Case: Pagliolo v. Guidant Corp.

On March 1st, 2006, a group of former employees of Guidant Corporation filed a lawsuit under 28 U.S.C. § 2201 against Guidant Corporation in the United States District Court for the District of Minnesota. The plaintiff, represented by private counsel, asked the court for declaratory judgment that the Severance Agreement and Release of Claims was invalid under the Older Workers Benefits Protection Act ("OWBPA"). The plaintiffs claimed that employment Releases given by Guidant Corporation failed to comply with the OWBPA and were invalid. Plaintiffs also asked the Court for summary judgment on Guidant's counterclaims in the case, which were for declaratory judgment under 28 U.S.C. § 2201 that the employment Release was valid under OWBPA. Guidant also made counterclaims for unjust enrichment, restitution, recoupment, and setoff, and breach of contract.

In 2004, Guidant Corporation began developing "Project Apple," which was a codename for a Reduction in Force (RIF). Guidant began selecting employees at the local level whose employment would be terminated. Ultimately, over 700 employees were informed their employment would be terminated. As part of the "RIF," these employees were given notice for eligibility of benefits. Each terminated employee received a package of documents including a cover letter, a copy of the Severance Agreement and Release of Claims (the "Release"), a statement of Severance Pay and Benefits, along with a Severance Eligibility Disclosure.

One plaintiff, Joseph Pagliolo, ultimately used information in the Severance Eligibility Disclosure to perform an analysis that led to his choice in not signing the Release. His calculations showed that a disproportionate number of employees ages 40 and older had been affected by the RIF. This information led to forming the case at hand in which employees claim Guidant had engaged in age discrimination when terminating the 700 employees.

Specifically, the plaintiff claimed that Exhibit B, the employment Release form, violated the OWBPA. Within an employment release form, there are certain statutory requirements that must be met or else it is ineffective under the law.

On June 11th, 2007, plaintiffs filed a motion for class certification, and the Court approved the class on September 28th, 2007.

The Court (Judge Donovan W. Frank) found that Guidant Corporation did not meet statutory requirements for various parts of the employment Release form that was part of employees' severance packages. First, the Court held that the Release form contained material misrepresentations that failed to satisfy OWBPA. The form included a list of employees who were redeployed for employment as part of the group of employees eligible for severance benefits. This material misrepresentation had the effect of making it appear that there were 10% fewer terminations of employees ages 40 and older. The Court also found that the Release form did not disclose the decisional unit for the RIF and did not give employees a document that explained the eligibility factors for the RIF. Lastly, the Court found that Guidant did not satisfactorily fulfill the age and job formatting requirements. Guidant failed to provide the age on the Project Apple Spreadsheet, but rather only included birthdates.

On September 28th, 2007, the Court ordered that the Releases signed by plaintiffs under the Older Workers Benefits Protection Act were void, with respect to plaintiffs' claims under the Age Discrimination in Employment Act. The Court dismissed defendants' counterclaims for declaratory judgment and breach of contract. The Court also denied defendants' motion for partial summary judgment.