Justia Kentucky Supreme Court Opinion Summaries

Articles Posted in Business Law
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In this case, the Supreme Court of Kentucky addressed a dispute over the division of proceeds from the sale of a commercial property. The parties involved were business partners who had formed an LLC to manage the property. One of the partners, Allen, had previously asked his partners to sell their interests in the LLC to his children to resolve a tax problem. The partners agreed, but wanted to ensure they would not forfeit potential future profits from the property sale. They decided that proceeds from a future sale of the building would be split according to their ownership interests up to $8 million, and any proceeds above $8 million would be divided equally among them.In 2017, the property sold for $10 million, and a dispute arose over how to distribute the proceeds. One of the partners, Swyers, distributed the proceeds according to the previously agreed upon formula. However, the Allen family contested this, arguing that the entire proceeds should have been distributed according to ownership interests.The trial court ruled in favor of Swyers, finding that the agreement provided for a bifurcated distribution of proceeds, with an $8 million sale price threshold. The Court of Appeals disagreed, concluding that distributions of one-third each were warranted only if the total net proceeds exceeded $8 million.The Supreme Court of Kentucky reversed the Court of Appeals' decision, agreeing with the trial court's interpretation of the agreement. The court concluded that the parties had intended to split the proceeds on a sale price threshold of $8 million, and that only the sales commission needed to be deducted before calculating the distribution of the final $2 million of the sale price. View "SWYERS V. ALLEN FAMILY PARTNERSHIP #1" on Justia Law

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The Supreme Court affirmed the judgment of the court of appeal denying a writ of prohibition against the circuit court, holding that S.I.A. Limited's argument that the circuit court lacked jurisdiction over it was unavailing.SIA, a foreign Gibraltar corporation, allegedly engaged in illegal gambling activities involving Kentucky residents. SIA later voluntarily dissolved. SIA subsequently filed a motion to dismiss, requesting that the circuit court apply the law of Gibraltar to determine that the case must be dismissed because SIA was no longer a legal entity capable of being sued. The circuit court denied the motion, and the court of appeals denied SIA's ensuing petition for a writ of prohibition. The Supreme Court affirmed, holding that the law does not allow foreign corporations to use voluntary dissolution as a means to subsequently divest these Courts of such jurisdiction, and therefore, equity requires that this lawsuit continue. View "S.I.A. Ltd. v. Honorable Wingate" on Justia Law

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The Supreme Court reversed the judgment of the circuit court opining on the constitutionality of the Governor's 2021 COVID-19 legislation and enjoining the Governor from interfering with Plaintiffs' business operations, holding that Plaintiff lacked standing to bring this action.In its 2021 regular session, the General Assembly passed three bills amending the Governor's emergency powers under Ky. Rev. Stat. 39A. Plaintiff, a business, sought to enjoin the Governor from any action contrary to the 2021 legislation. The circuit court entered an amended judgment declaring the constitutionality of the 2021 COVID-19 legislation, holding any orders to the contrary imposed by the Governor unconstitutional, and prohibiting the three named defendants from enforcing any emergency order, decree or regulation in conflict with the 2021 legislation. The Supreme Court reversed, holding that Plaintiff plainly had no standing to bring this action, and the circuit court had no jurisdiction. View "Beshear v. Ridgeway Properties, LLC" on Justia Law

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The Supreme Court vacated the trial court's order granting a temporary injunction enjoining Defendants from enforcing against only the individual Plaintiffs multiple specifically enumerated executive orders, administrative regulations, and directives, holding that the trial court erred.Plaintiffs, several businesses, filed suit against the Governor, the Secretary of the Cabinet for Health and Family Services, and the Commissioner of the Kentucky Department of Public Health, seeking declaratory relief, a temporary injunctions and a permanent injunction regarding the Governor's orders related to COVID-19. The circuit court granted temporary injunctive relief. The Supreme Court vacated the order, holding that the trial court erred by refusing to allow the Governor to call witnesses and present evidence. View "Beshear v. Goodwood Brewing Co." on Justia Law

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The Supreme Court held that Plaintiffs, eight members of the Kentucky Retirement System's (KRS) defined-benefit retirement plan, did not have standing to bring claims for alleged funding losses sustained by the KRS plan against former KRS trustees and officers and private-investment advisors and hedge funds and their principals.Plaintiffs alleged that KRS trustees and officers attempted to gamble their way out of an actuarial shortfall by investing $1.5 billion of KRS plan assets in high-risk products offered by the defendant hedge-fund sellers, resulting in a multimillion dollar loss that contributed to what was a $25 billion funding shortfall in the KRS general pool of assets. Defendants moved to dismiss the claims for lack of constitutional standing. The circuit court denied the motion. The Supreme Court reversed, holding that Plaintiffs did not have an injury in fact that was concrete or particularized and therefore did not have standing to bring their claims. View "Overstreet v. Mayberry" on Justia Law

