Kentucky Supreme Court
Employment - Public Schools - Conduct Unbecoming
Board of Education of Fayette County v. Richards, 396 S.W.3d 879, 2013 WL 1776952 (Ky. April 25, 2013)

This case arises from the termination of a teacher of twenty two years and her interaction with an insolent male second grader and his two sisters. The event began with the mistake of seeing a job not being done and assuming the responsibility of hall monitor herself. She was confronted with three siblings, who appear to have been raised vacuus parentes. For more detail of the incident the reader is referred to the opinion, but the gravamen is that the teacher physically directed the student to the principal's office. There was no physical injury or really any force used at all. The student resisted the attempts to direct him. The school superintendent terminated the teacher, and the hearing Tribunal found that the teacher used poor judgment, that this poor judgment constituted conduct unbecoming, but changed the discipline to suspension without pay for about seventeen months. The Circuit Court reversed, holding that the conduct in question did not amount to conduct unbecoming.

The Court acknowledged that the Tribunal is entitled to deference with respect to findings of fact, but held that the determination of what constitutes "conduct unbecoming" is a question of law. This holding is premised on the fact that the term "conduct unbecoming" is a creature of statute. KRS 161.790. The Court found that the phrase "conduct unbecoming" refers to conduct that violates the accepted norm of decent behavior and offends the sensibilities of reasonable persons, taking into account the role of a secular public school teacher in our culture. The Court essentially held then that, assuming the conduct in question was actually poor judgment, it was insufficient to meet the statutory criterion.

This case involves an important but unspoken policy issue. In this case the Court implicitly removed the authority to make this type of decision from the school board and placed it within the authority of the courts. The conclusion that the courts must decide is a question of law because it is created by statute is a mere pretext, as juries are often asked to determine what conduct meets or fails to meet a statutory standard as set out in the jury instructions. If the reasoning were correct, then it would be an issue of law whether a motorist maintained a reasonable lookout. Accordingly, this case must be viewed as a response to the conclusion that public school system is too dysfunctional to be trusted with these types of judgments, as this case demonstrates. It's not clear that courts are any better qualified, but until the public gets serious about the education of their children this solution will have to do.

Kentucky Supreme Court
Sovereign Immunity - Declaratory Judgment
Commonwealth of Kentucky v. Kentucky Retirement Systems, 396 S.W.3d 833, 2013 WL 1776890 (Ky. April 25, 2013)

A number of public employees filed a declaratory judgment action against the Commonwealth and Kentucky Retirement Systems. The legislature had enacted significant reductions to the retirement program, and the plaintiffs sought a declaration as to the legislation's constitutionality. To make a long story short, such a declaratory judgment action can be maintained against the state. As to the rationale, the opinion is at best confusing. On the one hand the Court viewed the issue as one in contract, but on the other held that the statute creating the retirement program was a waiver of sovereign immunity.

Kentucky Court of Appeals
Limitations of Actions - Personal Injury - Motor Vehicle Accidents
Cole v. Fagin, ___ S.W.3d ___, 2013 WL 1694758 (Ky.App. April 19, 2013), motion for discretionary denied February 12, 2014

The plaintiff received injuries in an automobile accident, and made application for no-fault benefits under her auto policy with Grange. The policy provided both no-fault and med pay benefits. When plaintiff filed suit against the alleged tortfeasor and Grange, she did so more than two years after the accident itself. Grange paid medical expense in the sum of $3,976.57, less than the limits of both first party coverages.

Grange argued that the medical expenses were paid under the med pay coverage. Since med pay does not toll the limitations under KRS 304.39-230(1) as do no-fault payments, the tort and UIM claims would have been time barred when filed. The Court held that regardless of any agreement or intent, the first payments made are no-fault benefits, and med pay kicks in only after no-fault is exhausted. While this ruling saves the plaintiff's claim in this case, it sets a bit of a trap where the no-fault benefits are exhausted since the unwary plaintiff may calculate the time from the payment of the last expense paid by the insurer, when the time would actually begin to run when the no-fault is exhausted. In effect, no-fault benefits are primary over med pay benefits where they both are provided by one policy.

Kentucky Court of Appeals
Professional Liability - Effect of Non-Licensure
Estate of Mabel C. Moloney v. Becker, 398 S.W.3d 459, 2013 WL 1688378 (Ky.App. April 19, 2013)

A financial planner drafted a Qualified Personal Residence Trust (QPRT) for a client. Because it was defective, a farm was included in the client's estate subjecting the estate to an additional $142,901.00 in estate taxes. A jury trial was had and the jury found that the financial planner was negligent but that the negligence did not cause the injury. The estate on appeal argued that it should have received a directed verdict because the conduct constituted the unauthorized practice of law, which it argued was negligence per se. The Court noted that whether the defendant had engaged in the unauthorized practice of law was immaterial. The Court also observed that violation of a statute that constitutes negligence per se must still be a cause in order to support a finding of liability.

