Flora Setayesh v. State of Tennessee ( 2021 )

12/13/2021
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
September 8, 2021 Session
FLORA SETAYESH V. STATE OF TENNESSEE
Appeal from the Tennessee Claims Commission
No. K20190352 James A. Haltom, Commissioner
No. M2020-01490-COA-R3-CV
This appeal involves the interpretation of a provision in an employment contract executed
by a professor and Nashville State Community College. The appellant, a tenured faculty
member, transitioned from a teaching position to an administrative position and back again,
and asserts that Nashville State breached the terms of her employment contract when it
refused to pay her 80% of her administrative salary when she returned to a faculty position.
The Tennessee Claims Commission held a trial on the breach of contract issue and
determined that the contract referred to a Tennessee Board of Regents policy that did not
entitle the professor to 80% of her administrative salary, and therefore, the professor’s
breach of contract action failed. The Commissioner recalculated the amount of money the
professor was owed for her spring 2018 salary. The professor appeals, asserting that the
Commissioner erred in refusing to consider parol evidence in rendering its decision. We
agree with the professor that parol evidence is helpful to understanding the parties’ intent
as expressed in the agreement, and we reverse the Commissioner’s decision. The case is
remanded for calculation of the professor’s faculty salary at no less than 80% of her
administrative salary.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Claims Commission
Reversed and Remanded
ANDY D. BENNETT, J., delivered the opinion of the Court, in which W. NEAL MCBRAYER,
and KRISTI M. DAVIS, JJ., joined.
Loyd Garrett Anglin and Loyd Gilbert Anglin, Murfreesboro, Tennessee, for the appellant,
Dr. Flora Setayesh.
Herbert H. Slatery, III, Attorney General and Reporter, Andrée Blumstein, Solicitor
General, and John William Dalton, III, Senior Assistant Attorney General, for the
appellant/appellee, State of Tennessee and Nashville State Community College.
OPINION
FACTUAL AND PROCEDURAL HISTORY
Dr. Flora Setayesh is a tenured chemistry faculty member at Nashville State
Community College (“Nashville State”). She has been employed at Nashville State in
various capacities since August 2000. In 2014, Dr. Setayesh became a tenured faculty
member. On July 11, 2014, Dr. Setayesh and Nashville State President, Dr. George H. Van
Allen, executed a contract entitled “Notice of Appointment and Agreement of
Employment” for Dr. Setayesh to serve as Interim Associate Vice President for Academic
Affairs/Executive Assistant to the President (“2014 Contract”). Her salary was set at
$93,481.50. Paragraph 6 of the 2014 contract provided that “[b]oth parties acknowledge
that T[ennessee] B[oard of] R[egents] policy governing tenure and salary conversion
supersede all language associated by this contract.”
On June 30, 2015, Dr. Setayesh and Dr. Van Allen entered into a second contract
entitled “Notice of Appointment and Agreement of Employment” (“2015 Contract”) that
promoted Dr. Setayesh to the permanent position of Vice President for Institutional
Effectiveness with an annual salary of $115,000.1 Paragraph 6 of the 2015 Contract states:
6. The following special conditions shall govern this appointment: Both
parties acknowledge that TBR policy governing tenure and salary
conversion supersedes all language associated by this contract. It is also
understood that Dr. Setayesh, if transferred to a faculty position during
FY 2015-2016, may elect the division she is assigned to for the balance of
2015-2016.
(Emphasis in original). The 2015 Contract also contains a thirty days’ notice termination
provision.
In September 2017, Dr. Setayesh told Dr. Van Allen she wished to leave her position
as Vice President for Institutional Effectiveness and return to a faculty position. Dr. Van
Allen was required to get approval from the Tennessee Board of Regents (“TBR”)2 for this
change in position. He was told to coordinate Dr. Setayesh’s conversion to a faculty role
with April Preston, Assistant Vice Chancellor for Human Resources. On September 25,
1
There were two versions of the 2015 Contract. In the first version, the “special conditions” were
inadvertently left out. The parties re-signed the 2015 Contract with the “special conditions” quoted above.
There is no dispute that this re-signed version of the 2015 Contract is the applicable version of the contract.
2
The TBR is the governing body of “13 community colleges and 27 colleges of applied technology” in
Tennessee. The TBR Syllabus, http://www.tbr.edu/board/tbr-syllabus. (last visited Dec. 1, 2021).
Tennessee Code Annotated section 49-8-201 sets forth the composition of the TBR’s nineteen members.
Nashville State is among the community colleges governed by the TBR.
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2017, Dr. Van Allen sent Ms. Preston an email stating, “I am requesting that Dr. Setayesh
be offered a faculty contract, effective January 1, 2018. Policy requires a minimum of 80%
of her current salary be offered. Many are converted at 100%. I am recommending that
her faculty salary be 90% of her administrative salary.” On October 5, 2017, Dr. Van Allen
sent a follow-up email to Ms. Preston reaffirming his request for conversion of Dr.
Setayesh’s salary. His October 5 email also included examples of scenarios in which the
“80% Rule” applied to other employees’ transitions from administrative roles to faculty
roles. With respect to Dr. Setayesh’s performance, Dr. Van Allen stated, “Dr. Setayesh’s
performance has been outstanding. Nearly all of our gains in student retention can be
attributed to her data analysis and ensuing recommendations. There has been no force
equal to hers in promoting student success at [Nashville State].” On October 9, 2017, Dr.
Setayesh was notified via Memorandum from the Director of Human Resources that her
salary would increase to $131,152.70 based on Nashville State’s equity plan.
On October 19, 2017, Ms. Preston provided a Memorandum to Flora Tydings,
Chancellor of the TBR, in which she noted that the salary Dr. Van Allen requested for Dr.
