Watters v. City of Billings

Watters v. City of Billings, 2017 MT 211 (Aug. 28, 2017) (Rice, J.; Wheat, J., dissenting) (5-2, rev’d)

Issue: Whether the district court erred by holding the CBAs were unambiguous and excluding extrinsic evidence concerning their interpretation.

Short Answer: Yes.

Reversed and remanded

Facts: Officers are current and retired police officers and members of the union, which collectively bargains with the city. The central dispute in this case is the correct interpretation of the longevity pay provisions in the 2000-2003, 2003-2006, and 2006-2009 CBAs.

In an order granting partial summary judgment, the district court judge found that the plain language of the agreement controlled, and did not address the accumulation theory put forth by the officers. In a few sentences at the end of its order, the court gave examples of equations showing how longevity would be calculated. In doing so, the court incorporated calculation issues that had not been plead or briefed by the parties. The court did not refer to the CBA language or discus any governing legal principles to explain its sample equations. These examples became known as the Swandal Formula. The officers thereafter changed their legal theory from the accumulation theory to the Swandal Formula.

The Swandal Formula incorporated a non-completed year of service within the years-of-service multiplier, which had not been raised in the litigation and was contrary to the city’s longstanding practice.

Following a bench trial, the district court issued findings, conclusions, and an order. Relying on the plan language of the CBAs, the court held that longevity must be calculated ‘at the beginning of year one,’” although that term was only in the 2000-2003 CBA. The court refused to consider extrinsic evidence offered by the city about the meaning of the longevity formulas, except for reading the omitted term into the 2003-2006 and 2006-2009 CBAs on the basis that its omission was a “scrivener’s error.” Moreover, it selectively considered other extrinsic evidence reflected in its findings of fact and conclusions of law.

Procedural Posture & Holding: The district court entered final judgment requiring the city to pay the officers $932,960.90, imposing a 110% penalty of $1,026,256.99, and awarding attorneys’ fees of $653,072.63 and costs of $125,854.60, for a total of $2,738,145.12. The city appeals, and the Supreme Court reverses. 

Reasoning: This case involves three CBAs, each with different language. The parties offer reasonable readings of the contractual term, “at the beginning of year one,” thereby creating a legal ambiguity. That term is found only in the 2000-2003 CBA. Not only was its meaning contested, but the propriety of applying it to the subsequent CBAs was another legal question to be determined in the proceeding. The district court resolved these issues in the officers’ favor. The problem is that the Swandal Formula is not explanatory, and the district court ended up doing what it said it would not do – using extrinsic evidence to resolve the contractual ambiguities.

The district court’s analysis was contradictory and incorrect. It erred by concluding that the longevity provisions of the CBAs were unambiguous, and then by excluding all extrinsic evidence offered by the city while selectively relying on other extrinsic evidence.

Justice Wheat’s Dissent (joined by McGrath, C.J.): Justice Wheat disagrees with the majority’s conclusion that the district court erred by relying on some extrinsic evidence while excluding other extrinsic evidence. He would affirm.

The city testified that certain omissions from the second and third CBAs were inadvertent, and that it had continued to calculate and pay longevity as it had done under the first CBA. Based on this undisputed testimony, then-presiding Judge Swandal noted that the omissions were “scrivener’s errors” and reformed the second and third CBAs accordingly. Judge Gilbert incorporated this reference into the court’s findings and conclusions.

The city then changed its position and began arguing that “years of service” meant “years of completed service.” The longstanding rule is that the district court will not be held in error for a ruling to which the appellant acquiesced, participated, or made no objection.

While the city strenuously argues against the district court’s interpretation, the Court must interpret the language in the contract before it.

Justice Wheat also believes the Court is remiss in failing to address other issues raised on appeal, including the proper statute of limitations, the appropriate class members, and certain damage awards.