A Damaging Lesson

Abstract

FOR THE 1997-98 school year, the Arrowhead School District, which is in southwestern Montana, employed James Klyap as a new teacher at its single school, which serves grades 1-8 and at the time had 11 full-time teachers and various part-timers. Klyap taught math, language arts, and physical education for grades 6-8. He also helped initiate a sports program and coached flag football, basketball, and volleyball. During that same year, the teachers considered forming a union. The school board delayed offering teaching contracts until the teachers decided whether to unionize; state law would have required the board to collectively bargain with the teachers. The vote, however, was against unionization. On or about 15 June 1998, the school district offered Klyap a contract for the next school year. On June 30, he accepted the offer by signing the contract and sending it back. The contract, which was a standard form with blanks to be filled in on an individual basis, provided for a salary of $20,500 and included a (also known as damages) clause. The clause explained that, if a teacher breaks a contract, the district incurs costs that are impractical or extremely difficult to calculate; thus the amount the teacher would owe the district would be fixed in relation to the date of requested release from the contract. More specifically, the contract required the teacher to provide two weeks' notice for any requested release and to pay 10% of his or her salary as damages if the request was before July 20 and 20% if the request was after July 20. Klyap also signed a form acknowledging responsibility for reading the teachers' handbook, which included the same liquidated damages clause. Despite signing the contract, Klyap continued to seek other employment opportunities in the area. At interviews he was forthcoming about his signed status but also explained that the district had not yet given him the finalized contract, and, based on what he perceived as a lack of support and security during the past year, he was not sure that Arrowhead could be trusted to send it back. On or about August 5, Klyap received an offer for what he considered his dream job, serving as co-manager with his wife of a nearby 5,000- acre resort ranch that offered guests hunting, fishing, and horseback riding. With limited time for this life decision, he decided to accept the offer. On August 12, he informed Arrowhead officials that he would not be returning. Knowing that the school year was scheduled to start on August 26, he offered to work the first few weeks and to help in the process of finding and orienting a replacement teacher. Arrowhead insisted on enforcing the liquidated damages clause, and Klyap duly submitted a check for the stipulated amount of $4,100, which was 20% of the stated salary. However, he requested that Arrowhead's administration not deposit the check right away because his account did not have sufficient funds to cover that amount. Shortly thereafter, upon consulting with family members who advised him that the liquidated damages clause was not enforceable, he stopped payment on the check. Arrowhead first attended to filling the vacancy caused by Klyap's departure. Although the district had had 80 applications on file at the time of offering Klyap the contract, only two viable applicants remained available in August. The district was able to hire one of them, a brand-new teacher, at a salary of $19,500, just before the start of classes. Next, in response to Klyap's stop payment, on 26 February 1999 the district filed suit in state court to enforce the liquidated damages clause. On 12 March 2001, after a trial at which a school board member testified that the purpose of the clause was to prevent losing a teacher at a later period of time, the judge ruled that the clause was enforceable because the damages met the state statutory standard of being impractical or extremely difficult to fix and because the district had enforced the clause routinely and equitably against other teachers. …