Setayesh was “higher than the Dean[3] of that department who is in a 12 month position, as
well as every other full-time tenured full professor.” On October 25, 2017, Chancellor
Tydings sent Dr. Van Allen a Memorandum regarding the reassignment of Dr. Setayesh
stating, “equity among other faculty should be a determining factor” in setting Dr.
Setayesh’s salary. The Chancellor’s memorandum noted the salary of the highest paid
faculty member and the average professor salary, among others. Dr. Van Allen retired on
December 31, 2017, and Dr. Kim McCormick assumed the position of Interim President
of Nashville State.
On February 2, 2018, Dr. McCormick informed Dr. Setayesh that she was
reorganizing several departments, which included eliminating Dr. Setayesh’s position. Dr.
Setayesh was given the option of becoming the Executive Director for Community & Civic
Engagement with a salary of $101,900 or to return to a tenured faculty position with a
salary of $89,700,4 which was the highest faculty pay at Nashville State. Under protest,
Dr. Setayesh elected to return to the faculty position with a reservation of rights.
Dr. Setayesh’s faculty status was set to begin on February 16, 2018, but her then-
current salary would remain in place until March 16, 2018. On February 13, 2018, she
received a spreadsheet with calculations of two options to receive the balance of her annual
leave payout and her new salary going forward. Dr. Setayesh disagreed with the way her
salary was calculated. On February 15, 2018, Dr. Setayesh signed a “Notice of Tenure
Appointment and Agreement of Employment for Faculty” agreeing to a prorated academic
3
The “Dean” Ms. Preston was referring to was Jennifer Knapp. There was conflicting testimony about
whether Ms. Knapp was actually the dean of the department—Dr. Van Allen stated she was not the dean at
the time, but Ms. Preston maintained that she was the dean.
4
Dr. Setayesh was offered a faculty position making approximately 68% of her administrative salary.
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year salary of $44,850.00 beginning March 23, 2018 and ending May 8, 2018. Above her
signature, Dr. Setayesh wrote by hand: “I am executing this agreement without waiving
any rights and privileges I might have relative to my prior contracts and/or the policies and
procedures of the TBR or the institution and under law or equity as relates to my
employment.”
On August 24, 2018, Dr. Setayesh filed a Claim for Damages in the Division of
Claims Administration seeking redress against Nashville State for breach of contract for
their failure to award her at least 80% of her administrative salary when she returned to
faculty. Nashville State answered and later filed a motion for summary judgment which
the Commissioner denied.5 The case proceeded to trial before the Claims Commission.
Six witnesses testified at trial: 1) Dr. Van Allen; 2) Dr. Setayesh; 3) Ms. Preston; 4) Becky
Abuorf (Nashville State Payroll Manager); 5) Dr. McCormick; and 6) Chancellor Tydings.
The Commissioner stated that, “while some witnesses testified slightly differently
regarding their perception of the events, the Tribunal found the testimony of the witnesses
to be credible.”
Dr. Van Allen testified that he was president of Nashville State for twenty-five years
before he retired in December 2017. He testified that he had authority to enter into and
negotiate contracts on behalf of Nashville State. He testified he intended for the “special
conditions” language contained in both Dr. Setayesh’s 2014 and 2015 Contracts to refer to
the “80% Rule,” which he understood would allow Dr. Setayesh to return to a faculty
position at a pay rate of no less than 80% of her administrative salary. Regarding his
understanding of the application of the 80% Rule, Dr. Van Allen stated:
Q. Okay. Now, Dr. Van Allen, what in your view was the final
understanding between yourself and Dr. Setayesh with regard to this salary
conversion policy?
A. That after a period of time, if she returned to faculty, she would receive
a minimum of 80 percent of her base salary or annual salary.
Q. Okay. And did you in executing this contract personally assure Dr.
Setayesh that if she returned to faculty from her administrative position that
she would receive that 80 percent of her fiscal year salary?
5
As reasoning for denying the motion for summary judgment, the Commissioner stated, inter alia:
There is a material dispute regarding the interpretation of TBR General Personnel Policy
5.01.00.00 and whether past practices applied the rule to permanent administrative
professionals that returned to the faculty. On one hand, Nashville State has submitted the
Affidavit of April Preston, TBR Associate Vice Chancellor for Human Recourses, who
attests that TBR General Personnel Policy 5.01.00.00 Sections IV (I) through (K) only
refers to temporary administrative duties, while Claimant submitted the Affidavit of
President Van Allen, who attests the policy was mandated to apply to all faculty. Those
conflicting statements create an issue of disputed material fact that preclude summary
judgment.
-4-
A. I assured her she would receive a minimum of 80 percent.
...
Q. Okay. And based on your knowledge as the president of Nashville State
Community College when you entered into this contract, did you consider
this provision to be binding on Nashville State as the president of the
institution?
A. I certainly did.
Dr. Van Allen was further questioned regarding why he did not explicitly state in the
contract that Dr. Setayesh’s salary would convert at no less than 80%, and he explained:
Q. . . . The state had brought the contract to your attention and asked you
about why you had not explicitly put minimum 80 percent in the contract.
Would you just explain briefly why that was not explicitly included
in the contract provision?
A. It was - - you know, a conversion and TBR conversion was part of
institutional vernacular. . . . So when I was talking to HR about a conversion,
they understood minimum 80 percent. Surely the employee that I’m
negotiating the contract with understands minimum 80 percent. It was in our
vernacular.
Q. And to your knowledge - - to your knowledge, did you make it clear to
[Dr. Setayesh] that that was what was meant by that salary conversion
policy?
A. Absolutely.
When asked about whether the “80% Rule” created inequities among staff members, Dr.
