                                                                           FILED
                           NOT FOR PUBLICATION
                                                                           MAY 22 2017
                    UNITED STATES COURT OF APPEALS                      MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS


                            FOR THE NINTH CIRCUIT


CELIA RUMANN; MICHAEL                            Nos. 14-15621
O’CONNOR,                                             14-16032

              Plaintiffs-Appellants,             D.C. No. 2:13-cv-01107-SRB

 v.
                                                 MEMORANDUM*
PHOENIX SCHOOL OF LAW, LLC, a
Delaware limited liability company;
INFILAW HOLDING, LLC, a Delaware
limited liability company,

              Defendants-Appellees.


                   Appeals from the United States District Court
                            for the District of Arizona
                    Susan R. Bolton, District Judge, Presiding

                     Argued and Submitted February 12, 2016
                            San Francisco, California

Before:      TASHIMA and W. FLETCHER, Circuit Judges, and BASTIAN,**
             District Judge.



      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The Honorable Stanley Allen Bastian, United States District Judge for
the Eastern District of Washington, sitting by designation.
      Appellants Michael O’Connor and Celia Rumann are husband and wife who

were previously employed as tenured professors by Appellee Phoenix School of

Law, LLC (“PSL”). In 2013, after PSL withdrew its tenure offer to them for the

2013-2014 academic year, Appellants initiated this action alleging breaches of

contract and of the implied covenant of good faith and fair dealing. The district

court dismissed their Second Amended Complaint (“SAC”) and subsequently

awarded attorneys’ fees to PSL. Appellants challenge both of these rulings. We

have jurisdiction pursuant to 28 U.S.C. § 1291,1 and we affirm.

      PSL’s employment policies are set forth in Chapter II of its Faculty

Handbook. In relevant part, § 2.2.4 provides that a tenure contract is:

      for an academic year and gives the faculty member the contractual right to
      be re-employed for succeeding academic years until the faculty member
      resigns, retires, is discharged for adequate cause, is terminated pursuant to a


      1
              After we heard oral argument, we remanded this appeal to the district
court “for the limited purpose of determining whether it had subject matter
jurisdiction at the time it entered its order of dismissal, and, if not, whether such
lack of jurisdiction can be cured by amendment, dismissal of any non-diverse
defendant, or otherwise.” On limited remand, the district court concluded that, at
the time it dismissed the SAC, it lacked subject matter jurisdiction because
Defendant InfiLaw Holding, LLC, had a non-diverse member. The district court
further reasoned, however, that it could cure this defect by dismissing InfiLaw as a
party, which it did. Thereafter, the parties filed supplemental briefs, which
included Appellants’ objections to the district court’s determination with regard to
subject matter jurisdiction. Because we are not persuaded the district court erred,
we affirm its conclusion as to the jurisdictional defect and its adopted remedy.
Accordingly, we now turn to the merits of the instant appeal.
                                          2
      reduction in force, becomes disabled, or dies, but subject to the terms and
      conditions of employment which exist from academic year to academic year.
      Tenure status is defined by the terms of this Faculty Handbook and a tenure
      contract and does not exist apart from a legally subsisting contractual
      agreement.

Additionally, § 2.2.5 sets forth a form contract, which expressly states that the

contract “contains the entire agreement between [PSL] and the Employee,” and

that “[a]ny changes of any kind in the employee’s acceptance of this Contract shall

constitute a counter-offer and shall automatically nullify the offer extended

herein.”

      Prior to the 2012-2013 academic year, Appellants each received and

executed an employment contract for a tenured position. These contracts were

nearly identical to the Faculty Handbook’s form contract. They contained a

provision whereby PSL’s Dean and Faculty Development Committee would

“conduct an extensive review of each tenured faculty member” every four years, as

set forth in the Faculty Handbook.

      In the lead up to the 2013-2014 term, PSL opted to issue “Appointment

Letters” to returning faculty in place of the earlier “lengthy contracts.” The

Appointment Letters stated that Appellants were being offered positions as

“Professor[s] of Law” and that these were “tenure” positions. Additionally, the

Appointment Letters incorporated by reference Chapter II of the Faculty


                                           3
Handbook. And, in an accompanying cover letter and email, PSL represented that

the Appointment Letters “do[] not contain any fewer protections, rights, and

responsibilities than the previous contracts issued to returning faculty.”

