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Riley v. American Family Mutual Insurance Co.

decided: July 26, 1989.


Appeal from the United States District Court for the Western District of Wisconsin. No. 88 C 303 -- John C. Shabaz, Judge.

Bauer, Chief Judge, Cummings, Circuit Judge, and Hubert L. Will, Senior District Judge.*fn*

Author: Cummings

CUMMINGS, Circuit Judge

This appeal presents us with the responsibility of interpreting the consequences of plaintiff's legal representation. Plaintiff, Jocelyn Riley, initially filed a claim of sexual discrimination in violation of the Wisconsin Fair Employment Act ("WFEA"), Wis. Stats. §§ 111.32 et seq., against her employer, American Family Mutual Insurance Co., on March 25, 1985, with the Equal Rights Division ("ERD") of the Wisconsin Department of Industry, Labor and Human Relations ("DILHR") alleging retaliation for a complaint of sexual harassment resulting in her constructive discharge. Her claim was designated ERD case #8500634 and cross-filed with the federal Equal Employment Opportunity Commission ("EEOC") as EEOC case #055851913 and is still pending before the ERD.

Plaintiff subsequently filed a complaint (No. 85-CV-3061) in Dane County, Wisconsin, Circuit Court on June 13, 1985, alleging violation of WFEA and several tort claims, later amending it on November 21, 1986, to eliminate the WFEA claim. On May 5, 1987, plaintiff's counsel, Daphne Webb, agreed to dismiss four claims in that state court action against the defendant voluntarily because she believed that the state court would probably dismiss all claims but the first, which was an assault and battery claim, due to the "exclusivity of workers' compensation as a remedy for employer's torts" (R.18, para. 6). Plaintiff's counsel later agreed to dismiss the first claim as well as the other four provided that the dismissal would be without prejudice or costs.*fn1

At the suggestion of the defendant's counsel, Webb further agreed to execute a release on behalf of her client, waiving all "claims in Case No. 85-CV-3061, in which case defendant would stipulate to a dismissal without prejudice and without costs." (R.19, p.2.) However, the release drafted by defendant's counsel and executed by both parties exceeded the original agreement between the parties by providing for a release of all claims against the defendant:

relating in any way to her employment, or terms and conditions of employment, at American Family Mutual Insurance Company and the claims alleged in Case No. 85-CV-3061; EXCEPT THAT this release shall in no way preclude or affect the right of Jocelyn Riley to pursue and appeal her administrative claim against American Family Mutual Insurance Company now pending before the Wisconsin Department of Industry, Labor and Human Relations in the case entitled Jocelyn Riley v. American Family Insurance Company, ERD Case No. 8500634, EEOC Case #055851913.

The order and stipulation dismissing the state action entered on May 12, 1988, also expanded on the initial consensus between the parties by providing for a dismissal of the "Complaint [including the WFEA claim], Amended Complaint, and each claim for relief contained therein . . . on the merits" with prejudice subject to an exception mirroring the language of the release that the dismissal would not preclude the plaintiff from prosecuting and appealing her administrative claims before the ERD.*fn2 Plaintiff's counsel purportedly agreed to a dismissal with prejudice relying on the representation of defendant's counsel that the phrase "with prejudice" "would not make any difference, as long as Riley would still pursue and appeal her administrative claim" (R. 19, p.3).*fn3 Plaintiff's counsel was hardly an aggressive negotiator. When the dust settled in the negotiations, plaintiff had dismissed her state tort claims and WFEA action with prejudice and released all other claims against the defendant save her right "to pursue and appeal her administrative claim" pending before the Wisconsin ERD solely in consideration for defendant's agreement not to seek costs for the state court action.

Plaintiff requested and obtained a "right to sue letter" from the EEOC on March 22, 1988, and this Title VII action based on the same factual allegations as contained in the state court action and the ERD claim was filed on April 12, 1988. Defendant moved for summary judgment asserting that the state court dismissal precluded this Title VII suit based on the same facts or alternatively that the release signed by plaintiff waived all claims relating to her employment with the exception of the administrative claim pending before the ERD. The district court granted defendant's motion and dismissed the Title VII action without prejudice, reasoning that the release signed by plaintiff had waived all avenues of relief save the right to "pursue and appeal" her administrative claim before the ERD, which included the right to appeal an unfavorable decision of the ERD to the Wisconsin courts or filing a Title VII claim after seeking EEOC review of the ERD determination. Plaintiff appeals the dismissal, contending the release and state court dismissal preserved her right to pursue a Title VII action without awaiting exhaustion of Wisconsin administrative remedies. We must decide whether the minimal language excepting plaintiff's administrative claim from the release is sufficient to preserve her Title VII action here.*fn4