Van Allen explained that it did and “rightfully so.” He testified: “after a tour of duty in
administration and you go back to faculty, you’re usually beat up, tired, probably lost all
your friends. It’s just - - it’s just difficult. That’s why colleges and universities have these
conversion policies, sometimes called ‘retreat salaries.’” Regarding Dr. Setayesh’s
effectiveness in her role as Vice President for Institutional Effectiveness, Dr. Van Allen
stated that Nashville State “made significant progress in student retention” during her time
in the position.
Dr. Setayesh testified that she has a Ph.D. from Vanderbilt, and Nashville State
recruited her to “improve the prestige, the reputation of the college” because many of the
other faculty members had only a master’s degree. From the beginning of her employment
with Nashville State, Dr. Setayesh always negotiated the terms of her employment. She
agreed to transfer to an administrative role for “as long as [she] was productive and as long
as [she] enjoyed being an administrator.” She stated that she knew she would eventually
want to “go back to [her] first love, which was students.” Regarding the “special
conditions” language included in her 2014 and 2015 contracts, Dr. Setayesh testified:
-5-
Q. Okay. And [the 2015 Contract] included this special condition - -
A. It included this special condition.
Q. - - in regards to TBR’s conversion policy?
A. Right. And this was supposed to [] basically summarize the promises,
the assurances that I was given. And that meant in our understanding, Dr.
Van Allen and I, that that would entitle me to no less than 80 percent of my
highest administrative salary if I returned to faculty as a 9-month employee
contract.
...
. . . I would have never, ever spent a day in this position without being entitled
to no less than 80[%] minimum. That was the condition of my employment.
And Nashville State got what they wanted out of me, okay?
Dr. Setayesh reiterated that the inclusion of the “special condition” language in her contract
“influenced me to basically come and work as the VP of institutional effectiveness to help
the college be accredited and move basically - - our retention goes forward and improve
our student success and retention and our ranking within the system.”
Ms. Preston was called to testify on behalf of the State. She has been employed
with the TBR since 2011 and began her current role as associate vice chancellor for human
resources and payroll services in November 2017. Ms. Preston testified that in 2017 she
received a brief email from Dr. Van Allen regarding Dr. Setayesh’s request to transfer from
an administrative position to a faculty position. The email stated “I am requesting that Dr.
Setayesh be offered a faculty contract, effective January 1, 2018. Policy requires a
minimum of 80% of her current salary be offered. Many are converted at 100%. I am
recommending that her faculty salary be 90% of her administrative salary.” Ms. Preston
did not have a copy of Dr. Setayesh’s contract at the time, so she called the “college
representative and asked and was told there was no stipulations in her contract.” In
response to Dr. Van Allen’s email, Ms. Preston compiled a memorandum for the
Chancellor which included a table containing the salaries for other faculty members in the
department. Ms. Preston testified regarding her interpretation of General Personnel Policy
5.01.00.00(IV)(I)-(K) and stated that it addresses temporary administrative responsibilities
and how to revert and remove stipends. Ms. Preston was asked whether there was a policy
for when a permanent administrative employee converts to a faculty position, and she
responded, “There is not.” Ms. Preston testified there was a policy that requires fair and
equitable wages to be paid to employees. She was unaware that Nashville State had a
practice of applying an 80% Rule.
Becky Abuorf has been employed by Nashville State for more than 36 years and is
the payroll manager. Ms. Abuorf was in charge of calculating Dr. Setayesh’s salary for the
remainder of the spring semester 2018. Ms. Abuorf testified that she calculated the amount
based on prior practice at Nashville State, but there was no specific policy for the
calculation.
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Dr. Kim McCormick was the interim president after Dr. Van Allen’s retirement in
late 2017, and she is currently employed at the TBR. Her role as interim president was to
“stabilize, reorganize, [and] do what needed to be done to get the college ready for the
following enrollment cycle and for the new president.” Dr. McCormick was informed by
Dr. Van Allen that Dr. Setayesh desired to return to faculty. Dr. McCormick offered Dr.
Setayesh a position as executive director of community and civic engagement, but Dr.
Setayesh turned the position down, explaining that she could make more money in her
faculty role if she taught in the summer. Dr. McCormick testified that the determination
of Dr. Setayesh’s salary and reorganization of the college were two of the decisions she
made as interim president. When asked about whether she was aware of the “special
conditions” in Dr. Setayesh’s contract, Dr. McCormick responded as follows:
Q. Were you aware that the contract she was converting from to faculty had
a salary conversion provision in the contract itself?
A. I see that they have written that both parties acknowledge that TBR policy
governing tenure and salary supersedes all language associated by this
contract. It is also understood that Dr. Setayesh may choose the division
she’s going back to.
However, Dr. Setayesh was administration. And she moved from
administration to faculty. That is not the same things as a person who is a
faculty member having an extra administrative duty.
Q. Okay. Well - -
A. So the policy for the TBR that governs tenure and salary conversion has
nothing to do with her job moving from an administrator to a faculty member.
In determining the appropriate salary for Dr. Setayesh, Dr. McCormick reviewed a memo
that had a suggested salary range for Dr. Setayesh, and Dr. McCormick “negotiated, as best
I could, the highest salary we could pay her to be fair and equitable to the other employees
of that institution.” Dr. McCormick admitted a mistake was initially made with the notice
provided to Dr. Setayesh, but when it was brought to her attention, “it was corrected.”
