Opinion
Supreme Court No. S-13714.
August 17, 2011.
Appeal from the Superior Court of the State of Alaska, Third Judicial District, Anchorage, Mark Rindner, Judge, Superior Court No. 3AN-08-07609 CI.
Appearances: Kenneth P. Jacobus, Kenneth P. Jacobus, P.C., Anchorage, for Appellant. Joshua M. Freeman, and Pamela A. Weiss, Assistant Municipal Attorneys, and Dennis A. Wheeler, Municipal Attorney, Anchorage, for Appellee.
Before: Fabe, Winfree, and Stowers, Justices. [Carpeneti, Chief Justice, and Christen, Justice, not participating.].
NOTICE
Memorandum decisions of this court do not create legal precedent. See Alaska Appellate Rule 214(d). Accordingly, this memorandum decision may not be cited for any proposition of law or as an example of the proper resolution of any issue.
MEMORANDUM OPINION AND JUDGMENT
Entered pursuant to Appellate Rule 214.
When the Municipality of Anchorage invited bid proposals for contractors to perform tree trimming services, it specified as one condition of the contract that the successful contractor had to have a current collective bargaining agreement or a letter of assent with the IBEW Local No. 1547. Skookum Construction and Tree Service did not have a collective bargaining agreement with the IBEW, but Skookum's owner, John Stefanski, signed a letter of assent agreeing to comply with and be bound by the current labor agreement. The labor agreement provided that all employees (including employees of contractors like Skookum) were required to become and remain members of the IBEW as a condition of employment. Skookum was awarded the tree trimming contract. Despite a number of warnings from the Municipality and IBEW that Skookum was not in compliance with the contract or letter of assent, its employees did not join the IBEW. In fact, Skookum's employees voted twice unanimously not to join the IBEW. The Municipality terminated the contract on grounds that Skookum materially breached it by failing to comply with its terms.
Skookum sued the Municipality for breach of contract. The Municipality filed a motion for summary judgment, arguing that there were no genuine issues of material fact and that its termination of the contract was appropriate because Skookum's failure to comply with the letter of assent constituted a material breach of contract. Skookum opposed, arguing that Skookum was in compliance with the letter of assent and that its duty to comply with the labor agreement was discharged after its employees voted to reject IBEW representation. In a cross-motion for summary judgment, Skookum argued that the Municipality's bid specification requiring a contractor to sign a letter of assent was against public policy, the contract with the Municipality was a contract of adhesion, and the Municipality breached the implied duties of good faith and fair dealing in its dealings with Skookum.
The superior court granted the Municipality's motion for summary judgment and denied Skookum's cross-motion. We have carefully reviewed the issues presented to the superior court in the cross-motions for summary judgment and the record on appeal. We have also considered the issues presented on appeal in light of the applicable standards of review, and we conclude that the superior court correctly ruled on the cross-motions for summary judgment. The decision of the superior court granting summary judgment to the Municipality and denying Skookum's cross-motion for summary judgment is AFFIRMED for the reasons stated in the superior court's Order Re: Parties' Cross-Motions For Summary Judgment, attached as an appendix.
Appellant argues for the first time on appeal that the letter of assent is not a § 8(f) contract under the National Labor Relations Act ( 29 U.S.C. § 158(f) (2006)), the labor agreement did not cover his work because his company was hired to trim trees and clear brush, and that because his employees never went to work on the job the contract termination was invalid. Appellant's new arguments are waived because "[i]ssues not properly raised or briefed at trial are not properly before this court on appeal." Hagans, Brown Gibbs v. First Nat'l Bank of Anchorage, 783 P.2d 1164, 1166 n. 2 (Alaska 1989). Though we do not necessarily adopt the superior court's characterization of the agreement as a § 8(f) contract, we do not need to reach this question because appellant did not request an NLRB-certified election, which was itself a violation of the letter of assent signed by appellant.
