Opinion
NO. 2013-CA-002030-MR
04-24-2015
MARK JORDAN APPELLANT v. EAST KENTUCKY POWER CO-OP and ALTERNATIVE SERVICE CONCEPTS, LLC APPELLEES
BRIEF FOR APPELLANT: William C. Jacobs Lexington, Kentucky BRIEF FOR APPELLEE, ASC: Barry D. Hunter Kathryn B. Kendrick Lexington, Kentucky BRIEF FOR APPELLEE, EKPC: George B. Hocker John O. Hollon Lexington, Kentucky
NOT TO BE PUBLISHED APPEAL FROM CLARK CIRCUIT COURT
HONORABLE JEAN CHENAULT LOGUE, JUDGE
ACTION NO. 11-CI-00735
OPINION
AFFIRMING
BEFORE: ACREE, CHIEF JUDGE; KRAMER AND THOMPSON, JUDGES. KRAMER, JUDGE: Mark Jordan appeals a judgment of the Clark Circuit Court dismissing his breach of contract action against appellees, East Kentucky Power Co-op (EKPC) and Alternative Service Concepts, LLC (ASC). Upon review, we affirm.
FACTUAL AND PROCEDURAL HISTORY
To understand the factual and procedural history of this case, it is best to begin with a 2006 summary judgment order that the United States District Court for the East District of Kentucky entered in a prior case, Jordan v. Cooperative Ben. Administrators, Inc., No. 05-313-JBC, 2006 WL 2367133 (E.D. Ky. Aug. 14, 2006). In relevant part, the order provides:
I. Facts:
The plaintiff, Mark Jordan, is a former employee of the East Kentucky Power Cooperative ("EKPC"). EKPC is a member of the National Rural Electric Cooperative Association, which sponsored a group disability plan (the "Plan"). This Plan, in which Jordan participated, is governed by ERISA and administered by Cooperative Benefit Administrators ("CBA"). In September 2000, Jordan was injured while working for EKPC. As a result of this injury, Jordan filed a worker's compensation claim, which settled in 2004. A condition of this agreement was that Jordan would retain his right to prospective benefits under EKPC's group health, life, and retirement benefit plans.
In January 2002, as a result of his workplace injury, Jordan began receiving long-term disability benefits under the terms of the Plan. The Plan has two different standards for evaluating disability. During the first twenty-four months, a claimant is "disabled" if he is "completely unable to perform any and every duty pertaining to [his] occupation." After this time, the claimant is "disabled" only if he is "completely unable to engage in any and every gainful occupation for which [he] is reasonably fitted by education, training or experience." In March 2004, CBA terminated Jordan's benefits, finding that he was not precluded from all gainful employment. After Jordan's administrative appeal was denied, he sought judicial review in this court.
Jordan alleges that CBA and EKPC denied his claim for benefits in violation of the terms of the Plan. Additionally, he alleges that EKPC breached the settlement agreement by failing to continue to provide medical and life insurance. The defendants have moved for judgment as a matter of law on both of these claims.Id. at *1.
The district court's order thereafter provides an analysis of Jordan's ERISA claim; an ultimate determination that CBA was legally justified in denying Jordan a continuation of long-term disability benefits; and, accordingly, its decision to dismiss that particular claim. Id. at *1-*2.
Next, the district court's order provides in relevant part:
III. Breach of ContractId. at *2.
EKPC argues that it has not failed to provide benefits in contradiction of the settlement agreement and seeks summary judgment on this claim. . . .
. . . .
The settlement agreement provides that "the employee retains his rights under group health, life insurance, and retirement plans as to any prospective benefits to which he is entitled." EKPC claims that Jordan's right to benefits was conditioned on his continuing eligibility for those benefits, and that Jordan became ineligible when CBA terminated his long-term disability benefits. This claim is properly supported by affidavit. In response, Jordan offers no argument or contradictory evidence suggesting a disputed issue of material fact. Therefore, EKPC is entitled to summary judgment. . . .
In 2007, the Court of Appeals for the Sixth Federal Circuit affirmed the district court's decision.
Then, in 2012, Jordan filed the same breach of contract claim he had previously litigated in the federal district court. As before, he asserted it against EKPC. This time, however, he filed it in Clark Circuit Court, and he added ASC as EKPC's co-defendant. Boiled down to its essentials, his complaint alleged that he was now ready, willing, and able to argue and present contradictory evidence suggesting that his right to benefits under Numerical Paragraph 1.7 of his settlement agreement with EKPC was not conditioned on his continuing eligibility for ERISA benefits; and, that his settlement agreement had been breached.
