-96 (9th Cir. 2004); Spink v. Lockheed
Corp., 125 F.3d 1257, 1260 (9th Cir. 1997). Upon review, we
“must construe the complaint in the light most favorable to
the plaintiff and must accept all well-pleaded factual allega-
tions as true.” Shwarz v. United States, 234 F.3d 428, 435 (9th
Cir. 2000). “We also review de novo questions of statutory
interpretation.” Artichoke Joe’s Cal. Grand Casino v. Norton,
353 F.3d 712, 719 (9th Cir. 2003).
III.
A.
[1] Added as a collection of discrete amendments to the
Age Discrimination in Employment Act (“ADEA”) in 1990,
the Older Workers Benefit Protection Act (“OWBPA”), Pub.
L. No. 101-433 (codified at 29 U.S.C. §§ 621, 623, 626, &
630), imposes, in relevant part, mandatory requirements for
waivers of ADEA rights and claims, see 29 U.S.C. § 626(f),
to ensure that “older workers are not coerced or manipulated
into waiving their rights to seek legal relief under the ADEA,”
see S. REP. NO. 101-263, at 5 (1990), as reprinted in 1990
U.S.C.C.A.N. 1509, 1510; see also Oubre v. Entergy Opera-
tions, Inc., 522 U.S. 422, 427 (1998) (“[The OWBPA] is
designed to protect the rights and benefits of older workers.
The OWBPA implements Congress’ policy via a strict,
unqualified statutory stricture on waivers.”). Under the
OWBPA, “[a]n employee ‘may not waive’ an ADEA claim
unless the employer complies with the statute.” Oubre, 522
U.S. at 427. To this end, “[t]he OWBPA sets up its own
regime for assessing the effect of ADEA waivers, separate
and apart from contract law. . . . [and] creates a series of pre-
requisites for knowing and voluntary waivers.” Id.10542 SYVERSON v. IBM
[2] Section 626(f), part of the OWBPA, sets forth specific
requirements for a “knowing and voluntary” waiver.5 Of pri-
5
Section 626(f), in relevant part, provides:
(1) An individual may not waive any right or claim under this
chapter unless the waiver is knowing and voluntary. Except as
provided in paragraph (2), a waiver may not be considered know-
ing and voluntary unless at a minimum —
(A) the waiver is part of an agreement between the individ-
ual and the employer that is written in a manner calculated
to be understood by such individual, or by the average indi-
vidual eligible to participate;
(B) the waiver specifically refers to rights or claims arising
under this chapter;
(C) the individual does not waive rights or claims that may
arise after the date the waiver is executed;
(D) the individual waives rights or claims only in exchange
for consideration in addition to anything of value to which
the individual already is entitled;
(E) the individual is advised in writing to consult with an
attorney prior to executing the agreement;
(F)(i) the individual is given a period of at least 21 days
within which to consider the agreement; or
(ii) if a waiver is requested in connection with an exit incen-
tive or other employment termination program offered to a
group or class of employees, the individual is given a period
of at least 45 days within which to consider the agreement;
(G) the agreement provides that for a period of at least 7
days following the execution of such agreement, the individ-
ual may revoke the agreement, and the agreement shall not
become effective or enforceable until the revocation period
has expired;
(H) if a waiver is requested in connection with an exit incen-
tive or other employment termination program offered to a
group or class of employees, the employer (at the com-
mencement of the period specified in subparagraph (F))
informs the individual in writing in a manner calculated to
be understood by the average individual eligible to partici-
pate, as to —
SYVERSON v. IBM 10543
mary importance here is the requirement that a waiver be part
of an agreement “between the individual and the employer
that is written in a manner calculated to be understood by
[the] individual, or by the average individual eligible to par-
ticipate” in a workforce reduction plan. 29 U.S.C. § 626(f)
(1)(A).6 Also relevant to this case is the requirement that the
selected employee or employees “[be] advised in writing to
consult with an attorney prior to executing the agreement.” Id.§ 626(f)(1)(E). When a dispute arises over whether the
requirements of § 626(f) are met, the party asserting the valid-
ity of the waiver bears the burden of proof. Id. § 626(f)(3).
[3] To satisfy the “manner calculated” requirement,
“[w]aiver agreements must be drafted in plain language
geared to the level of understanding of the individual party to
the agreement or individuals eligible to participate” in a group
termination plan. 29 C.F.R. § 1625.22(b)(3) (2005). Employ-
ers are thus instructed to “take into account such factors as the
level of comprehension and education of typical participants.”
Id. These considerations “usually will require the limitation or
(i) any class, unit, or group of individuals covered by such
program, any eligibility factors for such program, and any
time limits applicable to such program; and
(ii) the job titles and ages of all individuals eligible or
selected for the program, and the ages of all individuals in
the same job classification or organizational unit who are
not eligible or selected for the program.
