Opinion
No. 45676-8-I.
Filed: June 11, 2001. DO NOT CITE. SEE RAP 10.4(h). UNPUBLISHED OPINION.
Appeal from Superior Court of King County, No. 95-2-16677-6, Hon. Glenna S. Hall, November 5, 1999, Judgment or order under review.
Counsel for Appellant(s), Dan W. Kilpatric, Davidson Czeisler Kilpatric Zeno, P.O. Box 817, Kirkland, WA 98083.
Counsel for Respondent(s), Frederick E. Wollett, City of Seattle Law Dept, 600 4th Ave 10th Flr, Seattle, WA 98104.
This appeal concerns interpretation of a class action settlement agreement. The question is whether a substitute employee of the Seattle Public Library is eligible for 'regularization,' a process created under the agreement to grant benefits to employees whose appointments are for less than half time work, but who work more than half time for a designated interval. The agreement is ambiguous on this point.
Our de novo review of the stipulated evidence persuades us she is eligible.
Procedural History
This litigation grew out of Scannell v. City of Seattle, a city-wide class action seeking benefits for intermittent employees. After a decision by the State Supreme Court, the city-wide action was settled. The settlement provided (among other things) that certain intermittent, temporary, part-time, and substitute employees could acquire retirement benefits. Library employees were among the class members, and received benefits under the settlement.
Scannell v. City of Seattle, 97 Wn.2d 701, 648 P.2d 435 (1982), opinion amended, 656 P.2d 1083 (1983) (city charter requires City to provide intermittent employees proportionate vacation pay).
Because the Library uses a different personnel system, a separate class action was filed on behalf of Library employees in 1990. At issue in Hughes v. City of Seattle was health care benefits and paid leave for part-time, substitute, and temporary Library employees. The Hughes class certification order identified the class as:
The agreed class certification order was based upon a stipulation of the parties. It was signed by the author of this opinion, who was then serving on the King County Superior Court. The author had no other connection with this case at the trial level.
Past, current and future employees of the City of Seattle employed in the Seattle Public Library who are considered or designated as regular part-time scheduled for less than 20 hours per week, regular substitutes, or temporary, and who, because of their status or designation, did not receive the employee benefits or compensation provided to full-time regular employees of the Library.
Clerk's Papers at 310.
The Hughes trial judge made an oral ruling in favor of the employees. Settlement negotiations occupied some months thereafter, and an agreement was approved in November, 1992. Among other things, the agreement provided that under the following circumstances, an employee could become regularized:
2. Regularization of an employee.
The employment of an employee who has any regular appointment(s) for a total of less than 40 hours per [two week] pay period for work actually (not average) totalling 40 hours or more . . . in each pay period for 26 consecutive pay periods shall convert the employee's assignment into a regular appointment of at least 40 hours per pay period.
Clerk's Papers at 1006 (emphasis added). Employees thus regularized were eligible for health benefits and paid leave.
Ellinor James was a substitute librarian. During 1994, James worked 19 consecutive pay periods in excess of 40 hours. Citing the agreement, her union notified her supervisor that she was entitled to health benefits and should be regularized.
Under the settlement agreement, class members are eligible to obtain health benefits if they actually work a minimum of 40 hours in each pay period for 13 consecutive pay periods. Benefits continue for a minimum of one quarter.
Abruptly, the Library reduced James' hours, and she was not thereafter scheduled to work more than 40 hours in any pay period. The Library refused to regularize her, and James filed this action seeking arbitration under the agreement. She claimed eligibility for benefits, and that the Library's reduction in her hours was intended to prevent eligibility for benefits in violation of the Prevention of Abuses section of the agreement, entitling her to double damages under RCW 49.52.070.
The Prevention of Abuses section provides that:
The Library shall not reduce hours of work . . . solely to avoid either regularization or payment of health care premiums for class members. . . .
A reduction in hours shall be deemed to have the effect of denying the employee health benefits or regularization if the reduction follows at least 10 pay periods during which the employee has consecutively worked 40 or more actual hours per pay period in the case of health benefits, and 20 pay periods in the case of regularization, under the terms specified in this settlement.
Clerk's Papers at 1006-07.
On summary judgment, the trial court ruled James was not eligible for regularization. We reversed, because questions of fact existed as to the intent of the parties on the issue.
