Chapter 2



Chapter 10

Nature and

Terminology

Case 10.1

263 F.Supp.2d 358, 19 IER Cases 1838

United States District Court,

D. Rhode Island.

Derek A. ARDITO, et al.,

v.

CITY OF PROVIDENCE, et al.

C.A. No. 03-155T.

May 27, 2003.

TORRES, Chief Judge.

Introduction

The plaintiffs are fourteen individuals who have applied for positions as Providence police officers and were selected to attend the 61st Providence Police Academy, successful completion of which is a prerequisite to being hired. The plaintiffs brought this action to enjoin city officials from, now, excluding them from the Academy and replacing them with other applicants chosen on the basis of changed selection criteria.

The matter is before the Court for consideration of the plaintiffs' application for a preliminary injunction pursuant to Fed.R.Civ.P. 65(a). For the reasons hereinafter stated, the plaintiffs' application is granted and the defendants will be preliminarily enjoined from conducting the 61st Providence Police Academy unless the plaintiffs are included.

Facts

After observing the witnesses who testified during a four-day hearing and reviewing the exhibits, this Court finds the relevant facts to be as follows.

Sometime in 2001, the City of Providence (all defendants collectively referred to as "the City") decided to begin hiring officers to fill existing vacancies in its Police Department ("the Department") and additional vacancies that the City expected would result from anticipated retirements. Only individuals who graduate from a training academy conducted by the City are eligible to become Providence police officers. Accordingly, the City decided to conduct two consecutive training academies, the 60th and 61st Police Academies.

The size of each Academy is based on the number of vacancies that the City expects will need to be filled. The size of previous Academies has ranged from as few as four applicants to as many as fifty-eight. Originally, the 60th and 61st Academies were each to consist of fifty applicants; but, because Academy personnel complained that a school of fifty was too large, the number to be admitted to the 61st Academy was reduced to forty.

In order to be admitted to the Academy, an applicant must pass a series of tests and be deemed qualified by members of the Department who interview the applicant. Applicants are provided with a booklet describing the selection process and they complete an application form in which they acknowledge that although they may successfully complete all phases of the evaluation process and may be deemed qualified, they are not guaranteed acceptance into the Academy.

The selection criteria have varied slightly from academy to academy; but, generally, the process includes a physical agility test, a written examination, a background check and one or more interviews. The applicants deemed the most qualified, then, are tentatively selected to fill available slots in the Academy. At that point, a letter is sent informing those applicants that they have been selected to attend the Academy provided that they successfully complete a medical examination and psychological examination. Applicants who pass both examinations, then, are admitted into the Academy.

Members of each Academy class are ranked based upon their performance; and, upon graduation, they are hired, in the order of their ranking, to fill available vacancies in the Department. If there are more graduates than job openings, the City may either hire all of the graduates and temporarily lay off those not needed or the City may hire only those needed and put the others on a waiting list.

Before becoming permanent members of the Department, Academy graduates must serve a one-year probationary period during which they may be terminated even without cause. The collective bargaining agreement between the City and the police officer's union provides that once the probationary period is completed, a police officer can be terminated only for cause. The collective bargaining agreement also provides for job assignments, post assignments, vacation choices, layoffs, shift assignments, and the like to be made on the basis of seniority. In addition, seniority plays a role in promotions. Seniority among members of the same academy class is determined on the basis of rank within the class.

At the time the decision was made to conduct the 60th and 61st Academies, the police chief was Colonel Richard Sullivan. Colonel Sullivan asked Major Dennis W. Simoneau to chair a Majors' Board that would interview applicants as part of the selection process. Major Simoneau was chosen, at least in part, because evidence presented during a trial in which members of a previous administration were prosecuted for corruption (the "Plunderdome" trial) indicated that, when applicants were being selected for an earlier academy, Major Simoneau had opposed efforts to admit an applicant that Major Simoneau felt was unqualified and from whom it later was discovered a bribe had been solicited.

Major Simoneau agreed to chair the Majors' Board provided that "ground rules" were established for selecting applicants. Colonel Sullivan agreed and the procedure that was adopted consisted of the following steps.

Applicants first had to pass a physical agility test and a written examination. Although the written examination was scored, an applicant's score played no role in ranking that applicant for admission into the Academy because some community groups had expressed concern that the test was not fair to minority applicants. Accordingly, 70 was selected as a passing grade and applicants who attained a grade of 70 or more remained eligible for consideration.

The 391 applicants who passed both the physical agility test and the written examination, then, were interviewed by a Patrolmen's Board that usually consisted of four patrolmen and a lieutenant. The members of that Board had a list of five questions and lists of the points that they felt should be included in a satisfactory answer to each question. The same five questions were asked of each applicant and each Board member graded an applicant based upon the applicant's answers to the questions and the applicant's answers to follow-up questions asked by the Board. In addition, Board members had discretion to award "bonus points" for specified factors such as ability to speak more than one language. An applicant's score on the Patrolmen's Board was the total of the points received from each Board member.

Lieutenant Kenneth M. Cohen, the head of the Human Resources Department, then ranked the applicants according to their scores on the Patrolmen's Board and scheduled those with the highest scores for interviews by the Majors' Board chaired by Major Simoneau. The applicants were not scheduled in any particular order and the majors did not know where an applicant ranked.

Before the Majors' Board interviews were conducted, background checks were performed. The officer assigned to perform a background check submitted a brief report that included the officer's recommendation as to whether the applicant should be considered for the Academy. The reports were reviewed by Lt. Cohen who was supposed to schedule Majors' Board interviews only for those applicants receiving favorable recommendations.

All of the plaintiffs in this case, except Jerome Musco, received favorable recommendations; but, due to an oversight, Lt. Cohen scheduled Musco for a Majors' Board interview. The report on Musco did not contain anything negative about his character. It simply stated, "I do not feel that I can fully recommend Jerome to continue as a potential candidate" because "one of the character references he used did not even know him." The report concluded by saying, "Jerome fulfills the required age of 21, but I do believe it may be best for Mr. Musco to grow and mature a bit more and possibly reconsider a career in Law Enforcement at a later time." The reference alluded to was Major Simoneau, who Musco listed because he was an uncle of Musco's girlfriend at the time.

The Majors' Board consisted of Major Simoneau and Major Guido Laorenza. On a few occasions when Major Laorenza was unavailable, Captain Thomas Oates took his place. According to the procedure established by Colonel Sullivan, the Majors' Board was to go as far down the Patrolmen's Board rankings as was necessary to select the number of applicants required to fill the class. Although there were only fifty slots in the 60th Academy, the 125 applicants with the highest scores on the Patrolmen's Board were interviewed so that comparisons could be made. The seventy-five applicants not selected plus the twenty-five applicants with the next highest scores, later, were interviewed by the Majors' Board for the 61st Academy. Thus, for each Academy, the Majors' Board interviewed a number of applicants that was approximately double the number of spaces in the class and the Board selected what it considered to be the best of those applicants.

Prior to interviewing a candidate, Major Simoneau reviewed that applicant's file including the results of the background check. During the Majors' Board interview, Major Simoneau asked questions based, primarily, on information contained in the applicant's file, and Major Laorenza questioned the applicant about more general matters. The applicant also was asked to give a brief presentation on why he/she should be accepted into the Academy. At the conclusion of the interviews, all applicants were told that if they "passed" the Majors' Board, they would be offered a place in the Academy provided that they successfully completed a medical examination and a psychological examination.

Majors Simoneau and Laorenza felt that maturity was an important consideration in selecting for the 60th Academy because graduates of the 61st Academy would look to graduates of the 60th Academy for guidance on the job. Accordingly, age and work experience were two of the factors that they considered. Among the other factors that they considered were fluency in a foreign language, membership in a minority group, military background, police background, experience in a serviced-based occupation and college education. Each of them graded applicants, essentially, on a scale of 1-5 with 1 signifying most qualified and 5 signifying least qualified. Applicants rated 5 by either major were eliminated from consideration for that Academy. Applicants rated 1 or 2 by both majors were placed on the list of individuals who would be invited to attend the Academy subject to passing the medical and psychological examinations. The remaining slots in the Academy were filled after the majors discussed the applicants and reached agreement on who should be selected. The list of applicants selected for the 60th Academy by the Majors' Board was provided to Colonel Sullivan, who directed that conditional letters of acceptance be sent to them.

The seventy-five, or so, applicants not selected for the 60th Academy, were "recycled" and considered for admission into the 61st Academy along with the twenty-five applicants having the next highest scores on the Patrolmen's Board. Once again, those applicants were scheduled, in no particular order, for Majors' Board interviews. When those interviews had been completed, Major Simoneau presented a list of the forty applicants who had been selected to Major Laorenza, who had succeeded Colonel Sullivan as Chief.

Chief Laorenza instructed Lt. Cohen to draft and send letters to the applicants on that list. Letters also were sent to two or three individuals who were unable to complete the 60th Academy because of injuries and had been promised consideration for the 61st Academy. Forty-two or forty-three letters were sent in the expectation that a few of the applicants interviewed would fail either the medical or psychological examination; and that, therefore, no more than forty would qualify. Because of the expense involved, the medical and psychological examinations generally were the last steps in the selection process and were administered only to the number of applicants needed to fill the available slots in the Academy.

Most of the letters were sent on October 15, 2002. [FN1] The first two paragraphs informed the recipient that he/she had placed high enough on the oral evaluation "to make you eligible to be accepted into the 61st Training Academy Class of this department depending upon your successfully passing the next two phases of the process" which were identified as "the psychological examinations and the medical examinations." [FN2] Those paragraphs further stated that the letter was "a conditional offer of employment" but reiterated that "selection as a participant in the Academy Class" was dependent upon "successful completion of the two remaining phases of the evaluation process."

FN1. Plaintiff Annis received the letter on September 23, 2002.

FN2. A sample of the October 15 letter is attached to this Memorandum & Order.

The third paragraph of the October 15 letter stated that, "there are more candidates then [sic] positions in the 61st Recruit Class" and that "[t]herefore an actual offer of employment will not be made until all of the results are known". That language was inserted only because Lt. Cohen believed that no final decision had yet been made as to whether the size of the class would be as many as forty or as few as thirty. That belief appears to have been erroneous because Major Simoneau testified that Colonel Sullivan previously had fixed the class size at forty. In any event, there was no question in anyone's mind that, if the class size was fixed at forty all of the recipients of the October 15 letter who passed the medical and psychological examinations would be admitted to the Academy.

All of the plaintiffs received the October 15 letter and all of them passed the medical and psychological examinations which were both lengthy and intrusive. [FN3] Most of the plaintiffs notified their employers that they expected to be leaving their jobs soon and some withdrew their names from consideration for other jobs.

FN3. Plaintiff Forlini had already taken and passed the psychological examination in connection with his application to the Warwick Police Department, so he was able to satisfy that portion of the requirements by signing a release authorizing Providence to obtain a copy of the results.

A couple of months after the October 15 letter was sent, Colonel Dean Esserman was hired to replace Colonel Laorenza as Police Chief. Because of rumors of favoritism and revelations regarding past irregularities in the selection of Providence police officers that surfaced during the "Plunderdome" trial, Chief Esserman ordered a review of the procedure employed in selecting applicants for the 61st Academy. He instructed Lt. Cohen to review the background checks that had been performed on applicants who had received the October 15 letter and he appointed a committee to report to him about the selection process. Lt. Cohen informed Chief Esserman that the officers performing the background checks had made favorable recommendations with respect to all of the applicants receiving the October 15 letter except plaintiff Musco. Nevertheless, after hearing the committee's report about how applicants were chosen, Chief Esserman did not feel "comfortable" with the selection process because he concluded that the scoring system used by the Majors' Board was too subjective and, therefore, was not a "best practice". Chief Esserman has made it clear that his concern was based solely on the process, itself, and not on any belief that the process was tainted by any impropriety or that the applicants selected are, in any way, unqualified. Indeed, the City has indicated that the plaintiffs might very well be accepted into a future academy.