29 U.S.C. § 626(f)(1).
6
The somewhat awkward language of this subsection is intended to
reach both individually tailored termination plans, which allow arms-
length negotiations between the employer and the terminated employee,
and termination plans “targeted at groups of employees,” which normally
do not allow for any negotiation of terms. See S. REP. NO. 101-263, at 32,
as reprinted in 1990 U.S.C.C.A.N. 1509, 1537.
10544 SYVERSON v. IBM
elimination of technical jargon and of long, complex sen-
tences.” Id.7
As developed in greater detail below, the employees dis-
pute, as they did before the district court, whether the MERA
Agreement satisfies the “manner calculated” requirement of
§ 626(f)(1)(A).
B.
In Thomforde II, the Eighth Circuit considered the precise
question we are asked to determine here, holding that “the
release of claims signed by Thomforde as part of IBM’s
involuntary termination program did not satisfy the statutory
waiver requirements of the [OWBPA], 29 U.S.C. § 626(f).”
7
The statute sets up the minimum requirements that must be satisfied
before a waiver is found “knowing and voluntary.” However, “[o]ther
facts and circumstances may bear on the question of whether a waiver is
knowing and voluntary, as, for example, if there is a material mistake,
omission, or misstatement in the information furnished by the employer to
an employee in connection with the waiver.” 29 C.F.R. § 1625.22(a)(3).
Indeed, “[t]he waiver agreement must not have the effect of misleading,
misinforming, or failing to inform participants and affected individuals.
[And] [a]ny advantages or disadvantages described shall be presented
without either exaggerating the benefits or minimizing the limitations.” Id.§ 1625.22(b)(4); see also S. REP. NO. 101-263, at 31, as reprinted in 1990
U.S.C.C.A.N. 1509, 1537 (“[W]aivers not supervised by the EEOC may
be valid and enforceable if they meet certain threshold requirements and
are otherwise shown to be knowing and voluntary.” (emphasis added)).
Although this circuit has not addressed the question, other circuits apply
a “totality of the circumstances” test to determine whether a particular
waiver is “knowing and voluntary.” This further inquiry is necessary,
however, only if the minimum statutory requirements are met. See, e.g.,
Kruchowski v. Weyerhaeuser Co., 423 F.3d 1139, 1142 (10th Cir. 2005);
Wastak v. Lehigh Valley High Network, 342 F.3d 281, 294 n.8 (3d Cir.
2003); Griffin v. Kraft Gen. Foods, Inc., 62 F.3d 368, 373-74 (11th Cir.
1995) (per curiam). As we conclude that the MERA Agreement does not
satisfy the threshold statutory requirements, we have no occasion to deter-
mine whether the “totality of the circumstances” inquiry is the proper one
where those requirements are met.
SYVERSON v. IBM 10545
406 F.3d at 501. In addition to parsing the language of the
SGRA Agreement, the court noted in its recitation of facts
that:
Prior to signing the Agreement, Thomforde asked
his supervisor, Andrew Schram, if the exception for
ADEA claims contained in the covenant not to sue
meant that he could sue IBM if the case was limited
to claims under the ADEA. Schram told Thomforde
that he would contact IBM’s legal department.
Schram later sent Thomforde an e-mail stating “Re-
garding your question on the General Release and
Covenant Not to Sue, the wording is as intended by
IBM. The site attorney was not comfortable provid-
ing an interpretation for you and suggested you con-
sult with your own attorney.” After meeting with his
attorney to review the Agreement, Thomforde con-
cluded that he could sign the Agreement and still
pursue his claims of age discrimination as long as
they were limited to ADEA claims.
Id. at 502 (citation omitted). The Thomforde II panel con-
cluded that “[g]iven the lack of clarity in the Agreement, and
IBM’s declination to tell Thomforde what it meant by the lan-
guage, we hold that the Agreement is not written in a manner
calculated to be understood by the intended participants as
required by the OWBPA.” Id. at 504 (emphasis added).
C.
[4] Seeking to capitalize on Thomforde II, the employees
argue for the application of offensive nonmutual issue preclu-
sion,8 which prevents “a defendant from relitigating the issues
8
“Rather than using the terms ‘res judicata’ and ‘collateral estoppel,’ the
Supreme Court has [in recent years generally] used the terms ‘claim pre-
clusion’ and ‘issue preclusion,’ ” Frank v. United Airlines, Inc., 216 F.3d
845, 850 n.4 (9th Cir. 2000) (citing Migra v. Warren City Sch. Dist. Bd.
of Educ., 465 U.S. 75, 77 n.1 (1984)), a practice we follow in this opinion.
10546 SYVERSON v. IBM
which a defendant previously litigated and lost against
another plaintiff.” Parklane Hosiery Co. v. Shore, 439 U.S.
322, 329 (1979); see State of Idaho Potato Comm’n v. G &
T Terminal Packaging, Inc., 425 F.3d 708, 713 n.3 (9th Cir.