Following a period of motion practice, the circuit court determined that EKPC was entitled to judgment on the basis of res judicata; ASC was entitled to judgment on the basis of collateral estoppel; and, in conformity with those determinations, the circuit court dismissed Jordan's claims against EKPC and ASC on the basis of Kentucky Rules of Procedure (CR) 12.02(f). This appeal followed.
STANDARD OF REVIEW
The standard of review of a dismissal of a complaint pursuant to CR 12.02(f) for failure to state a claim is as follows:
The court should not grant the motion unless it appears the pleading party would not be entitled to relief under any set of facts which could be proved in support of his claim. In making this decision, the circuit court is not required to make any factual determination; rather, the question is purely a matter of law. Stated another way,
the court must ask if the facts alleged in the complaint can be proved, would the plaintiff be entitled to relief?James v. Wilson, 95 S.W.3d 875, 883-84 (Ky. App. 2002) (internal quotation and footnote omitted).
ANALYSIS
For a variety of reasons, Jordan urges that the circuit court should have disregarded the district court's legal conclusion that his right to continued participation in EKPC's group health, life, and retirement benefits plans, as described in Numerical Paragraph 1.7 of the workers' compensation settlement, "was conditioned on his continuing eligibility for those benefits, and that [he] became ineligible when CBA terminated his long-term disability benefits." First, he argues that only ASC and himself, and not EKPC, were "signatories" to the workers' compensation settlement agreement. In his view, if EKPC did not sign the workers' compensation settlement agreement: (1) EKPC was not a party to it; (2) EKPC therefore had no obligation to perform any part of it; and, (3) without ASC—the only party in Jordan's opinion (besides himself) legally bound by the workers' compensation settlement agreement—the district court had no jurisdiction to interpret or adjudicate any issue arising under the workers' compensation settlement agreement.
To apparently underscore this argument, Jordan asserts in his pre-hearing statement that he incorrectly added EKPC as a party-defendant to these proceedings. He also offers no contention that the circuit court's decision to dismiss his claims against EKPC was in any way erroneous; and, in doing so, has left this Court with no option other than to affirm the circuit court's judgment as it relates to EKPC. See, e.g., Osborne v. Payne, 31 S.W.3d 911, 916 (Ky. 2000) ("Any part of a judgment appealed from that is not briefed is affirmed as being confessed.").
However, a procedural difficulty with Jordan's argument is that it conflicts with paragraph "7" of his amended complaint, which affirmatively alleges "That both East Kentucky and ASC, as signatories to the Settlement, agreed to abide by and perform the terms of such Settlement, including but not limited to Numerical Paragraph 1.7 of the Settlement[.]" (Emphasis added). It also appears that Jordan inappropriately raised this contention regarding EKPC's purported non-signatory status for the first time before the circuit court in a post-judgment CR 59.05 motion. See Hopkins v. Ratliff, 957 S.W.2d 300, 301 (Ky. App. 1997) ("A party cannot invoke CR 59.05 to raise arguments and introduce evidence that could and should have been presented during the proceedings before the entry of the judgment.").
And, a more substantive problem is that the record only supports that EKPC was a party to and signatory of Jordan's workers' compensation settlement agreement; and that EKPC and ASC both agreed to abide by and perform what was specified in Numerical Paragraph 1.7. To explain, Numerical Paragraph 1.7 originates from a document entitled "settlement agreement." The "settlement agreement" document clearly indicates that EKPC was a party to and bound by the settlement it contemplates. And, the settlement agreement document recites that the promise set forth in Numerical Paragraph 1.7 represents an agreement of the "parties," not simply an agreement between Jordan and ASC. To be sure, EKPC did not sign this "settlement agreement" document; it was only signed by Jordan and ASC. But, EKPC adopted it in writing. Specifically, EKPC executed the Form 110-I "agreement as to compensation and order approving settlement" entered by the Administrative Law Judge (ALJ) in Jordan's workers' compensation proceedings on August 17, 2004, which specifically incorporated the "settlement agreement" document in its entirety. It provided:
In relevant part, the "settlement agreement" document provides:
This Settlement Agreement ("Settlement Agreement") is made and entered into on this 6 day of August, 2004, by and between:(In Numerical Paragraph 1.7, the font was deliberately changed by the parties.)
"Employee:" MARK JORDAN
"Employor:" EAST KENTUCKY POWER CO-OP; Self-Insured "Insurer:" ASC as Third-Party Administrator
. . .