Dr. Flora Tydings has been employed by the TBR as Chancellor since February 1,
2017. She was previously president of Chattanooga State Community College and Athens
Technical College in Athens, Georgia. Dr. Van Allen informed Dr. Tydings in September
2017 that Dr. Setayesh wished to return to faculty in the chemistry department, and he
requested that her salary be set at 90% of her administrative salary. Dr. Tydings asked HR
and legal to look into it and provide her with salary “ranges.” Dr. Tydings received a
memorandum from Ms. Preston titled, “Transfer of VP of Institutional Effectiveness to
Faculty.” Attached to the Memorandum was a chart of salary ranges for the full-time
biology faculty members and an email from Ms. Preston to Danny Gibbs, Vice Chancellor
for Business and Finance, stating, “There are no special conditions in Dr. Setayesh’s
current contract that stipulate her salary upon return to another position.” On October 25,
2017, Dr. Tydings sent a memorandum to Dr. Van Allen stating that “equity among other
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faculty should be a determining factor” in setting Dr. Setayesh’s faculty salary. The memo
went on to state, “Ms. Setayesh’s salary should not exceed the highest paid professor and
faculty member which is at $87,279 nor should it be lower than the lowest paid professor
which is at $60,944.” Dr. Van Allen did not respond to this memorandum before he retired
in late 2017. On cross-examination, Chancellor Tydings acknowledged that she did not
review Dr. Setayesh’s contract prior to sending the October 25 memorandum. She became
aware of the “special conditions” in Dr. Setayesh’s contract upon receiving communication
from Dr. Setayesh’s attorney in December 2017.
The Commissioner entered an Order 1) denying Dr. Setayesh’s claim for breach of
contract related to the conversion of her administrative salary to her faculty salary; 2)
granting Dr. Setayesh’s claim related to her remaining spring 2018 academic salary and
finding Nashville State owed her an additional $16,225.15; and 3) denying her claim for
breach of the contract’s 30-day notice provision. Specifically, the Commissioner found
the 2015 Contract was not ambiguous and did not indicate that Dr. Setayesh’s salary would
be converted using the “so-called 80% Rule.” The Claims Commissioner held that the
“special conditions” language in Dr. Setayesh’s contract referred to the TBR’s written
General Personnel Policy 5.01.00.00 IV (I)-(K) (“TBR General Personnel Policy”) which
did not apply to Dr. Setayesh’s permanent position. The Commissioner held that Dr.
Setayesh’s 2015 Contract “does not say anything about an 80% rule, and the applicable
TBR policy does not apply to permanent positions.” Next, the Commissioner found Dr.
Setayesh was underpaid for the remaining portion of the spring 2018 academic year and
determined she was entitled to $33,637.50 instead of $17,412.35. Finally, the
Commissioner denied her breach of contract claim based on Nashville State’s alleged
failure to give thirty days’ notice. Dr. Setayesh raises three issues on appeal which we
summarize as follows: 1) whether the trial court erred in disallowing extrinsic evidence;
2) whether the trial court erred in its determination that Dr. Setayesh was not entitled to a
minimum of 80% of her fiscal year salary upon her return to faculty; and 3) whether the
trial court erred in its calculation of damages with regard to her return to a faculty position.
STANDARD OF REVIEW
Appeals from the Tennessee Claims Commission are governed by the Tennessee
Rules of Appellate Procedure. See Bowman v. State, 206 S.W.3d 467, 472 (Tenn. Ct. App.
2006). Because the Claims Commission hears cases without a jury, this Court reviews the
Commission’s factual findings de novo upon the record accompanied by a presumption of
correctness unless the evidence preponderates otherwise. Id. (citing Beare Co. v. State,
814 S.W.2d 715, 717 (Tenn. 1991); Dobson v. State, 23 S.W.3d 324, 328-29 (Tenn. Ct.
App. 1999); Sanders v. State, 783 S.W.2d 948, 951 (Tenn. Ct. App. 1989)). We review
the Claims Commission’s legal conclusions de novo with no presumption of correctness.
Turner v. State, 184 S.W.3d 701, 704 (Tenn. Ct. App. 2005). The interpretation of a
contract is a question of law, which we review de novo with no presumption of correctness
on appeal. TENN. R. APP. P. 13(d); Dick Broad. Co., Inc. of Tenn. v. Oak Ridge FM,
-8-
Inc., 395 S.W.3d 653, 659 (Tenn. 2013); 84 Lumber Co. v. Smith, 356 S.W.3d 380, 383
(Tenn. 2011).
LEGAL CONCEPTS
“‘The State of Tennessee, as a sovereign, is immune from suit except as it consents
to be sued.’” Stewart v. State, 33 S.W.3d 785, 790 (Tenn. 2000) (quoting Brewington v.
Brewington, 387 S.W.2d 777, 779 (Tenn. 1965)). Pursuant to Tenn. Code Ann. § 9-8-
307(a)(1)(L) the State has consented to be sued for “[a]ctions for breach of a written
contract between the claimant and the state which was executed by one (1) or more state
officers or employees with authority to execute the contract.” To prevail on a claim for
breach of contract, the claimant must prove: “the existence of a valid and enforceable
contract, a deficiency in the performance amounting to a breach, and damages caused by
the breach.” Fed. Ins. Co. v. Winters, 354 S.W.3d 287, 291 (Tenn. 2011) (citing ARC
LifeMed, Inc. v. AMC-Tenn., Inc., 183 S.W.3d 1, 26 (Tenn. Ct. App. 2005)).
Tennessee’s rules of contract interpretation “reflect balance; they demonstrate a
definite focus on the written words in the parties’ contract, but they also consider evidence
related to the situation of the parties and the circumstances of the transaction in interpreting
those words.” Individual Healthcare Specialists, Inc. v. BlueCross BlueShield of Tenn.,
Inc., 566 S.W.3d 671, 692 (Tenn. 2019). While the “written words” of the contract are the
“lodestar of contract interpretation” the “common thread in all Tennessee contract cases—
the cardinal rule upon which all other rules hinge—is that courts must interpret contracts
so as to ascertain and give effect to the intent of the contracting parties consistent with legal
principles.” Id. at 688, 694 (citing Wallis v. Brainerd Baptist Church, 509 S.W.3d 886,
899 (Tenn. 2016); Dick Broad. Co., Inc. of Tenn., 395 S.W.3d at 659; Clark v. Sputniks,
LLC, 368 S.W.3d 431, 441 (Tenn. 2012); Allmand v. Pavletic, 292 S.W.3d 618, 630 (Tenn.
