Tag Archives: good faith and fair dealing

Amended Lawsuit Against Phoenix School of Law by Former Profs

Round two is already underway.  Federal Judge Susan Bolton allowed former Phoenix Law School Professors Michael O’Connor and Celia Rumann to amend their complaint.  Judge Bolton dismissed the original complaint because she viewed the complaint did not sufficiently state a legal claim.

The facts of the matter are Michael O’Connor and Ceclia Rumann were professor at Phoenix School of Law (PSL) and tenured respectively in 2010 and 2011.  Both were tenured until their termination in May 2013.  Both Professors were presented with a “letter of appointment” on May 3, 2013 which left several material terms undefined, and was a change from their previous tenure contracts. On May 20, 2013 PSL revoked the letters of appointment because it viewed the unresponsive Professors as rejecting their offer of employment for the following academic year.

According to the Profs, they school breached their tenured contract and violated the implied warranty of good faith and fair dealing.

The case is No. CV-13-01107-PHX-SRB.

*** During the course of the lawsuit Phoenix School of Law changed its name to Arizona Summit Law School as a part of a re-branding effort to coincide with a curriculum change.

Arizona Employment Law

Even though Arizona law is not asserted in the complaint, it is a good idea to have a legal background about it — after all, it is being litigated in federal court for the District of Arizona and contract law is the domain of the states, as there is not a federal contract law.  Even though it is being litigated in federal court, the court will most likely defer to Arizona state law when making its judgment.

Arizona is an at-will employment state. At-will employment is where an employer does not need to have “just cause” to fire an employee.  The employee can dismissed by an employer for any reason that does not violate public policy (generally discrimination statutes).  This is codified in the Employment Protection Act, Ariz. R. Stat. § 23-1501(A)(2)

2. The employment relationship is severable at the pleasure of either the employee or the employer unless both the employee and the employer have signed a written contract to the contrary setting forth that the employment relationship shall remain in effect for a specified duration of time or otherwise expressly restricting the right of either party to terminate the employment relationship. Both the employee and the employer must sign this written contract, or this written contract must be set forth in the employment handbook or manual or any similar document distributed to the employee, if that document expresses the intent that it is a contract of employment, or this written contract must be set forth in a writing signed by the party to be charged. Partial performance of employment shall not be deemed sufficient to eliminate the requirements set forth in this paragraph…

Under the act, an employee has a claim if the employer breaches the contract.  In the employment context, employee handbooks are recognized as a formal contract.  Usually, there is not any bargaining over the employee handbook unlike in typical contractual situations — it is a take it, or leave it scenario.  However, an employee has a chance to accept or reject the handbook via if she takes the job or not.

The statute indicates when both the employer and employee sign the employee handbook it becomes a binding contract. See Demasse v. ITT Corp,. 984 P.2d 1138, 1143 (Ariz. 1999).

Second Amended Complaint

Breach of Contract

As with the first complaint, one of the major points of contention is if the defendants breached the contract by using a letter of appointment instead of a tenure contract.

What is interesting in the Second Amended Complaint is Profs provide both a Tenure Contract from 2012-2013 academic year and the Letter of Appointment for the 2013-2014 academic year.

The Tenure Contract from the 2012-2013 school year is a typical two-page contract.  Exhibit B, is a partial copy of the Faculty Handbook for Phoenix School of Law explaining the basic rights and responsibilities of faculty.  The the tenure contract acts like an annual re-affirmation of the original employment contract.

Both parties acknowledge that § 2.25 of the Faculty Handbook states the form of the employment contracts (as a sample template with blanks needing to be filled in is provided).  What is not agreed upon is if the Letter of Appointment meets the “form and style” of the sample template provided in § 2.25.

The content of the Letter of Appointment is mostly similar to that of the Tenure Contract. Although the stated purpose of the Letter of Appointment is to “simplify the process.”  The Letter of Appointment is approximately half the length of the Tenure Contract, so it accomplishes it’s stated purpose.  It does this through referencing the employee handbook where items are explained in detail. While the Letter of Appointment reads, as a ‘letter’ to each professor, it contains the elements to meet the definition of a contract.  The letter contains the amount of pay, the pay period, general responsibilities, incorporates the Faculty Handbook for specific responsibilities, and mentions indicators used in faculty review.

The Professors argue that while it may meet the elements of a contract, it is not in the “form and style” of the sample template.  The school responds that it does not matter if small deviations are met as long as it is materially similar.

In her analysis, Judge Bolton agreed that there are no material differences between the content of the Tenure Contract and the Letter of Appointment.  Even though there may be small differences between the Tenure Contract and the Letter of Appointment, Judge Bolton says these do not affect the rights of the Professors, and thus do not affect the form and style. Judge Bolton seemed to imply that the structure could change as long as the rights and content are not affected, because she did not address the layout or particular wording of the documents.

It will be difficult to see how Judge Bolton will rule differently on the breach of contract in the Second Amended Complaint, unless Judge Bolton addresses the layout and wording of the Letter of Appointment.

Good Faith and Fair Dealing

The Profs also argue that the school broke the implied covenant of good faith and fair dealing.  A covenant is a promise in contracts to continually do something.  Covenants can be written into a contract.  The covenant of good faith and fair dealing is implied because it is not written into the contract.  It does not have to be in the contract because Arizona’s common law requires both parties in a contract to act in good faith.  Wells Fargo Bank v. Arizona Laborers, Teamsters & Cement Masons Local No. 395 Pension Trust Fund, 38 P.3d 12, 28 (Ariz. 2002).

Even though a violation implied covenant of good faith and fair dealing is a separate claim, it is dependent in part on the breach of contract claim.  If Judge Bolton finds that the school did not breach the contract, it is very difficult to argue how the school did not act fairly.

The Professors make a lot of claims about how they were treated unfairly for speaking out against the changes at the school.  The argument of a violation of the implied covenant of good faith and fair dealing would be stronger if the Professors claimed constructive discharge by the law school.

It appears Judge Bolton is reviewing a Motion to Dismiss the Second Amended Complaint.  I will post when the Court makes a determination.