2005) (noting that offensive, as opposed to defensive, nonmu-
tual issue preclusion involves “a plaintiff seek[ing] to prevent
a defendant from relitigating an issue that the defendant previ-
ously litigated unsuccessfully against a different party”). In
Parklane Hosiery, the Supreme Court sanctioned the use of
offensive nonmutual issue preclusion and granted to trial
courts “broad discretion to determine when it should be
applied.” 439 U.S. at 331.
[5] We have since specified that the application of offen-
sive nonmutual issue preclusion is appropriate only if (1)
there was a full and fair opportunity to litigate the identical
issue in the prior action, see Fund for Animals, Inc. v. Lujan,
962 F.2d 1391, 1399 (9th Cir. 1992); Resolution Trust Corp.
v. Keating, 186 F.3d 1110, 1114 (9th Cir. 1999); Appling v.
State Farm Mut. Auto Ins. Co., 340 F.3d 769, 775 (9th Cir.
2003); (2) the issue was actually litigated in the prior action,
see Appling, 340 F.3d at 775; (3) the issue was decided in a
final judgment, see Resolution Trust Corp., 186 F.3d at 1114;
and (4) the party against whom issue preclusion is asserted
was a party or in privity with a party to the prior action, see
id. See also Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 442
F.3d 741, 746 (9th Cir. 2006) (setting out standard); Robi v.
Five Platters, Inc., 838 F.2d 318, 322 (9th Cir. 1988) (same);
RESTATEMENT (SECOND) OF JUDGMENTS § 27 & cmt. j (1982)
(same).
The term “nonmutual” refers to the use of the doctrine by a nonparty
to a prior action “to preclude a party to that [prior] action from relitigating
a previously determined issue in a subsequent lawsuit against the nonpar-
ty.” State of Idaho Potato Comm’n v. G & T Terminal Packaging, Inc.,
425 F.3d 708, 713 n.3 (9th Cir. 2005); see also Parklane Hosiery Co. v.
Shore, 439 U.S. 322, 326-28 (1979) (discussing the abandonment of the
“mutuality requirement”).
SYVERSON v. IBM 10547
The Supreme Court’s grant of “broad discretion” to trial
courts provides those courts the authority to take potential
shortcomings or indices of unfairness into account when con-
sidering whether to apply offensive nonmutual issue preclu-
sion, even where the above-listed standard prerequisites are
met. See Parklane Hosiery, 439 U.S. at 331; Appling, 340
F.3d at 776. The potential shortcomings or indices of unfair-
ness identified by the Court include whether (1) “the plaintiff
had the incentive to adopt a ‘wait and see’ attitude in the hope
that the first action by another plaintiff would result in a
favorable judgment” which might then be used against the
losing defendant; (2) the defendant had the incentive to
defend the first suit with full vigor, especially when future
suits are not foreseeable; (3) one or more judgments entered
before the one invoked as preclusive are inconsistent with the
latter or each other, suggesting that reliance on a single
adverse judgment would be unfair; and, (4) the defendant
might be afforded procedural opportunities in the later action
that were unavailable in the first “and that could readily cause
a different result.” Parklane Hosiery, 439 U.S. at 330-31; see
also 18A CHARLES ALAN WRIGHT, ARTHUR R. MILLER, &
EDWARD H. COOPER, FEDERAL PRACTICE AND PROCEDURE § 4465
(2002) [hereinafter FED. PRAC. & PROC.] (discussing limita-
tions on nonmutual issue preclusion). It is against this back-
drop of concerns that we consider the employees’ assertion
that Thomforde II controls our decision in this appeal.
IBM takes the position that Thomforde II should not have
preclusive effect because (1) the decision in Thomforde II is
not “final”; (2) there were prior inconsistent judgments; (3)
there is a salient difference between the Thomforde action, a
single plaintiff action, and the case before us, a putative class
action; and (4) the issue addressed in Thomforde II is not
identical to the one raised in this appeal.
We do not adopt IBM’s first three contentions. First, con-
trary to IBM’s assertion that the “district court [in Thomforde]
. . . may still consider whether, based on the actual evidence
10548 SYVERSON v. IBM
and not just the plaintiff’s allegations, the [w]aiver is valid
under the OWBPA,” the Eighth Circuit’s opinion leaves no
room for such reconsideration by the district court. See Thom-
forde II, 406 F.3d at 501 (stating that “the release of claims
signed by Thomforde as part of IBM’s involuntary program
did not satisfy the statutory waiver requirements of the
[OWBPA]”). The Eighth Circuit’s decision on the waiver
question is thus sufficiently “final” even though there are to
be further proceedings on remand on the merits of the ADEA
action. See Luben Indus., Inc. v. United States, 707 F.2d 1037,
1040 (9th Cir. 1983) (“To be ‘final’ for [issue preclusion] pur-
poses, a decision need not possess ‘finality’ in the sense of 28
U.S.C. § 1291.”). Instead, the proper query here is whether
the court’s decision on the issue as to which preclusion is
sought is final. It is. See Lummus Co. v. Commonwealth Oil
Refining Co., 297 F.2d 80, 89 (2d Cir. 1961) (Friendly, J.)