We review a superior court's grant of summary judgment de novo. Nielson v. Benton, 903 P.2d 1049, 1052 (Alaska 1995) (citing Tongass Sport Fishing Ass'n v. State, 866 P.2d 1314, 1317 n. 7 (Alaska 1994)). In our review, we must determine "whether any genuine issue of material fact exists and whether on the established facts the moving party is entitled to judgment as a matter of law." Id. at 1051-52 (citing Wright v. State, 824 P.2d 718, 720 (Alaska 1992)). We draw all factual inferences in favor of, and view the facts in the light most favorable to, the party against whom summary judgment was granted. Rockstad v. Erikson, 113 P.3d 1215, 1219 (Alaska 2005) (citing Ellis v. City of Valdez, 686 P.2d 700, 702 (Alaska 1984)). "The interpretation of a statute is a question of law to which we apply our independent judgment, interpreting the statute according to reason, practicality, and common sense, considering the meaning of the statute's language, its legislative history, and its purpose." Parson v. State, Dep't of Revenue, Alaska Hous. Fin. Corp., 189 P.3d 1032, 1036 (Alaska 2008) (citing Grimm v. Wagoner, 77 P.3d 423, 427 (Alaska 2003)). The interpretation of a contract is a question of law to which we apply our independent judgment. Hixson v. Sarkesian, 66 P.3d 753, 757 (Alaska 2003) (citing Flannery v. Flannery, 950 P.2d 126, 129 (Alaska 2003)).
In the superior court's order, the court suggested without deciding that Stefanski could have paid his employee's union dues under "fee objector" status. Because this point was not developed and is unnecessary to our decision, we have omitted that portion of the superior court's order.
The appended Order Re: Parties' Cross Motions For Summary Judgment has been edited to conform to the technical rules of the Alaska Supreme Court, and most internal citations have been omitted.
IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE ORDER RE: PARTIES' CROSS-MOTIONS FOR SUMMARY JUDGMENT
I. INTRODUCTION
This case arises out of a Municipal Invitation to Bid on a contract for tree removal services. Skookum Construction and Tree Service bid on, and was awarded, a Municipal contract that required Skookum to follow Union bargaining agreements for the duration of the contract. The Municipality of Anchorage terminated the contract after alleging Skookum failed to comply with the relevant labor agreement. Skookum filed suit alleging breach of contract.
II. FACTS PROCEEDINGS
A. Facts
On January 26, 2005, Skookum Construction submitted a bid proposal to the Municipality of Anchorage ("Municipality") to perform a contract for "Tree Trimming Services in the Anchorage area on an `as needed' basis for Municipal Light and Power." Plaintiff John Stefanski, owner of Skookum Construction, signed the submitted bid proposal on behalf of Skookum. The Municipality's invitation to bid included an addendum specifying that "as a condition of the contract or subcontract," all bidding parties were required to "have a current collective bargaining agreement or letter of assent with the IBEW Local No. 1547."
As required by those specifications, Stefanski signed a Letter of Assent ("LOA") on January 25, 2005 on behalf of Skookum. That agreement, between Skookum and the IBEW, referenced the Outside Labor Agreement ("Outside Agreement") and stated that Stefanski agreed to "comply with and be bound by, all of the provisions contained in said current and subsequent approved labor agreements." Section 2.19 of the Outside Agreement states that all employees covered by the agreement "shall be required to become and remain members of the Union as a condition of employment." Stefanski acknowledges that the LOA he signed required him to comply with the provisions of the Outside Agreement. Stefanski asserts that he was never provided with a copy of that agreement, but also acknowledges he never requested a copy. Stefanski also admits that the reason he obtained an LOA from IBEW was that he believed the contract required such a letter.
On January 26, 2005, the bids were unsealed, with Skookum identified as the lowest bidder. On March 25, 2005, Skookum and the Municipality signed a contract for the tree trimming services described in the bid. On April 11, 2005, following the execution of the contract, Skookum's employees twice voted unanimously against joining the IBEW. At oral argument, the parties agreed that neither of those elections were formal elections certified by the National Labor Relations Board ("NLRB").
Following those votes, and Skookum's subsequent failure to comply with the terms of the Outside Agreement, the Municipality sent three notifications to Stefanski informing him that he was not in compliance with the LOA, that he had thus failed to fulfill a material condition of the contract, and that he needed to take steps to comply with the requirements of the Outside Agreement. Moreover, the IBEW also contacted Stefanski twice to alert him that he was not in compliance with the LOA. Specifically, the IBEW informed Stefanski that he was not in compliance with the LOA because his employees had not become members of IBEW Local 1547. The Municipality informed Stefanski that it considered Skookum's failure to comply with the terms of the LOA to be a material breach of its contract and threatened termination. Stefanski responded to those letters by alleging that it was the Municipality who was in breach of the contract and demanded that the Municipality "show cause" in response to a "UCC Commercial Truth Affidavit."