The court permitted the arbitration to go forward on the health benefits issue, which involved a different section of the settlement agreement. The arbitrator found the Library violated the Prevention of Abuses section of the agreement by wrongfully reducing James' hours in order to prevent regularization, and that this had the effect of denying her health care benefits. He awarded back pay and double damages. Judgment was entered on the award, and no appeal was taken.
James v. City of Seattle, No. 38550-0-I (Wash.Ct.App. Aug. 18, 1997).
On remand, the parties stipulated to trial upon written evidence. After considering the record and argument, the court concluded that a substitute is not eligible for regularization. James again appeals.
Discussion
When an appellate court is in as good a position as the trial court to judge the evidence, our review is de novo. In Re Rosier, 105 Wn.2d 606, 616, 717 P.2d 1353 (1986) (appellate court not bound by trial court's findings of fact when the record on appeal is identical to that considered by the trial court). The record on review comprises approximately 1,200 pages. Materials from the original Hughes litigation include the class certification order, motions for summary judgment, transcripts of the court's oral rulings and a proposed (unsigned) order granting summary judgment to plaintiffs, memos in support of the settlement agreement, notice of settlement to the class members, and the settlement agreement itself. Materials from this litigation include declarations and depositions from the attorneys who drafted the Hughes agreement, the deposition of Ellinor James, and depositions and statements from multiple Library employees.
We have ruled that following a trial by affidavit, in which the trial court is required to enter findings of fact, we review for substantial evidence. In Re Marriage of Stern, 68 Wn. App. 922, 928-29, 846 P.2d 1387 (1993) (child support modification). Federal courts utilize this standard of review in all cases, on the basis of judicial economy. See Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 574, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985) (the trial on the merits should be the 'main event' rather than a 'tryout on the road'). Following Bessemer City, the federal rule was amended to reflect that view: 'Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous[.]' Fed.R.Civ.P. 52(a). This standard of review is sensible for a trial on stipulated evidence. First, the trial court has the benefit of extended argument and the opportunity to question counsel on all aspects of the evidence — an advantage not available to the appellate court. Second, if the trial court is reviewed de novo, the entire proceeding at the trial court level is mooted by appellate review, resulting in waste of judicial resources, and the resources of the parties. Because our Supreme Court has yet to address this issue, and has adopted the de novo standard, however, we apply a de novo standard. We note that the holding in In Re Rosier, 105 Wn.2d 606, 717 P.2d 1353 (1986) is based upon Smith v. Skagit County, 75 Wn.2d 715, 453 P.2d 832 (1969) in which the court held de novo review appropriate where the trial court has not been required to assess credibility 'nor reconcile conflicting evidence.' Smith, 75 Wn.2d at 718. The trial court here did reconcile conflicting evidence, and we believe the better standard of review to be a substantial evidence standard. The result here would be the same under either standard.
The objective for the court interpreting a contract is to ascertain the intent of the parties. Berg v. Hudesman, 115 Wn.2d 657, 663, 801 P.2d 222 (1990) (citing Corbin, The Interpretation of Words and the Parol Evidence Rule, 50 Cornell L. Quar. 161, 162 (1965)). The same standard applies to settlement agreements. See Schwartz v. Florida Bd. of Regents, 807 F.2d 901, 905 (11th Cir. 1987).
In determining intent, relevant inquiries include circumstances surrounding the making of the contract, subsequent acts and conduct of the parties to the contract, and the reasonableness of respective interpretations advocated by the parties. Berg, 115 Wn.2d at 667 (citing Stender v. Twin City Foods, Inc., 82 Wn.2d 250, 254, 510 P.2d 221 (1973)). Examination of extrinsic evidence as well as the agreement itself is appropriate. Berg, 115 Wn.2d at 667. Where, as here, the agreement specifically provides it 'supercedes all negotiations, offers, discussions, and proposals and all such matters are merged into this agreement,' Clerk's Papers at 1028, extrinsic evidence may not contradict the terms of the agreement, but may only elucidate their meaning to the parties. Berg, 115 Wn.2d at 670.