        Appellants declined to sign the tendered Appointment Letters. Instead, they

challenged as inadequate the Appointment Letters’ incorporation of Chapter II of

the Faculty Handbook – and, consequently, the form contract – on grounds that the

form contract left certain material terms blank. Appellants wrote back to PSL that

“[t]o ensure . . . a complete contract that reflects all material terms of the contract,

and avoid any confusion regarding those material terms,” they were enclosing their

own form of an employment contract that purportedly complied with § 2.2.5. They

requested that PSL execute their proposed contract no later than May 17, 2013. On

May 20, 2013, PSL responded by withdrawing the respective offers of employment

to Appellants. This action followed.

        1.    Appellants contend that the district court erred in dismissing their

breach of contract claim because the Appointment Letters purportedly breached

their 2012-2013 employment contracts and the Faculty Handbook in a number of

ways.

              A.    Appellants first object that the Appointment Letters neither

adhered to the content of the Faculty Handbook’s form contract, nor specified


                                            4
whether they were “tenure contracts” as defined in § 2.2.4 of the Faculty

Handbook. But the Appointment Letters fully incorporated Chapter II of the

Faculty Handbook, including the form contract, and expressly stated that

Appellants were being offered “full time ‘tenure’ position[s].”

      Second, Appellants argue that the Appointment Letters used ambiguous

terms – such as “appointment” and “tenure-track position” – that were inconsistent

with PSL’s assertion that the Appointment Letters offered tenure positions. Thus,

they contend, the Letters effectively amounted to a demotion.

      Even assuming these specific references are ambiguous, however,

Appellants’ proposed interpretation of the Appointment Letters is unreasonable.

As noted, the Appointment Letters expressly state that the positions being offered

are “full time ‘tenure’ position[s].” This has the effect of resolving any latent

ambiguity that might otherwise have existed. And contrary to Appellants’

position, the Faculty Handbook does not use the term “appointment” exclusively in

relation to non-tenured positions. For example, § 2.1.4.2, which concerns

“administrative faculty,” provides that “[a]dministrators who are hired with or

appointed to tenure status in the faculty shall retain their status during term of their

administrative position employment unless otherwise agreed.” (Emphasis added.)




                                           5
      Finally, under Arizona law, a contract must be “read in light of the parties’

intentions as reflected by their language and in view of all the circumstances.”

Darner Motor Sales, Inc. v. Universal Underwriters Ins. Co., 682 P.2d 388, 398

(Ariz. 1984) (internal quotation marks omitted). Accordingly, “the interpretation

of a negotiated agreement is not limited to the words set forth in the document,”

but also depends on “[e]vidence of surrounding circumstances, including

negotiation, prior understandings, subsequent conduct and the like . . . to interpret

the meaning of the provisions contained in the agreement.” Id. Here – where it is

undisputed that Appellants achieved tenure status in 2010 and 2011, where the

parties entered into a tenure employment contract for the 2012-2013 term, and

where PSL represented that the Appointment Letters did not reduce the

“protections, rights, and responsibilities” established in “previous contracts” – the

surrounding circumstances render Appellants’ proposed interpretation

unreasonable.

             B.     Appellants next argue that the Appointment Letters’

incorporation of the Staff Employee Handbook amounts to a breach of contract

because it could subject them to termination without warning or cause, which,

according to Appellants, is “a complete repudiation” of their existing tenure rights.

This argument misses the mark. The Staff Employee Handbook applies primarily


                                           6
to non-faculty staff positions. And, contrary to Appellants’ argument, the

Appointment Letters’ incorporation of the Staff Employee Handbook does nothing

suddenly to render its provisions applicable to tenured faculty. This conclusion is

consistent with Chapter II of the Faculty Handbook, which distinguishes between

faculty and staff, and the express language of the Appointment Letter, which draws

the same distinction.

             C.         Appellants further argue that the Appointment Letters ran

afoul of their 2012-2013 employment contracts by failing to include a separate

provision for post-tenure review. This argument fails because the Appointment

Letters expressly incorporated Chapter II of the Faculty Handbook, which includes

the tenure review provision at § 2.5.6. Moreover, the fact that this provision was

amended in October 2012 – to extend the period between reviews from four to five

years – does not support a different conclusion. This is made clear by the express

language of the Appointment Letters, which incorporate “Chapter II of the Faculty

Handbook, as they may be modified from time to time.” (Emphasis added.)

