Justia Business Law Opinion Summaries

Articles Posted in Kentucky Supreme Court
by
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

by
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

by
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

by
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

by
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

by
Appellants, three physicians, were formerly employed by The New Lexington Clinic (“NLC”) but resigned to practice at a facility opened by Baptist Healthcare System Inc. through its subsidiary (collectively, “Baptist”). NLC subsequently brought actions against Appellants for breach of fiduciary duties owed in their capacity as members of the NLC board of directors. Baptist was joined as a defendant on the ground that it aided and abetted Appellants’ breaches. The trial court dismissed the complaints, concluding that the complaints did not properly invoke Ky. Rev. Stat. 271B.8-300, which the court considered controlling to all actions involving a breach of a corporate director’s duties. The Supreme Court remanded to the trial court, holding (1) section 271B.8-300 does not abrogate common law fiduciary duty claims against Kentucky directors but codifies a standard of conduct and liability for directors derived from business judgment rule principles; (2) section 271B.8-300 did not apply in this case because preparing for and participating in a competing venture does not constitute the type of conduct addressed in the statute; and (3) NLC properly pled common law fiduciary duty claims on the alleged facts. View "Baptist Physicians Lexington, Inc. v. New Lexington Clinic, P.S.C. " on Justia Law

by
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

by
In March 1991, Appellee's predecessor corporation obtained a default judgment against Appellant for over $13,000. To collect on the judgment, Appellee caused a writ of execution to issue against Appellant in April 1991. Appellee also filed judgment liens, initiated garnishment proceedings, most recently in 2005, and undertook post-judgment discovery examinations. In 2008, Appellant filed a declaration of rights action, contending that Appellee could no longer recover on the judgment against him because the fifteen-year limitations period had expired. The trial court ruled that any enforcement activity by a judgment creditor, including judgment liens and garnishments, keeps a judgment alive for purposes of the statute of limitations, and therefore, limitations did not bar Appellee's attempts to collect on the judgment. The court of appeals (1) upheld the circuit court's rulings with regard to garnishments, finding that the definition of "execution" in Ky. Rev. Stat. 413.090(1) includes a garnishment; and (2) did not reach the question of whether judgment liens are also executions for purposes of the statute of limitations. The Supreme Court affirmed, holding that garnishment proceedings and the filing of judgment liens toll the fifteen-year statute of limitations. View "Wade v. Poma Glass & Specialty Windows, Inc." on Justia Law

by
Creditor attempted to collect on debt incurred by a wholly-owned subsidiary, but the subsidiary had been deprived of all income and rendered asset-less by the acts of its parent and grandparent corporations (Appellees). Creditor sued Appellees, seeking to pierce the corporate veil and establish Appellees' liability for the judgment. The trial court granted summary judgment to Creditor and the court of appeals affirmed, finding it appropriate to pierce the corporate veil where the evidence showed the subsidiary was merely an instrumentality or alter ego of Appellees, operated by them to achieve tax benefits and avoid various liabilities. The Supreme Court affirmed, holding the lower courts properly pierced the subsidiary's corporate veil to hold Appellees liable for the debt to Creditor because Appellees exercised complete dominion and control over the subsidiary, depriving it of a separate existence, and both Appellees derived the benefits associated with the lease with Creditor while rendering the subsidiary an income-less and asset-less shell incapable of meeting its lease obligations.

by
General Electric (GE) obtained a judgment against Intra-Med for breach of contract. Thomas Schultz was the president and sole shareholder of Intra-Med. After collecting only a portion of the judgment, GE intervened in another lawsuit and filed a third-party complaint against Schultz seeking to pierce the corporate veil and hold him personally liable for the judgment against Intra-Med. The trial court entered judgment on the pleadings in favor of GE, allowing GE to pierce Intra-Med based upon the instrumentality theory of veil piercing. The court of appeals affirmed, concluding (1) none of Schultz's affirmative defenses negated the fact that he admittedly used corporate funds and property as his own to GE's detriment, and (2) Schultz's admissions fulfilled the requirements for piercing the corporate veil and supported the trial court's judgment on the pleadings. The Supreme Court reversed, holding that the trial court improperly granted GE's motion for judgment on the pleadings, as Schultz's admissions did not conclusively establish harm, fraud, or unjust loss, the three elements that must be established to warrant a piercing of the corporate veil under the instrumentality theory.