2009); Allstate Ins. Co. v. Watson, 195 S.W.3d 609, 611 (Tenn. 2006); Frizzell Constr. Co.
v. Gatlinburg, L.L.C., 9 S.W.3d 79, 85 (Tenn. 1999)). Of overall importance, and
“foundational” to the task of contract interpretation is “the principle that the rules used for
contract interpretation ‘have for their sole object “to do justice between the parties, by
enforcing a performance of their agreement according to the sense in which they mutually
understood it at the time it was made.”’” Id. at 688 (quoting McNairy v. Thompson, 33
Tenn. 141, 149 (Tenn. 1853)).
If the language of the contract is “clear and unambiguous” the literal meaning of the
words in the contract controls. Dick Broad. Co., Inc. of Tenn., 395 S.W.3d at 659.
However, if the terms of the contract are ambiguous, “we must apply other established
rules of construction to aid in determining the contracting parties’ intent.”6 Id. (citing
6
Our Supreme Court has pointed out that some judges and scholars have criticized the “ambiguous
versus unambiguous” dichotomy, noting that: “‘The problem, perhaps ironically, is that the concept of
ambiguity is itself perniciously ambiguous.’” Individual Healthcare Specialists, Inc., 566 S.W.3d at 686
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Planters Gin Co. v. Fed. Compress & Warehouse Co., 78 S.W.3d 855, 890 (Tenn. 2002)).
“‘Ambiguity in a contract is doubt or uncertainty arising from the possibility of the same
language being fairly understood in more ways than one.’” Artist Bldg. Partners v. Auto-
Owners Mut. Ins. Co., 435 S.W.3d 202, 216 (Tenn. Ct. App. 2013) (quoting Mid-Century
Ins. Co. v. Williams, 174 S.W.3d 230, 240 (Tenn. Ct. App. 2005)). In other words, if the
contractual language is “susceptible to more than one reasonable interpretation, the parties’
intent cannot be determined by a literal interpretation of the contract.” Shuttleworth,
Williams, Harper, Waring & Derrick, PLLC v. Gary K. Smith, Smith, Sabbatini &
McLeary, PLLC, No. W2007-02295-COA-R3-CV, 2010 WL 744375, at *3 (Tenn. Ct.
App. Mar. 5, 2010) (citing Allstate Ins. Co., 195 S.W.3d at 611).
Also important to the interpretation of the contract in this appeal is the parol
evidence rule. Under the parol evidence rule, “‘a writing intended by the parties to be a
final embodiment of their agreement cannot be modified by evidence of earlier or
contemporaneous agreements that might add to, vary, or contradict the writing.’”
Individual Healthcare Specialists, Inc., 566 S.W.3d at 694-95 (quoting BLACK’S LAW
DICTIONARY 1292 (10th ed. 2014)). Although parol evidence cannot “vary, contradict, or
supplement” the terms of a fully integrated agreement, it can be used to give context to the
language used in the contract:
“The parol evidence rule does not . . . prohibit courts from considering
extrinsic evidence of the facts and circumstances surrounding the contract’s
execution as an aid in the construction of the contract’s language, but the
evidence may only give the words of a contract a meaning consistent with
that to which they are reasonably susceptible, i.e., to interpret contractual
terms. This is true even if doing so reveals a latent ambiguity in a contract’s
terms. But whether a court is considering if an ambiguity exists or construing
the terms of an unambiguous contract, surrounding facts and circumstances
can only provide context that elucidates the meaning of the words employed,
and nothing else. As we have often stated in one way or another,
understanding the context in which an agreement was made is essential in
determining the parties’ intent as expressed in the agreement, but it is the
parties’ expressed intent that the court must determine.”
Id., 566 S.W.3d at 697-98 (quoting URI, Inc. v. Kleberg Cnty., 543 S.W.3d 755, 765 (Tex.
2018)). When the contract at issue is “fully integrated, general extrinsic evidence of
context may be used to interpret the contractual language in line with the parties’ intent.”
Id. at 697.
n.15 (quoting Lawrence M. Solan, Pernicious Ambiguity in Contracts and Statues, 79 CHI.-KENT L. REV.
859, 859 (2004)).
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ANALYSIS
In this appeal we must construe an inartfully worded provision of an employment
contract in tandem with a poorly drafted personnel policy. Despite conducting a full trial
on the breach of contract issue, the Commissioner found that Dr. Setayesh’s 2015 Contract
was not ambiguous and “accordingly, consideration of parol evidence is not necessary to
determine whether a breach of contract occurred.” The Commissioner then found that the
2015 Contract incorporated a TBR General Personnel Policy that it found inapplicable to
Dr. Setayesh, and ultimately held that her breach of contract action failed. As we previously
mentioned, the Commissioner’s conclusion is not entitled to a presumption of correctness
on appeal; therefore, we review the decision de novo. See Dick Broad. Co., Inc., 395
S.W.3d at 659.
The 2015 Contract contains two separate provisions that reference policies—
paragraph 3 and paragraph 6:
3. This appointment is made subject to the laws of the State of Tennessee,
the policies and requirements of the Tennessee Board of Regents, and the
policies and requirements of the institution. It is the Institution’s
responsibility to publish and distribute policies and requirements. It is the
employee’s responsibility to become familiar with both. Both are available
through the college library and on the Internet.
