Kentucky Court Report - SCOKY & COAKY

CIVIL PROCEDURE - Res judicata: Clemmer v. Rowan Water, Inc. (COA 1/23/2009)

Clemmer v. Rowan Water, Inc.
2007-CA-000355
01/23/2009
2009 WL 152867
Opinion by Senior Judge Guidugli; Chief Judge Combs and Judge Stumbo concurred.

The Court reversed and remanded a partial summary judgment in favor of appellee concluding that appellants’ claims for trespass, nuisance, and fraud were barred by the doctrine of res judicata. The Court held that a federal court order dismissing the claims for lack of subject matter jurisdiction did not preclude relitigation of the same claims in state court because there was no adjudication in federal court on the merits of the claims.

TRIAL - Instructions on threshold, apportionment in error; no DV for settling defendant: COMBS V. STORTZ (COA 1/9/2009)

Combs v. Stortz
2007-CA-001232
01/09/2009
2009 WL 50174
Opinion by Judge Caperton; Judge Keller and Wine concurred.

The Court reversed and remanded a judgment of the circuit court entered pursuant to a jury verdict finding liability but awarding no damages on appellant’s claims for negligence arising from an automobile accident.

The Court held that 1) the damage instructions impermissibly linked the two threshold questions of monetary damages for reasonably necessary medical expenses exceeding $1,000 and the specifically enumerated physical or permanent injuries, loss, or death, as allowed by KRS 304.39-060(2)(b); 2) appellant was not entitled to a directed verdict on the liability of a settling party; 3) the apportionment instruction as to the liability of the settling party was not improper and even so, any error was harmless; 4) the trial court did not commit reversible error by excluding reference to the insurer as the provider of UIM coverage; 4) the trial court did not err in admitting expert opinion testimony that took into account the mechanism of injury, appellant’s medical history and available medical records, in addition to the information derived from a physical examination; 5) the trial court did not err by allowing testimony regarding prior workers’ compensation claims and insurance payments for impeachment purposes; 6) the trial court did not err in excluding expert medical testimony regarding appellant’s condition that was couched in terms of possibility, rather than probability or certainty, and that was not timely produced; 7) appellant placed her medical condition at issue and therefore, defense counsel did not improperly cross-examine her regarding past workers’ compensation claims, past treatment and injury claims with past employers; 8) while cross-examination about appellant’s nephew’s employment by appellant’s counsel was admitted in error, the error was harmless; and 9) expert testimony by an auto mechanic regarding alleged brake failure was properly admitted.

JURISDICTION: Subject matter, Indiana contract -- LYNN V. DIGITAL LIFESTYLES, LLC (COA 11/14/2008)

LYNN V. DIGITAL LIFESTYLES, LLC
JURISDICTION:  Subject matter, Indiana contract
EVIDENCE:  Spoliation of Evidence
2007-CA-002442
PUBLISHED: AFFIRMING
PANEL:  LAMBERT JAMES PRESIDING; HENRY, NICKELL CONCUR
JEFFERSON CIR. COURT
DATE RENDERED: 11/14/2008

The Court affirmed a judgment of the circuit court denying appellant’s motion for summary judgment and findings of fact and conclusion of law awarding damages to appellee on its claim for breach of contract for the installation of a home theater system. The Court first held that the case fell into the exception articulated in Transportation Cabinet, Bureau of Highways, Com. of Ky. v. Leneave, 751 S.W.2d 36 (Ky. App. 1988), allowing for the appeal of a denial of a motion for summary judgment because the facts were not in dispute, the question of whether the Court had jurisdiction was a matter of law, and there was a final judgment with an appeal taken. The Court then held that the trial court had personal jurisdiction over appellant even though he was an Indiana resident, the contract was signed in Indiana, and the work was to be performed in Indiana. Appellant came into Kentucky and sought out the on-going contract for goods and services, traveled into Kentucky to re-negotiate the contract, ultimately contracted with another Kentucky business, and caused direct consequence within the state by negotiating a contract for a large sum of money. The Court then held that appellee was not required to prove with certainty the costs of the equipment for the project because the equipment was ultimately not purchased because of the breach. Therefore, the trial court did not abuse its discretion by relying on testimony that the equipment costs amounted to half of the contract price and awarding damages based on that testimony. The Court finally held that there was no evidence that appellee suppressed or spoiled evidence. 

