Is a ''Release of All Claims'' (Including Later Injuries) Clause In a Retirement Agreement Legal ?
Is a ''release of all claims'' clause in retirement agreement enforceable ?
In Babbitt v. Norfolk & Western Ry. Co., 104 F.3d 89 (6th Cir. 1997), the court determined whether the release language in an early retirement agreement prevented a Federal Employers' Liability Act (FELA) action based upon the plaintiff's subsequent claim of hearing loss. Babbitt, 104 F.3d at 90.
The agreement sought to release the railroad defendant from "all claims, known and unknown, for which the company may ever be held liable." Babbitt, 104 F.3d at 91.
The court determined that such a release was contrary to section 55 and reversed the district court's finding of summary judgment in the defendant's favor. Babbitt, 104 F.3d at 93.
In its analysis, the court considered three United States Supreme Court cases that involved releases and subsequent FELA claims: Callen v. Pennsylvania R.R. Co., 332 U.S. 625, 92 L. Ed. 242, 68 S. Ct. 296 (1948); Philadelphia, B. & W. R. Co. v. Schubert, 224 U.S. 603, 56 L. Ed. 911, 32 S. Ct. 589 (1912); and Duncan v. Thompson, 315 U.S. 1, 86 L. Ed. 575, 62 S. Ct. 422 (1942).
In Callen, the plaintiff sued for injuries he sustained in a railroad accident after he signed a general release agreement that waived any claim for injuries he sustained in the accident in exchange for a cash payment. Callen, 332 U.S. at 626-27, 92 L. Ed. at 246, 68 S. Ct. at 298.
The Court upheld the validity of the release because it was "not a device to exempt from liability but was a means of compromising a claimed liability." Callen, 332 U.S. at 631, 92 L. Ed. at 246, 68 S. Ct. at 298.
The Court recognized that section 55 is not violated by a release that settles a "controversy" with regard to the employer's liability and the extent of that liability for a particular accident or exposure. Callen, 332 U.S. at 631, 92 L. Ed. at 246, 68 S. Ct. at 298-99.
In Schubert, the plaintiff contributed a portion of his salary to a "relief fund" until he was injured on the job. Schubert, 224 U.S. at 606, 56 L. Ed. at 914, 32 S. Ct. at 589.
He received benefits from the fund, but then filed a FELA claim for damages. Schubert, 224 U.S. at 608, 56 L. Ed. at 914, 32 S. Ct. at 590.
The railroad argued that the plaintiff's claims were barred because he agreed, as a member of the relief fund, that if he collected from the fund, he would release all personal injury claims against the railroad. Schubert, 224 U.S. at 606-608, 56 L. Ed. at 914, 32 S. Ct. at 589-90.
The Supreme Court ruled that the release did not preclude the plaintiff's claim for damages because the purpose of the general release was to provide immunity to the railroad for any injury resulting in collection from the relief fund, in direct violation of 55. Schubert, 224 U.S. at 611-612, 56 L. Ed. at 916, 32 S. Ct. at 591.
In Duncan, the plaintiff was injured after he fell from a locomotive. Duncan, 315 U.S. at 2, 86 L. Ed. at 576, 62 S. Ct. at 422.
When plaintiff continued to suffer from his injuries, his employer paid $ 600 toward his living expenses in exchange for his agreement to "endeavor, in good faith, to adjust and settle any claim 'for injuries' without resorting to litigation." Duncan, 315 U.S. at 2-3, 86 L. Ed. at 577, 62 S. Ct. at 422.
As the Babbitt court summarized, the United States Supreme Court ruled that the release did not bar the plaintiff's later FELA claim because "the money that was exchanged was earmarked for living expenses, not settlement purposes, and the promise that was procured was given in exchange for a promise not to sue." Babbitt, 104 F.3d at 92, citing Duncan, 315 U.S. at 7-8, 86 L. Ed. at 579, 62 S. Ct. at 424-25.