Your Releases Should Also Release Attorneys’ Fee Claims

Releases are everydayoccurrences in many personnel offices. Employees or ex-employees agree inwriting to surrender and waive their claims against the employer in exchangefor some valuable consideration. These agreements are essential to the smoothfunctioning of any personnel office.

Nevertheless, they fail toblock employee claims if they are not properly drafted. No personnel departmentwants to discover that money was paid to settle an employee claim and, yet, therelease language used was defective.Superiors will certainly want to know why ironclad release language wasnot used.

Title VII and otheremployment statutes allow a “prevailing party to recover a reasonableattorney s fee. Employees and their lawyers rely heavily on this statutoryprovision in the hope of forcing the employer to pay not only its counsel sattorneys fees but the employee s counsel s fees as well. Generally, anyrecovery in the case other than nominal damages entitles an employee to asserthe/she has “prevailed. This rule certainly applies to settlements wheresomething of value is given to the employee.

For this reason, it isessential that any release also release attorneys fee claims. If those claimsare not addressed in the release, the employer runs a major risk. It has likelyidentified the employee as a prevailing party simply by entering into thesettlement agreement conferring benefits. The employee can collect thesettlement proceeds and, once the employer s check clears, sue the employer forattorneys fees as a prevailing party.

This trap was sprung onMetropolitan Life in a recent case, Torresv. Metropolitan Life, 80 FEP Cases 104 (3d Cir., June 24, 1999). Met Lifewas defending an employment discrimination case brought by Edward Torres, whoclaimed he had been unlawfully denied participation in Met Life spre-employment training program.

Torres lost when thedistrict court held he could not sue Met Life under Title VII because he wasnever its “employee. Acting as his own attorney, Torres filed an appeal. TheThird Circuit appointed attorneys for the appeal. Those attorneys agreed withMet Life s attorneys to settle the case for $45,000. A written settlementagreement was prepared and signed. The original case was dismissed withprejudice as mandated by the settlement agreement.

Torres cashed Met Life scheck. He then promptly filed a motion seeking an order requiring Met Life topay attorneys fees and expenses totaling $30,427.14 to the law firm that hadhandled his appeal and negotiated the final $45,000 settlement. Met Lifeprotested that the settlement agreement specifically released “all claims,charges or demands including anyclaims Torres may have under Title VII.They even produced affidavits from the two assigned counsel who handledTorres appeal (they had since left the firm) stating they believed theirsettlement agreement settled all of their client s claims including any potentialattorneys fee claim.

Met Life lost. The ThirdCircuit held that Torres was entitled to have Met Life pay his attorneys fees in addition to the $45,000 finalsettlement. The appeals court majority noted the settlement agreement failed tomention attorneys fees at all. That was a fatal mistake. Citing an earlierThird Circuit case, El Club Del BarrioInc. v. United Community Corps., 735 F.2d 98 (3d Cir. 1984), the panelmajority held that “a settlement agreement that is silent as to attorneys feeswill not be deemed to constitute a waiver regardless of the course ofnegotiations.

The majority thus rejectedthe affidavits from Torres assigned counsel. Such extrinsic evidence was“irrelevant because only the language of the settlement agreement mattered.The majority disagreed with the dissenting judge that the agreement s referenceto all Title VII claims necessarilyincluded attorneys fee claims under that law.

The bright-line rule underthis decision is clear. The court held:
If the parties to a settlement agreement wish to extinguish the prevailingparty s claim for attorney s fees, they must do so specifically and expresslyin the terms of the agreement.

Employers should leavenothing to chance. Examine your release agreements. They must “specifically and expressly release all attorneys fees claims under any laws by additional language orby an additional stipulation.

The language of thesettlement agreement controls on thispoint. The parties negotiations and beliefs as to what is being released donot. They are, as the Third Circuit held, legally irrelevant. You must havespecific language within the four corners of your settlement agreement clearlywaiving and releasing all attorneys fee claims. If you don t, that “finalsettlement you thought you had will suddenly become much more expensive. No personnel director wants that.

Copyright © 1999 Nixon Peabody LLP. All rightsreserved.

The information contained inthis article is intended to provide useful information on the topic covered,but should not be construed as legal advice or a legal opinion.