From COA November Summaries

Community charters, laches, and prospective application: COMMONWEALTH OF KY V. HOME FEDERAL SAVINGS AND LOAN ASSOCIATON (COA 10/31/2008)

COMMONWEALTH OF KY V. HOME FEDERAL SAVINGS AND LOAN ASSOCIATON
CORPORATIONS:  CHARTERS; Laches; Prospective application of decisions
2007-CA-002353
PUBLISHED: AFFIRMING
PANEL:  WINE PRESIDING; KELLER, LAMBERT CONCUR
FRANKLIN COUNTY
CAMPBELL COUNTY
DATE RENDERED: 10/31/2008

The Court affirmed a declaratory judgment of the circuit court, which rejected the interpretation by The Office of Financial Institutions (OFI) of KRS 286.6-107 as allowing community or geographic charters for state credit unions. The Court first held that Home Federal Savings and Loan did not lack standing to bring the action. Because the case involved OFI’s administration of its regulatory authority, Home Federal, as a competitor of the regulated credit unions showed an actual, justiciable injury. The Court next held that Home Federal was not required to exhaust any administrative remedies before bringing the action because the agency was acting in excess of its power and further, there were no administrative remedies to pursue. The Court then adopted the opinion of the trial court holding that the action was not barred by the doctrine of laches because any delay in bringing a challenge would have minimal impact, it would be error to allow the erroneous interpretation of the statute to continue, the Court’s ruling was applied prospectively. The Court ultimately adopted the opinion of the trial court holding that OFI acted outside of the scope of its authority in allowing community-based charters because community (or geographic) fields of membership were not authorized under KRS 286.6-107. 

Digest taken from COA Summaries

ABRITRATION: Challenges to contract as whole vs. clause: CONSULTANTS & BUILDERS, INC. V. PADUCAH FEDERAL CREDIT UNION (COA 9/19/2008)

CONSULTANTS       &  BUILDERS, INC. V. PADUCAH FEDERAL CREDIT UNION
      ABRITRATION:  Challenges to contract as whole vs. clause
      2007-CA-001874
PUBLISHED: REVERSING AND REMANDING
      PANEL: VANMETER PRESIDING; CAPERTON, GUIDUGLI CONCURS
      COUNTY: MCCRACKEN
      Date Rendered: 9/19/2008       

In Consultants v. Paducah Federal Credit Union the Court of Appeals addresses the long standing question of arbitration challenges.  If a party claims they were fraudulently induced into the contract as a whole, doesn’t that mean the arbitration clause contained therein is not valid?  A resounding NO was the Court’s response.  The Court’s decision, based upon Federal case law, was that the decision of whether there was fraudulent inducement to the whole contract is a decision for the arbitrator.  However, if you claim you were fraudulently induced to enter into the arbitration clause, then it is a decision for the court.

      

Digested by Paul R. Schurman
      

6th Cir. NPO Decision of Grange Mut. Cas. Co. v. Mack (8/26/2008) re private cause of action under RICO claiming ongoing conspiracy to fraudulently bill insurance company for medical expenditures under the Kentucy No Fault Act

Grange Mutual Casualty Company v. Joni Mack
    Eastern District of Kentucky at London
8/26/2008 - 08a0523n.06

JULIA SMITH GIBBONS, Circuit Judge. Plaintiffs Grange Mutual Casualty Co., Grange Indemnity Insurance Co., and Trustgard Insurance Co. appeal the district court’s Rule 12(b)(6) dismissal of their civil action under the Racketeer Influenced and Corrupt Organizations Act (“RICO”) against defendant Joni L. Mack. Plaintiffs argue that the district court erred in concluding that plaintiffs could not establish a private cause of action under 18 U.S.C. § 1964(c) against Mack. In light of the Supreme Court’s decision in Bridge v. Phoenix Bond & Indemnity Co., 128 S. Ct. court’s dismissal and remand for further proceedings.

Plaintiffs allege that Mack joined an ongoing conspiracy that involved fraudulently billing plaintiffs for medical expenditures. Although Mack is the only defendant in this case, plaintiffs initiated a separate civil RICO action on December 4, 2002, against Mack’s husband, Greg S. Mack, and other members of a conspiracy allegedly involving a number of medical rehabilitation centers.1 In this case, plaintiffs allege that Mack joined the same conspiracy, alluding to the suit filed against Greg Mack.