Because of his dissatisfaction with the selection process, Chief Esserman directed Lt. Cohen to write to all applicants who passed the physical agility and written tests informing them that the process was being reviewed and asking them to notify the Department if they were still interested in admission to the Academy. That letter was sent on February 13, 2003, and all of the plaintiffs responded by reiterating their interest.

Eventually, Chief Esserman decided to revise the selection process by combining the scores received by each applicant on the written examination and the Patrolmen's Board and inviting the forty applicants with the highest combined scores to attend the 61st Academy, which he scheduled for April 28, 2003. Although Musco was among those with the forty highest scores, he was not invited, presumably because he had not been recommended by the officer performing his background check. None of the other plaintiffs had scores placing them in the top forty.

When the plaintiffs learned, through the "grapevine", that they were not going to be included in the Academy class, they brought this action seeking, among other things, to enjoin the City from conducting the Academy unless they were allowed to participate. Their complaint includes claims for breach of contract and violation of the Americans with Disabilities Act ("ADA"), 42 U.S.C. § § 12101 et seq.; and a § 1983 claim for deprivation of property without due process.

Preliminary Injunction Standard

[1] A party seeking a preliminary injunction must demonstrate:

1. That it is likely to ultimately succeed on the merits of its claim;

2. That it does not have an adequate remedy at law and will suffer irreparable harm before the case can be litigated on the merits if the injunction is not granted;

3. That such harm outweighs any harm that the adverse party will suffer if the injunction is granted; and

4. That the requested injunction will not adversely affect the public interest.

Collazo Rivera v. Torres-Gaztambide, 812 F.2d 258, 259 (1st Cir.1987); Planned Parenthood League of Mass. v. Bellotti, 641 F.2d 1006, 1009 (1st Cir.1981); Bertoncini v. City of Providence, 767 F.Supp. 1194, 1197 (D.R.I.1991).

Analysis

I. Likelihood of Success on the Merits

A. The Contract Claim

[2][3] A contract arises when the parties manifest their mutual assent to its terms and consideration is given. Rhode Island Five v. Med. Assoc. of Bristol County, Inc., 668 A.2d 1250, 1253 (R.I.1996); Smith v. Boyd, 553 A.2d 131, 133 (R.I.1989); see also John D. Calamari & Joseph M. Perillo, The Law of Contracts § 2.1 (3d ed.1987) [hereinafter "Calamari on Contracts"]; Laurence P. Simpson, Handbook on the Law of Contracts § 3 (1954) [hereinafter "Simpson on Contracts"]. Ordinarily, the expression of mutual assent takes the form of an offer by one party manifesting its willingness to enter into the proposed agreement and an acceptance of that offer by the other party. Smith, 553 A.2d at 133. In determining whether a contract exists, it is the words, conduct and other objective manifestations of intent that govern, but subjective intent may be considered in making that determination. Bourque v. Fed. Deposit Ins. Corp., 42 F.3d 704, 708 (1st Cir.1994) (citations omitted).

[4] In the case of a bilateral contract, acceptance consists of a promise by the offeree to render the bargained-for performance. B & D Appraisals v. Gaudette Mach. Movers Inc., 733 F.Supp. 505, 507-08 (D.R.I.1990). In the case of a unilateral contract, on the other hand, the offer invites and is accepted by actual performance. Id. at 508.

[5] In this case, the October 15 letter, particularly when considered in conjunction with what applicants were told when they appeared before the Majors' Board, is a classic example of an offer to enter into a unilateral contract. The October 15 letter expressly stated that it was a "conditional offer of employment" and the message that it conveyed was that the recipient would be admitted into the 61st Academy if he or she successfully completed the medical and psychological examinations, requirements that the City could not lawfully impose unless it was making a conditional offer of employment. See 42 U.S.C. § 12112(d)(2)(A).

Moreover, the terms of that offer were perfectly consistent with what applicants had been told when they appeared before the Majors' Board. At that time, Major Simoneau informed them that, if they "passed" the Majors' Board, they would be offered a place in the Academy provided that they also passed medical and psychological examinations.

The October 15 letter also was in marked contrast to notices sent to applicants by the City at earlier stages of the selection process. Those notices merely informed applicants that they had completed a step in the process and remained eligible to be considered for admission into the Academy. Unlike the October 15 letter, the prior notices did not purport to extend a "conditional offer" of admission.

[6] The plaintiffs accepted the City's offer of admission into the Academy by satisfying the specified conditions. Each of the plaintiffs submitted to and passed lengthy and intrusive medical and psychological examinations. In addition, many of the plaintiffs, in reliance on the City's offer, jeopardized their standing with their existing employers by notifying the employers of their anticipated departure, and some plaintiffs passed up opportunities for other employment. See Alix v. Alix, 497 A.2d 18, 21 (R.I.1985) (under the doctrine of promissory estoppel, an offeror whose promise induces an offeree to act or forbear to act is estopped from claiming the contract is invalid for lack of consideration) (citing Restatement (Second) of Contracts § 90 (1981)).

[7] The City argues that the October 15 letter should not be construed as a conditional offer of admission to the Academy because the third paragraph stated that the number of qualified applicants exceeded the number of available slots and that an "actual offer of employment" would not be made until "all of the results are known." This Court rejects that argument for several reasons.

First, at most, that paragraph may make ambiguous what, otherwise, was the clear and unequivocal offer set forth in the first two paragraphs that the recipient would be accepted into the 61st Academy if the recipient passed medical and psychological examinations. Since the defendants drafted the October 15 letter, if the letter contains an ambiguity that makes it susceptible to more than one reasonable interpretation, the letter should be construed in the manner most favorable to the plaintiffs. Employers Mutual Cas. Co. v. Pires, 723 A.2d 295, 298 (R.I.1999) (insurance policy construed in favor of the insured and against the insurer); Fryzel v. Domestic Credit Corp., 120 R.I. 92, 385 A.2d 663, 666-67 (1978) (ambiguities in a contract must be construed against the drafter of the document); A.C. Beals v. Rhode Island Hosp., 110 R.I. 275, 292 A.2d 865, 872 (1972) (any ambiguities or omissions in an agreement construed against the drafting party).

Here, the only ambiguity would be whether an applicant's admission to the Academy also was conditioned upon a final decision regarding the size of the class. Such an interpretation is, at least, debatable because, while an additional condition might be inferred from the statement that the number of qualified applicants exceeded the number of available slots, that inference appears to be inconsistent with the statement that an "actual offer of employment will not be made until all of the results are known". Since the only "results" not known when the October 15 letter was sent were the results of the medical and psychological examinations, the statement suggests that successful completion of those examinations were the only requirements on which the offer of admission was conditioned.

However, even assuming, arguendo, that the October 15 letter should be construed as making a decision fixing the size of the Academy class at forty an additional condition of admission, that condition was satisfied. A final decision has been made fixing the size of the Academy at forty recruits. Indeed, as already noted it appears that unbeknownst to Lt. Cohen, the decision had been made before the October 15 letter was sent.

Nor is there any question that the City intended to admit all of the recipients of the October 15 letter who passed the medical and psychological examinations provided that the Academy class consisted of forty recruits. Lt. Cohen, who drafted the letter, testified that the language relied upon by the defendants was included only because it was his understanding that a final decision had not yet been made regarding class size. He acknowledged that he sent only forty-two or forty-three letters in the expectation that no more than forty would pass both the medical and psychological examinations and that all of them would be admitted into the Academy.

The City argues that there is no contract between the parties because the plaintiffs have no legally-enforceable right to employment. The City correctly points out that, even if the plaintiffs graduate from the Academy and there are existing vacancies in the Department, they would be required to serve a one-year probationary period during which they could be terminated without cause which would make them employees at will who, under Rhode Island law, have no right to continued employment. Southland v. Town Council of South Kingstown, 108 R.I. 738, 279 A.2d 441, 442, 444 (1971). That argument misses the point. The contract that the plaintiffs seek to enforce is not a contract that they will be appointed as permanent Providence police officers; rather, it is a contract that they would be admitted to the Academy if they passed the medical and psychological examinations.

The City also argues that the plaintiffs did not even have a contractual right to be admitted into the Academy because, in their applications to become police officers, they acknowledged understanding that successful completion of each step in the evaluation process did not necessarily guarantee acceptance into the Academy. That argument overlooks the fact that the October 15 letter was more than a mere notification that the plaintiffs had successfully completed another step in the evaluation process. As already noted, it was a conditional offer of admission to the 61st Academy which the plaintiffs accepted by performing the specified conditions.

[8] Finally, the City argues that, because the plaintiffs were not required to attend the Academy or become Providence police officers, the mutuality of obligation necessary to establish a binding contract was lacking. The flaw in that argument is that, while mutuality of obligation is an essential element of a bilateral contract, Crellin Tech., Inc. v. Equipmentlease Corp., 18 F.3d 1, 7 (1st Cir.1994), it is not required to establish a unilateral contract. B & D Appraisals, 733 F.Supp. at 508 ("In a unilateral contract, no mutuality of obligation exists--only the promisor becomes bound when the promisee executes the bargained for act."); Calamari on Contracts § 4-12(c); Simpson on Contracts § 37. Performance by the offeree is sufficient to create a unilateral contract. B & D Appraisals, 733 F.Supp. at 508.

B. The Due Process Claim

[9][10][11] The Fourteenth Amendment prohibits a state or its subdivisions from depriving any person of "property" without due process of law. U.S. CONST. amend. XIV, § 1. Due process has both a substantive component that protects against arbitrary and capricious infringements and a procedural component requiring that the methods employed satisfy constitutional standards of fundamental fairness. See Smithfield Concerned Citizens for Fair Zoning v. Town of Smithfield, 719 F.Supp. 75, 80-81, 83 (D.R.I.1989). Procedural due process is a flexible standard that "calls for such procedural protections as the particular situation demands." Morrissey v. Brewer, 408 U.S. 471, 481, 92 S.Ct. 2593, 33 L.Ed.2d 484 (1972). Generally, procedural due process requires notice of the proposed action and an opportunity to be heard. Gorman v. Univ. of Rhode Island, 837 F.2d 7, 12 (1st Cir.1988).

[12] In this case, it is clear that the plaintiffs were afforded neither. They learned, second hand and after the fact, that the selection criteria had been changed and that they would not be invited to participate in the 61st Academy. Moreover, they received no explanation of the reasons for that decision and were not afforded any opportunity to contest it. Accordingly, the only issue presented is whether they had a constitutionally-protected property interest in attending the Academy.

[13][14] The "property" that is protected by the due process clause encompasses more than an ownership interest in real estate, chattels, or money. Bd. of Regents of State Coll. v. Roth, 408 U.S. 564, 571-72, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972). It also includes an interest in a specific benefit. Id. at 576, 92 S.Ct. 2701. However, the interest must consist of something more than an "abstract need or desire" for the benefit or a "unilateral expectation" of receiving it. Id. at 577, 92 S.Ct. 2701. The party asserting the property interest must demonstrate "a legitimate claim of entitlement" to the benefit in question. Id.

[15] The existence and scope of property rights are determined by reference to state law. Bishop v. Wood, 426 U.S. 341, 344, 96 S.Ct. 2074, 48 L.Ed.2d 684 (1976); Howard v. State of Rhode Island Water Res. Bd., C.A. No. 96- 064T, slip op. at 5 (D.R.I. December 31, 1996). However, it is federal law that determines whether a property right rises to the level of a constitutionally-protected property interest. Memphis Light, Gas and Water Div. v. Craft, 436 U.S. 1, 9, 98 S.Ct. 1554, 56 L.Ed.2d 30 (1978).