Accordingly, the Appointment Letters did, in fact, include a post-tenure review

provision and expressly took into account the possibility of amendments to

Chapter II of the Faculty Handbook.




                                            7
             D.    Finally, Appellants contend that PSL’s decision to withdraw

their employment offers was itself a breach of contract. According to Appellants,

by virtue of their tenured status, they had a “right to continuous employment until

resignation, retirement, death[,] or dismissal for cause.” Therefore, they argue,

when PSL effectively terminated them without cause, it breached both their 2012-

2013 employment contracts and Chapter II of the Faculty Handbook. This

argument fails. The form contract in the Faculty Handbook provides that “[a]ny

changes of any kind in the employee’s acceptance of this Contract shall constitute

a counter-offer and shall automatically nullify the offer extended herein.”

Appellants’ 2012-2013 employment contracts included the same statement. After

refusing to sign the Appointment Letters, Appellants proposed an employment

contract that differed from the Appointment Letters in at least one significant way.2

Because “[a]ny changes of any kind in the employee’s acceptance” had the effect

of “automatically nullify[ing] the offer,” PSL was not in breach when it withdrew

its offer for the 2013-2014 term.




      2
             Specifically, Appellants’ proposed contract set August 19, 2013, as
the date on which retroactive salary increases would take effect. In contrast, the
Appointment Letters and the 2012-2013 employment contracts set that date at
August 1.
                                          8
      2.      Appellants raise many of the same arguments in support of their

contention that the district court erred in dismissing their cause of action for breach

of the implied covenant of good faith and fair dealing. They contend that PSL

impaired their right to receive the contractual benefits of “continuous employment”

and “protection against dismissal without cause or process.” PSL achieved this

result, Appellants contend, by falsely representing that the Appointment Letters

contained the same rights and responsibilities as the 2012-2013 employment

contracts, unilaterally changing material terms of the Faculty Handbook’s form

contract, and creating a pretext for withdrawing the offer of employment. These

arguments fail for the same reasons set forth above: the Appointment Letters

incorporated the relevant provisions of the Faculty Handbook and expressly stated

that the positions being offered were tenured, and Appellants’ counteroffer had the

effect of automatically nullifying PSL’s offer. Accordingly, there is no basis for

concluding that PSL breached the implied covenant of good faith and fair dealing.

      3.     Finally, Appellants challenge the district court’s award of attorneys’

fees to PSL. The district court awarded $41,739.75 in fees pursuant to Ariz. Rev.

Stat. § 12-341.01, which provides that “[i]n any contested action arising out of a

contract, express or implied, the court may award the successful party reasonable

attorney fees.” Section 12-341.01 “vest[s] discretion in the trial court to determine


                                           9
the circumstances appropriate for the award of fees.” Associated Indem. Corp. v.

Warner, 694 P.2d 1181, 1184 (Ariz. 1985). When awarding such fees, the trial

court should consider several factors, including whether the unsuccessful party’s

claim was meritorious, whether the litigation could have been avoided or settled,

and whether imposing fees would cause extreme hardship. See Harris v. Maricopa

Cty. Superior Court, 631 F.3d 963, 974 n.3 (9th Cir. 2011) (listing the Associated

Indemnity factors).

      Appellants contend that the district court erred in its consideration of the

Associated Indemnity factors and abused its discretion when it analyzed the billing

records of PSL’s attorneys. Neither of these arguments is persuasive. The district

court correctly identified and reasonably applied the Associated Indemnity factors.

In doing so, it committed no legal error. Moreover, the court carefully reviewed

PSL’s billing records, reduced the fees as necessary to account for disputed time

entries and inadequate billing descriptions, and it reasonably calculated the fees

award. There was no abuse of discretion.

                                      •   !    •

      We affirm the district court’s: (1) dismissal of InfiLaw Holdings as a party-

defendant; (2) dismissal of the SAC; and (3) award of $41,739.75 in attorneys’ fees

to PSL.


                                          10
In each of these appeals, the judgment of the district court is AFFIRMED.




                                 11