The schemes were designed to take advantage of Kentucky’s statutory automobile insurance coverage system—which encourages insurers to promptly pay providers for medical costs associated with automobile accidents—in two ways. First, the conspirators coordinated testing services for physicians, which encouraged the physicians to refer patients for unnecessary testing. Second, the conspirators operated clinics—including the Injury & Rehab Centers of Kentucky, PLLC (“IRC”)—to cater to automobile victims. At IRC clinics, physicians and other employees were creat[ed] and implement[ed][ ] multiple fraudulent schemes to bill Plaintiffs for medical treatments or supplies that were never rendered or supplied, were medically unnecessary or were billed unlawfully. [In addition, these individuals] caused these fraudulent bills to be submitted to Plaintiffs via the United States mail or interstate wire communications.

In this case, the district court treated plaintiffs’ complaint as alleging that Mack violated both § 1962(c)’s substantive provision and the § 1962(d) conspiracy provision. It then determined that because the complaint failed “to plead facts demonstrating that [p]laintiffs’ injuries were suffered in reliance on the fraudulent conduct of Mack or any conspiratorial acts after her joinder in the conspiracy” it could not conclude “that Mack’s conduct was the proximate cause of [p]laintiffs’ injuries.” Given that plaintiffs are no longer required to allege reliance following Bridge, we remand to the district court for consideration of whether plaintiffs have alleged facts establishing proximate cause for either a § 1962(c) or § 1962(d) violation. To establish proximate cause for a § 1962(c) violation, plaintiffs must allege that Mack’s own violations of § 1962(c) led directly to plaintiffs’ injuries. See Anza, 547 U.S. at 461. To establish proximate cause for a § 1962(d) violation, plaintiffs must allege that they were injured by reason of a conspiracy to violate § 1962(c)’s substantive provision. See Beck v. Prupis, 529 U.S. 494, 500, 507 (2000) (holding that to maintain a § 1964(c) claim predicated on a violation of § 1962(d), a plaintiff must be injured by an act of “racketeering or otherwise unlawful under the statute”). If plaintiffs can make this showing, the district court will need to further consider whether Mack can be held civilly liable for injuries caused by the conspiracy but occurring prior to Mack’s joinder in the conspiracy.

For the foregoing reasons, we vacate and remand to the district court for further consideration consistent with this opinion.

By Michael Stevens

Although district court does not have appellate jurisdiction over local code enforcement, it can do a de novo review of the record but not de novo trial: HIGHVIEW MANOR ASSOCIATION LLC V. LOUISVILLE METRO HEALTH DEPT. (COA 6/13/2008)

HIGHVIEW MANOR ASSOCIATION LLC V. LOUISVILLE METRO HEALTH DEPT.
GOVERNMENT:  Review of municipal code and enforcement (bingo halls)
2007-CA-000233
PUBLISHED: REVERSING IN PART, VACATING IN PART, AND REMANDING
PANEL:  KELLER PRESIDING; CLAYTON, MOORE CONCUR
JEFFERSON COUNTY
DATE: 6/13/2008

COA accepted discretionary review in this matter to determine the scope of a district court's authority to review a decision of a local code enforcement pursuant to KRS 65.8831.

The underlying matter involves citations and fines imposed against bingo hall owners by the Louisville-Jefferson County Metro Government's Code Enforcement Board for violations of the Smoke Free Law, Louisville Metro Ordinance No. 123-2005.   The facilities argued that they were exempt from application of the Smoke Free Law, as they leased their premises to charitable organizations that conducted bingo games as authorized by KRS 238.500, et seq., and thus were private organizations.

In response, the Health Department argued that the private organization exception did not apply, as there was no evidence that the facilities were not open to the general public, and that the district court was limited to a review of the record created before the code enforcement.

In its Findings and Order on April 26, 2006, the district court found that a conflict existed in the statutes regarding its jurisdiction: KRS 24A.010 provides that it does not have appellate jurisdiction, while KRS 65.8831 provides that in an appeal of a decision of the code enforcement board, the district court is limited to a review of the record the board created.