[16] In determining whether a claimed entitlement to a benefit is a property right, the relevant inquiry is whether there are "rules or mutually explicit understandings that support [the] claim of entitlement to the benefit." Perry v. Sindermann, 408 U.S. 593, 601, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972) (property interest can arise from rules, policies, or contract); see also Bishop, 426 U.S. at 344, 96 S.Ct. 2074 (a property interest can be created by ordinance or implied contract); Roth, 408 U.S. at 577, 92 S.Ct. 2701 (property interests are created by rules or understandings arising from state law).

[17][18] A valid contract may be sufficient to support a claim of entitlement. Perry, 408 U.S. at 601, 92 S.Ct. 2694 (employment contract); Marrero-Garcia v. Irizarry, 33 F.3d 117, 121 (1ST Cir.1994) (contract for water service). However, not every contract recognized by state law creates a constitutionally-protected property interest. San Bernardino Physicians' Servs. Med. Group, Inc., v. County of San Bernardino, 825 F.2d 1404, 1408 (9th Cir.1987). If that were the case, every breach of contract action against a state or municipality would be converted into a federal constitutional case. Women's Dev. Corp. v. City of Central Falls, 968 F.Supp. 786, 789 (D.R.I.1997). Whether a contractual claim rises to the level of a constitutionally-protected property interest turns on how closely related the contractual right is to an important interest such as employment. San Bernardino, 825 F.2d at 1409-10.

In this case, there was a "mutually explicit understanding" that the plaintiffs would be admitted to the 61st Academy if they passed the medical and psychological examinations. Indeed, as already noted, that understanding rose to the level of a binding contract. Moreover, while admission to the Academy was not a guarantee of ultimate employment, it was a sine qua non. The City had an established policy of hiring only individuals who graduated from the Academy. Consequently, the plaintiffs have a legitimate claim of entitlement to admission into the 61st Academy that qualifies as "property" protected by the due process clause.

Support for the plaintiffs' due process claim may be found in Stana v. Sch. Dist. of the City of Pittsburgh, 775 F.2d 122 (3rd Cir.1985). In Stana, the plaintiff was a teacher who alleged that the Pittsburgh School District violated her due process rights when they removed her from a list of persons eligible to be hired as teachers. State law required the school district to maintain an eligibility list and to hire only from among the top three individuals on that list. Despite an established policy of maintaining individuals on the list for a period of two years, the school district removed the plaintiff from the list, without giving her an opportunity to be heard, after receiving a negative evaluation of her performance from the principal of a private school where she was teaching. When a vacancy occurred and the only other person on the list was unavailable, the school district hired a teacher not on the list to fill it. The Third Circuit held that:

... remaining on the eligibility list, which was a prerequisite to a teaching position, was a "legitimate entitlement" that the School District had created through the policies it promulgated to implement the state statute on teacher hiring. As such, it represented both an existing policy or rule and an explicit understanding sufficient to constitute a property interest, which triggered the requirement for an inquiry that comported with procedural due process.

Stana, 775 F.2d at 126-27 (citations omitted).

Further support for the plaintiffs' due process claim also may be found in Martin v. Helstad, 578 F.Supp. 1473 (W.D.Wis.1983). There, the plaintiff applied for admission to law school while incarcerated in federal prison. On his application, the plaintiff disclosed that he had been convicted of a crime but he was less than forthcoming in providing the details. Upon receiving a letter of acceptance, the plaintiff contracted to rent housing in the town where the law school was located. Later, the law school learned the details of the plaintiff's conviction, and gave him an opportunity to explain his failure to make full disclosure. When the plaintiff failed to provide an explanation satisfactory to the law school, his admission was rescinded on the ground that the decision to admit him had been conditioned on full and truthful answers to the questions on the application form. The court rejected the plaintiff's procedural due process claim on the ground that he had received all of the process due under the circumstances. However, the court found that, unless the plaintiff's conduct was fraudulent, his admission created a constitutionally-protected property interest, albeit only a "slight" one, because:

An offer of admission to a law school and the subsequent acceptance of that offer create a mutually explicit understanding that the accepted applicant will be admitted. The accepted applicant relies on the acceptance in foregoing offers from other law schools, and in contracting for housing, and in making other preparations for attendance ... Also, because admission to an accredited law school is the first step in acquiring the skills and credentials for a professional career in law, revocation of admission constitutes a deprivation to the individual involved.

Martin, 578 F.Supp. at 1481.

The analogy to the case of an individual applying for admission to a university is an apt one because admission to a university itself, like admission to a police academy, has no intrinsic value. What does have value and what the applicant seeks is an education or training, and the opportunity to obtain a "good job." However, because admission is a prerequisite to achieving those goals, it is a significant "benefit." Therefore, a letter of acceptance into either a university or a police academy, coupled with the recipient's reliance on that acceptance, creates a property interest that is entitled to protection under the due process clause. While that interest may be of lesser magnitude than the interest in "a good job"; and, therefore, may not be entitled to the same level of procedural protection, an individual cannot be deprived of that interest without some level of due process. See id. at 1482.

The defendants' reliance on Flood v. County of Suffolk, 820 F.Supp. 709 (E.D.N.Y.1993) and Atkinson v. City of Dayton, 99 F.Supp.2d 846 (S.D.Ohio 1998) is misplaced for several reasons. In Flood, the plaintiff applied for a position with the Suffolk County Police Department (SCPD); and, after taking a polygraph test, she was placed on an eligibility list. Later, the SCPD learned of various "inaccuracies" on the plaintiff's application regarding her prior drug use; and, when the plaintiff refused to take a second polygraph test, her name was removed from the eligibility list. The plaintiff claimed that the removal deprived her of a property right in the "appointment process" but the court rejected that claim on the ground that the plaintiff's inclusion on the eligibility list created "nothing more than an expectation of being appointed to the SCPD." 820 F.Supp. at 713.

Flood is readily distinguishable from this case because, here, the plaintiffs were not merely on a list of those "eligible" for admission to the 61st Academy; rather, they had been conditionally admitted and had satisfied the conditions. Moreover, in this case, there is no suggestion that the plaintiffs gained admission into the Academy by fraud.

In Atkinson, the plaintiffs had been selected to participate in the Dayton Police Academy but the Dayton Fraternal Order of Police (FOP) obtained an injunction that prevented the academy from being conducted on the ground that the plaintiffs had been selected in violation of a collective bargaining agreement that prohibited the city from hiring applicants who had ever used or trafficked in a controlled substance. The plaintiffs brought a § 1983 action claiming that they had been deprived of their "liberty and property interests in police academy positions and the concomitant opportunity to become permanent Dayton police officers." 99 F.Supp.2d at 850. The court rejected that claim on the ground that the plaintiffs had no property interest in employment as police officers for two reasons. First, police recruits were required to serve a probationary period and, under Ohio law, probationary employees did not possess a property interest in government employment. Id. at 851. Second, the court found that the plaintiffs had no contractual right to employment because, under Ohio law, public employees hold office "as a matter of law and not of contract", id. at 852; and, in any event, "the notices from the City were insufficient, as a matter of law, to constitute a contractual agreement." Id.

Atkinson is not persuasive because it did not address whether the plaintiffs had a property interest in their admission to the academy. Furthermore, in this case, the October 15 letter, coupled with the statements by Major Simoneau and the City's acknowledged intent to admit all recipients of the October 15 letter who passed the medical and psychological examinations were sufficient to support the existence of a contract.

To summarize, the City may select police officers in whatever manner it deems appropriate as long as the method chosen is lawful. It is not the Court's prerogative to decide which lawful method is preferable. However, once a method has been chosen, the City cannot "change the rules in the middle of the game". The City cannot renege on commitments made to individuals selected pursuant to that method, and reasonably relied upon by them, by retroactively changing the method of selection unless there is a compelling reason for doing so.

In this case, no compelling reason has been established. In light of rumors and revelations made during the "Plumderdome" case regarding past attempts to improperly influence the selection of Providence police officers, it is easy to understand Chief Esserman's preference for what he viewed as a less subjective selection process. [FN4] However, there is no suggestion that the process of selecting recruits for the 61st Academy was tainted by favoritism, political influence, or fraud. On the contrary, the evidence shows that Major Simoneau was chosen to chair the Majors' Board because of his past efforts to prevent and expose attempts to improperly influence the selection process. Moreover, it seems unlikely that the plaintiffs were favored because they were passed over in selecting recruits for the 60th Academy. Nor does the City contend that any of the plaintiffs here are in any way unqualified to be police officers. Accordingly, this Court finds that the plaintiffs have demonstrated a strong likelihood that they will succeed on the merits of their claims.

FN4. It should be noted that one of the past abuses involved advance disclosure of answers to the questions on the written examination, one of the objective components of the selection process.

II. Irreparable Harm to Plaintiffs

[19][20][21] A preliminary injunction is appropriate only where there would be no adequate remedy at law available to the party seeking the injunction if that party ultimately prevails. Sampson v. Murray, 415 U.S. 61, 88, 94 S.Ct. 937, 39 L.Ed.2d 166 (1974) (the basis of injunctive relief in the federal courts has always been irreparable harm and the inadequacies of legal remedies). Generally, the party seeking the injunction must establish that its loss cannot be measured in terms of money damages or that money damages would not provide adequate compensation. Ross-Simons of Warwick v. Baccarat, Inc., 102 F.3d 12, 18 (1st Cir.1996).

Here, the plaintiffs have made that showing. Unless a preliminary injunction is granted, they will not be included in the 61st Academy; and, therefore, will not be eligible for consideration as Providence police officers. Furthermore, there is no guarantee that another academy will be conducted at any time in the near future or that the plaintiffs would be selected to participate. See O'Neill v. Commonwealth of Massachusetts, No. Civ.A. 02- 10233-GAO, 2002 WL 342675 at *3 (D.Mass. March 1, 2002).

Moreover, even if the plaintiffs were assured a position in a future academy, it would be impossible to restore their lost seniority rights or to attach a dollar value to that loss. The evidence shows that seniority affects job assignments, shift assignments, vacation selection, promotions and layoffs. Since it would be virtually impossible for the Court to restore their seniority, or to measure its value, the plaintiffs, if successful, will be irreparably harmed if they are excluded from the 61st Academy. See Bertoncini, 767 F.Supp. at 1197.

III. Harm to Defendants

[22] The City contends that if a preliminary injunction is granted, it will suffer some hardship because including the plaintiffs in the Academy would expand the recruit class to a size that would make it difficult to effectively manage; would require more staff and would lengthen the duration of the Academy two to four weeks.

However, those burdens would result from a situation of the City's own making. It was the City that retroactively changed the selection process and invited other applicants to fill the slots previously promised to the plaintiffs. Therefore, the City cannot cite the possible consequences of that decision as a hardship that weighs against granting a preliminary injunction.

Moreover, including the plaintiffs in the Academy need not necessarily increase the size of the recruit class. There is no evidence that the City has made binding commitments to the applicants that it has selected to replace the plaintiffs. Consequently, there is no apparent reason why those applicants could not be disinvited in order to maintain a class size of forty recruits.

In any event, even if the City increases the size of the recruit class from forty to fifty-four in order to accommodate the plaintiffs, any resulting "harm" that it suffers clearly would be outweighed by the harm to the plaintiffs if an injunction is not granted. Essentially, the alleged harm to the City would consist of the relatively modest expense of hiring additional instructors and arranging to use facilities that can accommodate a larger number of recruits. The fact that past academies have included as many as fifty-eight recruits is compelling evidence that any hardship imposed would be minimal.

Consequently, the balancing of the harms component of the preliminary injunction test weighs very heavily in favor of granting the requested injunction.

IV. The Public Interest

The effect that granting or denying a preliminary injunction might have on the public interest provides little guidance in this case because two conflicting and equally important public interests are involved.