(explaining that “ ‘[f]inality’ in the context [of issue preclu-
sion] . . . may mean little more than that the litigation of a par-
ticular issue has reached such a stage that a court sees no
really good reason for permitting it to be litigated again”); see
also FED. PRAC. & PROC. § 4434 (“[I]ssue preclusion [has been
applied] to matters resolved by preliminary rulings or to
determinations of liability that have not yet been completed
by an award of damages or other relief. The most prominent
[of those] decisions have involved issues that were resolved
by appeal prior to final judgment in the first action.” (empha-
sis added)).
Second, the two judgments that IBM offers up as “prior
inconsistent judgments” — Thomforde I (in favor of IBM)
and the district court’s ruling in this action (in favor of IBM)
— are not pertinent judgments for the purposes of an issue
preclusion determination. Thomforde II reversed Thomforde I,
definitively rejecting its “application of a legal rule to the evi-
dence.” RESTATEMENT (SECOND) OF JUDGMENTS § 29 cmt. f
(noting the prior inconsistent judgment rule applies where
“the outcomes [of the judgments] may have been based on
equally reasonable resolutions of doubt as to the probative
SYVERSON v. IBM 10549
strength of the evidence or the appropriate application of a
legal rule to the evidence” (emphasis added)). Thomforde I is
not a judgment on which a party to the present action may
rely, and is not, therefore, inconsistent with Thomforde II for
the purposes of our issue preclusion determination.
We also do not consider the district court’s decision in this
case, which we are here reviewing, to be a prior judgment
inconsistent with Thomforde II. Intermediate determinations
that are part of ongoing litigation do not trigger the prior
inconsistent judgment fairness concerns identified by the
Supreme Court in Parklane Hoisery. See 439 U.S. at 330-31.
There, the Supreme Court relied on Professor Currie’s exam-
ple in which “a railroad collision injures 50 passengers all of
whom bring separate actions against the railroad. After the
railroad wins the first 25 suits, a plaintiff wins in suit 26,” and
Currie’s argument “that offensive use of collateral estoppel
should not be applied [in such a circumstance] so as to allow
plaintiffs 27 through 50 automatically to recover.” Id. at 330
n.14. As this example demonstrates, allowing plaintiffs to
cherry-pick favorable prior decisions to preclude issues in an
ongoing or subsequent litigation raises serious fairness con-
cerns. By contrast, Thomforde II is the only prior judgment
that is final on the waiver matter at issue here because appel-
lants have challenged the district court’s decision in this case.
Finally, we acknowledge that there may be merit to IBM’s
contention that, based on the “different stakes and tactical
considerations” at play in a single-plaintiff action as com-
pared to a putative class action, a defendant should not be pre-
cluded from relitigating an issue in a later class action if it did
not have a full and fair opportunity to litigate the issue in an
earlier single-plaintiff action. The lone case cited by IBM,
Schwab v. Philip Morris USA, Inc., No. CV 04-1945 JBW,
2005 WL 2401645 (E.D.N.Y., Sept. 27, 2005), however, does
not support its per se position that a final determination of an
issue in a single-plaintiff action cannot preclude relitigation of
that issue in a later-brought class action. In Schwab, class
10550 SYVERSON v. IBM
action plaintiffs sought to preclude Philip Morris, the defen-
dant, from relitigating the issue of whether it had conspired
with other tobacco companies to defraud the public. 2005 WL
2401645, at *1. The decision in Schwab primarily turned on
the fact that the prior case was based on distinct substantive
legal grounds — state consumer fraud law rather than a
RICO-based theory — not on the fact that the prior case was
brought by a single plaintiff. See id. at *1-2. We further note
that here the two litigations were occurring nearly simulta-
neously, so invocation of issue preclusion in this case was
foreseeable and IBM had every incentive to litigate Thom-
forde “fully and vigorously.” See Parklane Hosiery, 439 U.S.
at 330, 332.
In the end, we do not need to decide whether the single-
plaintiff nature of Thomforde is alone sufficient to preclude
nonmutual issue preclusion. A comparison of these actions
convinces us that, while the question is close, the issue
decided in Thomforde is not identical to that raised here.
Thomforde II, therefore, cannot preclude us from reaching the
merits of this appeal.
Several factors bear on the question of whether the issue
decided in Thomforde II is sufficiently similar to the one
raised here, including whether there is a “substantial overlap
between the evidence or argument . . . advanced” in both pro-
ceedings, whether “new evidence or argument involve[s] the
application of the same rule of law” as applied in the earlier
decided action, and the degree to which the claims advanced
in both actions are “closely related.” Resolution Trust, 186
F.3d at 1116.
IBM maintains that Thomforde II should not have preclu-
sive effect here because the Eighth Circuit’s holding in that
case rested on two bases — “the lack of clarity in the Agree-
ment” and “IBM’s declination to tell Thomforde what it
meant by the language.” See Thomforde II, 406 F.3d at 504.