It is undisputed that Stefanski's employees at no time joined the IBEW, although there is a dispute as to whether their failure to join caused Skookum to fall out of compliance with the LOA, and thus the underlying contract. On May 27, 2005, after repeated communication between Stefanski and the Municipality failed to result in an agreement, the Municipality notified Stefanski that it was terminating the contract, alleging that Skookum was in breach of the contract terms.
B. Proceedings
Stefanski filed a complaint against the Municipality on May 21, 2008. The amended complaint alleges that the Municipality breached its contract with Skookum when it sent a notification of termination to Stefanski on May 27, 2005. It also raised an unfair labor practice allegation. This court previously struck that claim. The Municipality answered the amended complaint on August 26, 2008, alleging that at the time it terminated the contract with Skookum, Skookum did not have a current letter of assent and was therefore not in compliance with the terms of the contract.
The Municipality filed a motion for summary judgment on July 6, 2009, alleging that there was no factual dispute and its termination was not a breach of contract because Skookum's prior failure to maintain a current LOA constituted a material breach.
On August 11, 2009, Stefanski filed a cross-motion for summary judgment and opposition to the Municipality's motion for summary judgment. Stefanski asserts that Skookum at all times was "in compliance with the bid by providing a Letter of Assent to the Municipality" and that the Municipality terminated the contract without cause. Stefanski claims his duty to comply with the Outside Agreement was discharged after his employees voted to reject IBEW representation, as allowed by the LOA, and that he was never in material breach of the contract.
Additionally, Skookum's cross-motion for summary judgment raises new allegations, not alleged in the amended complaint. He asserts that 1) the Municipality's bid specification, specifically the LOA, is against public policy in that it forces people to join the union; 2) the contract with the Municipality was one of adhesion because it is a pre-printed "fill-in-the-blanks" form prepared by the IBEW; and 3) the Municipality violated the implied duties of good faith and fair dealing in its dealings with Stefanski.
The Municipality moved to strike Stefanski's cross-motion for untimeliness on August 14, 2008. That motion was denied on September 4, 2008.
Oral argument on the cross summary judgment motions was held on September 24, 2009.
III. STANDARD OF REVIEW
Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. In a motion for summary judgment, the moving party has the initial burden of offering admissible evidence showing both the absence of any genuine dispute of fact and the legal right to a judgment. Once the moving party has made this showing, the burden shifts to the non-moving party to produce admissible evidence reasonably tending to dispute or contradict the moving party's evidence.
Alaska R. Civ. P. 56.
Cikan v. ARCO Alaska, Inc., 125 P.3d 335, 339 (Alaska 2005).
Id.
To defeat a motion for summary judgment, the non-moving party may not rest on its allegations, but must put forth specific facts showing that there is a genuine, material factual dispute. A genuine, material factual dispute requires more than a scintilla of contrary evidence. In meeting their respective burdens, the parties may use pleadings, affidavits, and any other material that is admissible in evidence. In evaluating a motion for summary judgment, the court must draw all reasonable inferences in favor of the non-moving party.
Id.
Id.
Miller v. City of Fairbanks, 509 P.2d 826, 829 (Alaska 1973).
Cikan, 125 P.3d at 339.
IV. DISCUSSION
A. Cross-Motions For Summary Judgment
The contentions raised by both sides are legal in nature and summary judgment is appropriate in deciding whether the Municipality unjustifiably terminated the contract with Skookum. It is undisputed that the bidding specifications required that Skookum either enter into a collective bargaining agreement with the IBEW or that it obtain an LOA from the IBEW. It is also undisputed that the language of the LOA, which Stefanski signed on behalf of Skookum, bound him to comply with the terms of current labor agreements, including the Outside Agreement. The Skookum employees clearly voted not to join the IBEW, but neither party contends that those votes constituted NLRB-sanctioned elections. Skookum does not allege that it was ever in compliance with the terms of the Outside Agreement. The dispute arises over the interpretation of the language of the contract entered into between the Municipality and Stefanski. Both parties agree it is a purely legal question: whether Skookum's failure to comply with the Outside Agreement violated the LOA and thus breached his contract with the Municipality, or whether the obligations of the LOA were avoidable, as Stefanski asserts, by a vote of the Skookum employees.
1. Skookum employees' vote to reject the union did not relieve Skookum of its obligation to comply with the Outside Agreement, as mandated by the LOA.