...
6. The following special conditions shall govern this appointment: Both
parties acknowledge that TBR policy governing tenure and salary
conversion supersedes all language associated by this contract. It is also
understood that Dr. Setayesh, if transferred to a faculty position during
FY 2015-2016, may elect the division she is assigned to for the balance of
2015-2016.
(Emphasis in original). Our task is to determine the applicable “TBR policy governing
tenure and salary conversion” referenced in the “special conditions” provision of paragraph
6. This TBR policy is to “supersede[][7] all language associated by the contract.” The
parties purposefully included the “special conditions” language in the contract and intended
for the “special conditions” to “govern” Dr. Setayesh’s appointment to the position of Vice
President of Institutional Effectiveness. We must give the language of Paragraph 6 effect
in line with the intent of the parties.
The Commissioner determined that the “special conditions” in paragraph 6 of Dr.
Setayesh’s 2015 Contract referred to TBR General Personnel Policy 5.01.00.00(IV)(I)-(K).
7
“Supersede” means “[t]o annul, make void, or repeal by taking the place of.” Supersede, BLACK’S
LAW DICTIONARY (11th ed. 2019).
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Neither party proffered another written policy of the TBR that referenced salary
conversion. At the time the parties entered into the contract, TBR General Personnel Policy
5.01.00.00(IV)(I)-(K) stated as follows:
I. Faculty members may be asked to temporarily assume administrative
responsibilities which entail moving from an academic year to a fiscal year
contract with the assignment of additional duties. This temporary
appointment may be on a long-term or short-term basis but is still considered
a temporary appointment subject to this policy. This does not apply when a
faculty member is hired into a permanent administrative position such as a
deanship which requires a twelve-month contract.
J. Temporary administrative responsibilities may necessitate the awarding
of an administrative stipend in addition to the previously established salary.
The stipend amount or any other understanding concerning compensation
must be set out in a newly-executed contract. The contract
1. Should include a statement that the stipend is awarded as
compensation for additional administrative responsibilities and will
be removed at the time the administrative responsibilities end; or
2. Should otherwise address how compensation would be affected
at the end of an administrative appointment.
K. The awarding of an administrative stipend is an issue separate from that
of conversion from an academic year to a fiscal year basis. When the
conversion is to take place, the institution should just convert the salary from
the academic year contract by adding 25% and then adding any stipend
amount determined necessary.
1. The following illustrates the procedure defined above.
a. A faculty member making $20,000 on an academic contract
is converted to a fiscal year contract at a salary of $25,000.
b. In addition, a $1,500 administrative stipend is added and so
indicated because of additional duties. The total amount of
salary is then $26,500.
c. At the time the faculty member serving as administrator
returns to a faculty position on an academic year basis, the
administrative stipend will end.
d. The base faculty salary is reduced to an academic year
contract at a rate no less than 80% of the fiscal year contract.
The institution may choose to exceed the 80% number on the
basis for comparable faculty salaries, including rank, merit,
length of service, experience, degrees and yearly percentage
increase in salary.
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Subsection (I) states that faculty members may be asked to temporarily assume
administrative duties and that these temporary assignments may be short or long term.
Subsection (I) goes on to state “[t]his does not apply when a faculty member is hired into
a permanent administrative position such as a deanship which requires a twelve-month
contract.”
The Commissioner ultimately held that TBR General Personnel Policy
5.01.00.00(IV)(I)-(K) was not applicable to Dr. Setayesh. When interpreting subsection
(I), the Commissioner stated, in his order:
Section (I) clearly states ‘(t)his [section] does not apply when a faculty
member is hired into a permanent administrative position such as a deanship
which requires a twelve-month contract.’ Here, Claimant was hired into a
permanent administrative position. Accordingly, the Claimant’s breach of
contract claim fails.
The Commissioner inserted the word “[section]” into the third sentence of subsection (I)
and summarily found that Dr. Setayesh’s breach of contract case must fail because she was
hired into a permanent position, not a temporary appointment. We are not convinced that
the third sentence of subsection (I) renders the remaining subsections of section (IV)
inapplicable to Dr. Setayesh. Therefore, our analysis continues.
Subsection (J) discusses the award of a stipend for temporary administrative
responsibilities. Subsection (J)(2) states that a contract for temporary administrative
responsibilities “[s]hould otherwise address how compensation would be affected at the
end of an administrative appointment.” Subsection (J)(2) suggests that salary conversion
for a temporary administrative appointment could be accomplished through a contractual
provision. Nevertheless, subsection (J) does not apply to Dr. Setayesh because she was not
awarded an administrative stipend for any temporary administrative responsibilities.
We move on to subsection (K) which begins by discussing the procedure for
converting salary from an “academic year to a fiscal year.” Again, we are not concerned
with converting from an academic year to a fiscal year; rather, we are concerned with the
opposite salary conversion—from fiscal year (which applies to administrative positions) to
academic year (for faculty positions). Subsection (K)(1)(a)-(b) goes on to illustrate and
provide an example of converting a faculty salary to an administrative salary. In subsection
(K)(1)(c)-(d), the language switches gears and no longer illustrates the procedure for
converting a salary from an academic year to a fiscal year; rather, it discusses the procedure
for converting an academic year contract to a fiscal year contract. Subsection (K)(1)(d) is
the first provision that could possibly apply to this dispute, and it states:
d. The base faculty salary is reduced to an academic year contract at
a rate no less than 80% of the fiscal year contract. The institution may
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choose to exceed the 80% number on the basis for comparable faculty
salaries, including rank, merit, length of service, experience, degrees
and yearly percentage increase in salary.
The Commissioner held that because Dr. Setayesh was appointed to a permanent vice
president position, and because subsections (I)-(K) all relate only to temporary
administrative appointments, then subsection (K)(1)(d) did not apply to Dr. Setayesh.