On the one hand, the public has a strong interest in ensuring that the process of selecting police officers is impartial and designed to produce the most qualified applicants. On the other hand, the public has an equally strong interest in ensuring that the process is fair to applicants and that, once commitments are made and relied upon, those commitments are honored.

In this case, there is evidence that the process by which the plaintiffs were selected may not have been a "best practice". However, there is no indication that the process was tainted or that any of the plaintiffs are unqualified and there, also, is compelling evidence that the City has made promises to the plaintiffs that ought to be honored.

Thus, based on the evidence presented, to the extent that there is any discernible public interest in the course to be followed, that interest would be best served by granting the requested injunction.

Conclusion

For all of the foregoing reasons, the plaintiffs' application for a preliminary injunction enjoining the 61st Academy unless they are allowed to participate is granted.

IT IS SO ORDERED.

Case 10.2

101 P.3d 371, 193 Ed. Law Rep. 895, 510 Utah Adv. Rep. 3, 2004 UT App 354

Court of Appeals of Utah.

GARY PORTER CONSTRUCTION dba Porter & Sons, Plaintiff, Appellee, and Cross-appellant,

v.

FOX CONSTRUCTION, INC.; and National Surety Corp., Defendants, Appellants, and Cross-appellees.

No. 20030071-CA.

Oct. 7, 2004.

BILLINGS, Presiding Judge:

Fox Construction, Inc. (Fox) appeals from a trial court order granting summary judgment to Gary Porter Construction (Porter.) We affirm. Porter appeals from a trial court order granting summary judgment and awarding attorney fees to National Surety Corporation (National.) We reverse in part and remand. The appeals have been consolidated.

BACKGROUND

The University of Utah the (University) contracted with Fox for the construction of a Women's Gymnastics Training Facility (the Facility) on the University campus. As required by Utah Code section 63-56-38 and its contract with the University, Fox and its surety, National, issued a payment bond (the Bond) for the benefit of persons supplying labor and material for construction of the Facility. See Utah Code Ann. § 63-56-38 (1997).

Fox entered into a subcontract with Porter whereby Porter was to perform various excavation and soil placement services. Specifically, the subcontract required Porter to "furnish and install all materials, equipment and labor per plans, specification sections 02000, 02070, 02230, 02601, 02680, 02700 and 02721 and addendums 1 and 2" (Included Sections) for the sum of $146,740.00. Subsequently, Fox and Porter mutually agreed that section 02680 had been included by mistake, and as a result, Porter did no work specified in that section. After work on the Facility had begun, Fox also asked Porter to perform additional work under sections 02300, 02665, and 02711 Excluded Sections, none of which were included in the subcontract or the bid.

When Porter invoiced Fox for its work, it identified the specific work done, the costs of the work by line item, and the particular section under which the work had been performed. At times, Fox verbally acknowledged that Porter was performing work outside the subcontract. Until sometime in early 1998, Fox paid for all work done by Porter, whether it fell under Excluded Sections or Included Sections. Thereafter, numerous disputes over payments arose between Fox and Porter. In short, Porter claimed that Fox owed it payments in addition to the $146,740.00 for work it had done under the (Excluded Sections,) and Fox claimed that because these sections had been mistakenly excluded from the subcontract when Fox had drafted it, Fox owed Porter no additional amounts. The last day Porter worked on the Facility was May 16, 1999.

Sometime in early spring of 1999, Porter verbally requested information on the Bond from Fox because it planned to file a lawsuit. On April 23, 1999, Porter sent a letter to the University requesting information on the Bond. The University forwarded the letter to Fox, but neither Fox nor the University provided Porter information on the Bond. In May 1999, Porter again verbally requested information on the Bond from Fox. Fox again did not provide the information to Porter.

Porter filed its complaint against Fox on March 16, 2000, alleging breach of contract, quantum meruit, and breach of the covenant of good faith and fair dealing. Porter did not make a claim upon the Bond at this time. In late June 2000, Fox provided Porter a copy of the Bond pursuant to a discovery request. Approximately six months later on January 12, 2001, Porter filed a motion to amend its complaint, which was unopposed and ultimately granted. On March 14, 2001, Porter filed its amended complaint naming National as a party and making a claim upon the Bond.

Porter moved for summary judgment on its claims against Fox. The trial court granted Porter's motion. Fox appeals.

National moved for summary judgment against Porter based upon its affirmative defense that the statute of limitations barred Porter's claim upon the Bond. The trial court granted National's motion after it concluded that (1) Porter had no legal justification for failing to name National and make a claim upon the Bond in its original complaint against Fox, which would have been timely; and (2) no identity of interest existed between National and Fox, and thus Porter's amended complaint did not relate back to its original complaint against Fox as required under rule 15(c) of the Utah Rules of Civil Procedure. The trial court then awarded attorney fees to National. Porter appeals.

ISSUES AND STANDARDS OF REVIEW

First, Fox argues that the trial court erred by granting summary judgment to Porter after concluding that Fox had failed (1) to comply with rule 4-501(2)(B) of the Utah Rules of Judicial Administration [FN1] or (2) to create a material dispute with its additional facts. Second, Porter argues that the trial court erred by granting summary judgment to National after concluding that Porter's claims against National were barred by the applicable statute of limitations.

FN1. On November 1, 2003, rule 4-501(2)(B) of the Utah Rules of Judicial Administration was repealed, and its procedural content was moved to rule 7(c)(3)(B) of the Utah Rules of Civil Procedure.

[1][2] Motions for summary judgment should be granted when "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Utah R. Civ. P. 56(c). When reviewing a grant of summary judgment, we view all facts and reasonable inferences drawn therefrom in the light most favorable to the nonmoving party and review the trial court's conclusions of law for correctness. See Lovendahl v. Jordan Sch. Dist., 2002 UT 130,¶ 13, 63 P.3d 705. However, "the trial court has discretion in requiring compliance with rule 4- 501 [of the Utah Rules of Judicial Administration]." Fennell v. Green, 2003 UT App 291,¶ 9, 77 P.3d 339.

[3][4] Porter also challenges the trial court's calculation of attorney fees awarded to National. "Calculation of reasonable attorney fees is in the sound discretion of the trial court, and will not be overturned in the absence of a showing of a clear abuse of discretion." Dixie State Bank v. Bracken, 764 P.2d 985, 988 (Utah 1988) (citation omitted).

ANALYSIS

I. Fox's Appeal

The trial court granted Porter's motion for summary judgment on two separate grounds. First, the trial court ruled that Fox had failed to comply with rule 4-501(2)(B) of the Utah Rules of Judicial Administration. Second, the trial court concluded that Fox had not created a material dispute with the additional facts it had submitted. We address each ground.

A. Rule 4-501(2)(B)

[5] When summary judgment papers were filed in this case, rule 4- 501(2)(B) read as follows:

The points and authorities in opposition to a motion for summary judgment shall begin with a section that contains a verbatim restatement of each of the movant's statement of facts as to which the party contends a genuine issue exists followed by a concise statement of material facts which support the party's contention. Each disputed fact shall be stated in separate numbered sentences and shall specifically refer to those portions of the record upon which the opposing party relies. All material facts set forth in the movant's statement and properly supported by an accurate reference to the record shall be deemed admitted for the purpose of summary judgment unless specifically controverted by the opposing party's statement.

Utah R. Jud. Admin. 4-501(2)(B) (2002). Because Fox did not "begin with a section that contains a verbatim restatement of each of [Porter's] statement of facts ... followed by a concise statement of material facts which support [Fox's] contention [that a genuine issue of facts exists]," the trial court concluded that Fox had failed to comply with rule 4-501; for this reason, the trial court admitted "[a]ll the material facts set forth in [Porter's] statement" of undisputed facts. Id. Based upon this admission, the trial court ruled that there were no disputed issues of fact and that Fox was thereby entitled to summary judgment.

Two cases decided after the trial court's ruling support the trial court's conclusion that it had discretion to admit facts not "specifically controverted" in the manner outlined in rule 4-501(2)(B). In Lovendahl v. Jordan Sch. District, 2002 UT 130, 63 P.3d 705, the Utah Supreme Court ruled that the trial court had properly admitted the moving party's facts because these facts were not " 'specifically controverted by the opposing party's statement.' " Id. at ¶ 50 (quoting Utah R. Jud. Admin. 4- 501(2)(B) (2002)). Similarly, in Fennell v. Green, 2003 UT App 291, 77 P.3d 339, this court held that the trial court had not "abused its discretion in requiring compliance with rule 4-501 and thus ruling that the facts, as stated in [the moving party's] motions and supporting memoranda, were deemed admitted." Id. at ¶ 9. Specifically, it was not an abuse of discretion for the trial court to admit all of the moving party's facts when the nonmoving party's opposition papers did "not refer to [the moving party's] statements of uncontroverted facts, but instead included only [its] own statement of undisputed facts ... [leaving] it unclear what facts ... were disputed." Id. at ¶ 7.

Both Lovendahl and Fennell support the conclusion that the trial court in this case did not abuse its discretion in enforcing rule 4-501(2)(B) by admitting Porter's facts as undisputed when Fox failed to comply with the rule. However, the Utah Supreme Court has since interpreted rule 4-501(2)(B), without mentioning these prior cases, in a somewhat more relaxed way. See Salt Lake County v. Metro W. Ready Mix, Inc., 2004 UT 23,¶ 23 n. 4, 89 P.3d 155. As the court explained in Metro West, even where an

opposing memorandum [does] not set forth disputed facts listed in numbered sentences in a separate section as required [by the rule, as long as] the disputed facts [are] clearly provided in the body of the memorandum with applicable record references, ... failure to comply with the technical requirements of rule 4-501(2)(B) [is] harmless.

Id. [FN2] Because some of the facts Fox set forth in a separate section had appropriate record citations, which Fox asserts create disputed issues of material fact, under Metro West the trial court abused its discretion to enforce rule 4-501(2)(B) when it admitted Porter's undisputed facts because Fox failed to comply with rule 4-501. Thus, we must examine whether Fox's additional "facts are sufficient to preclude summary judgment in favor of [Porter]." Id.

FN2. Although we are bound by the Utah Supreme Court's most recent interpretation of rule 4-501(2)(B), we respectfully note that the rule announced by the court leaves it unclear what remedies are available to trial courts for a party's failure to follow the procedure outlined in rule 4-501(2)(B). Rule 56(c) of the Utah Rules of Civil Procedure states that summary judgment is appropriate when "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Id. If compliance with former-rule 4-501(2)(B), the procedural content of which is currently in rule 7(c)(3)(B) of the Utah Rules of Civil Procedure, is anything other than a mere suggestion, then it seems that a trial court must have the discretion to grant summary judgment in instances where it would not otherwise be sanctioned by rule 56(c) alone. In other words, if failure to comply with the rule is "harmless" as long as a disputed fact can be gleaned from the opposition papers, then the rule would seem to add nothing to what rule 56 already requires.

While fashioning the proper remedy for failure to comply with rule 7(c)(3)(B) remains within the trial court's discretion, see Fennell v. Green, 2003 UT App 291,¶ 9, 77 P.3d 339, it currently is unclear whether granting summary judgment, because facts are admitted as undisputed that otherwise would not have been, is ever within the trial court's discretion for failure to comply with the rule. For this reason, and because the rule announced in Salt Lake County v. Metro West Ready Mix, Inc., 2004 UT 23, ¶ 23 n. 4, 89 P.3d 155, was in a footnote with no reference to apparently conflicting prior case law, we ask the Utah Supreme Court to clarify the scope of remedies under rule 7(c)(3)(B) to guide trial courts. See Johnson v. Department of Transp., 2004 UT App 284,¶ 7 n. 2 (concluding that facts stricken pursuant to rule 4-501 would not have created a material dispute even if the facts should have been considered under the test in Metro West ).