The question presented by the parties in interpreting the contract language essentially comes down to whether Skookum could "opt out" of the obligation it agreed to in the LOA — that it would abide by the terms of the Outside Agreement — after its employees voted not to join the union. The LOA states that by signing the agreement with the IBEW, Skookum agreed to "comply with, and be bound by, all of the provisions contained in said and current subsequent approved labor agreements," specifically the Outside Agreement referenced in the LOA. Additionally, paragraph two of the LOA states that Skookum:
Agrees that if a majority of its employees authorize the Local Union to represent them in collective bargaining, the Employer will recognize the Local Union as the NLRA Section 9(a) collective bargaining agent for all employees performing electrical construction work within the jurisdiction of the Local Union on all present and future jobsites.
Skookum alleges that by voting to reject IBEW as their collective bargaining representative, its employees freed Skookum of its obligation to comply with the Outside Agreement.
Agreements under § 9(a) of the National Labor Relations Act ("NLRA") provide for a Union's exclusive representation of all employees in a [bargaining] unit and require a majority vote of the employees to approve such representation. Section 9(e) of the NLRA sets the requirements of elections for § 9(a) representation. First, the employees must petition the NLRB to conduct an election, next the Board must conduct a secret election, and finally, the Board must certify the results of that election. It was conceded by both sides at oral argument that the "election" conducted by the Skookum employees was not NLRB-conducted. Nor is there evidence that the voting was conducted in secret. Additionally, it is undisputed that the NLRB did not certify the election results. In short, the vote in question was not an election under § 9(e) to determine whether Skookum employees authorized the IBEW to act as their § 9(a) collective bargaining representative.
29 U.S.C. § 159(a) (2006).
29 U.S.C. § 159(e) (2006).
Id.
Moreover, the court finds that even had the election been a valid election regarding § 9(a) representation, such an election would not have allowed Skookum to evade the obligations it entered into by signing the LOA. The LOA between Skookum and IBEW created a § 8(f) agreement, so named based on the NLRA section under which it is authorized. Section 8(f) agreements allow "employers engaged primarily in the building and construction industry to enter into pre-hire agreements containing union security clauses whether or not the union represents a majority of the employer's employees." Essentially, § 8(f) agreements allow non-union shops to bid for traditional union jobs by ensuring that any non-union contractor who performs such work is bound by the same employment terms as a union contractor would be. Under a § 8(f) contract, the union enjoys no presumption of majority status and either party may repudiate the relationship upon the expiration of the contract. In short, § 8(f) agreements create temporary union representation for the duration of a contract, without requiring majority support of the employees covered.
29 U.S.C. § 158(f) (2006); Elec. Workers Local 58 Pension Trust Fund v. Gary's Electric Serv. Co., 227 F.3d 646 (6th Cir. 2000).
N.L.R.B. v. Triple C Maintenance, Inc., 219 F.3d 1147, 1152 (10th Cir. 2000).
Id.
Sheet Metal Workers' Int'l Ass'n Local 19 v. Herre Bros., Inc., 201 F.3d 231, 239 (3d Cir. 1999); see also James Luterbach Constr. Co., 315 N.L.R.B. 976, 978 (1994).
Under § 9(a) representation, on the other hand, when "a majority of employees in a unit appropriate for collective bargaining designates a labor union to represent it," the union becomes the exclusive representative for all collective bargaining purposes. A § 8(f) relationship can be converted into a § 9(a) relationship whenever the union can show majority employee support for such a change in an NLRB-sanctioned election After such § 9(a) status is attained, the union "enjoys a presumption of majority status for the duration of a contract or for a reasonable period."
N.L.R.B. v. Triple C Maintenance, Inc., 219 F.3d 1147, 1152 (10th Cir. 2000).
Id. (citing John Deklewa Sons, Inc., 282 N.L.R.B. 1375, 1378 (1987)).
Id. at 1152; Herre Bros., Inc., 201 F.3d at 239.
The NLRA clearly contemplates two distinct types of relationships between unions and employees: the exclusive representation under § 9(a), wherein a majority of employees must vote in favor of union representation, and the specialized agreements designed for the construction industry contemplated in § 8(f), which do not require a vote or a majority of employees' consent. That employees have the option under the § 8(f) agreement created by the LOA to vote in favor of increased representation under a § 9(a) relationship does not necessitate Stefanski's assertion that by choosing not to exercise that option, those employees can relieve their employer from its obligation to follow the labor agreement it earlier agreed to comply with.
