Employment Agreement Releasing Liability Against City Held Valid

In Shaw v. City of Sacramento, 2001 WL 726684, the Ninth Circuit Court of Appeals upheld a jury’s finding that a release of liability in an employment contract was valid.

Employee, Fred Arthur, signed an early retirement agreement stating that he “agree[d] to waive and release all claims against the City [of Sacramento] arising from or related to his employment and departure from employment with the City, whether known, unknown, contingent, liquidated or non-liquidated.” Following his retirement, Employee filed a discrimination claim under the California Fair Employment and Housing Act (FEHA).

At the trial on Employee’s FEHA claim, the trial court instructed the jury that the release clearly and unambiguously waived Employee’s discrimination claim against the City. However, the trial court further instructed the jury to decide whether the release was “voluntary, deliberate, and informed.” Although the jury found that City had discriminated against Employee, it further found that the release was valid.

On appeal to the Ninth Circuit Court of Appeals, Employee argued that the trial court incorrectly instructed the jury that the release was unambiguous. First, the Court of Appeals noted that Employee had waived its right to appeal this issue because it had not objected to the instruction at trial. The Court, nevertheless, also determined that, even if Employee had properly objected to the instruction, the instruction was correct because the release language is clear and unambiguous.

The Court of Appeals next rejected Employee’s claim that he was entitled to attorney fees, under three alternative statutes.

  • Attorney fees under 42 U.S.C. § 2000e-5(g)(2)(B) – Under this section, a plaintiff who files a Title VII claim may recover attorney fees if he shows discrimination under Title VII and the defendant proves that it would have taken the same action in the absence of the discriminatory motive. The Court of Appeals rejected Plaintiff’s claim under this statute because he had not filed a Title VII claim. The Court further determined that, because City’s defense was based on the release and not on a claim of non-discriminatory motive, § 2000e-5(g)(2)(B) did not apply.
  • Attorney fees under the FEHA, California Government Code § 12965(b) – A prevailing party in an FEHA case may receive attorney fees. However, Employee did not prevail because he did not receive actual relief on the merits. The positive effect on Employee’s name and reputation that indirectly resulted from the jury’s finding of discrimination did not make Employee the prevailing party.
  • Attorney fees under California’s private attorney general statute, California Civil Procedure Code § 1021.5 – Employee was not the “successful party” as required by § 1021.5. Furthermore, pursuant to California case law, fees under § 1021.5 are not available in an FEHA case.

If you have any questions about this Legal Alert, please contact Emily Vasquez, or any attorney in the Employment & Labor Department at (916) 321-4500.