B. Fox's Additional Facts

[6] The trial court also concluded that the additional facts submitted by Fox do not create a material dispute. We agree.

[7] Porter argues that Fox owes additional compensation for work it did under the Excluded Sections based upon a contract implied in fact. [FN3] To succeed on this claim, Porter must show that (1) Fox requested Porter to perform the work under the Excluded Sections, (2) Porter expected additional compensation from Fox for the work, and (3) Fox knew or should have known that Porter expected additional compensation. See Davies v. Olson, 746 P.2d 264, 269 (Utah Ct.App.1987). The facts provided by Porter satisfy all of these elements and are not properly controverted by Fox.

FN3. Porter also makes independent claims for breach of contract, breach of a contract implied at law, and breach of the covenant of good faith and fair dealing. However, because Porter's implied-in-fact contract claim is sufficient to affirm the trial court's ruling, we do not discuss these additional claims.

In its moving papers, Porter set forth the following facts, with appropriate record citations: (1) Jeff Wood, Fox's project manager, drafted the subcontract which contains only the Included Sections; (2) Fox repeatedly asked Porter to perform work outside the subcontract under the Excluded Sections; (3) Porter performed all work identified in the subcontract as well as the requested work under the Excluded Sections; (4) for months, Fox reviewed and paid line-item bills from Porter which identified the work performed, the costs of the work, and the specific section under which the work was done; (5) at times, Fox acknowledged that Porter was performing work outside the subcontract; and (6) the total cost of the work performed by Porter was $296,750.00, and the amount Fox paid Porter was $135,441.62, leaving a balance of $161,309.08.

The additional facts submitted by Fox do not create a material dispute regarding any of the three elements required for Porter's implied-in-fact contract claim. Fox does not dispute that it requested Porter to perform work under the Excluded Sections; and Fox provides no facts to dispute Porter's claim that Porter expected additional compensation for the work under the Excluded Sections. However, Fox does attempt to dispute the third element--whether Fox knew or should have known that Porter expected additional compensation.

[8] Most of the facts Fox provides in its opposition papers come from the deposition testimony of Floyd Cox, the Vice President of Fox. However, much of Cox's testimony is inadmissible. Cox testifies about conversations between Wood and Gary Porter, [FN4] as well as positions taken by the University, regarding Porter's work under the Excluded Sections. This testimony is inadmissible hearsay, to which Porter objected in its reply memorandum and with a separate motion to strike, and therefore it cannot create a disputed issue of material fact. See Utah R. Civ. P. 56(e) (requiring that facts set forth be admissible to defeat summary judgment).

FN4. The fact reads as follows: "Mr. Cox explained that [Porter] and [Wood] had several conversations about the subcontract between Fox and Porter about 2 issues; 1 is that there was a specification section left out of the subcontract and 2 is that a specification was included in the subcontract that should have been left out." Although any statements made by Porter would not be inadmissible hearsay because it would have been spoken by a party opponent, see Utah R. Evid. 801(d)(2), no statement is specifically attributed to Porter in the fact submitted by Fox.

[9] In the relevant admissible evidence remaining, Cox states that one Excluded Section, "section 2300[ ], had been left out of the subcontract;" and Wood states "that there was a section of specifications that was left out of the subcontract by mistake." Neither statement creates a material dispute over whether the Excluded Sections are part of the subcontract because they do not explain how the mistakes occurred despite ordinary diligence on the part of Fox. See Oliphant v. Estate of Brunetti, 2002 UT App 375,¶ 21, 64 P.3d 587 (explaining that to change the express terms of a contract due to unilateral mistake, "the mistake must have occurred notwithstanding the exercise of ordinary diligence by the party making the mistake" (quotations and citation omitted)). Also, because Fox presents no evidence that Porter should have known about Fox's mistake either when it entered into the subcontract or after performing, billing for, and being paid for work under the Excluded Sections, as a matter of law, Fox should have known that Porter expected additional compensation for its work under the Excluded Sections. [FN5]

FN5. Fox also asserts that it is proper to consider parol evidence when interpreting the scope of the subcontract not because it is ambiguous on its face, but rather because the trial court accepted that section 02680 was not part of the subcontract due to Porter and Fox's mutual agreement to strike the section when they discovered that it had been included by mistake. Fox seems to consider evidence of this subsequent mutual agreement parol evidence, and from this assumption concludes that all parol evidence should be considered to interpret the scope of the subcontract. However, because the subsequent mutual agreement between Fox and Porter to strike section 02680 was not a "contemporaneous [or prior] conversation [ ], representation[ ], or statement[ ]," Spears v. Warr, 2002 UT 24,¶ 19, 44 P.3d 742 (first alteration in original) (quotations and citations omitted), it is not parol evidence. Also, it is not disputed in this case that section 20680 is not part of the subcontract. Thus, Fox is mistaken that the trial court already had considered parol evidence when it agreed with the parties that section 02680 is outside the subcontract.

The facts set forth in Fox's opposition papers do not create a material dispute regarding whether (1) Fox requested Porter to perform the work under the Excluded Sections, (2) Porter expected additional compensation from Fox for the work, and (3) Fox knew or should have known that Porter expected additional compensation. Also, Fox does not dispute the amounts provided by Porter regarding the value of the work for which it was uncompensated. [FN6] Therefore, the trial court did not err when it granted Porter's motion for summary judgment against Fox for $161,309.08. [FN7]

FN6. Fox claims that the amount of damages cannot be determined on summary judgment because Porter identified the additional amount Fox owed it in 1999, before litigation had commenced, as "approximately $40,000.00" rather than the $161,309.08 it now claims. However, the mere fact that a plaintiff changes its damage calculation cannot preclude summary judgment, otherwise summary judgment would never be appropriate where damage calculations become more precise as discovery proceeds. Also, it is the nonmoving party's obligation to present the trial court admissible evidence to dispute the moving party's amounts. See Utah R. Civ. P. 56(e). Fox simply has not done this.

FN7. Fox also claims that the trial court erred by awarding attorney fees to Porter, but Fox's only argument is that the trial court should not have granted summary judgment in the first place. Because we disagree with Fox on this point and because Fox has advanced no additional argument upon which we could reverse the trial court's attorney fee award, we do not address the issue further.

II. Porter's Appeal

Porter contends the trial court erred when it ruled the statute of limitations barred Porter's claims against National. To make a claim upon the Bond, Porter had to initiate its action "within one year after the last day on which [Porter] performed labor or service or supplied the equipment or material on which the claim is based." Utah Code Ann. § 63-56-38(4) (2000). The trial court found, and National does not dispute on appeal, that the last day Porter worked on the Facility was May 16, 1999. Thus, while Porter's claim against Fox, which was initiated on March 16, 2000, fell within the one-year limit, its claim upon the Bond that named National as a party, which was initiated on March 14, 2001, fell outside the one-year limit and therefore would be barred.

Porter contends that the one-year limit does not apply in this case. First, Porter argues that the discovery rule tolled the statute of limitations because Fox concealed Porter's claim against National. Second, Porter argues that under rule 15(c) of the Utah Rules of Civil Procedure, its amended complaint adding National as a party and a claim upon the Bond relates back to its original complaint against Fox, which was filed within the one-year limit.

A. Discovery Rule

[10][11][12] In certain circumstances, the discovery rule tolls the statute of limitations period "until facts forming the basis for the cause of action are discovered." Spears v. Warr, 2002 UT 24,¶ 33, 44 P.3d 742. However, under the discovery rule, it is a threshold issue whether the plaintiff knew or should have known about its cause of action before the statute of limitations ran. See Russell/Packard Dev., Inc. v. Carson, 2003 UT App 316,¶ ¶ 16-17, 78 P.3d 616. We conclude that no legal justification exists for Porter's delay in naming National and making a claim upon the Bond.

Utah Code section 63-56-39 provides that "[a]ny person may obtain from the state a certified copy of a bond upon payment of the cost of reproduction of the bond and postage, if any." Utah Code Ann. § 63-56-39 (2000). To obtain a copy of the Bond, Porter either (1) could have gone to the University, requested a copy of the Bond, and paid copying fees, or (2) could have mailed a request to the University with return postage and payment for copying fees. See id. Instead, Porter attempted to obtain a copy of the Bond by requesting verbally a copy from Fox and sending a letter to the University without copying fees or return postage, as required by statute.

Porter's conduct demonstrates that it knew of the Bond when it was considering litigation. Also, even if Porter had no specific knowledge of the Bond, as an experienced contractor, Porter should have known that a payment bond was required for construction of public structures, such as the Facility, under Utah Code section 63-56-38. See id. § 63-56-38 (2000). Yet Porter failed to invoke the procedure afforded it under the statute to learn the terms of the Bond. Thus, despite Fox's failure to disclose the terms of the Bond to Porter, there was no excuse for Porter's delay in bringing its claim upon the Bond. Because Porter knew or should have known about its claim at such a time that it still could have been brought within the one-year limit, the discovery rule cannot save Porter's claim from the statute of limitations.

B. Relation Back Doctrine

Porter also argues that the relation back doctrine under rule 15(c) permits the filing date of its original complaint to serve as the filing date for its amended complaint, which would place it within the one-year limit. National argues, and the trial court ruled, that the relation back doctrine does not apply to Porter's amended complaint because there is no identity of interest between National and Fox.

1. Standard of Review

[13][14] We must first determine the standard of review of a relation back determination under rule 15(c). While determining whether an amended pleading relates back seems like a purely legal determination, the standard of review Utah courts apply to such determinations has changed with the posture of the case on appeal. For instance, in Penrose v. Ross, 2003 UT App 157, 71 P.3d 631, because the relation back issue was decided on appeal from an order granting a motion for summary judgment, the court applied a "correctness" standard, holding that "[t]he trial court correctly determined there was no identity of interest ... to permit relation back of the Amended Complaint." Id. at ¶ ¶ 7,21. However, in Nunez v. Albo, 2002 UT App 247, 53 P.3d 2, because the relation back issue was decided on appeal from an order denying a motion to amend, the court applied an "abuse of discretion" standard and "analyze[d] each of the trial court's reasons for denying [the] motion to amend in light of rule 15's liberal standard," despite the fact that one of its reasons was that "joining the [defendant] would be futile [because the statute of limitations had run]." Id. at ¶ ¶ 10,20.

The difference, we think, stems from a failure to distinguish clearly rule 15(a) analysis from rule 15(c) analysis. In the context of a motion to amend, the trial court has discretion to follow rule 15(a)'s dictate that leave to amend pleadings "shall be freely given when justice so requires." Utah R. Civ. P. 15(a). However, where one of the reasons the nonmoving party provides for denying the motion to amend is that the statute of limitations bars the claim, the analysis is not the weighing of equitable factors under rule 15(a), but rather a legal determination regarding whether the amendment would be futile. See Sulzen v. Williams, 1999 UT App 76,¶ 7, 977 P.2d 497 (characterizing the appeal from denial of a motion to amend as "challenging the trial court's apparent conclusion that the statute of limitations had run and that their effort to amend their complaint was thus futile"); see also Jensen v. IHC Hosps., Inc., 2003 UT 51,¶ 139, 82 P.3d 1076 (recognizing "that a court may deny a motion to amend as futile if the proposed amendment would not withstand a motion to dismiss" (quotations and citation omitted)).

Thus, a correctness standard applies to a trial court's rule 15(c) analysis and an abuse of discretion standard applies to a trial court's rule 15(a) analysis. See Wilcox v. Geneva Rock Corp., 911 P.2d 367, 369 (Utah 1996) (treating rule 15(a) analysis as logically prior to rule 15(c) analysis, but reviewing the relation back issue for correctness). This result is consistent with how a majority of courts, including the Court of Appeals for the Tenth Circuit, understand the doctrine. See Slade v. United States Postal Serv., 875 F.2d 814, 815 (10th Cir.1989) (stating that application of rule 15(c) is "purely legal determination" that is reviewed de novo); see also Miller v. American Heavy Lift Shipping, 231 F.3d 242, 247 (6th Cir.2000) ("[W]e review de novo the district court's decision to deny relation back of an amended complaint to the original complaint.").