Stefanski cites no case law to support the assertion that a vote against a § 9(a) agency renders the provisions of an § 8(f) agreement meaningless. In Electrical Workers Local 58 Pension Trust Fund v. Gary's Electrical Service Co., the Sixth Circuit rejected an argument similar to the one raised by Skookum here. In that case, the respondent, who had signed a LOA nearly identical to the one at bar, alleged that the obligations created by the LOA came into play only if a majority of the employees authorized the Union to represent them. The court was unpersuaded by this argument, noting that "what Defendant's argument fails to consider is that it was entering into the Letter of Assent-A under § 8(f) status because it did not have majority status at the time."
Electrical Workers Local 58 Pension Trust Fund v. Gary's Electrical Serv. Co., 227 F.3d 646 (6th Cir. 2000).
Id. at 654-55.
Id. at 654; see City Elec., Inc. v. Int'l Brotherhood of Elec. Workers, 288 N.L.R.B. 443, 444 (1988).
The Sixth Circuit ruled that the employer's obligations under the LOA were not contingent upon the union obtaining majority support of the employees, but rather the initial LOA itself created a bargaining obligation under § 8(f). Furthermore, the court found that the union did not forfeit its § 8(f) status when it unsuccessfully sought majority recognition from the employees covered by the § 8(f) agreement. Despite the fact that the employees voted against entering into a § 9(a) relationship with the union, the parties remained "bound by the Letter of Assent-A and the series of § 8(f) agreements made in relation thereto until such time that proper termination of the relationship is made."
Id. at 655.
Id.
Id.; City Elec., Inc., 288 N.L.R.B. at 444 (finding that the § 8(f) relationship continued even though the Board rejected the Union's claimed § 9(a) status).
Stefanski's claim here is similar to the claim raised in Gary's Electrical, but is less compelling than even that unsuccessful claim. Unlike in Gary's Electrical, it is undisputed that neither of the Skookum employees' votes were certified by the NLRB. Thus, even if Stefanski's interpretation of the LOA is correct and a vote against union representation under § 9(a), as specified by the LOA, would void Skookum's duties to follow the Outside Agreement, the elections that occurred here were not of the type required by § 9(a). In order for employees to validly vote on whether to enter into a § 9(a) relationship with a union, they or their employer must first petition the NLRB, which will then conduct the election by secret ballot and certify the results. Stefanski admitted at oral argument that neither he nor his employees petitioned the NLRB, nor did the NLRB conduct the elections in this case. Additionally, no evidence was presented that the elections were conducted by secret ballot. At oral argument, Stefanski asserted that the LOA does not require a NLRB-conducted election. However, paragraph two of the LOA, to which Stefanski turns in support of his assertion that his employees could vote to opt out of complying with the Outside Agreement, clearly references § 9(a) of the NLRA. To vote on union representation under that section, as noted above, requires a secret NLRB-conducted and certified election. No such election occurred here.
29 U.S.C. 159(e) (2006); N.L.R.B. v. Financial Inst. Employees of America, Local 1182, Chartered by United Food and Comm. Workers Int'l Union, AFL-CIO, 475 U.S. 192, 198 (1986).
Moreover, even had the elections been NLRB-sanctioned, the court rules as a matter of law that such a vote would not excuse Skookum from complying with the LOA it agreed to. Although not binding, the Court finds Gary's Electrical persuasive in its holding that even after NLRB-sanctioned elections occur, and employees reject a § 9(a) relationship with a union, such a vote does not relieve the employer from complying with the terms of the § 8(f) agreement it entered into. Stefanski agreed to comply with the Outside Agreement as a condition of his bid for the Municipality's contract, and Skookum was bound to do so if it wanted to continue its contract. It is contrary to both the purpose and language of the LOA to allow to continue the contract with the Municipality while refusing to comply with its terms. The LOA clearly stated that the contract required adherence to the standards of the Outside Agreement. Although Stefanski's employees were not required to join the union permanently or as full-fledged members, Stefanski did have to comply with the terms of the contract he signed, including complying with the provisions of the Outside Agreement.
Gary's Electrical, 227 F.3d at 655.
When Skookum failed to comply with the Outside Agreement, it failed to comply with the LOA and thus breached its contract with the Municipality. The court finds as a matter of law that due to this material breach, the Municipality was justified in terminating its contract with Skookum.