Kentucky Court of Appeals
Arbitration - Authority to Enter Into Contract
Kindred Nursing Centers Limited Partnership v. Leffew, 398 S.W.3d 463, 2013 WL 1688361 (Ky.App. April 19, 2013)

This is a nursing home case, and the patient was admitted by his son and wife. They had been appointed emergency custodians because a District Court found the patient was unable to attend to his daily needs. The order granted the custodians discrete powers, which did not include the power to dispose of his property, execute instruments on his behalf, or enter into contractual relationships. On admission the custodians signed a number of documents, one of which was an arbitration agreement. The son also presented the home a handwritten power of attorney, which purported to relate to criminal charges. Subsequently, the state became permanent guardian. On occasions where the patient was readmitted after a hospitalization, documents were executed by the state reaffirming the original admission documents, which included the arbitration agreement. On his death the obligatory action was brought against the nursing home. The nursing home sought to enforce the arbitration agreement.

The guardian, which had the authority to enter into an arbitration agreement, did not sign the agreement, but did sign documents reaffirming the prior arbitration agreement. The nursing home argued that the subsequent signing of documents constituted a ratification of the prior arbitration agreement. The Court rejected this argument, holding that only the principal could ratify prior acts. Moral of the story continues to be: require the arbitration agreement be signed by a legal guardian.

We are a little dubious of the legal proposition on which the holding is based. It is unclear why an agent, who had the authority to bind the principal in the first place, could not also ratify prior conduct on his behalf. However, it is not clear that the guardian was aware of the prior arbitration agreement, and the holding could be justified on that ground.

If this holding stands, however, it may prove important in the context of punitive damages. One basis for the imposition of punitive damages against an employer for the conduct of an agent is ratification. This holding may limit who can actually ratify the conduct, in turn restricting the imposition of punitive damages in that context.

Kentucky Court of Appeals - Unpublished
Standard of Care - Failure to Obtain Permit
Berry v. CSX Transportation, Inc., 2013 WL 1688376 (Ky.App. April 19, 2013)

The Court refused a jury instruction which would have made it negligence per se for the railroad to have failed to obtain a permit to encroach upon a highway. The Court noted that such a permit only gave the right to encroach, but would not determine the manner by which the encroachment could occur.

Kentucky Court of Appeals - Unpublished
Premises Liability - Natural Accumulations - Open and Obvious
Carter v. Bullitt Host, LLC, 2013 WL 1688338 (Ky.App. April 19, 2013), motion for discretionary review granted February 12, 2014 (2013-SC-325-DR)

The plaintiff checked into a hotel which had a canopy over the driveway leading to the lobby doors. They stopped because they encountered heavy snow. The next morning, plaintiff was going to do outside to warm up the car, and passed through the lobby doors. Plaintiff testified that he did not see any snow under the canopy, but did see water. He said he proceeded cautiously because he did not want to slip. As he was nearing one of the open sides of the canopy he slipped and fell on ice.

The Court first observed the long standing rule that a landowner owes no duty to clear his property of snow and ice. The hotel had taken no steps to clear the snow, even though they had previously hired a snow removal company. The Court rejected the argument that this prior removal created a duty to do so on this occasion. The Court also rejected the argument that the rule had been changed by Kentucky River Medical Center v. McIntosh, 319 SW 3d 385 (Ky. 2010). The Court of Appeals read McIntosh as limiting the open and obvious rule where the plaintiff was distracted, which was not the case here.

United States District Court
Multiple Tortfeasors - Apportionment - Liability to Plaintiff
Sadler v. Advanced Bionics, LLC, 2013 WL 1636374 (W.D.Ky. April 16, 2013)

This was a product liability case brought against the manufacturer of a cochlear implant device. The manufacturer filed a third party complaint against Astro Seal, and component part manufacturer. The Court determined that Astro Seal, who had been previously dismissed for lack of personal jurisdiction, would have been immune from suit under federal law as set out in the Biomaterials Access Assurrance Act [BAAA]. 21 U.S.C. §1604(a). The Court relied upon the holding in CertainTeed Corp. v. Dexter, 330 SW 3d 64 (Ky. 2010), whereby a condition for the giving of an apportionment instruction was a showing of liability to a the plaintiff. The District Court, however, appears to have over-read the Kentucky Court's opinion. The Certainteed opinion requires that the elements of the tort must be shown, and does not hold that the possibility of an affirmative defense would preclude an apportionment instruction, and with the exception of sovereign immunity this has never been Kentucky law.