The provision chiefly at issue is of course the regularization paragraph, under which only an employee who has a regular appointment is eligible. Central to the dispute is the proper interpretation of words used throughout the agreement: 'regular,' 'appointment,' and 'classification.' The term 'regular' is not defined in the agreement, but the agreement does define 'appointment':
An appointment is the position given a Library employee upon hire, promotion or reclassification which corresponds to a specific job title within the Library's classification system. All regular appointments come with an authorized level of hours which ranges from zero to 40 in a week. . . . Substitute appointments carry no specification of the number of hours of work which the Library agrees to make available. . . .
Clerk's Papers at 1009 (emphasis added). Substitute employees are defined as 'Library employees who are appointed to a job classification . . . entitled 'Substitute." Clerk's Papers at 1011.
These definitions are sources of confusion, rather than clarification. The term 'regular' has had a checkered history in the Library's vernacular; the distinction between appointment and classification is unclear; and substitutes are the only employees with an authorized level of zero hours.
The confusion begins with varying use of the term 'regular' in Library personnel practices. An employee was hired (appointed) to a particular job in the classification system. In 1982, there were two types of appointments for Library employees: permanent, and temporary (hired for less than 12 months). Later, the Library discontinued use of the term 'permanent' and replaced it with 'regular.' Classifications were also referred to as regular, to distinguish them from substitute classifications. James was appointed to a substitute classification. An assistant managing librarian who supervised James described her just as she describes herself: as having a regular appointment to a substitute classification. Not surprisingly, usage of these terms tended to merge, and common terminology did not always reflect these distinctions. Rather than reference a regular (versus temporary) appointment to a regular (versus substitute) classification, the common shorthand eliminated reference to the classification. So an employee was described as having a regular or substitute appointment, when the real reference was to classification.
An explanation of these terms was provided in 1982 by John Lyall, then the Library's personnel manager, who gave the following description of appointments and classifications:
Persons who are employed by the Seattle Public Library have received an appointment to a classification. An appointment describes the employer-employee relationship. An employee's appointment can be either permanent or temporary. . . . [W]hat jobs the employees may do, and what the pay rate will be, is determined by which one of those classifications the employee has been appointed to.
There are two types of job classifications. . . . [A] regular classification has an assigned [number of hours] and a five or seven step pay range. A substitute classification has no hours assignment and only a single rate for a pay 'range.' Clerk's Papers at 428 (italics ours). In 1987, Lyall wrote a memorandum entitled 'Guidelines on the Use of Appointments to Substitute Classifications.' The memo included the following:
GENERAL TERMS: REGULAR VS. TEMPORARY EMPLOYEES The Seattle Public Library has two kinds of employees: regular employees and temporary employees. A temporary employee is an employee who is hired for a specifically limited length of time. . . . A regular employee is hired without having a specifically limited duration of employment. Clerk's Papers at 429.
The parties were aware of this history when they negotiated the settlement, yet the shorthand usage continued. The agreement refers, apparently interchangeably, to substitute appointments, substitute classifications, and substitute employees. For example, the agreement contains the following references: 'substitute appointments' (Clerk's Papers at 1009, 1019, 1020); 'a classification that is identified as regular, not substitute' (Clerk's Papers at 1010); 'hours in any classification, including part-time, substitute and temporary' (Clerk's Papers at 1010); 'the employee in the substitute classification will . . . receive premium pay' (Clerk's Papers at 1012); 'appointed to a position in a substitute classification (a substitute Library employee)' (Clerk's Papers at 1017).
The Definitions section of the agreement provides that Unless otherwise noted in this Settlement, personnel terms . . . are defined as stated in this subsection. These definitions are not intended to change the Library's current definitions, or the Library's practices concerning these definitions, unless required by the express terms of this Agreement. Clerk's Papers at 1008-09.
Because the term 'regular' is not separately defined in the agreement, however, the agreement does not change its meaning. The Library argues that in the usage of the agreement, regular and substitute appointments are mutually exclusive, while James argues the definition of 'appointment' contemplates that regular appointments include substitute appointments.