SYVERSON v. IBM 10551
The second consideration is particular to the individual plain-
tiff in Thomforde and absent here.
It is far from clear exactly what significance the Thomforde
II panel gave to IBM’s refusal to clarify the SGRA Agree-
ment. The bulk of the opinion is devoted to explaining why
the language of the agreement lacks clarity. Id. at 503-04. The
significance of IBM’s refusal to explain the terms of the
agreement to Thomforde is not analyzed. Nevertheless, the
Eighth Circuit did point to that refusal in its final summary of
the grounds for its decision. That being so, we cannot con-
clude that this distinct set of facts, applicable to the individual
plaintiff in Thomforde but not to the named plaintiffs or the
putative class in this case, had no role in the Eighth Circuit’s
ultimate conclusion that the waiver was invalid.
We note that Thomforde II stated, in no uncertain terms,
that clarification outside the scope of the SGRA Agreement
would not satisfy the strict requirements of the OWBPA. See
406 F.3d at 504 n.1. It is, therefore, rather unlikely that IBM’s
declination to clarify the agreement played a material role in
Eighth Circuit’s determination. With no way to verify this
hunch, however, we decline to so assume.
[6] Because the Eighth Circuit’s reasoning did not end with
analysis of the language of the SGRA Agreement, but instead,
expressly took into account facts specific to the individual
plaintiff in that case, we conclude that the issues are not suffi-
ciently identical between that case and this one for offensive
nonmutual issue preclusion to apply. We therefore turn to the
merits of this appeal.
D.
At the outset of the MERA Agreement, the employee is
“advised to consult an attorney” prior to signing. The MERA
Agreement goes on to provide, in relevant part:
10552 SYVERSON v. IBM
If you feel that you are being coerced to sign this
General Release and Covenant Not to Sue (hereinaf-
ter “Release”), [or] that your signing would for any
reason not be voluntary . . . you are encouraged to
discuss this with your manager, the MERA Project
Office or Human Resources before signing this
Release.
In exchange for the sums and benefits received
pursuant to the terms of the MICROELECTRONICS
RESOURCE ACTION (MERA), [EMPLOYEE
NAME], (hereinafter “you”) agrees to release and
hereby does release [IBM] . . . from all claims,
demands, actions or liabilities you may have against
IBM of whatever kind including, but not limited to,
those that are related to your employment with IBM,
the termination of that employment, or other sever-
ance payments or your eligibility for participation in
the Retirement Bridge Leave of Absence, or claims
for attorneys’ fees.
....
You also agree that this Release covers, but is not
limited to, claims arising from the [ADEA], as
amended, . . . and any other federal, state or local
law dealing with discrimination in employment,
including, but not limited to, discrimination based on
sex, sexual orientation, race, national origin, reli-
gion, disability, veteran status or age . . . . This
Release covers both claims that you know about and
those that you may not know about which have
accrued by the time you execute this Release.
....
You agree that you will never institute a claim of
any kind against IBM . . . including, but not limited
SYVERSON v. IBM 10553
to, claims related to your employment with IBM or
the termination of that employment or other sever-
ance payments or your eligibility for participation in
the Retirement Bridge Leave of Absence. If you vio-
late this covenant not to sue by suing IBM . . . , you
agree that you will pay all costs and expenses of
defending against the suit incurred by IBM . . . ,
including reasonable attorneys’ fees, and all further
costs and fees, including attorneys’ fees, incurred in
connection with collection. This covenant not to sue
does not apply to actions based solely under the
[ADEA], as amended. That means that if you were
to sue IBM . . . only under the [ADEA], as amended,
you would not be liable under the terms of this
Release for their attorneys’ fees and other costs and
expenses of defending against the suit. This Release
does not preclude filing a charge with the U.S. Equal
Employment Opportunity Commission.
....
You hereby acknowledge that you understand and
agree to this General Release and Covenant Not to
Sue.
End Note 1 of the agreement explains that “[t]he [ADEA]
prohibits employment discrimination based on age and is
enforced by the [EEOC].”
E.
[7] 1. In arguing that the MERA Agreement is unclear and
confusing, the employees maintain that the last sentence of
the covenant not to sue,9 when read in conjunction with End
Note 1,10 conveys “the impression that, notwithstanding the
9
“This Release does not preclude filing a charge with the [EEOC].”
10
“The [ADEA] prohibits employment discrimination based on age and
is enforced by the [EEOC].”
10554 SYVERSON v. IBM
waiver, IBM employees could still obtain individual relief for
their ADEA claims [filed with the EEOC].” Section 1625.22
of the Code of Federal Regulations provides that “[a] waiver
agreement must not have the effect of misleading, misinform-
ing, or failing to inform participants and affected individuals.”
