UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
NICHOLAS BRANDT, et al., Plaintiffs
VERIZON COMMUNICATIONS, INC., et al., Defendants.
Attorneys for Plaintiffs,
Mark Malachowski CSBN 242696
Malachowski & Associates
Plaintiffs’ claimed that they were swindled by Defendants Verizon Communications Inc. (Verizon) and MCI Communications Services, Inc. (MCI) because they were told they could keep their same retirement plans when they moved from Intel to Verizon MCI when in fact, they ended up losing substantial retirement benefits.
Plaintiffs sued in federal court in San Jose for: (1) breach of contract, (2) intentional concealment and misrepresentation, (3) promissory fraud, (4) negligent misrepresentation, (5) promissory estoppel, (6) violation of California Labor Code § 970 (misrepresentation), and (7) declaratory judgment that the general releases that plaintiffs signed are unenforceable under California Civil Code § 1668.
Defendants Verizon MCI argued that Plaintiffs’ claims were preempted by 29 U.S.C. § 1144(a), 29 U.S.C. § 1144(a), under ERISA’s nationwide civil enforcement scheme. ERISA is a federal statute applicable to retirement plans.
The court found that the (1) breach of contract and (5) promissory estoppel were preempted by ERISA. However, the court ruled that Plaintiffs’ (2) intentional concealment and misrepresentation, (3) promissory fraud, (4) negligent misrepresentation, (6) violation of California Labor Code § 970 (misrepresentation), and (7) declaratory judgment that the general releases that plaintiffs signed are unenforceable under California Civil Code § 1668 claims were not preempted by ERISA.
As to the remaining five claims, Verizon MCI argued that those claims should be dismissed because Plaintiffs’ had signed releases to receive partial severance payments. Plaintiffs claimed that they were defrauded out of a substantial percentage of their severance payments and asked the court to have Verizon MCI pay the balance.
Plaintiffs argued that upon accepting employment with Verizon MCI they unknowingly agreed to sign releases in the future as a condition of receiving severance benefits in the event they were terminated, which Verizon MCI counsel had bragged had put Plaintiffs “over the barrel.”
Plaintiffs argued that Verizon MCI effectively “ratified” its earlier misrepresentations about the severance benefits and that this ratification transformed the earlier misrepresentation into a misrepresentation concurrent with the signing of the severance releases, thereby implicating the prohibitions of section 1668.
California Civil Code § 1668 states: “All contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.” In other words, a party may not exempt itself from liability for concurrent or future torts, where at least one element of the tort occurs concurrently or after the signing of the contract. Surprisingly, the court found that Verizon MCI’s earlier misrepresentations had no bearing on what Plaintiffs contended was an ongoing fraudulent scheme perpetrated by Verizon MCI.
Also, Plaintiffs claimed they signed the releases under economic duress because they expected to face personal financial hardship from “extended unemployment and minimal income from unemployment insurance” and therefore, Plaintiffs signed the releases under duress.
However, the court found that the losses the Plaintiffs faced from their choice to forfeit a partial retirement payout and the prospect of diminished employment opportunities did not rise to the level of duress as if Plaintiffs had experienced bankruptcy or financial ruin.