The only difference in the definition between regular and substitute appointments lies in the 'authorized hours' concept — but regular appointments 'come with an authorized level of hours which ranges from zero to 40,' Clerks Papers at 1009, and substitutes are the only employees with authorized hours of zero. Payroll and personnel records describe substitutes as having regular appointments with zero authorized hours. James contends that 'the concept of 'authorized hours of zero' for substitutes . . . was an important term of art in the litigation.' Appellant's Brief at 30. This assertion is supported by the declaration of the attorney who negotiated the settlement for the Hughes class. See Clerk's Papers at 297. Allegedly, the Library procedure had been to pay benefits based upon the number of hours 'authorized,' rather than the number of hours worked.
The Library also points to other language distinguishing substitute from regular appointments ('Regular employees who lose all regular . . . appointments, but who retain . . . one or more of substitute appointments. . . .' Clerk's Papers at 1019; 'The Library agrees that substitute Library employees who hold no regular appointments. . . .' Clerk's Papers at 1020; 'Each substitute appointment is a separate appointment, even for employees with an existing regular appointment.' Clerk's Papers at 1011). But these examples all appear consistent both with the shorthand reference for appointments to regular versus substitute classifications, and with the agreement definition of appointment, which appears to treat both substitute and temporary as subcategories of regular appointments.
The Library also argues that 'regular appointment' really means 'regularly scheduled and benefited,' relying upon a 1992 letter to James from John Lyall, the former Library personnel manager: 'Typically [a substitute employee] may be asked to cover an unplanned absence of a staff member holding what is called a 'regular' (regularly scheduled and benefits-eligible) appointment. . . .' Clerk's Papers at 739. The Library points to no other document containing this definition. Aside from the fact this is not the definition in the agreement, the difficulty with this argument is that this letter was not part of the Hughes discovery and was not disclosed to the negotiators of the settlement, so it could have played no part in forming their intent in the agreement. In addition, Lyall authored the two memoranda explaining the Library's terminology, which support James' interpretation of the language. See n. 8, supra. Differences between regular and temporary, and regular and substitute, thus appear clearly viable only in the context of classifications, where all the distinctions are apparently preserved — but classification is not the reference in the regularization provision. In short, the usage of these terms was jumbled before the agreement, and the agreement continued rather than cured the confusion.
The question remains what usage was intended by the term 'regular appointment' in the regularization paragraph. The Library urges us to conclude that its reading of the agreement is the more reasonable. It contends that if substitutes could be regularized, the agreement would be unworkable because the City would have no basis for knowing whether workload demands would justify a guarantee of minimum hours in future. But the entire structure of the agreement is aimed at preventing the Library from using employees as if they were fully benefited without providing those benefits. The Library can avoid regularization by means of the 'continuous cap on hours' provision. It is not apparent why this reading of the agreement is not workable.
The Prevention of Abuses section provides that 'the Library may continue to impose a continuous cap of fewer than 40 hours of work per pay period.' Clerk's Papers at 1006.
The City also contends its reading is the more reasonable because premium pay, not regularization, is the sole remedy for substitutes. But the premium pay provision is parallel to that adopted in Scannell; the reason for the Hughes litigation was to address the unique aspects of the Library system. Further, premium pay in lieu of benefits existed for substitutes before the agreement, at a flat rate of 8.8 percent; the agreement increased that benefit to a rate graduating from 5 percent to a maximum of 25 percent, based upon hours accumulated. This remedy applies to all substitutes, and does not address the issue of using substitutes as long-term replacements for fully-benefited workers. James, on the other hand, maintains that regularization is the remedy substitutes sought from the beginning. In a letter to the City's attorney during settlement negotiations, class counsel stated:
[I]t is absolutely essential that the Library be prohibited from deliberately scheduling substitutes for work for the purpose of making them ineligible for benefits, not based on the work needed to be done. We recognize that it might be hard for employees to prove the Library's intent, but this currently is the Library's intent, and it must be stopped, in some way, to avoid abuses. Otherwise, your suggestion that employees could be 'regularized' if they work a certain number of hours in 'discreet [sic] locations' and 'specific job titles' could be made meaningless by simply establishing a deliberate rotation system to ensure that each person moved around enough to not quality [sic] for benefits. There must be some way to draft a provision to preclude such abusive conduct.
Clerk's Papers at 154. This demonstrates that both the Hughes plaintiffs and the City contemplated regularizing substitutes.