As an initial matter, both parties are in agreement that if this Title VII action was not preserved in the release, then it must be dismissed with prejudice. Judge Shabaz dismissed this action without prejudice based on his understanding that plaintiff could refile her Title VII action in federal court after the ERD rendered a final administrative decision and after plaintiff sought EEOC review of that decision pursuant to 29 C.F.R. § 1601.76.*fn5 Under Title VII, authorized state and local agencies are given an initial deferral period of at least sixty days to investigate a charge of discrimination. 42 U.S.C. § 2000e-5(d). Many states, including Wisconsin, have entered into work-sharing agreements with the EEOC which provide that the state agency will process certain charges and the EEOC all others. Under such agreements, the deferral period is waived by the state agency for those claims designated for initial processing by the EEOC, enabling the EEOC to begin processing the claim immediately. EEOC v. Commercial Office Products, 486 U.S. 107, , 108 S. Ct. 1666, 1670, 100 L. Ed. 2d 96 . Likewise, the EEOC will refer those charges which are allocated to the state agency for initial investigation under the work-sharing agreement to that agency, suspending its investigation until the 60-day deferral period has elapsed. Once the 60-day deferral period has elapsed or has been waived under the work-sharing agreement, the claim is deemed filed with the EEOC. Commercial Office Products, 486 U.S. 107, 108 S. Ct. 1666, 100 L. Ed. 2d 96 . Plaintiff has the right, though no duty, to request a right to sue letter from the EEOC after 180 days have elapsed from the date the charge was deemed filed with the EEOC provided the EEOC has not filed suit before that time. 29 C.F.R § 1601.28(a). Alternatively, the plaintiff may await a final resolution of the claim by the EEOC while retaining the power to demand a suit letter at any time, provided the delay does not constitute laches. See, e.g., Kamberos v. GTE Automatic Elec., Inc., 603 F.2d 598 (7th Cir. 1979), certiorari denied, 454 U.S. 1060, 70 L. Ed. 2d 599, 102 S. Ct. 612 .

Here plaintiff's charge was initially filed with the ERD on March 25, 1985, and cross-filed with the EEOC on April 8, 1985. Well after 180 days from filing of the charge with the EEOC, the plaintiff received upon her request an EEOC right to sue letter on March 22, 1988, giving plaintiff ninety days from issuance of the letter to file a Title VII action against the defendant, or forfeit her cause of action. Having received the prerequisite notice from the EEOC (Alexander v. Gardner-Denver Co., 415 U.S. 36, 47, 39 L. Ed. 2d 147, 94 S. Ct. 1011 ), the plaintiff was required to file this Title VII action within ninety days, regardless of the stage of the ERD proceedings. Judge Shabaz's order dismissing this action without prejudice ignores the procedural consequences of delaying plaintiff's action until the ERD has completed its review. Although it is true that work-sharing agreements routinely allow state and federal agencies each the right to review the initial processing agency's resolution of the charge, Commercial Office Products, 486 U.S. at , 108 S. Ct . at 1670, where the EEOC has issued a right to sue letter, its review of the charge is terminated. 29 C.F.R. § 1601.28(a)(3).


There is no question that plaintiff may waive her cause of action under Title VII as part of a voluntary settlement provided her consent to the release was voluntary and knowing. Alexander, 415 U.S. at 52. ("In determining the effectiveness of any such waiver, a court would have to determine at the outset that the employee's consent to the settlement was voluntary and knowing.")*fn6 However, aside from this generally recognized proposition that waivers of federal rights must be knowing and voluntary, as this Court recognized in Morgan v. South Bend Community School Corp., 797 F.2d 471, 474 (7th Cir 1986), there is some tension in this and other Circuits surrounding the appropriate source of law applicable to interpretation of a waiver or settlement of Title VII and similar federal statutory rights, such as claims under the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. §§ 621-634. Some cases in this Circuit have indicated that a release of Title VII rights is to be governed by federal common law principles,*fn7 while other cases interpreting such settlements apply standard state contract law principles.*fn8 In the context of waiver of claims under the ADEA, the Second and Third Circuits have explicitly endorsed a "totality of the circumstances" approach which, in addition to assessing the contractual sufficiency of the release, examines the factors surrounding its execution to determine whether it was signed knowingly and voluntarily. Coventry v. U.S. Steel Corp., 856 F.2d 514 (3rd Cir. 1988) ("In light of the strong policy concerns to eradicate discrimination in employment, a review of the totality of the circumstances, considerate of the particular individual who has executed the release, is also necessary."). Accord, Bormann v. AT & T Communications, Inc., 875 F.2d 399 (2d Cir. 1989). Among those factors found relevant to the inquiry by the Second and Third Circuits were: (1) the plaintiff's education and business experience, (2) the amount of time the plaintiff had possession of or access to the agreement before signing it, (3) the role of plaintiff in deciding the terms of the agreement, (4) the clarity of the agreement, (5) whether the plaintiff was represented by or consulted with an attorney, (6) whether an employer ...

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