However, as a matter of federal law the conclusion in this case seems to be correct. The BAAA specifically deals with the issue, and provides for contribution or indemnity by a manufacturer against the component parts maker. 21 U.S.C. §1606. Thus, Kentucky law regarding several liability is preempted. This opinion should not be read as extending Certainteed beyond its holding.

United States Supreme Court
Subrogation - ERISA Reimbursement
U.S. Airways, Inc. v. McCutchen, 569 U.S. ___, 133 S.Ct. 1537, 185 L.Ed.2d 654, 2013 WL 1567371 (U.S. April 16, 2013)

McCutchen was a participant in a health benefit plan his employer, U.S. Airways, Inc., maintained under the Employer Retirement Income Security Act of 1974 (ERISA). McCutchen was injured in an automobile accident, and the plan paid about $66,866.00 in medical expenses. He retained attorneys on a 40% contingency fee basis, and obtained a total of $110,000.00. The recovery was substantially less than the damages provable, due in part to limited insurance coverage and also because there were multiple injuries arising out of the accident. After fees, McCutchen's share was $66,000. The plan documents contained a provision requiring an employee to reimburse the plan out of any recovery from third parties. U.S. Airways filed this action seeking full recovery, by which it meant the entire sum due to McCutchen. McCutchen claimed that because he did not recover all of his damages the amount that could be recovered by the plan was limited, and that any recovery should be reduced by attorney fees.

ERISA permits a plan to bring an action for "appropriate equitable relief" to enforce the terms of the plan. 29 U.S.C. §1132(a)(3). The Court had previously held that a subrogation claim could be made in connection with a tort recovery from a third person. Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356 (US 2006). The question in this case was whether equitable defense were available to the extent inconsistent with the plan language (As with Medicare Secondary Payer, the term reimbursement is being taken as meaning 100% reimbursement).

The Court held that such defenses were not available to McCutchen where inconsistent with the Plan language. In this case, the Court found the plan language, allowing reimbursement from the settlement, to be controlling. Thus, the plan was entitled to reimbursement without regard to the extent of recovery by the employee. Likewise, the reimbursement is not limited to the amount recovered for the corresponding loss, but is only limited by the entire recovery. The Court did find that, given the plan document's silence on how to handle the attorney fee issue, the "common fund" doctrine would control. In a sense the Court is speaking out of both sides of its mouth here, since reimbursement, if construed to mean 100% reimbursement without regard to the underlying merits, does negate any reduction for fees and expenses. But, the high Court has that luxury.

So the rule going forward is much like the rule found in the Medicare Secondary Payer context. The ERISA subrogor is entitled to full reimbursement without regard to the extent of liability or limits available to the employee, except that the subrogated amount is reduced by procurement costs, attorney fees and expenses. The practical impact is to add these cases to the list of claims that will be very difficult to settle, and which plaintiff's attorneys would be wise to avoid.

Sixth Circuit Court of Appeals
Professional Liability - Attorneys - Hiring Experts
Martello v. Santana, ___ F.3d ___, 2013 WL 1405237 (6th Cir. April 9, 2013)

Martello was a medical doctor who attended law school (Berkley) but failed to pass the bar examination on four occasions. Santana is a personal injury attorney in Kentucky, who retained Martello as a consultant on medical malpractice cases. While the retention was generally on an hourly basis, Martello claimed that in three cases Santana had agreed to a contingency type arrangement. There was a handwritten document suggesting such an agreement in one of the cases, but in a subsequent letter Santana explained that such an agreement would be unethical and suggested an hourly arrangement. Martello sought to enforce the contingent agreements.

It is unethical for a lawyer to share fees with a non-lawyer except in certain described circumstances. SCR 3.130(5.4). None of the exceptions apply to the retention of an consultant. The Court held that a contract which violated the ethical rules is violative of public policy and therefore void.

Sixth Circuit Court of Appeals
Statute of Limitations - Fraud - Discovery
Martello v. Santana, ___ F.3d ___, 2013 WL 1405237 (6th Cir. April 9, 2013)

Martello claimed that she was entitled to a portion of the settlement proceeds for consulting work, and that the attorney fraudulently concealed the fact of settlement from her. The Complaint was filed on March 7, 2011, but agreements tolled the limitations from July 11, 2005 to April 1, 2006. The applicable limitations period was five years from accrual. KRS 413.120. Because the suit was in federal court, federal law applied to determine when the case accrued. However, in both jurisdictions a case of this type accrues when the fraud should have, in the exercise of reasonable diligence, discovered the fraud.