James also points out that regularization was available for substitutes before the settlement. The settlement modified previous procedure by allowing regularization only after 26 two-week pay periods, rather than 13. James contends if substitutes are now ineligible for regularization, the agreement abolished previous practice, and the only employees who really need regularization — substitutes working more than 20 hours per week — may work full time for years without benefits.
The Library responds that regularization for substitutes in the past was only theoretical, because the record contains no evidence of any substitute employee being regularized; rather, the record shows only that temporary employees were regularized, and the settlement agreement thus merely maintains the status quo. See Respondent's Brief at 42. The City is incorrect. According to the Library's scheduling coordinator, Michael Wilson, substitutes were regularized before the agreement.
Finally, the City argues that in the compromise involved in all settlements, the regularization remedy sought by the class was not achieved ('[T]he fact that the Hughes plaintiffs may have wanted the moon does not mean that they got the moon.' Respondent's Brief at 41). If this is so, however, the agreement does not make it clear. Neither party's interpretation perfectly reconciles all the language, and both parties present reasonable interpretations. The interpretation James urges appears more consistent with the objectives of the litigation, and with the facts that past practice included regularization for substitutes, and the agreement permitted the Library to avoid regularization by scheduling appropriately. Perhaps most telling, however, James' interpretation is also completely consistent with the post-agreement conduct of the Library. This agreement was crafted as the culmination of a class action. It was therefore subject to court approval under CR 23(e), and in that process, certain documents were required. First, the parties formally sought the court's approval of the 50-page agreement. In a memo urging the court to approve the settlement as fair to the class, counsel for the class described the regularization provision thusly:
'3. Regularization of Employees. Any employee who works 40 hours or more each pay period for a year becomes a regular Library employee. The Scannell plaintiffs were not able to obtain this relief.'
Clerk's Papers at 560 (emphasis added).
Although the City took issue with other items in the memo, the City indicated no disagreement with this description. See Clerk's Papers at 148-49 (declarations of counsel for the Library, submitted in support of the agreement). The City's own memo supporting the settlement did not address regularization in any contradictory way. Based upon these memoranda, the class action judge tentatively approved the agreement, and ordered notice to the class. Drafted and signed by counsel for both sides and approved by the court, the Notice to Class Members described the settlement in pertinent part as follows: 'Class members . . . will be converted to regular employees if they work a minimum of 40 hours per pay period for 26 consecutive pay periods.' Clerk's Papers at 552 (emphasis added). Class members, of course, included 'regular substitutes,' which is the only possible description of James in the class certification order. The Library does not dispute that James is a member of the class.
We consider these two documents in particular — the uncontradicted memo, and the Notice — to have great weight. A representation made to and relied upon by the court will presumably bind the party against whom asserted. Where a party knows what is occurring and would be expected to speak to protect her interests, acquiescence manifests tacit consent. Bunn v. Walch, 54 Wn.2d 457, 463, 342 P.2d 211 (1959); accord Board of Regents, Univ. of Wash. v. City of Seattle, 108 Wn.2d 545, 554, 741 P.2d 11 (1987).
The memo and Notice are therefore strong evidence the parties intended that substitutes have the benefit of the regularization provision.
In addition, the Library's personnel manager sent a memo to all Library employees (and thereby most class members) describing the settlement, announcing that 'any temporary or substitute employee who works 40 or more hours for 26 consecutive pay periods will become a regular employee.' Clerk's Papers at 619.
The City takes the position that all these descriptions are simply inaccurate and should be disregarded. We are not persuaded. It is true that the Notice and memo both expressly deny they are complete representations of the settlement, and refer readers to the entire agreement. Given their purpose, however, the specific assertions of these documents should contain nothing to contradict the agreement, and they should be read to harmonize with it. In addition, the descriptions are not clearly inaccurate, at least with respect to substitute and temporary employees. We have already discussed regularization of substitutes; regularization of temporary employees is available not only under the settlement agreement, but under the collective bargaining agreement as well — the terms of which are expressly not changed by the settlement agreement. It is undisputed that temporary employees have been regularized in the past under the bargaining agreement.
The Notice and memo both referred the reader to the agreement itself for a full explanation. The Notice states that 'the actual agreement determines your rights, not this summary.' Clerk's Papers at 108. The memo states, 'You are cautioned not to rely solely on summaries such as this or any other.' Clerk's Papers at 649.