Essentially, the Commissioner found that the “special conditions” language that the parties
intended to “govern” Dr. Setayesh’s appointment had no meaning and no applicability to
her. This result begs the question, why would Dr. Setayesh and Dr. Van Allen specifically
include an inapplicable TBR policy to govern Dr. Setayesh’s employment contract?
Under these circumstances, extrinsic evidence of the facts and circumstances
surrounding the contract’s execution would be helpful as we strive to understand what the
parties intended by the phrase: “TBR policy governing tenure and salary conversion.” See
Individual Healthcare Specialists, Inc., 566 S.W.3d at 697-98; see also Hamblen Cnty. v.
City of Morristown, 656 S.W.2d 331, 334 (Tenn. 1983) (quoting Restatement of Contracts,
§ 235(d) and comment)) (“‘In applying the appropriate standard of interpretation even to
an agreement that on its face is free from ambiguity[,] it is permissible to consider the
situation of the parties and the accompanying circumstances at the time it was entered
into—not for the purpose of modifying or enlarging or curtailing its terms, but to aid in
determining the meaning to be given to the agreement.”). In this case, there is no shortage
of parol evidence to consider. Dr. Setayesh and Dr. Van Allen, the parties to the contract,8
8
The State did not raise any concern regarding Dr. Van Allen’s authority to execute the 2015 Contract
on behalf of Nashville State. Dr. Van Allen explicitly testified that he was authorized to negotiate and
execute Dr. Setayesh’s contract once the TBR had approved the position. He stated:
In negotiating contracts with any employee, the president has some latitude. All contracts
are prepared at the campus level. All these agreements are done by the president or his
designee. The - - if you look at the contract . . . the contract is not a college document.
The contract is a TBR document. The contract to TBR provides the college - - provides
for special stipulations. TBR understands that the presidents have to negotiate conditions
of employment beyond the ones stated. And therefore presidents have the authority to do
so. . . .
Q. And you stated that you had the authority to include a special provision such as this
one. Do you also testify here today that you had the authority to assure that Dr. Setayesh
would get no less than 80 percent of her fiscal year salary if she returned to faculty?
A. If my - - if my authority - - or the execution of my authority does not exist contrary - -
is not contrary to an existing TBR policy or law, I have the authority. In absence of TBR
policy or a federal or state law, I have the authority to do these things, yes.
We note that the agreement itself is consistent with Dr. Van Allen’s testimony as it has only two signature
lines, one for Dr.Van Allen as President of Nashville State and one for Dr. Setayesh as “Appointee.”
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testified explicitly and unequivocally that they intended for the “TBR policy governing
tenure and salary conversion” to refer to the “80% Rule” which derives from subsection
(K)(1)(d)9 of the TBR General Personnel Policy. The parties to the contract both testified
consistently that they included the special conditions to ensure Dr. Setayesh would receive
at least 80% of her administrative salary when she returned to a faculty position. Dr. Van
Allen’s testimony at trial regarding his understanding of the terms of the contract is
bolstered by every email he sent on the topic before he retired. On September 25, 2017,
he sent an email to April Preston regarding Dr. Setayesh’s transfer from her administrative
role to a faculty role stating, in pertinent part:
In order to execute a mutually beneficial arrangement, I am requesting that
Dr. Setayesh be offered a faculty contract, effective January 1, 2018. Policy
requires a minimum of 80% of her current salary be offered. Many are
converted at 100%. I am recommending that her faculty salary be 90% of
her administrative salary.
Again, on October 5, 2017, Dr. Van Allen sent an email to Ms. Preston stating, in relevant
part:
The recommendation you have under consideration is one affecting the status
of Flora Setayesh. My recommendation is based on a history of like actions.
In 2001, the college attempted to convert Ted Washington’s fiscal contract
to an academic contract at 75%. Ted Washington protested, citing TBR
policy. The college’s H.R. Director, Lori Maddox, was asked to call Debbie
Johnson for clarification. Mrs. Johnson stated that Mr. Washington was
correct and was entitled to “no less than 80% of his fiscal year contact.” Ms.
Maddox informed Mr. Washington via the attached email and offered him an
academic contract “at a rate of no less than 80%.” Thus, since 2001, we have
9
Regarding this written policy, Dr. Van Allen testified:
Q. Dr. Van Allen, very briefly, without going into any of the history of it - - could you just
state briefly for the Court what the salary conversion policy is as you knew it to be at the
time you entered into this contract.
A. Okay. It’s in general - - it’s in the general policy we already looked at. I can thumb
through and find it. The section that we were instructed to follow - - there’s not a page
number on here, but it’s in - - under K(d).
...
Then the base faculty salary is reduced to an academic year contract at a rate of no less
than 80 percent of the fiscal year contract. The institution may choose to exceed 80 percent
- - the 80 percent number on the basis of comparable faculty salaries, including rank, merit,
length of service, experience, degrees, and a yearly percentage increase. That’s basically
it.
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considered the “80% rule” TBR policy and acted in sync. You will find the
practice was followed in more recent conversions from fiscal to academic
contracts. In both cases, the individuals were removed from their positions
due to performance issues. Yet, because of the 2001 ruling, Jennifer Knapp
was converted at 85% of her base in 2014, and Judy Kane at 80% of her base
in 2004.
The only question which may remain is why the difference in the conversion
percentages. In the case of Dr. Knapp and Mrs. Kane, level of performance
led to their return to their faculty positions. Both were tenured. In the case
of Dr. Setayesh, she is asking, as a tenured-faculty member to be returned to
her teaching position in keeping with assurances offered when she accepted
administrative duties. One of those was that the “80% rule” was TBR policy
and consistently honored and, thus, not subject to institutional manipulation.