29 C.F.R. § 1625.22(b)(4). The employees argue that given
the last sentence of the covenant not to sue, it was “incumbent
upon IBM to provide sufficient information so as not to mis-
lead them” about their ability to obtain victim-specific relief
by filing claims with the EEOC, the availability of such relief
being, apparently, an open legal question. See generally
EEOC v. Waffle House, Inc., 534 U.S. 279, 294-98 (2002).11
The language that the employees challenge, however, does
not exaggerate or misrepresent the availability of relief via the
EEOC. It merely notes that such relief is unaffected by the
MERA Agreement. That representation is accurate. See 29
U.S.C. § 626(f)(4) (“No waiver agreement may affect the
[EEOC’s] rights and responsibilities to enforce this chapter.
No waiver may be used to justify interfering with the pro-
tected right of an employee to file a charge or participate in
an investigation or proceeding conducted by the [EEOC].”);
see also S. REP. NO. 101-263, at 35, as reprinted in 1990
U.S.C.C.A.N. 1509, 1541 (“The legislation provides that a
waiver may not interfere with the EEOC’s rights and respon-
sibilities to enforce the ADEA, nor may such a waiver be used
to interfere with the employee’s protected right to file a
charge or to participate in an EEOC investigation or proceed-
ing.”). We conclude that the last sentence of the covenant not
to sue does not render the MERA Agreement invalid.
2. The employees’ core complaint is that the MERA
Agreement misleads participating employees to believe that,
above and beyond their unaffected right to file an ADEA
11
We are not presented with, and do not decide the question whether the
EEOC may pursue victim-specific relief where an employee has signed a
waiver or release of ADEA claims.
SYVERSON v. IBM 10555
claim with the EEOC, they retain the right to pursue indepen-
dently an ADEA claim in court. They contend that the phras-
ing of the release and covenant not to sue engenders
confusion over whether ADEA claims are in fact covered by
the release or are excepted from it. We agree, and hold that
the MERA Agreement does not satisfy the “manner calculat-
ed” requirement of the OWBPA. The employees’ waiver of
ADEA claims, along with the accompanying covenant not to
sue, was therefore not “knowing or voluntary,” and both are
unenforceable.
[8] The MERA Agreement contains, on the one hand, a
release of “all claims,” including “claims arising from the
[ADEA]” and, on the other hand, a “covenant not to sue”
which includes an “agree[ment] . . . [to] never institute a
claim of any kind against IBM . . . related to . . . employment
with IBM.” It also provides, however, that “[t]his covenant
not to sue does not apply to actions based solely under the
[ADEA].” (emphases added). Considering this very same lan-
guage, the Eighth Circuit observed:
[O]ne plausible reading of the document reveals that
the employee releases IBM from all ADEA claims
and agrees not to institute a claim of any kind against
IBM, except the employee may bring an action
based solely under the ADEA. Without a clear
understanding of the legal differences between a
release and a covenant not to sue, these provisions
would seem to be contradictory; how can an
employee bring a suit solely under the ADEA if the
employee has waived all claims under the ADEA?
Thomforde II, 406 F.3d at 503.
We agree. The existence of a technical distinction between
legal terms does nothing to demonstrate that the average
employee confronted with the MERA Agreement would grasp
the import of the distinction in a meaningful way. See id. at
10556 SYVERSON v. IBM
504 (“Despite their distinct purposes, the differences between
a release and a covenant not to sue are fairly amorphous and
may not be readily apparent to the lay reader.”); see also
Watts v. Bellsouth Telecomms., Inc., 316 F.3d 1203, 1207-08
(11th Cir. 2003) (observing, in ERISA context, that what may
seem obvious to “attorneys and judges familiar with the law”
may not to “the average plan participant”). Instead, to a lay
reader — and, as we discuss below, to many lawyers as well
— these provisions seem first to release all ADEA claims an
employee might have, and then to preserve a right to sue
under the ADEA, implying retention, not release, of ADEA
claims.
IBM protests that it “cannot fairly be faulted for including
[in the agreement] a covenant not to sue that is permissible
under the law and necessary for IBM to obtain an affirmative
remedy [(i.e., the collection of fees and costs)] in the event of
a suit based on a waived claim.” According to IBM, the
release and the covenant not to sue serve distinct legal pur-
poses. So they can, but, as a practical matter, the two purposes
often merge.
[9] Black’s Law Dictionary defines “covenant not to sue”
as “[a] covenant in which a party having a right of action
agrees not to assert that right in litigation,” BLACK’S LAW DIC-
TIONARY 299 (abridged 7th ed. 2000) (emphasis added), and a
“release” as “the act of giving up a right or claim to the per-
son against whom it could have been enforced,” id. at 1034;
see also id. at 1276 (defining “waiver” as “[t]he voluntary
relinquishment or abandonment . . . of a legal right”). This
distinction is reflected in case law. See Medtronic AVE, Inc.
v. Advanced Cardiovascular Sys., Inc., 247 F.3d 44, 55 n.4
(3d Cir. 2001) (“A release is a provision that intends a present
abandonment of a known right or claim. By contrast, a cove-
nant not to sue also applies to future claims and constitutes an
agreement to exercise forbearance from asserting any claim
which either exists or which may accrue . . . .” (quotation
marks omitted)); Pacific States Lumber Co. v. Bargar, 10
SYVERSON v. IBM 10557
F.2d 335, 337 (9th Cir. 1926) (“Releases of, and covenants
not to sue, a wrongdoer have from early times been consid-
ered distinct. A covenant not to sue one of several joint oblig-
ers or joint tortfeasors did not at common law operate to
discharge others from liability, since it was said not to have
the effect, technically, of extinguishing any part of the cause
of action.” (quotation marks omitted)); see also Colton v. N.Y.