AGREEMENT
The parties agree as follows:1.0 FINAL DISCHARGE
In consideration of the payments set forth in Section 2 and in consideration of the agreements to pay medical expenses as provided herein, Employee hereby completely and forever discharges Employer and Insurer from any and all past, present or future claims, demands, obligations, actions or causes of action, including wrongful death claims and all claims or rights for damages, costs, loss of services, expenses and compensation of any nature whatsoever (whether based on a tort, contract, workers' compensation law or other theory of recovery) which the Employee now has (or may, in any way, grow out of) the accident or injury complained of or which is the subject of the Employee's claim, including, without limitation, any and all known or unknown claims for bodily injury and/or personal injuries to the Employee, or any future wrongful death claim of Employee's representatives or heirs, which have resulted from the Employee's employment with Employer (excepting those rights specifically protected by the statute).
1.1 This discharge shall also apply to Employer's and Insurer's past, present and future officers, directors, stockholders, attorneys, agents, servants, representatives, employees, subsidiaries, affiliates, partners, predecessors and successors in interest, and to assigns and all other persons, firms or corporations with whom any of the former have been, are now, or may hereafter be affiliated.
1.2 This discharge, on the part of the Employee, shall be a fully binding and complete settlement among the Employee, the Employer and the Insurer and their heirs, assigns and successors.
1.3 The Employee acknowledges and agrees that the agreement set forth above is a final discharge.
1.4 Employee expressly assumes the risk of any and all claims for damages which exist as of this date, but which are not known or suspected to exist (whether through ignorance, oversight, error, negligence or otherwise), and which, if known, would materially affect the decision to enter into this Settlement Agreement and hereby waives any and all such rights.
1.5 Employee further agrees that acceptance of the sums specified herein is a complete compromise of matters involving disputed issues of law and fact. The risk that the facts or law might be other than what they are believed to be is entirely borne by Employee.
1.6 It is understood and agreed to by the parties that this settlement is a compromise of a disputed claim and the payments are not to be construed as an admission of any future liability on the part of the Employer (by whom such liability is expressly denied.)
1.7 The employee retains his rights under group health, life insurance, and retirement plans as to any prospective benefits to which he is entitled.
1) The terms of settlement are contractually set out on the attached settlement agreement as to income benefits payable for temporary total or permanent partial or total, or death benefits. The attached settlement agreement is incorporated by this reference into this Form 110-I as if copied herein in full, and affirmed and adopted by the parties.
Next, Jordan states that it is "of the utmost importance that the Court keep in mind that ASC was not a party in the federal case."
We disagree. While ASC may have been considered a necessary party to the district court proceedings under Federal Rules of Civil Procedure (Fed. R. Civ. P) 19.01, ASC's absence did not deprive the district court of jurisdiction or otherwise prevent it from entering a valid judgment between Jordan and EKPC. See School Dist. of City of Pontiac v. Secretary of U.S. Dept. of Educ., 584 F.3d 253, 307 (6th Cir. 2009) ("Even if the court is mistaken in its decision to proceed in the absence of an interested person, it does not by that token deprive itself of the power to adjudicate as between the parties already before it through proper service of process." (Quoting Fed. R. Civ. P. 19 advisory committee's notes (1966))). Furthermore, the circuit court dismissed Jordan's action against ASC on the basis of collateral estoppel—a defense that does not require the one asserting it to have been a party to a previous action, provided the elements of the defense are met. See Board of Education of Covington v. Gray, 806 S.W.2d 400, 402 (Ky. App. 1991).
Kentucky law is to the same effect. See Skinner v. Morrow, 318 S.W.2d 419, 423 (Ky. 1958).
This, in turn, leads to Jordan's next argument. Jordan asserts that the circuit court erred in dismissing his action against ASC on the basis of collateral estoppel because, as he contends, the elements of collateral estoppel were not met. Those elements are: "(1) identity of issues; (2) a final decision or judgment on the merits; (3) a necessary issue with the estopped party given a full and fair opportunity to litigate; [and] (4) a prior losing litigant." Moore v. Commonwealth, 954 S.W.2d 317, 319 (Ky. 1997).