B. The LOA Is Not A Contract Of Adhesion And Requires No Special Interpretation.
Stefanski additionally asserts that the LOA is an adhesion contract under Burgess Construction Co. v. State Under Burgess, contracts of adhesion require that certain special interpretations be applied to the contract in favor of the non-drafting party. As defined by Burgess, an "`adhesion contract' is a handy shorthand descriptive of standard form printed contracts prepared by one party and submitted to the other on a `take-it-or-leave-it' basis." The Burgess court recognized that adhesion contracts were generally limited to consumer transactions in which form contracts are offered to the public on a mass basis. In fact, the court in Burgess refused to apply the principle of adhesion, noting that the contract at bar was a "commercial contract in a specialized field for a large amount between sophisticated parties who have the advice of attorneys readily at hand." Furthermore, the "weaker" party in that case was "not without options in the face of the State's form contract; it could refuse to bid, or it could calculate the cost of providing the protection required by the indemnity clause and build that cost into its bid."
Burgess Construction Co. v. State, 614 P.2d 1380 (Alaska 1980).
Id. at 1383.
Id.
Id. at 1383-84.
Id. at 1384.
Id.
As in Burgess, the contract in this case is a commercial contract for a substantial sum of money. Moreover, both parties are sophisticated. Stefanski is a 30-year business owner and self-acknowledged "wise and prudent business man" who has bid on and executed numerous contracts in his 30 years of business. He has submitted bids to, and been awarded contracts with, the Municipality "many times before this contract." Stefanski was "not without options," at the time of bidding; he was readily able to choose not to bid due to the contract language and requirements, or he was able to increase his bid to reflect any cost increases stemming from compliance with the terms of the collective bargaining agreement. Moreover, this transaction was not, "as a practical matter . . . essential, or nearly so, from the standpoint of the weaker party," as required by Burgess. The contract is not one of adhesion, and it is unnecessary to determine which, if any, of the interpretive remedies requested by Stefanski applies.
Id. at 1383.
C. Stefanski Fails To Demonstrate That The Municipality Breached The Implied Covenant Of Good Faith And Fair Dealing.
Additionally, in Stefanski's cross-motion for summary judgment, Skookum alleges for the first time that the Municipality violated its implied duty of good faith and fair dealing in its dealings with Skookum. Skookum alleges that the Municipality breached this covenant by: 1) failing to provide Stefanski with a copy of the Outside Agreement; 2) requiring Skookum to purchase special equipment; 3) discriminating against Skookum in favor of the IBEW; 4) not recognizing the elections held by Stefanski's employees; and 5) not giving notice to Stefanski that his employees would have to join the union.
The covenant of good faith and fair dealing has a subjective and an objective element. To prove the subjective element, Stefanski must show that the Municipality acted in bad faith to deprive Stefanski of the benefit of the contract. In analyzing this element of the covenant, the Alaska Supreme Court in McConnell phrased the inquiry as a question of whether the accused party "lived up to its side of the bargain" created by the contract. In the context of employment relationships, the court has stated that "the subjective element is not based on the employee's personal feelings, but rather on the employer's motives. Therefore, the employee must present proof that the employer's decision to terminate him or her `was actually made in bad faith.'"
McConnell v. State Dept. of Health Soc. Servs., 991 P.2d 178, 184 (Alaska 1999).
Id.
Id. at 185.
Pitka v. Interior Reg'l Hous. Auth., 54 P.3d 785, 789 (Alaska 2002).
To prove the objective element of the covenant, Stefanski must show that the Municipality did not act in a manner that a reasonable person would consider fair. However, the law is established that "the covenant of good faith cannot be interpreted to prohibit what is expressly permitted by [the] contract." In Ramsey, for instance, the court found no violation of the covenant when an employer terminated plaintiff's "at will" contract without investigating the allegations of wrongdoing underlying the termination because plaintiff's contract allowed for termination without cause.
Id.
Ramsey v. City of Sand Point, 936 P.2d 126, 133 (Alaska 1997) (citing Carma Developers v. Marathon Dev. California, 826 P.2d 710, 728 (Calif. 1992)); Jones v. Central Peninsula Gen. Hosp., 779 P.2d 783, 789 (Alaska 1989).
Ramsey, 936 P.2d at 133.
