Court Opinion

ID: 4715086
Source: CourtListenerOpinion
Date Created: 2021-08-12 00:43:14.68657+00
Date Added: 2024-06-11T08:07:25.707946
License: Public Domain

¶24 (dissenting) — I agree with the majority on several points. I agree that res judicata does not bar the University of Washington’s (University) claims in this case. I agree that the members of the plaintiff class— University faculty whose performance in the 2008-2009 academic year was deemed meritorious — substantially performed their obligation under the merit pay contract at issue here (Executive Order 64 (EO 64)). I also agree with the majority, as do the plaintiffs, that the faculty were on notice that the merit pay policy could be reevaluated. And *42I therefore agree that the primary question this case presents is what the term “reevaluation” means in the context of that policy. Majority at 39.
Gordon McCloud, J.
*42¶25 I disagree with the majority’s answer to that question. The majority concludes that in EO 64’s “Funding Cautions” provision, the term “reevaluation” really means revocation. Id. Because that conclusion is contrary to numerous well-settled principles of contract interpretation, I respectfully dissent.
ANALYSIS
¶26 A court’s primary task in interpreting a contract is to give effect to the parties’ intent. U.S. Life Credit Life Ins. Co. v. Williams, 129 Wn.2d 565, 569, 919 P.2d 594 (1996) (citing Eurick v. Pemco Ins. Co., 108 Wn.2d 338, 340, 738 P.2d 251 (1987)). To determine that intent, the court reads the contract as a whole, giving its terms their plain and ordinary meaning. Dickson v. Hausman, 68 Wn.2d 368, 370-71, 413 P.2d 378 (1966). Where terms in a contract are susceptible to more than one reasonable interpretation, extrinsic evidence is admissible to help resolve the ambiguity. Hearst Commc’ns, Inc. v. Seattle Times Co., 154 Wn.2d 493, 502, 115 P.3d 262 (2005). Thus, we may look to the circumstances surrounding the formation of a contract, including the conduct of the parties, to determine which party advances the better of two reasonable interpretations. Id.
¶27 In this case, the parties agree that the Funding Cautions provision was intended to authorize prospective changes to the merit raise policy, because it “notified the faculty that a 2% raise was not guaranteed throughout their academic careers.” Appellants’ Reply Br. at 4; see also Suppl. Br. of PI. Faculty Class at 10 (“The reevaluation provision makes it plain that the University is not making a career-long promise, and it retains the right to prospectively change the policy.”). The University contends that *43the provision was also intended to “allow [ ] the President to respond quickly to urgent situations, such as the budget cuts in this case,” by effecting the immediate suspension of raises already earned through meritorious performance. Suppl. Br. of Resp’t at 11.
¶28 The majority credits this argument with very little discussion.2 It does not read EO 64 as a whole, and it does not address any of the circumstances surrounding the formation of the merit pay contract. Instead, the majority summarily concludes that the term “ ‘reevaluate’ indicates a procedural requirement” and dismisses the faculty’s position as reading in a term: specifically, a “15-month waiting period” before any merit raise cancellation could take effect. Majority at 39.
¶29 This strained interpretation misstates the faculty’s position. The faculty does not argue that EO 64 requires the University to observe a “waiting period” before modifying terms in the merit pay contract. Id. Rather, it argues that the Funding Cautions provision authorized prospective changes to the merit pay policy but not the cancellation of raises already earned.
¶30 I dissent from the majority’s decision because I conclude that the faculty advance the only reasonable interpretation of the Funding Cautions provision. I reach that conclusion for three reasons.
*44¶31 First, the University’s interpretation of the Funding Cautions provision is not consistent with EO 64 as a whole. The University contends that the Funding Cautions provision rendered the merit pay promise contingent on legislative appropriations. But EO 64, which is primarily a statement of salary-related priorities, explicitly distinguishes between salary increases that are mandatory, those that are discretionary, and those that are contingent on legislative appropriations. It makes mandatory the two percent raise following a year of meritorious performance while making other “allocations” — e.g., for promotions in rank and “to address differentials occurring in the academic labor markets” — merely discretionary. Clerk’s Papers (CP) at 338 (EO 64, at 3). Most importantly, it provides that other “higher levels of salary increases [shall be awarded] as permitted by available funding.” CP at 337 (EO 64, at 2) (emphasis added). Had the University intended to make the two percent merit raises contingent on legislative appropriations, it could easily have done so explicitly, as it did with respect to the “[bjigher level[ ]” increases. Id. The fact that the University specifically designated some raises as contingent on legislative appropriations indicates that it did not intend to make others similarly contingent. See Burton v. Douglas County, 65 Wn.2d 619, 622, 399 P.2d 68 (1965).
¶32 Second, the record contains no support for the theory that the merit raise promise was intended to be contingent. The University adopted the merit raise policy in response to a report by the “Ad Hoc Advisory Committee on Faculty Salaries” in 1998, which concluded that “[t]he low level of faculty salaries at the University of Washington” threatened the University’s long-term survival:
Many current [University] faculty members do not receive a salary sufficient to allow them to purchase a home in the Seattle metropolitan area. There is a widespread belief that an increasing number of [University] departments and colleges can no longer compete successfully to hire the best candidates *45for faculty positions. These conditions are beginning to erode the quality and social fabric of a great university.
CP at 1160-61. To remedy that problem, the committee recommended that the University implement a system of regular merit evaluations and “opportunities for career advancement in salary for all faculty who are judged to be meritorious.” CP at 1160. A faculty senate meeting “Bulletin” from April 1999 refers to the newly proposed faculty salary policy as “sustain [ing] a predictable and regular salary progression for meritorious faculty.” CP at 288 (emphasis added).
¶33 When the University adopted the merit raise policy in January 2000, it made a number of statements to faculty that characterized the policy as a guarantee and specifically distinguished it from a mere aspiration contingent on legislative appropriations. A January 2000 letter from then President Richard McCormick described the policy as the University’s “commitment to a 2% salary adjustment every year for faculty who are deemed meritorious.” CP at 303 (emphasis added). The 2001 edition of the university handbook and the faculty code described the Faculty Salary Policy as the University’s “commit [ment] to providing every faculty member whose performance is deemed meritorious with a 2% yearly increase.” CP at 1195. It then stated that “[<Additional levels of increase are dependent upon funding.” Id. (emphasis added). By contrast, the University points to nothing in the record, other than the disputed Funding Cautions provision itself, which put faculty members on notice that their meritorious performance did not actually entitle them to a raise.
¶34 Finally, this court has previously rejected arguments similar to the University’s. In Carlstrom v. State, 103 Wn.2d 391, 392-93, 694 P.2d 1 (1985), the Yakima Valley College Federation of Teachers (Federation) negotiated an agreement with the State according to which the teachers would receive a salary increase of about seven percent in each of the following two academic years. The agreement contained *46a provision stating that it was “ ‘subject to all present and future acts of the legislature.’ ” Id. at 393. Halfway through the life of the agreement, the legislature passed a bill “ ‘defer[ring]’ ” appropriations for the salary increases until after the agreement expired. Id. The Federation sued, claiming the “ ‘deferral’ . . . was in reality a cancellation of the contractual increase” that violated the state and federal constitutions’ contract clause protections. Id. at 393-94.
¶35 This court agreed, reasoning that “[t]here is no doubt from the facts in this case that the State was fully aware how to make its contracts contingent on future acts of the Legislature” and concluding that it had not done so in the contract with the Federation. Id. at 394; see also Caritas Servs., Inc. v. Dep’t of Soc. & Health Servs., 123 Wn.2d 391, 406-07, 869 P.2d 28 (1994) (citing Carlstrom, 103 Wn.2d at 393-95, for the rule that if a state agency wishes to reserve the right to retroactively modify its contractual obligations in response to new legislation, it must do so explicitly).
¶36 Like the State in Carlstrom, the University here made a promise to its employees, decided that it did not want to keep that promise, and then argued that a vague contractual provision made that promise contingent. As in Carlstrom, the facts belie that argument.
CONCLUSION
137 The University knew how to make a salary increase contingent on legislative appropriations — this is clear from the terms of EO 64 itself. With respect to the merit raise, it did not do so. Instead, it promised faculty members that meritorious performance would be rewarded with a raise in the following year. The plaintiffs in this case rendered meritorious service in reliance on that promise. They substantially performed their obligations under the merit pay *47contract, and they are entitled to enforce it. I therefore dissent.
C. Johnson, Stephens, and González, JJ., concur with Gordon McCloud, J.
Reconsideration denied October 10, 2014.

 The majority claims not to “credit the [University]’s argument that the Funding Cautions language made the merit raise policy contingent on legislative funding.” Majority at 39. This is puzzling. There are only two possible interpretations of the ambiguous “funding cautions” provision at issue in this case. EO 64. According to the faculty, the Funding Cautions provision means that the merit raises are not guaranteed forever. According to the University and the majority, the provision means that the merit raises are never guaranteed — that they can be rescinded even after faculty members have earned them through substantial performance.
The University offers only one argument to support its (fairly extreme) interpretation: the argument that the Funding Cautions provision was intended to allow the University to respond immediately to shortfalls in legislative funding. According to the University, the faculty members knew that the merit raise contemplated this immediate response and therefore also knew that the merit raises were never truly guaranteed. If the majority does not credit this argument, it has no basis for rejecting the faculty’s interpretation of EO 64.