Again, we disagree. As to the first, third, and fourth elements, the necessary issue regarding Jordan's breach of contract claim against EKPC—in which Jordan was the losing litigant—was one of legal interpretation: Was Jordan's right to any of the benefits implicated in Numerical Paragraph 1.7, supra, conditioned upon his continuing eligibility for the long-term disability benefits that were governed by ERISA and administered by CBA? The district court answered this in the affirmative; found that CBA's termination of Jordan's long-term disability benefits rendered Jordan ineligible for continued participation in EKPC's group health, life, and retirement benefits plans; and, accordingly held that EKPC had not breached Numerical Paragraph 1.7 of its contract with Jordan by thereafter failing to provide him with continued participation in its group health, life, and retirement benefits plans. Here, Jordan has asserted exactly the same breach of contract claim against ASC; has raised exactly the same necessary issue described above, which he previously had a full and fair opportunity to litigate; and, there is nothing of record supporting that ASC's obligations to Jordan under Numerical Paragraph 1.7 were in any way different from EKPC's obligations to Jordan under that provision.
As noted, the district court stated that Jordan offered "no argument or contradictory evidence suggesting a disputed issue of material fact" regarding his breach of contract claim. This does not mean, as Jordan appears to insinuate in his brief, that his breach of contract claim was not "fully litigated" for purposes of res judicata or collateral estoppel. See Silcox v. United Trucking Service, Inc., 687 F.2d 848, 852 (6th Cir. 1982) (explaining that a party opposing res judicata "cannot now complain that the matter was not fully litigated because he asserts that he did not take full advantage of his opportunity to litigate it.").
The second element of collateral estoppel is similarly met in this case (i.e., there was a final decision or judgment on the merits), but this point warrants a greater measure of discussion. Jordan does not contest that summary judgments generally qualify as "judgments on the merits" for purposes of collateral estoppel. See Stemler v. Florence, 350 F.3d 578, 587 (6th Cir. 2003) (explaining a "summary judgment order is a decision on the merits" for purposes of issue preclusion under Kentucky law). Instead, the specifics of Jordan's argument begin with 28 United States Code (U.S.C.) § 1367(a), which provides:
Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.
Jordan asserts that his breach of contract claim against EKPC was not "so related to" his ERISA claim against CBA (the claim over which the district court had original jurisdiction) that it formed "part of the same case or controversy[.]" Thus, he reasons that the district court lacked supplemental jurisdiction to adjudicate the breach of contract claim he had asserted against EKPC in the prior federal proceedings, and, as such, that the district court's adjudication of that claim should be considered void and subject to collateral attack.
As a sidenote, we are not directed to and have found nothing indicating that the district court conducted an analysis or made explicit findings regarding its supplemental jurisdiction under 28 U.S.C. § 1367. This is another of Jordan's points of contention, but this oversight (if it can be considered an oversight) appears to be largely due to the fact that Jordan's complaint before the district court affirmatively alleged—and EKPC did not contest—that supplemental jurisdiction did exist over his breach of contract claim. In any event, even in a situation in which the issue of subject matter jurisdiction has not been raised and determined in a prior proceeding, the Restatement (Second) of Judgments § 12 (1982), comment d,
When this has occurred, two different approaches can be taken to the situation. One is to say that the issue of subject matter jurisdiction remains wholly open and the judgment therefore is indefinitely subject to attack on that ground. This was the traditional view, still adhered to at least nominally in some decisions and expressed in the proposition that subject matter jurisdiction may not be "conferred" by consent, waiver, or estoppel. The other approach is to say that the issue of subject matter jurisdiction, like questions of notice, territorial jurisdiction, and those concerning the merits, is implicitly resolved by the act of entering judgment. On this view, the entry of judgment should be taken as equivalent to actual litigation of the issue of subject matter jurisdiction and hence result in its becoming res judicata. . . .
We believe the latter of the two views noted by the Restatement commentary presents the more workable and logical solution, and is more consistent with binding precedent.
See, e.g., Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, n. 9, 102 S.Ct. 2099, 2104, 72 L.Ed.2d 492 (1982) ("A party that has had an opportunity to litigate the question of subject-matter jurisdiction may not ... reopen that question in a collateral attack upon an adverse judgment" (emphasis added)); Chicot County Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 375, 60 S.Ct. 317, 319, 84 L.Ed. 329 (1940) ("[T]hese bondholders, having the opportunity to raise the question of invalidity, were not the less bound by the decree because they failed to raise it" (emphasis added)).
With that said, the district court's implicit determination of its own subject matter jurisdiction is, as indicated, entitled to a form of res judicata. As the United States Supreme Court explained in Chicot County Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 376, 60 S.Ct. 317, 84 L.Ed. 329 (1940):
The lower federal courts are all courts of limited jurisdiction, that is, with only the jurisdiction which Congress has prescribed. But none the less they are courts with authority, when parties are brought before them in accordance with the requirements of due process, to determine whether or not they have jurisdiction to entertain the cause and for this purpose to construe and apply the statute under which they are asked to act. Their determinations of such questions, while open to direct review, may not be assailed collaterally.