The only category clearly excluded from the regularization provision is that of temporary substitutes, who by the express terms of the agreement 'receive premium pay . . . in lieu of all other benefits, including benefits set forth in this Settlement for other groups of temporary employees.' Clerk's Papers at 1021.
The Library's objection that there was no need to regularize temporary employees because regularization requires at least a year to earn, while by definition, a temporary employee works less than a year, ignores the fact that in the past, temporary employees have indeed worked more than a year and been regularized as a result.
Under the Library's collective bargaining agreement, which was not changed by the settlement agreement, temporary employees were regularized and received full rights under the bargaining agreement after 12 months.
The settlement agreement defines temporary employees as those appointed for less than 12 months.
The City argues that the memo from the personnel manager should be disregarded in favor of a later memo sent to the Library supervisory staff several days after the first memo appeared. The second memo did not include substitutes in the group of employees described as eligible for regularization, described provisions for substitutes without referring to regularization, and stated that part-time employees are eligible for regularization. This second memo did not, however, renounce the unequivocal statement in the first memo that substitutes are eligible for regularization. And it was not sent to the class members.
Finally, James points to the arbitrator's award of double damages, which was based upon a determination the Library had reduced her hours to avoid regularization in violation of the Prevention of Abuses section of the agreement. James argues this determination is preclusive on the issue of 'whether the Library understood that substitutes were eligible for regularization.' Appellant's Brief at 39. The arbitrator's determination of motive was necessary to a decision on James' double damages claim, but we are not here deciding the same question, and the finding has no preclusive effect on the question of interpretation of the agreement, because that question was not before the arbitrator. Misinterpretation or misunderstanding could account for actions after the agreement; we are concerned only with the intent of the parties at the time the agreement was reached.
Collateral estoppel depends upon the existence of a final judgment on the identical issue. Thompson v. State Dept. of Licensing, 138 Wn.2d 783, 790, 982 P.2d 601 (1999). This judgment can be a decision in an arbitration proceeding, so long as the issue was necessary to the judgment. Robinson v. Hamed, 62 Wn. App. 92, 96-97, 813 P.2d 171 (1991).
Both parties object to consideration of certain evidence. James objects to declarations of library personnel who testified that substitutes do not have regular appointments, characterizing them as inadmissible 'post hoc assertions of unilateral subjective 'intent." Appellant's Brief at 45. As to the declarations of Willean Denton, Library human resources manager, and Bob May, administrative services director, their descriptions of post-agreement practice are admissible as evidence of subsequent conduct. Berg v. Hudesman, 115 Wn.2d 657, 668, 801 P.2d 222 (1990); see also W. Alton Jones Foundation v. Chevron U.S.A., Inc., 97 F.3d 29, 33 (2d Cir. 1996) (parties to an agreement know best what they meant, and their action under it is often the strongest evidence of their meaning).
James also objects to the personnel director's second memo to supervisory staff for the same reasons, but again, under Berg, subsequent conduct of the parties is admissible to determine their intent at the time of the agreement. Berg, 115 Wn.2d at 668. James also objects to Lyall's 1990 letter to her explaining her status as a substitute, but this is admissible evidence of the practice of the Library at that time, especially since the agreement itself references previous usage of the terms in question. The fact the letter was not known to the negotiators goes to its weight, not its admissibility.
Both parties object to portions of the declarations of opposing counsel generated in this litigation; we have considered only the statements of fact (as opposed to opinion or expressions of unilateral intent) appropriate to an inquiry under Berg. For its part, the City contends our earlier decision was error because the agreement is fully integrated and contains no inconsistencies, and therefore no evidence is necessary outside the agreement. We reject this argument for the reasons stated in our previous opinion, and decline the City's invitation to overrule ourselves.
We have reviewed the entire record. Both parties offer reasonable interpretations of the regularization provision, but the interpretation offered by James is the more reasonable because it is consistent with previous practice, with the class litigation objectives, and with the Library's post-agreement conduct. We hold James is eligible for regularization under the agreement, and is entitled to arbitrate the regularization issue. We therefore reverse and remand for further proceedings consistent with this opinion.
Reversed and remanded.
WE CONCUR: GROSSE, J., BECKER, J.