The record disclosed that she was paid on one case on June 17, 1997. Martello claimed that Santana fraudulently told her the reduction was due to extra expenses, which had not actually been incurred. However, prior to that, on March 31, 1997, the attorney had sent a letter advising that a contingency agreement was unethical and that an hourly rate would be used. In two other cases Martello claimed the attorney declined to advise her of settlement amounts because of confidentiality provisions. The Court held that Martello had discovered sufficient facts to put her on notice that she needed to investigate whether she had been properly paid.

Kentucky Court of Appeals
Insurance - No-Fault - Payment of Medical Expense
Medlin v. Progressive Direct Insurance Company, ___ S.W.3d ___, 2013 WL 1365912 (Ky.App. April 5, 2013), motion for discretionary review denied February 12, 2014

Since the legislature eliminated the validity of assignments of benefits in 1998, insurers have been confronted with demands by claimants for the payment of medical benefits directly to the claimant. The following could be read to support such a right:

. . . Medical expense benefits may be paid by the reparation obligor directly to persons supplying products, services, or accommodations to the claimant, if the claimant so designates.

KRS 304-39.210(1). If a claimant can designate that the payments can be made directly to the provider, then absent a direction it follows that payment should be made directly to the claimant. Of course, the benefits often never reach the provider, which in turn defeats one of the very purposes of the no-fault scheme. KRS 304.39-010(3). Further, this could result in double recoveries where the medical expense is made by other insurance, and in the case of Medicare payments would clearly violate federal law.

The Court of Appeals held that the statute provides for two ways to collect medical expense benefits. First, he could direct the benefits to be paid directly to the provider, as allowed by the statute cited above. Second, he could pay the provider and then seek reimbursement from the no-fault insurer. Another way to think of this is that medical expense is not incurred by the claimant until paid.

Under the facts of the case, a third option was available. On his application the claimant had requested direct payment, but the application also advised that this would be done by a check payable to claimant and the provider. The approval of this approach could be viewed as a green light for no-fault insurers to create their own rules about payment, but the sounder view would be that the Court found the procedure to be consistent with the methods provided by the statute. In other words, if the provider has not been paid, then an insurer should be able to make the check payable to both with or without such language in the application or policy.

Kentucky Court of Appeals
Sudden Emergency - Automobile - Oncoming Vehicle
Carroll v. Wright, ___ S.W.3d ___, 2013 WL 1365941 (Ky.App. April 5, 2013), petition for rehearing denied July 5, 2013, motion for discretionary review granted April 9, 2014(2013-SC-528-DG)

While this opinion makes a bit of a hash of the legal principles discussed, it stands for the proposition that in most cases an oncoming vehicle struck in its own lane of travel will be entitled to a directed verdict. The defendant vehicle was confronted with vehicles stopped at an intersection. The driver of the tractor trailer locked up his brakes and avoided the stopped vehicles in his lane, his trailer swung around and hit the oncoming vehicle. On a prior appeal, the Court had ruled that two vehicles stopped at an intersection did not constitute an emergency. Absent such an excuse, the defendant violated his duty to remain in his lane of travel as a matter of law.

Kentucky Court of Appeals - Unpublished
Insurance - UM/UIM - Regular Use Exclusion
Arguelles v. Nationwide Investment Services Corporation, 2013 WL 1384922 (Ky.App. April 5, 2013)

The regular use exclusion withstood this challenge claiming it was against public policy. The claimant was at the time of her injury occupying a vehicle which she both owned and insured with another company. She was trying to recover UIM benefits under her parent's policy, which did not list her vehicle as a covered automobile. One can't discern a serious argument to strike the exclusion down, but it hasn't always required pone to be successful.

Kentucky Court of Appeals - Unpublished
Statute of Limitations - Kentucky Civil Rights Act
Robinson v. Meece , 2013 WL 1352073 (Ky.App. April 5, 2013), motion for discretionary review denied October 16, 2013 (2013-SC-288-D)

The core facts of the claim arose out of the plaintiff's arrest and indictment for attempted murder and assault. A number of theories were described, one of which was a violation of the Kentucky Civil Rights Act (KCRA), KRS 344.010 et. seq.. While the five year limitations applies to claims brought under the KCRA, and the suit was brought within five years, the Court upheld the dismissal because the facts alleged could not constitute a claim under the KCRA, which deals with discrimination in employment and public accommodations.