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The Supreme Court affirmed the decision of the court of appeals in this case alleging tortious interference involving a parent corporation and its wholly-owned subsidiary, holding that a parent company has a qualified privilege to interfere with the contractual relations of its wholly-owned subsidiary unless it employs wrongful means or its interference is not in the economic interest of the subsidiary.Plaintiff brought suit against against CONSOL of Kentucky Inc. (CKI), the wholly-owned subsidiary of CONSOL Energy, Inc. (Energy), Energy, and others, alleging that Energy interfered with the contractual relation between Plaintiff and CKI. The jury found for Plaintiff. The court of appeals concluded that a parent company cannot tortiously interfere with a wholly-owned subsidiary unless it employs wrongful means when interfering and that Energy was entitled to interfere in this case. The Supreme Court affirmed, holding that Plaintiff adduced no proof as to the required element of wrongful means in a tortious interference claim involving a parent and its wholly-owned subsidiary. View "Sparkman v. Consol Energy, Inc." on Justia Law

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Paul R. Plante, Jr. brought a shareholder derivative suit against Appellants, directors of Arthrodynamic Technologies Animal Health Division, Inc. (ADT), alleging that Appellants had violated various provisions of ADT’s shareholder agreement with respect to sales of stock. The law firm Miller, Griffin & Marks, PSC (MGM) was retained to represent Appellants. Plante moved to disqualify MGM as the counsel for Appellants, alleging that MGM’s participation in the action created a conflict of interest or at least an appearance of impropriety due to MGM’s representation of two Appellants in another suit and its representation of the board of directors, which included Plante, in giving advice on other litigation. The trial court concluded that disqualification of MGM was required based on the appearance of impropriety. Appellants subsequently sought a writ of prohibition to bar enforcement of the trial court’s order. The Court of Appeals denied the writ because Appellants had not shown irreparable injury. The Supreme Court reversed, holding (1) the trial court applied a disqualification standard that is no longer appropriate under the Rules of Professional Conduct; and (2) the trial court’s factual findings were insufficient to allow disqualification under the proper standard of a showing of actual conflict. View "Marcum v. Hon. Ernesto Scorsone" on Justia Law

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Plaintiffs, former members of the St. Joseph Catholic Orphan Society’s Board of Trustees, sued St. Joseph, challenging the validity of the Board’s action removing them from the Board and seeking reappointment to the Board. St. Joseph moved to dismiss, arguing that the trial court was without subject-matter jurisdiction because of the application of the ecclesiastical-abstention doctrine. The trial court denied the motion. St. Joseph then sought a writ of mandamus requiring the trial court to dismiss the underlying action. The court of appeals denied the writ. The Supreme Court (1) affirmed the denial of the writ, concluding that the ecclesiastical-abstention doctrine does not divest courts of subject-matter jurisdiction to adjudicate cases they are authorized to hear; but (2) reversed the trial court’s order denying St. Joseph’s motion. Specifically, the Court treated St. Joseph’s petition for writ of mandamus as an interlocutory appeal from the trial court’s denial of its motion to dismiss and, on the merits, agreed that the underlying action presented a question of ecclesiastical governance, which meant that the ecclesiastical-abstention doctrine prohibited the underlying action from going forward in the trial court. View "St. Joseph Catholic Orphan Soc’y v. Hon. Brian C. Edwards" on Justia Law

Posted in: Business Law
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Appellant physicians were former employees of The New Lexington Clinic (NLC) who resigned from NLC to practice at a nearby facility opened by Baptist Healthcare System, Inc. through its subsidiary (collectively, Baptist). NLC brought actions against Appellants for breach of fiduciary duties, alleging that Appellants used confidential information and recruited NLC personnel while serving as members of the NLC board of directors. Baptist was joined as a defendant for allegedly aiding and abetting Appellants' breaches. The trial court granted summary judgment for Defendants, concluding that the complaints did not properly invoke Ky. Rev. Stat. 271B.8-300, which the trial court considered controlling as to actions involving breach of a Kentucky corporate director's duties. The court of appeals reversed and remanded, concluding that section 271B.8-300 controlled but that sufficient facts were alleged to state a cause of action. The Supreme Court affirmed but on other grounds, holding (1) section 271B.8-300, which did not abrogate common law fiduciary duty claims against Kentucky directors, did not apply in this case; and (2) NLC properly pled common law fiduciary duty claims on the alleged facts. Remanded.View "Baptist Physicians Lexington, Inc. v. The New Lexington Clinic, PSC" on Justia Law

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Ann Shannon was the sole member of a limited liability company (LLC). In 2004, Shannon signed a lease for commercial space with the property’s owner, Rick Pannell, on behalf of the LLC. In 2005, the LLC was administratively dissolved. In 2006, Shannon and Pannell entered into a release of the old lease and a new lease. The new lease expressly stated that the LLC was the tenant and was signed by Shannon but did not mention Shannon’s company capacity in any direct way. Pannell subsequently sued for breach of the lease, naming the LLC and Shannon individually. Shortly after, the LLC was reinstated. The circuit court concluded that Shannon was entitled to immunity from personal liability and awarded Pannell damages against the LLC under the lease. The court of appeals affirmed. The Supreme Court affirmed, holding (1) based on the facts of this case, Shannon did not directly obligate herself because she clearly signed the lease in her representative capacity and the lease was expressly with the company; and (2) Shannon could not be personally liable under Kentucky’s Limited Liability Company Act or under the theory that she exceeded her authority as an agent of the LLC during the dissolution. View "Pannell v. Shannon" on Justia Law