Hosp., 414 N.Y.S.2d 866, 871-73 (1979) (canvassing the
“generally abstrusely worded distinction” between releases
and covenants not to sue).
[10] The technical distinction between these terms is some-
times more apparent than real. As the court in Colton
observed:
[P]erhaps the most important difference between a
covenant not to sue and a release [—] the effective-
ness of the agreement as a bar to subsequent action
by a breaching promisor [—] has long been recog-
nized as being invariably a distinction without a dif-
ference. Since equity would not permit specific
performance of a covenant not to sue, an action
would lie for its breach. The measure of the
aggrieved promisee’s damages, however, would
except for attorneys fees, be equal to his original lia-
bility on the underlying claim. Thus, in order to pre-
vent a circuity of actions, where a covenant not to
sue was given in perpetuity and did not involve joint
torfeasors, it would be deemed to operate as a
release, a complete and permanent bar to the under-
lying action.
414 N.Y.S.2d at 873 (emphasis added) (citation omitted).
[11] Further, the distinction between releases and covenants
not to sue becomes particularly murky when both are included
in a single document. As the EEOC recognized:
10558 SYVERSON v. IBM
Although ADEA covenants not to sue (absent dam-
ages) operate as the functional equivalent of waivers,
they carry a higher risk of violating the OWBPA by
virtue of their wording. An employee could read
“covenant not to sue” or “promise not to sue” as giv-
ing up not only the right to challenge a past employ-
ment consequence as an ADEA violation, but also
the right to challenge in court the knowing and vol-
untary nature of his or her waiver agreement. The
chance of misunderstanding is heightened if the cov-
enant not to sue is added to an agreement that
already includes an ADEA waiver clause. The cove-
nant in such a case would have no legal effect sepa-
rate from the waiver clause. Nonetheless, its
language would appear to bar an individual’s access
to court.
Waivers of Rights and Claims: Tender Back of Consideration,
65 Fed. Reg. 77438, 77443 (Dec. 11, 2000) (emphases added)
(to be codified at 29 C.F.R. pt. 1625).
[12] Given this substantive overlap between releases and
covenants not to sue, that fact that the MERA Agreement’s
covenant not to sue contains an exception for ADEA claims
necessarily creates potential confusion, as it appears to lift any
barrier from proceeding to court with an ADEA claim. The
confusion ensues, in part, from including in a single document
two concepts that, technically speaking, cannot coexist. Under
the classic definitions contained in Black’s Law Dictionary
and in the case law quoted above, a covenant not to sue is per-
tinent only if the underlying right is not extinguished, while
a release extinguishes any underlying right. Where both none-
theless appear in the same document, the covenant not to sue
largely swallows the release — and the negation of the cove-
nant not to sue can therefore be read as negating the release
as well.
IBM stresses that without the covenant not to sue it would
have been deprived of the “full benefit of its bargain” with
SYVERSON v. IBM 10559
those employees who signed on to the MERA Agreement,
because without the covenant, although “IBM could raise the
Release as an affirmative defense and obtain a dismissal of
the suit, it still would be out its costs and attorneys’ fees.”
IBM also maintains that the covenant not to sue was drafted
to comply with the EEOC regulation that provides: “[n]o
ADEA waiver agreement, covenant not to sue, or other equiv-
alent arrangement may impose any . . . penalty, or any other
limitation adversely affecting any individual’s right to chal-
lenge the agreement . . . . [including] provisions allowing
employers to recover attorneys’ fees and/or damages because
of the filing of an ADEA suit.” 29 C.F.R. § 1625.23(b).
[13] It very well may have been IBM’s intention to draft an
agreement that would preserve the right of an employee to
challenge without penalty his waiver of ADEA claims as not
knowing or voluntary. See Thomforde II, 406 F.3d at 504(observing that “[t]he intended effect of the Agreement was
to release the employee’s substantive claims under the
ADEA, while preserving the employee’s right to challenge
the validity of the release through a lawsuit, as provided by
the regulations” (citing 29 C.F.R. § 1625.23(b))). If that was
IBM’s intention, it would have been quite easy to have
accomplished this purpose directly. The MERA Agreement,
by contrast, uses a term unfamiliar to lay people, “covenant
not to sue,” and does not explain how the release and the cov-
enant not to sue dovetail, either in general or as they relate to
the ADEA claims. See id. (noting that “the Agreement does
not explain how the provisions relate to each other or the lim-
ited nature of the exception to the covenant not to sue in light
of the release of claims”); see also 29 C.F.R. § 1625.22(b)(3)
(“Consideration [of the need to draft waiver agreements in
plain language] . . . usually will require the limitation or elim-
ination of technical jargon and of long, complex sentences.”).
