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Stacey Brothers v. Public School Employees of Washington

April 28, 1997


Appeal from Superior Court of King County. Docket No: 93-2-27745-8. Date filed: 07/07/95.

Authored by H. Joseph Coleman. Concurring: Walter E. Webster, Faye C. Kennedy.

The opinion of the court was delivered by: Coleman

COLEMAN, J. -- Stacey Brothers, president of the Mercer Group, contracted to sell insurance to a labor organization called Public School Employees of Washington. After entering the contract, the parties disputed certain terms, including the use of the PSE logo in Brothers' materials. After continued Discussions, Brothers sued for breach of contract. PSE contended that it had not refused performance. Brothers brought a partial motion for summary judgment for a determination that PSE had repudiated the contract and had not withdrawn this repudiation. The court denied that motion.

At trial, the court admitted evidence of the parties' negotiations after PSE's alleged repudiation of the contract. Brothers objected, contending that such evidence was inadmissible. The court instructed the jury to consider evidence of negotiations as to whether there was a breach, repudiation, or mitigation of damages, and if a breach was found, to consider negotiation evidence for no other issue. The jury found in favor of PSE.

On appeal, Brothers argues that the court erred by admitting evidence of settlement negotiations and by instructing the jury on this issue because ER 408 generally prohibits the admission of settlement negotiations. ER 408 permits such evidence, however, if it is offered for another purpose and here, the evidence was offered to demonstrate whether PSE repudiated the contract. Thus, we hold that it was properly admitted.

PSE cross-appeals, arguing that the court erred in failing to award all requested attorney fees and costs. We deny this claim. We need not consider the remainder of PSE's cross claims because we affirm.


In 1990, Brothers met Frank Warnke, then PSE's executive director, and told him about his "Pension Maximization" insurance program. The PSE Board approved a pilot program of the PENMAX program in March 1991, which was then tested in three school districts.

On March 23, 1992, Brothers and PSE signed a contract that is the center of this dispute. That contract provided that PSE did not sponsor or endorse the program in any manner and that "all pertinent materials provided to PSE members shall reference the fact that PSE does not endorse the program[.]" PSE's involvement in the program was limited to providing PENMAX with an opportunity to address its members and ensuring that the PSE name and logo were not used inappropriately. PSE agreed to allow PENMAX access to its membership so that PENMAX could present its program to PSE members. PSE also agreed to provide promptly to PENMAX all needed information about its members as requested, including names, addresses, school districts, places of employment, compensation, birth dates, genders, and the employees' retirement plans.

Brothers agreed to the following: PENMAX activities with members was not to conflict with the time allotted to members for PSE business; all video presentations and use of the PSE logo were subject to PSE's prior approval; and the presentations were to state that PSE was not a provider or endorser of the program. The contract was to continue for three years and provided for reasonable attorney fees and costs for the prevailing party in any dispute arising from the contract.

After the contract was signed, Brothers made presentations of his program in two additional districts. Brothers did not, however, submit the materials used for these presentations to PSE for its approval. Brothers claimed that he thought the submission was unnecessary since the same materials had been used in the presentations before the parties had entered the contract. The videotape presented at these meetings did not contain any disclaimer of PSE sponsorship. Furthermore, the written materials contained the disclaimer on the last page. Brothers stated that he submitted the disclaimer but did not disclose where the disclaimer would be placed.

Another problem arose when a new WAC went into effect on May 29, 1992. The WAC prohibited the superintendent of public instruction from giving, selling, or providing access to names of school district employees for commercial purposes. WAC 392-105-055. Brothers had requested information on PSE employees from the superintendent, who then told PSE that it would no longer be entitled to the information if Brothers had access to it. PSE was concerned about this because that data was needed to accomplish the primary work of PSE-- engaging in collective bargaining on behalf of classified public school employees. PSE's inability to provide the superintendent's data to Brothers, however, made it difficult and cumbersome to provide the employee data as contemplated by the contract.

On June 23, 1992, Brothers met with PSE executive director Jerald Vaughn to discuss the problems that had arisen. Brothers' main contention on appeal is that Vaughn repudiated the contract at that meeting. Vaughn testified that he gave Brothers three options: (1) To suspend the program indefinitely until Brothers complied with the contract; (2) to come to a mutual agreement to void the contract; and (3) for PSE to exercise its legal options under the contract to ensure Brothers' compliance or absent Brothers' ability to comply, to terminate the contract. By contrast, Brothers testified that Vaughn's three options all involved a repudiation of the contract: While he agrees to Brothers' characterization of the second option, Vaughn's first option was to suspend the contract indefinitely, not contingent upon Brothers' compliance; and the third option was for PSE to break the contract legally. Following this meeting, Vaughn wrote a follow-up memorandum to PSE's Board of Directors:

The meeting was concluded by my presenting three options to them and advising them that I intended to request the President place this matter on the July Board Meeting agenda for action by the full Board of Directors. The three options that I set forth were: (1) an indefinite suspension of the program, in writing, wherein no activity of any kind on PENMAX would occur; (2) that PSE and PENMAX mutually agree, in writing, that ...

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