In reviewing past actions, I concluded and, thus, recommended a 90%
conversion rate for Flora Setayesh. Unlike the two cited within this
paragraph, Dr. Setayesh’s performance has been outstanding. Nearly, all of
our gains in student retention can be attributed to her data analysis and
ensuing recommendations. There has been no force equal to hers in
promoting student success at [Nashville State]. The changes she initiated
will, unless undone, continue to have a positive impact on our student
population.[10] I am more than willing to add other contributions made by her
but her evaluations can be accessed if necessary. Therefore, based on the
above-referenced policy interpretation, previous contract conversions, and
stellar performance, I am again, recommending Dr. Setayesh be offered an
academic contract at 90% of her base salary effective January 1, 2018.
This extrinsic evidence is relevant and illuminates the parties’ intent. We find Dr. Van
Allen’s e-mail and testimony that the “80% Rule” had been previously applied to
transitions from permanent administrative positions to faculty positions compelling. Here,
the parol evidence provided by Dr. Setayesh and Dr. Van Allen does not contradict the
language of the contract; it explains it.
10
Dr. Van Allen’s statements about Dr. Setayesh’s exceptional performance satisfy the requirement in
TBR General Personnel Policy 5.01.00.00(IV)(F) that, “The president shall ensure that all employees shall
be paid equal wages or salaries for equal work . . . except where pay differentials are based upon: 1. market
factors, 2. a merit or evaluation system, 3. length of service, or 4. any other proper, non-discriminatory
basis.” Moreover, applying the “80% Rule” to transfers from temporary administrative positions and not
from permanent administrative positions makes no sense. It is not fair or equitable to treat a return from a
temporary administrative position better than a return from a permanent administrative position. As we
have previously noted, Dr. Van Allen testified that “[a]fter a tour of duty in administration and you go back
to faculty, you’re usually beat up, tired, probably lost all of your friends. It’s just – it’s just difficult. That’s
why colleges and universities have these conversion policies.”
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Dr. Setayesh signed her contracts with the special stipulations in July 2014 and June
2015, well before Ms. Preston, Dr. McCormick, and Chancellor Tydings assumed their
current or interim positions. Dr. Van Allen had been head of Nashville State for twenty-
five years and testified that he had authority to insert such conditions in contracts. Thus, it
appears that the institutional knowledge of the policy lies with Dr. Van Allen who testified
that “in the absence of TBR policy or federal or state law, I have authority to do these
things. Yes.” Dr. Setayesh’s situation falls within a gap in the TBR policy.11 She points
to section 5.01.00.00(IV)(K)(1)(d), which concerns temporary assignments. We have been
directed to no other policy that addresses the situation. The State contends that if Dr. Van
Allen had wanted to include the 80% requirement he could have said so explicitly. In Dr.
Van Allen’s view, he did so, he just used “institutional vernacular,” much like lawyers use
“legalese.” Dr. Setayesh understood this vernacular to mean “in our understanding, Dr.
Van Allen and I, that that would entitle me to no less than 80 percent of my highest
administrative salary if I returned to faculty as a 9-month employee contract.”
As our Supreme Court pointed out when emphasizing the importance of ascertaining
the parties’ intent, “judges ‘are entitled to place themselves in the same situation as the
parties who made the contract, so as to view the circumstances as they viewed them, and
so as to judge the meaning of the words and the correct application of the language to the
things described.’” Individual Healthcare Specialists, Inc., 566 S.W.3d at 694 (quoting
Staub v. Hampton, 101 S.W. 776, 785 (Tenn. 1907)). Above all else, our job is “‘to do
justice between the parties, by enforcing a performance of their agreement according to the
sense in which they mutually understood it at the time it was made.’” Id. at 688 (quoting
McNairy, 33 Tenn. at 149). Based on these important considerations and all of the evidence
adduced at the trial, including parol evidence that assists us in defining what the parties
meant by the terms included in paragraph 6, we find that Dr. Setayesh’s contract was
breached when Nashville State failed to provide her with at least 80% of her administrative
salary upon her transition to a faculty role. When we step into the situation of the parties,
view the circumstances surrounding the execution of the contract as they viewed them, and
consider the meaning of the words included in the contract as the words were mutually
understood at the time the contract was made, the parties’ intent could not be more clear:
Dr. Setayesh and Dr. Van Allen intended for Dr. Setayesh to return to faculty with a salary
not less than 80% of her administrative salary.12 In refusing to compensate Dr. Setayesh
at 80% of her administrative salary, Nashville State breached Dr. Setayesh’s 2015 Contract,
11
We note that the TBR has recently promulgated a policy that covers the situation presented in this
case, where a faculty member is appointed to an administrative position and later returns to a faculty
assignment. See TBR General Personnel Policy 5.01.00.00(III)(H)(1)(a) (“Unless the Chancellor approves
an exception, an administrator returning or moving to a 9-month faculty position shall not receive a salary
greater than the highest-paid 9-month faculty member in the department.”).
12
Because we have determined that Dr. Setayesh’s contract was breached when she was not provided
at least 80% of her administrative salary upon returning to a faculty position, the remaining issues on appeal
are pretermitted.
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and Dr. Setayesh is entitled to a recalculation of her salary at a minimum of 80% of her
administrative salary from the day she transitioned into her faculty role going forward.
CONCLUSION
For the foregoing reasons, the judgment of the Claims Commission is reversed. The
case is remanded to the Claims Commission to determine the amount of salary to be
awarded to Dr. Setayesh under the 2015 Contract. Costs of this appeal are assessed against
the State for which execution may issue if necessary.
_/s/ Andy D. Bennett_______________
ANDY D. BENNETT, JUDGE
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