Release May Act as Defense of Waiver to Statutory Cause of Action

April 14, 2008

The Supreme Court recently published Humana v. Blose, which dealt with the limited issue of whether a claimant can waive his right to a statutory action by signing a release of claims.  The Court of Appeals held that the “remedy for a breach of a release and waiver of a statutory right is “an original action or counterclaim for recovery of damages incurred as a result of the breach,” rather than the dismissal of the statutory action.”

Blose was employed by Humana and terminated allegedly as an overall reduction in workforce.  In exchange for 12 weeks severance pay and continuation of benefits, Blose signed a release, agreeing to settle any claim she might have arising out of her termination.  This included any statutory rights she may have resulting from her disability.  Several years later, she filed suit against Humana, alleging among other claims, disability discrimination.  Humana filed for a dismissal or in the alternative a summary judgment based on Blose’s execution of the release.  The claim was dismissed.

The Court of Appeals held that Blose could not waive a statutory right of action, and that the appropriate remedy to Humana was a suit for breach of contract.  (The breach being Blose’s filing of a lawsuit despite her agreement). The Court of Appeals also held that further discovery was warranted on the factual issues surrounding the execution of the release by Blose.  (This part of the order was not appealed).

The Supreme Court noted that releases and compromise agreements were contracts, governed by contract law.  As such, they could be impeached if procured by fraud, bad faith, or false representations.  Relief from such an agreement could also be granted if the agreement was procured under duress.

The SC noted:

Even before American General , we had held, “a release is a discharge of a claim or obligation and surrender of a claimant’s right to prosecute a cause of action .” Thus, a “‘release’ extinguishes a claim or cause of action.” … Thus, a release without duress, fraud, or bad faith, is effective to waive a plaintiff’s right to bring a claim, whether statutory or otherwise.

Therefore, Humana could assert the release as a defense to Blose’s claim, and not simply counterclaim for breach of the release. The SC reversed so much of the Court of Appeals’ opinion that required the trial court to consider the breach of the release as a counterclaim, as opposed to dismissing the case outright.

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