2. Utah's Relation Back Doctrine

[15][16] Utah's relation back doctrine developed out of the common law, under which a party could correct a clerical error without bringing a new action where the real parties were involved unofficially all along, see Greenfield v. Wallace, 1 Utah 188, 190 (1875), or make a "formal" change of party by amendment, such as substituting an administratrix for an heir where a cause of action already brought required the administratrix as a party. Pugmire v. Diamond Coal & Coke Co., 26 Utah 115, 72 P. 385, 386 (1903). By the time these common law principles were incorporated into rule 15(c), [FN8] the focus had expanded to whether (1) the amended pleading alleged only claims that "arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading," and (2) the added party had received notice that it would have been a proper party to the original pleading such that no prejudice would result from preventing the new party from using a statute of limitations defense that otherwise would have been available. [FN9] Utah R. Civ. P. 15(c); see also, Doxey-Layton Co. v. Clark, 548 P.2d 902, 906 (Utah 1976).

FN8. Rule 15(c) of the Utah Rules of Civil Procedure states, "[W]henever the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading." Utah R. Civ. P. 15(c). Even though Utah's rule 15(c) does not explicitly mention the addition of parties as has the corresponding federal rule since 1966, see Fed.R.Civ.P. 15(c), Utah's rule nonetheless embodies the same common law doctrines embodied in the federal rule regarding the addition of parties. See Doxey-Layton Co. v. Clark, 548 P.2d 902, 906 (Utah 1976) (citing commentary on the federal rule).

FN9. Misnomer cases, such as Greenfield v. Wallace, 1 Utah 188 (1875), are now analyzed under rule 15(c), and the analysis focuses upon whether there was sufficient notice to the real party of interest so that "relation back is not prejudicial." Wilcox v. Geneva Rock Corp., 911 P.2d 367, 369 (Utah 1996) (quotations and citation omitted) (permitting relation back where the plaintiff had served the correct defendant, Geneva Rock Products, Inc., but had named the defendant in the complaint as "Geneva Rock Corporation"); see Sulzen v. Williams, 1999 UT App 76,¶ 30, 977 P.2d 497 (where a complaint misnamed a parent as guardian, rather than the child by and through the parent as guardian, relation back was permitted because service on the parent was legally sufficient for service on the child, the child clearly was identified in the body of the complaint, and no prejudice would result).

[17] In Doxey-Layton, the first Utah case interpreting Utah's rule 15(c), the Utah Supreme Court held that an amendment substituting heirs for a husband and wife who had recently died, where the heirs had been informally involved in the litigation from the start, related back to the original pleading, and thus the statute of limitations did not bar the claim. See 548 P.2d at 905-06. The Court recognized that rule 15(c) generally does "not apply to an amendment which substitutes or adds new parties" because if it did, "the purpose of a statute of limitation would be defeated," but also recognized that "a mechanical use of a statute of limitations [should not] prevent adjudication of a claim" where "new and old parties have an identity of interest; so it can be assumed or proved the relation back is not prejudicial." [FN10] Id. at 906. "Such is particularly valid where ... the real parties in interest were sufficiently alerted to the proceedings, or were involved in them unofficially, from an early stage." Id. Where a new party had sufficient notice that it would have been a proper party to the original pleading, the purpose of the statute of limitations is not defeated by applying the relation back doctrine to deprive the new party of its statute of limitations defense.

FN10. This point is consistent with interpretations of the corresponding federal rule. See 3 James Wm. Moore, Moore's Federal Practice § 15.19[3] [c] (3d ed. 2001) ("A court may find notice is adequate if there is a sufficient 'identity of interest' between the new defendant and the original one so that relation back will not be prejudicial.").

The court further elaborated the relation back doctrine in Perry v. Pioneer Wholesale Supply Co., 681 P.2d 214 (Utah 1984). In Perry, a general contractor brought a breach of contract claim against a subcontractor for defective doors the subcontractor had provided. See id. at 216. The subcontractor later filed an untimely third-party complaint against the supplier and manufacturer of the doors, in which its "only claim for relief stated that in the event [the subcontractor] was held liable to the general contractor [it] should have judgment against the supplier and the manufacturer in the same amount." Id. The court refused to apply the relation back doctrine because there was no "identity of interest between the original plaintiff, the defendant, and the third-party defendants other than privity of contract." Id. at 217.

The court then outlined the test for "identity of interest" as follows: when "the parties are so closely related in their business operations that notice of the action against one serves to provide notice of the action to the other" (Notice Transfer Test). Id. After Perry, the notice required under the relation back doctrine could be actual notice, such as being informally involved in the litigation from the start, or constructive notice under the Notice Transfer Test. No matter how the formal test is articulated, what is crucial is that at an adequately early stage of the litigation, the new party was "sufficiently on notice of the facts and claims that gave rise to the proposed amendment." 3 James Wm. Moore, Moore's Federal Practice § 15.19[1] (3d ed. 2001) ("The purpose of the statute of limitations is to prevent stale claims and the rationale of allowing an amendment to relate back is that once a party is notified of litigation involving a specific factual occurrence, the party has received the notice and protection that the statute of limitations requires.").

In accordance with these principles, in two subsequent cases Utah courts refused to relate an amended pleading back where the added parties had no constructive notice (and clearly no actual notice) that they would have been proper parties under the original pleading. First, in Russell v. Standard Corp., 898 P.2d 263 (Utah 1995), the court held, in a libel case, that there was not sufficient identity of interest between an Ogden newspaper on the one hand, and the Salt Lake Tribune and the Associated Press on the other hand, merely because they "adopt and incorporate the same material, pursuant to contractual agreements with one another." Id. at 265. Second, in Dansie v. Anderson Lumber Co., 878 P.2d 1155 (Utah Ct.App.1994), this court held, in a personal injury case involving a faulty handrail in a new home, that there was not sufficient identity of interest between a general contractor, a realtor, and a realty company on the one hand and a lumber company and manufacturer on the other hand. See id. at 1158 n. 7. In neither case was it reasonable to assume that notice of the substance of the claims against the original parties served as notice to the added parties.

In two other cases, this court permitted relation back where the new party had sufficient actual notice that it would have been a proper party under the original pleading. In Hebertson v. Bank One, Utah, N.A., 1999 UT App 342, 995 P.2d 7, [FN11] this court stated that relation back would be proper where the new parties (1) had actual notice of the original pleading, which clearly described an injury that had occurred at the time the new parties owned the property on which the injury had occurred, and (2) had the same insurer and attorney as the named party, the current owner of the property. See id. at ¶ 19 n. 9. In Nunez v. Albo, 2002 UT App 247, 53 P.3d 2, this court permitted relation back where the new party, a hospital, had actual notice of a malpractice claim against one of its doctors. See id. at ¶ 30.

FN11. While Hebertson v. Bank One, Utah, N.A., 1999 UT App 342, 995 P.2d 7, involved analysis of the savings statute, the court explicitly adopted the test under rule 15(c) and applied it to the facts of the case to reach its savings-statute holding. See id. at ¶ 18.

Later cases apply the same common-law test, but articulate it in a slightly different way: "[P]arties have an identity of interest when 'the real parties in interest were sufficiently alerted to the proceedings, or were involved in them unofficially, from an early stage.' " [FN12] Sulzen v. Williams, 1999 UT App 76,¶ 14, 977 P.2d 497 (citation omitted); see Nunez, 2002 UT App 247 at ¶ 29, 53 P.3d 2; Hebertson, 1999 UT App 342 at ¶ 18, 995 P.2d 7. Thus, despite changes in how the relation back doctrine has been articulated, Utah courts have consistently applied the test developed under the common law: whether no prejudice would result because the added party had actual or constructive notice that it would have been a proper party to the original pleading.

FN12. The shift in terminology appears to stem from the Russell court's misinterpretation of Perry as holding that identity of interest, a test for constructive notice, is a necessary, rather than a sufficient, condition for relation back. See Russell v. Standard Corp., 898 P.2d 263, 265 (Utah 1995) ("[R]ule 15(c) does not apply to amendments that add new parties 'who have no identity of interest with existing parties.' " (quoting Perry, 681 P.2d at 217)). The shift in terminology, however, has not affected the substance of the doctrine, but does explain the trial court's failure to focus upon whether National had actual notice of the substance of Porter's claims against Fox.

For example, in Sulzen this court permitted relation back where parents were named in and served with a complaint in which their children were "clearly identified" as the negligent parties. 1999 UT App 76 at ¶ 15, 977 P.2d 497. Because the children lived with the parents, the court concluded that "it is entirely reasonable to assume that [the children] were sufficiently alerted to the proceedings." Id.

Therefore, in spite of terminological shifts, the test for relation back under rule 15(c) remains as follows: whether (1) the amended pleading alleged only claims that arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading and (2) the added party had received (actual or constructive) notice that it would have been a proper party to the original pleading such that no prejudice would result from preventing the new party from using a statute of limitations defense that otherwise would have been available.

2. Porter's Amended Pleading

[18] National does not dispute that Porter's added claim upon the Bond naming National as a party "arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in [Porter's] original pleading." Utah R. Civ. P. 15(c). National is liable only to the extent Porter succeeds on its claims against Fox, and no additional facts would be necessary to demonstrate National's liability other than its obligation under the Bond, which it does not dispute.

Thus, the only issue is whether National had sufficient actual or constructive notice that it would have been a proper party to the original pleading before the one-year limit expired. The focus of the trial court, and the parties below, was on whether the relationship between Fox and National was sufficient to satisfy the Notice Transfer Test (constructive notice) for identity of interest. The trial court ruled that the common interest between Fox and National was "privity of contract," which "as held in Perry, ... is an insufficient identity of interest to allow for relation back." We do not disagree, but the Notice Transfer Test is a test for constructive notice, and is merely one way of demonstrating that an added party had sufficient notice to avoid prejudice. In addition, the relationship between National and Fox consists of more than privity of contract.

[19] Porter argues that under the Notice Transfer Test the relationship between a general contractor and surety "as a matter of law ... is always sufficiently close to meet the 'identity of interest' standard with respect to bond claims." We do not adopt such a per se rule. There is no reason to infer, as a matter of law, that a general contractor would have alerted a surety to such a pleading. Thus, the Notice Transfer Test is not satisfied by the general contractor/surety relationship alone.

[20] However, a consideration not addressed by the trial court, but that could be relevant to imputing notice to a new party, is whether it shared counsel with a named party prior to the running of the statute of limitations. See Hebertson v. Bank One, Utah, N.A., 1999 UT App 342,¶ 19 n. 9, 995 P.2d 7 (considering having the same attorney and insurance carrier relevant to relation back analysis). While National and Fox currently have the same counsel, the record does not indicate whether they shared counsel prior to the lapse of the one-year limit or, if so, whether the nature of counsels' representation of National was such that imputation of notice is appropriate. See Singletary v. Pennsylvania Dep't of Corr., 266 F.3d 186, 190 (3d Cir.2001) (refusing to impute notice where the new party did not retain the same counsel as the named party until after the statute of limitations had run).

Furthermore, the parties and the trial court focused only upon the Notice Transfer Test. Application of the relation back doctrine also would be appropriate if National had sufficient actual notice of the original pleading prior to the running of the statute of limitations. Thus, we also remand for a determination of whether National had actual notice of the nature of Porter's claims against Fox, and therefore against the Bond, before the statute of limitations ran. [FN13] See Sam Finley, Inc. v. Interstate Fire Ins. Co., 135 Ga.App. 14, 217 S.E.2d 358, 362-63 (1975) (remanding for a determination of whether a surety had actual notice of the original complaint against the general contractor after deciding that the claim upon a payment bond arose out of the same facts as the original claims).