Relevant to the inquiry into whether the Municipality breached the covenant of good faith and fair dealing is the contractual language regarding the parties' ability to terminate the contract. The contract between the Municipality and Skookum states in relevant part that:
The Contractor's services may be terminated in whole or in part . . . for cause, by either party where the other party fails in any material way to perform its obligations under this contract. Termination under this subsection is subject to the condition that the terminating party notifies the other party of its intent to terminate, stating with reasonable specificity the grounds therefore, and the other party fails to remedy the problem within fifteen (15) days after receiving the notice.
The Municipality first notified Stefanski that he was in breach of the contract on April 25, 2005. The Municipality then sent repeated letters to Stefanski requesting that he comply with the terms of the contract as the Municipality understood them, an interpretation that the court upheld earlier in this opinion. Stefanski demonstrated an unwillingness to comply with those terms and the Municipality eventually terminated the contract, more than 15 days after first informing Stefanski he was in breach.
Stefanski first asserts that the Municipality breached the covenant by failing to provide him with a copy of the Outside Agreement. Preliminarily, the Municipality correctly asserts that although obtaining a valid LOA was a requirement of the Municipality's offer to bid, the contract created by the LOA was between Skookum and the IBEW, not the Municipality. Stefanski's assertion that "a prudent Union and Letter of Assent would have [included a copy of the Outside Agreement] with it" may be true, however, that is an allegation that should be raised against the IBEW, not the Municipality.
Even if the Municipality was a party to the LOA, however, no breach of the covenant would be found based on its alleged failure to provide Stefanski with a copy of the Outside Agreement. The LOA clearly references the Outside Agreement, and states that the undersigned agrees to "comply with and be bound by, all of the provisions contained in said current and subsequent approved labor agreements." Despite admitting that he knew the LOA he signed required him to comply with the provisions of the referenced Outside Agreement, Stefanski also admits that he never requested a copy of the agreement, either from the Municipality or the IBEW.
Stefanski does not meet the subjective element by offering proof that the Municipality acted in bad faith to deprive him of the benefit of the contract by not providing a copy. Nor does he meet the objective element by demonstrating that the Municipality acted in a manner a reasonable person would deem unfair. Courts assume that parties will read contractual terms prior to signing and will hold them accountable for the contracts they sign. Williston on Contracts states:
People are free to sign legal documents without reading them, but the documents are binding whether read or not. The failure to read a document before signing it does not enable one to ignore the obligations imposed by that document on the ground that they did not read the contract or that the contents of the contract were not known to the party. . . . Absent fraud or mutual mistake, a commercial entity signing a contract is expected to have read the provisions therein and understood their binding effect..
27 WILLISTON ON CONTRACTS (4th Ed.) § 70:113.
Stefanski knew that the LOA required him to comply with the clearly referenced Outside Agreement. His failure to ask for a copy prior to agreeing to comply with the agreement was done at his peril. The Municipality's failure to attach to its Invitation to Bid an unrequested copy of the clearly referenced Outside Agreement simply does not rise to the level of a breach of the covenant of good faith and fair dealing.
Second, Stefanski alleges that the Municipality breached the covenant by requiring him to purchase special equipment and then terminating his contract. There is some dispute as to whether some or all of the equipment at issue was purchased prior to Skookum's being awarded the contract. However, this dispute is immaterial. Even if viewed in the light most favorable to Stefanski, and assuming that he could demonstrate that these purchases were made in contemplation of and preparation for the contract with the Municipality, Stefanski fails to meet either the subjective or objective elements of the good faith and fair dealing covenant. The fact that Stefanski purchased equipment to perform a contract that was terminated is not enough to demonstrate that the Municipality acted in bad faith or unreasonably. Again, Stefanski offers no evidence to show that the Municipality's actions were maliciously motivated. As to the objective element, the Municipality terminated Skookum's contract for cause, a termination found justified by this court. The covenant of good faith and fair dealing cannot be used to expand the language of a contract in order "to prohibit what is expressly permitted by the contract." The contract in question explicitly allows for termination after the other party material breaches one or more of the contract terms, which Stefanski did by failing to comply with the Outside Agreement. Based on Stefanski's material breach of the contract conditions, it was not a violation of the covenant for the Municipality to terminate its contract with Skookum, even if Skookum had already made purchases in anticipation of the contract.
Ramsey, 936 P.2d at 133.