Indeed, far from explaining the intended, independent func-
tions of the release and of the covenant not to sue, the MERA
Agreement muddles the matter by referring to both provisions
10560 SYVERSON v. IBM
with the same shorthand name — “Release” — indicating
interchangeability, not distinction. See Thomforde II, 406 F.3d
at 504 (noting same). Adding to the confusion, the paragraph
containing the covenant not to sue in fact refers to the cove-
nant and the broader “Release” as if the terms were com-
pletely interchangeable. See id. (noting same).
[14] In reaching its conclusion that the MERA Agreement
satisfies the “manner calculated” requirement for ADEA
waivers, the district court, looking to the technical, legal dis-
tinction between a release and a covenant not to sue, noted
that “[t]o the extent the language of the [MERA Agreement]
requires clarification, the [agreement] explicitly advises
affected employees to consult an attorney, their manager, the
MERA Project Office or Human Resources prior to signing.”
IBM now advances a similar argument. We do not agree that
the direction to consult an attorney or an IBM employee miti-
gates confusing waiver language.
As explained in Thomforde II,
[i]t seems axiomatic that if an agreement needs clari-
fication, it is not written in a manner calculated to be
understood. To rely on the agreement’s direction to
seek legal advice, a separate statutory requirement
for a valid waiver, see [29 U.S.C.] § 626(f)(1)(E), for
clarification of the waiver would nullify the distinct
requirement that the agreement be written in a man-
ner calculated to be understood by the participant (as
opposed to his attorney).
406 F.3d at 504 n.1. As this passage indicates, were we to
embrace IBM’s suggestion that any lack of clarity might be
cured by compliance with § 626(f)(1)(E), we would rob all
purpose from the distinct “manner calculated” requirement set
forth in subsection (A).
SYVERSON v. IBM 10561
We decline, as we must, the invitation to so construe the
OWBPA. “[A] statute ought, upon the whole, to be so con-
strued that, if it can be prevented, no clause, sentence, or word
shall be superfluous, void, or insignificant.” Market Co. v.
Hoffman, 101 U.S. 112, 115-16 (1879) (internal quotation
marks omitted), cited with approval in Duncan v. Walker, 533
U.S. 167, 174 (2001); see United States v. 144,774 Pounds of
Blue King Crab, 410 F.3d 1131, 1134 (9th Cir. 2005), cert.
denied sub nom. Deep Sea Fisheries, Inc. v. United States,
126 S. Ct. 828 (Dec. 12, 2005). As the Sixth Circuit has
explained, “Congress’s intent in enacting § 626 was to compel
employers to provide data so that an employee considering
waiving ADEA rights could assess, with the assistance of
counsel, the viability of a potential ADEA claim.”12 Raczak v.
Ameritech Corp., 103 F.3d 1257, 1259 (6th Cir. 1997) (con-
struing 29 U.S.C. § 626(f)(1)(H)); see Am. Airlines v.
Cardoza-Rodriguez, 133 F.3d 111, 118 (1st Cir. 1998) (fol-
lowing Raczak); see also S. REP. NO. 101-263, at 34, as
reprinted in 1990 U.S.C.C.A.N. 1509, 1540 (noting that
“[d]ue to the complexity of [group termination and exit incen-
tive] programs, the Committee views the assistance of counsel
as a practical necessity in analyzing the programs and deter-
mining whether a violation of the Act has occurred”). The
12
Section 626(f)(1)(H) provides:
[I]f a waiver is requested in connection with an exit incentive or
other employment termination program offered to a group or
class of employees, the employer . . . informs the individual in
writing in a manner calculated to be understood by the average
individual eligible to participate, as to —
(i) any class, unit, or group of individuals covered by such
program, any eligibility factors for such program, and any time
limits applicable to such program; and
(ii) the job titles and ages of all individuals eligible or
selected for the program, and the ages of all individuals in the
same job classification or organizational unit who are not eligible
or selected for the program.
29 U.S.C. § 626(f)(1)(H).
10562 SYVERSON v. IBM
independent statutory requirement that waivers of ADEA
rights and claims be written in a “manner calculated” to be
understood by the average affected employee serves a differ-
ent purpose entirely: that employees do not acquiesce to such
waivers unwittingly. See S. REP. NO. 101-263, at 5, as
reprinted in 1990 U.S.C.C.A.N. 1509, 1510.
[15] We hold that the MERA Agreement does not satisfy
the “manner calculated” requirement of the OWBPA, was not
“knowing and voluntary,” and cannot be enforced. The dis-
trict court’s dismissal is reversed, the award of $27,500 to
IBM on its counterclaim is vacated, and the case is remanded
for further proceedings consistent with this opinion.
REVERSED, VACATED, and REMANDED.