FN13. There are some indications that National did have actual notice. For example, Fox's president testified that the relationship between Fox and National was extremely close: "They pretty much knew when I cut my fingernails, yes."

Thus, we reverse and remand for a determination of all facts relevant to determining whether National had constructive or actual notice that it would have been a proper party to Porter's original complaint.

C. Attorney Fees

Finally, Porter claims that the trial court abused its discretion by awarding National attorney fees in the amount of $25,000 plus costs. [FN14] Given our disposition of Porter's appeal, we vacate the award.

FN14. While Porter challenges the reasonableness of the award, it does not challenge the trial court's statutory authority to award reasonable attorney fees and costs to the prevailing party, in this case National, to a "suit upon a payment bond." Utah Code Ann. § 63-56- 38(6) (2000).

CONCLUSION

Because Fox did not set forth facts sufficient to create a disputed issue of material fact regarding Porter's implied-in-fact contract claim, the trial court did not err by concluding that Porter was entitled to judgment as a matter of law. Therefore, we affirm.

Because Porter's failure to bring its claim upon the Bond and against National within the one-year limit was due to Porter's own negligence, the discovery rule cannot save Porter's claim from the applicable statute of limitations. Porter's rule 15(c) claim cannot be determined as a matter of law on the facts before the trial court. The record is insufficient for us to determine whether National had actual or constructive notice of Porter's original complaint. Therefore, we reverse and remand. We also vacate the award of attorney fees to National.

WE CONCUR: PAMELA T. GREENWOOD, Judge and GREGORY K. ORME, Judge.

Case 10.3

146 Cal.App.4th 586, 52 Cal.Rptr.3d 898, 07 Cal. Daily Op. Serv. 235, 2007 Daily Journal D.A.R. 343

Robert WAGNER, etc., Plaintiff and Appellant,

v.

COLUMBIA PICTURES INDUSTRIES, INC., Defendant and Respondent.

No. B184523.

Jan. 8, 2007.

, Acting P.J.

*588 Robert Wagner individually and as trustee of his children's trusts brought this action against Columbia Pictures claiming he and the trusts are contractually entitled to share in the net profits Columbia earned from two motion pictures it produced based on the Charlie's Angels television series. The trial court concluded the contract did not entitle Wagner and the trusts to share in the profits from the movies and granted Columbia's motion for summary judgment. Wagner filed a timely appeal from the judgment. We affirm.

This unusually complex case was well briefed and ably argued by counsel for both parties. Beyond the normal round of briefs and oral argument, counsel responded to two requests for letter briefs from the court and returned for a second oral argument. If we have erred in our resolution of the issues it was not for counsels' lack of effort to set us straight.

FACTS AND PROCEEDINGS BELOW

Robert Wagner and Natalie Wood (the “Wagners”) entered into an agreement with Spelling-Goldberg Productions (SGP) “relating to Charlie's Angels (herein called the ‘series').” The contract entitled the Wagners to 50 percent of the net profits SGP received as consideration “for the right to exhibit photoplays of the series and from the exploitation of all ancillary, music and subsidiary rights in connection therewith.” SGP subsequently sold its rights and obligations with respect to the Charlie's Angels series to defendant Columbia Pictures. Thirteen years later Columbia contracted to obtain the motion picture rights to the series from the heirs of the show's writers, Ivan Goff and Ben Roberts. In 2000 and 2003 Columbia produced and distributed two Charlie's Angels films based on the TV series.

Wagner contends the “subsidiary rights” provision in the agreement with SGP entitles him and the trusts to 50 percent of the net profits from the two Charlie's Angels films. Columbia contends even if the term “subsidiary rights” may sometimes include movie rights its production of the Charlie's Angels movies did not constitute exploitation of a subsidiary right “in connection with ” the “right to exhibit photoplays of the series.”

Wagner brought this action against Columbia for breach of contract, unjust enrichment, declaratory relief and an accounting. Columbia answered and moved for summary adjudication of the cause of action for breach of contract. After the trial court granted that motion the parties stipulated to entry of judgment in favor of Columbia on the ground the order granting the motion as to the breach of contract cause of action effectively disposed of the remaining causes of action.

*589 DISCUSSION

I. SCOPE OF REVIEW.

In we thoroughly examined the role of an appellate court called upon to review a trial court's decision interpreting a contract and we need not repeat this discussion here. Essentially, when a party to a contract claims its terms are ambiguous the trial court's threshold determination of ambiguity is a question of law subject to our **901 independent review. If parol evidence is admitted to determine the meaning of a contract term and the evidence is in conflict we defer to the trial court's determination under the substantial evidence test. If the evidence is not in conflict but is subject to different interpretations then we do not defer to the trial court's findings. Instead we review the lower court's interpretation de novo.

II. THE CHARLIE'S ANGELS AGREEMENT IS UNAMBIGUOUS IN DESCRIBING THE CONDITIONS UNDER WHICH THE WAGNERS ARE ENTITLED TO SHARE IN THE NET PROFITS FROM THE MOTION PICTURES.

The Wagners' contract with SGP entitled them to a share of “all monies actually received by the producer, as consideration for the right to exhibit photoplays of the [Charlie's Angels] series, and from the exploitation of all ancillary, music and subsidiary rights in connection therewith.” The principal dispute between the parties is whether the phrase “in connection therewith” modifies “Charlie's Angels television series,” so the net profits SGP, or Columbia, received from any ancillary or subsidiary right which bears a “connection” to the television series are included within the agreement (Wagner) or whether the phrase “in connection therewith” modifies “the right to exhibit photoplays of the series” so only the net profits SGP, or Columbia, received by taking advantage of SGP's rights, as producer, to exhibit photoplays of the series are included in the agreement (Columbia).

Wagner offered extrinsic evidence to show the contract was reasonably susceptible to his interpretation. As has been explained in numerous cases, when a party contends the language of a contract is ambiguous the test for the admissibility of extrinsic evidence to explain the meaning of the contract is not whether the contract appears to the court to need interpreting “but whether the offered evidence is relevant to prove a meaning to which the *590 language of the instrument is reasonably susceptible.” Therefore, the court must provisionally receive all credible evidence concerning the parties' intentions to determine whether the contract language is reasonably susceptible to the interpretation urged by a party. If in light of the extrinsic evidence the language is reasonably susceptible to the interpretation urged, then the extrinsic evidence is admitted to aid in interpreting the contract. “If it is not, the case is over.”

.

A. Wagner's Extrinsic Evidence.

1. The antecedent “Love Song” agreement.

Wagner introduced evidence of the history of the negotiations underlying the Charlie's Angels contract in support of his interpretation of the agreement.

Parol evidence of the negotiations underlying a contract is admissible to explain but not contradict the meaning of its terms.

**902 This history begins with a contract the Wagners entered into with SGP to star in a television movie-of-the-week, “Love Song.” As compensation for Wagner and Wood acting in “Love Song,” SGP agreed to pay them a fixed amount plus one-half the net profits derived from the “exploitation of all ancillary, music and subsidiary rights in connection therewith.” The evidence shows the definition of net profits in the “Love Song” agreement was derived from a memorandum of understanding based on negotiations between SGP and the Wagners. SGP sent a copy of this “deal memo” to its counsel requesting counsel prepare a contract under which SGP, after recouping its costs, “will share equally (50/50) with [the Wagners] in all gross revenues derived from all sources from the exploitation of ‘Love Song.’ ”

An early draft of the “Love Song” contract limited the Wagners' net profit to the net of “all monies received by the Producer as consideration for the right to exhibit the photoplay.” The Wagners objected to this language as inconsistent with the “deal memo” which stated SGP's intent there be an equal split of all revenues “derived from all sources.” They called for the phrase “and all rights therein” to be added immediately following the word photoplay and asserted these rights should be defined as “including but not limited to ... remake rights, sequel rights, publication rights, legitimate stage rights, television rights, etc.”

*591 SGP's counsel responded to the Wagner's request for a revised definition of net profits stating the language they wanted to include could be construed as granting them ownership rights in “Love Song.” Counsel affirmed, however, the Wagners were entitled to receive a share of “income from any and all sources and it is my opinion that the agreement so states[.]”

The Wagners replied their intent was not to ask for ownership rights in “Love Song” “but merely to make certain [they] participated in all revenues from all sources.”

After receiving this letter SGP's counsel revised the net profit definition to include profits “derived from all sources from the exploitation of the photoplay and all ancillary rights therein[.]” In an accompanying letter counsel noted with respect to net profits: “I have made the change requested” and “covered your comment.”

In the final “Love Song” contract net profits were not limited to monies received “for the right to exhibit the Photoplay.” Instead they were defined as the net of “all monies received by Producer as consideration for the right to exhibit the Photoplay, and exploitation of all ancillary, music and subsidiary rights in connection therewith.” (Italics added.)

2. The Charlie's Angels agreement.

Another provision of the “Love Song” agreement stated the Wagners would team up with SGP “to jointly submit up to five ideas to ABC for the basis of a pilot script for the 1974-1975 television season.” The parties agreed if ABC accepted any of these ideas they would “enter into a business relationship ... where the profits therefrom are shared equally between the parties.” One of the ideas the Wagners and SGP submitted to ABC was a series called “Harry's Angels.”

After ABC expressed interest in the series, renamed “Charlie's Angels,” the Wagners entered into negotiations with SGP under the joint submissions provision of the “Love Song” agreement discussed above. As in the “Love Song” agreement the parties agreed to a fifty-fifty share of the net profits. The Charlie's Angels agreement defines net profits as the net of “all monies actually received by Producer as consideration for the right to exhibit photoplays of the series and from the exploitation of all ancillary, music and subsidiary**903 rights in connection therewith.” This language is identical to the final definition of net profits in the “Love Song” agreement. In a letter to counsel for the Wagners counsel for SGP noted the definition of net profits in the Charlie's Angels agreement “is not a standard definition, but has many changes more favorable to your clients than any such standard definition.”

*592 Wagner's argument is simple and straightforward. The net profits provision in the “Love Song” agreement was intended to give the Wagners a one-half share in the net profits received by SGP “from all sources” without limitation as to source or time. This intent was confirmed by SGP's attorney who acknowledged the Wagners were entitled to receive “income from any and all sources and it is my opinion that the agreement so states this.” The Charlie's Angels agreement was based on the “Love Song” agreement and defines net profits in identical language. Therefore, the Charlie's Angels agreement should also be interpreted as providing the Wagners with a 50 percent share in SGP's income “from all sources” without limitation as to source or time. Since Columbia admits it stands in SGP's shoes with respect to SGP's obligations under the Charlie's Angels agreement, Columbia is obligated to pay Wagner and the trusts 50 percent of the net profits derived from the Charlie's Angels movies.

B. Wagner's Extrinsic Evidence Does Not Support A Meaning To Which The Contract Is Reasonably Susceptible.

The problem with Wagner's extrinsic evidence is that it does not explain the contract language, it contradicts it. “Under the parol evidence rule, extrinsic evidence is not admissible to contradict express terms in a written contract or to explain what the agreement was. The agreement is the writing itself. Parol evidence cannot be admitted to show intention independent of an unambiguous written instrument.” Thus, as Justice Holmes explained, parol evidence is not admissible to show that when the parties “said five hundred feet they agreed it should mean one hundred inches, or that Bunker Hill Monument should signify the Old South Church.”

.

.