The district court determined that it had original jurisdiction of the matter.  The district court further determined that the facilities were exempt from enforcement of the Smoke Free Law and that the charitable organizations that rented the bingo halls were exempt.

COA presumed the General Assembly (and, in turn, the Louisville Metro Government) was aware that the district court had no appellate jurisdiction pursuant to KRS 24A.010(3) when it enacted KRS 65.8831, which limited the district court to a review of the record created before the code enforcement board.  The district court is not permitted to conduct a de novo trial, but instead is merely permitted to review only that evidence and testimony introduced before the code enforcement board.  The district court may not take additional evidence, but must confine itself to the board's record. It is incumbent upon the code enforcement board to ensure that its record is sufficient to provide for meaningful review.

Because it does not have appellate jurisdiction, the district court may conduct a de novo review of that evidence and is not confined to a determination as to whether the board's decision was arbitrary.

Therefore, the circuit court erred when it held that the district court could only review the board's action for arbitrariness.

Accordingly, COA reversed the circuit court's holding in this regard and remanded this matter to the circuit court to address the merits of the district court's decision, which must be supported by the board's record.

On remand, the circuit court shall first determine whether the district court properly concluded that the organizations operating the bingo games were private organizations. If so, then the circuit court must next determine whether the district court properly applied the private organization exemption to the owners of the respective facilities.

For the foregoing reasons, the Jefferson Circuit Court's Opinion and Order is hereby reversed in part and vacated in part, and this matter is remanded to the circuit court for further proceedings consistent with this opinion.

By Michael Stevens

Legal negligence claim filed more than one year after "occurrence" for the claim but within one year of "discovery" of "irrevocable, non-speculative injury" was timely: LANE V. RICHARDS (COA 6/13/2008)

LANE V. RICHARDS
LEGAL NEGLIGENCE:  Statute of limitations; "Occurrence" and "Discovery" rules
2007-CA-000083
PUBLISHED: REVERSING AND REMANDING
PANEL: ACREE PRESIDING; LAMBERT, ROSENBLUM CONCUR
LAUREL COUNTY
DATE: 6/13/2008

Lane appeals TC's grant of summary judgment to Hugh Montgomery Richards on her legal malpractice claim holding that it was not filed within the one-year statate of limitations. Lane retained Richards in April 1998 to represent her on a federal court action against the Bell County School Board. This action was subsequently dismissed by the federal court on February 11, 2002. Lane then retained another attorney, H. Wayne Roberts, to handle her appeal. The appeal was also dismissed by the Sixth Circuit Court of Appeals on August 12, 2003. By letter dated September 12, 2003, Attorney Roberts advised Lane of the dismissal and his unwillingness to further appeal to the US Supreme Court, but did correctly advise her that she had 90 days from the dismissal date to file a writ. Roberts also informed Lane that in his opinion she had a malpractice claim against Attorney Richards, and conservatively stated that she had 1 year from August 12, 2003 in which to file such a claim. Lane then retained yet another attorney, Thomas Grady, to file the writ with the US Supreme Court in October 2003, and Attorney Grady verbally advised Lane that the writ had been timely filed. While not hearing back for some months, Lane wrote to Grady on July 28, 2004 inquiring about the writ status. In response, one of the partners in Grady's firm responded by letter dated December 28, 2004 advising Lane that Grady had been fired from the firm and more importantly, that he had prepared the writ but never filed it with the Supreme Court. Lane then filed this legal malpractice claim on November 3, 2005.

In its analysis, the COA notes that Lane's claim against the school board officially terminated on November 11, 2003 when the time for filing the writ expired. And while she learned of Richards' alleged legal negligence in September 2003 from Roberts, the COA noted that Lane did not discover her alleged injury until December 31, 2004 upon receiving the letter from Grady's firm. As the COA notes, KRS 413.245 governing professional negligence claims actually contains two different limitation periods, one from the date of "occurrence" and the second from the date of actual or constructive discovery of the cause of action.