Third, Stefanski asserts that the Municipality violated the covenant of good faith and fair dealing because it "discriminated against him in favor of the IBEW Union." In support of this allegation, Stefanski states only that the Municipality "discriminated against me and my employees" and that the union threatened them in some unspecified manner. However, again, Stefanski asserts no proof of the Municipality's bad faith, or even a description of the alleged discriminatory actions, nor does he show how the alleged discrimination resulted in deprivation of the benefit of the contract to Skookum. Indeed, the allegation of bad faith is directed predominantly against the union, not the Municipality. Stefanski's allegations are additionally unsupported by any evidence to support a finding that the Municipality acted unreasonably in its actions with Stefanski.
The fourth alleged violation of the covenant is Stefanski's claim that "the Municipality refused to recognize the elections held by Stefanski's employees." The court already addressed this issue in finding the claimed "elections" did not meet the requirements under § 9 of the NLRA, and were not sufficient either to reject § 9(a) representation or to relieve Skookum of its obligation to comply with the § 8(f) agreement it entered into. Stefanski does not provide additional evidence that persuades the court that in failing to recognize an invalid election, the Municipality acted either subjectively in bad faith or in an objectively unreasonable manner.
The fifth, and final, allegation of breach of the covenant of good faith and fair dealing arises from Stefanski's allegation that the Municipality did not give "any clear notice to Stefanski as part of the bid process that he would be required to join the IBEW Union as a condition of the contract." As discussed above, a signatory to a contract signs a contract without reading it fully at his or her own peril. Failure to read the terms of a contract will not allow a person to ignore the obligations of that contract. Admittedly, the Outside Agreement is lengthy. However, by signing the LOA agreeing to comply with the Outside Agreement, Skookum bound itself to comply with all the terms of that agreement, including § 2.19, which requires all employees covered by the agreement "to become and remain members of the Union as a condition of employment." The Municipality offer[s] evidence that the IBEW informed Stefanski of at least some of the requirements of the Outside Agreement prior to Stefanski signing the agreement. However, even without relying on this assertion, the court finds as a matter of law that Stefanski was put on notice by signing the LOA that he was required to comply with the Outside Agreement. It was his responsibility, prior to signing the agreement, to read the terms of the contract he signed. There is no indication of a subjective malicious action or intent on the part of the Municipality to deprive him of the benefit of the contract, nor is there evidence to show the Municipality acted unreasonably in its failure to explicitly single out this particular requirement of the contract for Stefanski's awareness. It is not the Municipality's duty to explain all the requirements of a bid to a potential bidding party. The Municipality's Invitation to Bid notified that he needed a LOA in order to bid on the contract. The LOA in turn notified Stefanski that he was required to comply with the Outside Agreement. As part of the contract he signed, it was Stefanski's responsibility to read the terms of that agreement.
WILLISTON ON CONTRACTS (4th Ed.) § 70:113.
The court finds as a matter of law that the Municipality did not breach the implied covenant of good faith and fair dealing in any of the instances alleged above. Stefanski offers no evidence to support any of its allegations that the Municipality subjectively operated in bad faith or with an impermissible motive. Nor does it demonstrate with any evidence that, objectively, the Municipality acted unreasonably. Under the contract with Stefanski, either party was authorized to terminate the contract upon material breach by the other, after providing the breaching party with 15 days notice and an opportunity to cure. The covenant of good faith and fair dealing will not override the terms of that contract to offer more protection than is contracted for by the parties. The contract required that the terminating party give the breaching party 15 days notice to cure the alleged defect. Stefanski materially breached the contract, and the Municipality terminated it after providing proper notice as required by the contract terms. There is no evidence offered that suggests that at any time in its dealings with Stefanski and Skookum the Municipality breached the duty of good faith and fair dealing it owed to Stefanski.
Ramsey, 936 P.2d at 133.
V. CONCLUSION
The Municipality's motion for summary judgment is GRANTED. Skookum was obligated to comply with the terms of the Outside Agreement as a condition of the LOA it signed. When it failed to comply with that agreement it was in material breach of its contract with the Municipality, and the Municipality was justified in terminating the contract.
Stefanski's cross-motion for summary judgment is DENIED. There is no evidence to support a finding that the Municipality was in breach of the implied covenant of good faith and fair dealing.
The Municipality will submit an appropriate judgment reflecting this order within ten business days.
DATED: November 2, 2009.