Even if the Wagners and SGP intended the Wagners would share in the net profits “from any and all sources” they did not say so in their contract. What they said in their contract was the Wagners would share in “all monies actually received by Producer, as consideration for the right to exhibit photoplays of the series, and from the exploitation of all ancillary, music and subsidiary rights in connection therewith.” For a right to be “subsidiary” or “ancillary,” meaning supplementary or subordinate, there must be a primary right to which it relates. The only primary right mentioned in the contract is “the right to exhibit photoplays of the series.” Thus the Wagners were entitled to share in the profits from the exploitation of the movie rights to Charlie's *593 Angels if those rights were exploited by Columbia as ancillary or subsidiary rights of its primary “right to exhibit photoplays of the series” but not if those rights were acquired by Columbia independently from its right to exhibit photoplays.

Webster's Third New International Dictionary (2002) page 80, column 1; page 2279, column 1.

**904 Thus, for example, if SGP held the motion picture rights to Charlie's Angels from the beginning or if it acquired them by exercising its right of first refusal as producer to purchase the rights from Goff and Roberts then it could be said to have acquired those rights by exploiting its right to exhibit photoplays of the series and the Wagners would be entitled to a share of the profits. But if SGP (or Columbia) purchased the motion picture rights to Charlie's Angels on the open market, independent of any right it had as producer of the TV series, then it could not be said to have acquired those rights by exploiting its right to exhibit photoplays of the series and the Wagners would not be entitled to a share of the net profits.

See discussion of the producer's right of first refusal at pages 905-906, below.

III. THE UNDISPUTED EVIDENCE SHOWS SGP DID NOT ACQUIRE THE MOTION PICTURE RIGHTS TO CHARLIE'S ANGELS BY EXPLOITING ITS RIGHTS AS PRODUCER OF THE TV SERIES.

To understand how the producer of a television series acquires the motion picture rights in the series it is necessary to understand the concepts of “works made for hire” under the Copyright Act of 1909 and “separated rights” under the 1970 Writers Guild of America Minimum Basic Agreement (MBA).

Former 17 United States Code sections 1-216 (35 Stat. 1075, as amended). Congress enacted a comprehensive revision to the 1909 Act in the Copyright Act of 1976 () which became effective on January 1, 1978. The citations in this opinion are to the 1909 Act which was in effect at all times relevant to this opinion. The text of the 1909 Act as amended is set out in 8 Nimmer on Copyright (2006) Appendix 6.

The Writers Guild is the collective bargaining unit of screen and television writers which for decades has negotiated an industry-wide collective bargaining agreement (the MBA) with motion picture and television producers governing the rights of its members. (Reiner, “ hereafter Reiner.) It is undisputed the 1970 MBA applied to the contract between SGP and the writers of the Charlie's Angels pilot production, Goff and Roberts.

A. Works Made For Hire

The 1909 Act provided the holder of the copyright in a work had “the exclusive right ... to ... make any other version thereof[.] It further provided “the word ‘author’ shall include an employer in the case of works *594 made for hire.” Thus, unless the parties agreed otherwise a writer's employer owned all of the rights comprised in the copyright, including the right to use a work created for one medium in another medium. It was not uncommon, however, for the parties to agree to a provision reserving to the employee writer the rights in certain media while the employer producer retained the rights in other media.

Former 17 United States Code section 1, subdivision (b).

Former 17 United States Code section 26.

1 Nimmer on Copyright, supra, section 5.03, page 5-56.9.

1 Nimmer on Copyright, supra, section 5.03, page 5-56.9, citing the 1960 Writers Guild of America MBA.

Here Goff and Roberts, who wrote the teleplay for the Charlie's Angels pilot, entered into a contract with the producer, SGP, which provided in relevant part: “Producer hereby engages Artist to render services in the writing, composition, preparation and revision of the literary material described in paragraph 3 hereof [a complete**905 pilot script entitled ‘Charlie's Angels'].... Artist agrees that all material composed, submitted, added and/or interpolated by Artist hereunder shall automatically become Producer's property and that Producer, for this purpose, shall be deemed the author thereof, Artist acting entirely as Producer's employee.” Thus, if there had been no further provision in the contract concerning media rights SGP would have had the exclusive right to exploit the Charlie's Angels television series in a motion picture, stage play, comic book or any other media.

B. Separated Rights

The contract between Goff and Roberts and SGP did contain additional provisions concerning media rights, however. The contract stated: “The parties acknowledge that this agreement is subject to all of the terms and provisions of the applicable [MBA] and to the extent that the terms and provisions of the [MBA] are more advantageous to Artist than the terms hereof, the terms of the [MBA] shall supersede and replace the less advantageous terms of this agreement.” As we shall explain, the “separated rights” provision of the MBA was more advantageous to Goff and Roberts than the “works made for hire” provision of their contract with SGP. Therefore in determining the rights of the parties the MBA's “separated rights” provision prevailed over the contract's “works made for hire” provision.

Article 16B of the MBA entitled “Separation of Rights” provided in relevant part the producer “agrees that separation of rights ... shall be accorded to the writer of a format, story, or story and teleplay for any television film.” The rights were separated as follows: “[Producer] shall own the exclusive film television rights in the literary material to which the *595 provisions of this Article 16B apply[.] ... Writer shall retain all other rights ... including but not limited to ... theatrical motion picture ... rights.”

Article 50 of the MBA described the rights and duties of the producer and writer with respect to separated rights. It stated: “The writer of any literary material subject to the provisions of Article 16B hereof and the [producer] agree that they will take no action with respect to the rights reserved to the writer or granted to the [producer] which will cause or permit such literary material to become a part of the public domain in the United States. Insofar as such literary material is covered by the copyright of the television film, the rights reserved to the writer hereunder will be held in trust for such writer by the owner of the copyright.... Without limiting the generality of the foregoing, [producer] agrees to execute and deliver to writer an assignment under the copyright of all rights in the copyright reserved or which may revert to writer pursuant to the provisions hereof[.]”

Thus, in the present case, SGP owned the copyright to Charlie's Angels and held “the exclusive film television rights in the literary material,” in other words it had “the right to exhibit photoplays of the series.” SGP also held in trust for Goff and Roberts the separated right to generate motion pictures based on the series.

It is undisputed Goff and Roberts were eligible for separated rights under the MBA.

Despite the provision in the MBA conferring the motion picture rights in a teleplay on the writers of the teleplay the producer retained a “limited interest in such rights.” As relevant here, this “limited interest” consisted of the right of first refusal should the writer decide to offer the movie rights for sale within five years from the date the writer delivered the teleplay to the producer. After the five **906 year period expired the producer could still purchase the movie rights but it had to do so on the open market and in competition with any other producer who wanted to purchase those rights.

Consequently, if Columbia had produced Charlie's Angels movies based on motion picture rights its assignor SGP had acquired from Goff and Roberts under SGP's right of first refusal Columbia could be said to have “exploited” an ancillary or subsidiary right, i.e., movie-making, in connection with “the right to exhibit photoplays of the series” and the Wagners would be entitled to a share of the movies' profits.

However, as we discuss below, there is no evidence SGP ever acquired the motion picture rights to Charlie's Angels by exercising its right of first refusal or in any other way connected to its right to exhibit photoplays of the series.

*596 C. SGP Did Not Acquire the Motion Picture Rights to Charlie's Angeles by Exercising a Right Connected To Its Right to Exhibit Photoplays Of the Series.

Columbia produced sufficient evidence to make a prima facie showing SGP never acquired the motion picture rights from Goff and Roberts. This evidence included the contract under which Columbia purportedly purchased from the heirs of Goff and Roberts “the right to create and produce motion pictures ... based upon the television series created by Ben Roberts and Ivan Goff entitled ‘Charlie's Angels.’ ” In addition, Columbia submitted the deposition testimony of Marvin Katz and the declaration of Gregory Boone. Katz, a former senior executive of SGP, testified it was his understanding SGP never acquired Goff's and Roberts' reserved rights in Charlie's Angels. Boone, an executive with Sony Pictures Television, testified that in the early 1990's he was asked to look into the issue of who owned the motion picture rights to the Charlie's Angels television series. Boone conducted a search of the business records of SGP which Columbia obtained after it purchased SGP's assets and “did not locate any evidence in SGP's business records to suggest that SGP owned the theatrical motion picture rights for ‘Charlie's Angels.’ ”

The reasonable inference from this evidence is that SGP did not acquire the motion picture rights to Charlie's Angels before it sold its assets to Columbia in 1982, more than six years after Goff and Roberts wrote the pilot episode. This inference, of course, may be rebutted “by other inferences or evidence, which raise a triable issue as to any material fact.” The record contains no such inferences or evidence.

.

The only evidence SGP might have acquired Goff's and Roberts' movie rights is a document entitled “Copyright Assignment Nunc Pro Tunc” executed by SGP on May 5, 1982, a few days after it sold its assets to Columbia.

The first paragraph of the “Copyright Assignment” states “[SGP] has sold, assigned, transferred and set over ... unto [Columbia] the sole and exclusive motion picture rights and certain other rights in and to those certain television motion pictures set forth on Schedules ‘A’ through ‘H’ attached hereto ... all as more particularly set forth and enumerated, and upon and subject to the terms and conditions set forth in that certain agreement between [SGP] and [Columbia] dated as of April 30, 1982....” (Italics added.) Schedule A is a list of Charlie's Angels television episodes.

**907 The second and third paragraphs of the “Copyright Assignment” empower Columbia to take all steps necessary to assure Charlie's Angels and the other *597 properties listed in the schedules do not fall into the public domain and to prosecute any action necessary to protect the copyrights in those properties from infringement.

Wagner reasons SGP would not have represented it sold rights to Columbia it did not own. Therefore, he argues, the first paragraph of the “Copyright Assignment,” reciting SGP “sold” the motion picture rights in Charlie's Angels to Columbia, should be viewed as raising a triable issue as to whether SGP acquired the motion picture rights from Goff and Roberts by exercising its right of first refusal under the MBA. We are not persuaded by this argument for two reasons.

Although the “Copyright Assignment” states SGP sold the motion picture rights in Charlie's Angels to Columbia it also states the sale of the motion picture rights was subject to the “terms and conditions” of the April 1982 purchase agreement with Columbia. Under this agreement Columbia's purchase of SGP's assets was expressly subject “to all SGP['s] ... industry-wide collective bargaining agreements” which would include the 1970 MBA under which Goff and Roberts, not SGP, held the motion picture rights to Charlie's Angels. These two statements are not contradictory because under Article 50 of the MBA the producer did not “sell” the separated rights to the writer. Rather, it “assigned” those rights to the writer. The assigned rights continued to be “owned” by the producer but “held in trust” for the writer. The purpose of SGP's “Copyright Assignment,” as shown by the second and third paragraphs, was to protect the properties from copyright infringement or becoming part of the public domain-a duty imposed on SGP under Article 50 of the MBA.

See discussion at pages 905-906, above.

Even if we viewed the “Copyright Assignment” as evidence SGP held the motion picture rights to Charlie's Angels when it sold its assets to Columbia the “Copyright Assignment” is not evidence SGP acquired those rights by exercising its right of first refusal under the MBA. SGP's right of first refusal under the MBA expired five years from the date Goff and Roberts delivered the pilot teleplay to SGP. We do not know the date Goff and Roberts delivered the teleplay but we do know it had to have been sometime before the pilot aired on March 21, 1976. We also know SGP sold its television assets to Columbia in April 1982. Therefore, SGP could have acquired the movie rights after its right of first refusal expired by purchasing them on the open market just as any other studio could have done.

See discussion at pages 905-906, above.

imbd. com/ title/ tt 0073972/ episodes# season-1. last visited January 2, 2007.

We conclude, therefore, a reasonable trier of fact could not find, based on the language of the “Copyright Assignment” that SGP acquired the motion *598 picture rights to Charlie's Angels by exercising a right connected to its right to exhibit photoplays of the series.

DISPOSITION

The judgment is affirmed. Respondent is awarded its costs on appeal.

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