The COA held that the "occurrence" limitations period ended on November 11, 2004, one year after her time for filing an appeal expired even though Lane did not yet know that she had been damaged by that time. Thus, this legal malpractice action was not timely filed under the "occurrence" limitations period. However, the COA notes that the 'discovery' limitation period does not begin to run until the cause of action was discovered or should have been discovered, which requires that all elements of the cause of action be known or discoverable. As the COA reasoned, the key question here is when should Lane have discovered that Richards' negligence had resulted in her "irrevocable, non-speculative injury"? The COA held that while Lane's cause of action accrued when Grady failed to file her writ and the judgment became final in November 2003, but her reasonable reliance of Grady's representations about the pending status of continued appeal prevented her from discovering the action accrual until she received the December 2004 letter from Grady's firm. As her case against Richards was filed within 1 year of this letter, Lane's Complaint was timely filed and not barred by KRS 413.245.


BY Chad Kessinger
SCHILLER OSBOURN BARNES & MALONEY

Gatekeeping role for scientific evidence is to keep out unsupported legal conclusions and not choose sides; "shaken baby" syndrome: COM. V. MARTIN (COA 6/13/2008)

COM. V. MARTIN
CRIMINAL:  Expert Testimony - Daubert - "shaken baby syndrome"; Gatekeeping role for scientific evidence is to keep out unsupported legal conclusions and not choose sides
2006-CA-002236
PUBLISHED: REVERSING AND REMANDING
PANEL: HENRY PRESIDING; BUCKINGHAM CONCURS; THOMPSON CONCURS IN RESULT ONLY
GREENUP COUNTY
DATE: 6/13/2008

In consolidated appeals, CA reversed circuit court order ruling that expert medical testimony about shaken baby syndrome was unreliable and therefore inadmissible under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). The trial court’s decision to exclude Dr. Spivack’s testimony was an abuse of discretion, because it was founded on the unsupported legal conclusion that because there was dispute amongst the experts as to the possible cause of the infants’ injuries, it was the court’s role to choose the side it found more convincing and exclude the side it found less convincing, based in part on giving greater weight to “scientific” as opposed to “clinical” studies. The Daubert test is designed to keep out unreliable or “pseudoscientific” expert scientific testimony that would confuse or mislead the jury, or that cannot legitimately be challenged in a courtroom. This ‘gatekeeping role of the trial court is designed to banish ‘junk science’ evidence from the courtroom. The testimony of the Commonwealth’s experts in this case, even accepting the trial court’s assessment of its flaws, could not be described as “pseudoscientific” or “junk science.”

By Scott Byrd

No time limitations for appealing open records denial to attorney general: WYRICK V. DEPARTMENT OF REVENUE, FINANCE, AND ADMINISTRATION CABINET (COA 5/30/2008)

WYRICK V. DEPARTMENT OF REVENUE, FINANCE, AND ADMINISTRATION CABINET
GOVERNMENT:  Open Records Request
2007-CA-000089
PUBLISHED: REVERSING IN PART, VACATING IN PART, AND REMANDING
PANEL: KELLER PRESIDING; THOMPSON, GRAVES CONCUR
FRANKLIN COUNTY
DATE RENDERED: 5/30/2008

In this open records request case, the Department of Revenue sought review of the Attorney General's decision, requiring disclosure of certain records requested by taxpayer's attorney, Mitzi D. Wyrick, who appealed the circuit court order which barred her from inspecting the documents.

COA held there was no time limitation to appeal open records denial to the attorney general and declined the DOR’s request there be a 30-day time limitation for seeking review before the Attorney General and hold that pursuant to the plain language of the statute, Wyrick’s appeal to the Attorney General would have been timely whenever she chose to file it.

With regard to the records requested, the DOR cannot on the one hand argue, successfully, that the material sought in the tax appeal case is irrelevant to that litigation to defeat the discovery request, and then on the other hand argue in the Open Records proceeding that it is pertaining to that litigation and therefore subject to the limitation. The DOR is not “permitted to feed one can of worms” to the Board of Tax Appeals and another to the circuit court in the Open Records action.  COA then rejected the DOR’s argument that just because a record requested in discovery is deemed irrelevant, does not mean that it is not related to that litigation. The public agency bears the burden of establishing that a requested record is exempt from release. When ruling on party litigation defense to Open Records Act request, trial court was required to first determine whether a listed exemption applied.  However, the party litigation limitation was inapplicable because underlying litigation  in this was case was a tax appeal and was administrative, not civil.

Digested by Michael Stevens