The exceptions to this form of res judicata are also limited. The United States Supreme Court has explained:
The rule is not absolute, and we have recognized rare situations in which subject-matter jurisdiction is subject to collateral attack. See, e.g., United States v. United States Fidelity & Guaranty Co., 309 U.S. 506, 514, 60 S.Ct. 653, 84 L.Ed. 894 (1940) (a collateral attack on subject-matter jurisdiction is permissible "where the issue is the waiver of [sovereign] immunity"); Kalb v. Feuerstein, 308 U.S. 433, 439-440, 444, 60 S.Ct. 343, 84 L.Ed. 370 (1940) (where debtor's petition for relief was pending in bankruptcy court and federal statute affirmatively divested other courts of jurisdiction to continue foreclosure proceedings, state-court foreclosure judgment was subject to collateral attack). More broadly, the Restatement (Second) of Judgments § 12, p. 115 (1980), describes three exceptional circumstances in
which a collateral attack on subject-matter jurisdiction is permitted:Travelers Indem. Co. v. Bailey, 557 U.S. 137, 153, at Note 6, 129 S.Ct. 2195, 2206, 174 L.Ed.2d 99 (2009).
"(1) The subject matter of the action was so plainly beyond the court's jurisdiction that its entertaining the action was a manifest abuse of authority; or
"(2) Allowing the judgment to stand would substantially infringe the authority of another tribunal or agency of government; or
"(3) The judgment was rendered by a court lacking capability to make an adequately informed determination of a question concerning its own jurisdiction and as a matter of procedural fairness the party seeking to avoid the judgment should have opportunity belatedly to attack the court's subject matter jurisdiction."
As a caveat, the Supreme Court added its statement in Baily, noted above, should not be taken to mean that it was adopting the exceptions listed in the Restatement. Id.
With this in mind, even if the district court had been incorrect—and we disagree that it was—in its assessment of whether Jordan's breach of contract claim against EKPC was "so related to" his ERISA claim against CBA that it formed "part of the same case or controversy," we do not view such an error as something that would rise to the level of triggering any of the arguable exceptions, noted above, to the res judicata effect of the district court's decision.
Jordan does not argue that the district court's decision is subject to collateral attack for any reason relating to the fact that Numerical Paragraph 1.7 was ostensibly incorporated into a workers' compensation agreement, but this point nevertheless warrants discussion because, to an extent, it implicates the second of the three exceptions to res judicata discussed in the Restatement, supra. Kentucky Revised Statutes (KRS) 342.305 specifies the sole forum for enforcing an award or agreement relating to workers' compensation is a Kentucky circuit court. See also Pierce v. Russell Sportswear Corp., 586 S.W.2d 301 (Ky. App. 1979). With that said, if Numerical Paragraph 1.7 would have been enforceable at all, it would not have been enforceable as any part of a workers' compensation settlement agreement. Form 110-I and similar forms promulgated by the Department of Workers' Claims were created to facilitate the settlement of claims in accordance with KRS 342.265, which states:
If the employee and employer and special fund or any of them reach an agreement conforming to the provisions of this chapter in regard to compensation , a memorandum of the agreement signed by the parties or their representatives shall be filed with the executive director, and, if approved by an administrative law judge, shall be enforceable[.]KRS 342.265(1) (emphasis added). Under the statute, a settlement utilizing Form 110-I embraces only "compensation" as that term is defined in Chapter 342. Id. "Compensation" is defined in KRS 342.0011(14) as "all payments made under the provisions of this chapter representing the sum of income benefits and medical and related benefits[.]" Thus, "Compensation" does not involve the private retirement and insurance benefits that Numerical Paragraph 1.7 implicated. And, because Numerical Paragraph 1.7 therefore included matters extraneous to the ALJ's jurisdiction, the ALJ lacked the authority to approve it and could not have made that provision enforceable per KRS 342.305 by approval. See Custard Ins. Adjusters, Inc. v. Aldridge, 57 S.W.3d 284, 288-89 (Ky. 2001).
In short, the circuit court properly dismissed Jordan's breach of contract claim against ASC because all of the elements of collateral estoppel were satisfied.
Moving on, Jordan's second argument is that the circuit court's decision represents an abdication of its decision-making responsibilities. In support, he notes that the circuit court solicited proposed judgments from the parties prior to announcing its decision in this matter and subsequently adopted, verbatim, the findings of fact and conclusions of law included within the proposed judgment tendered by ASC.
However, "[i]t is not error for the trial court to adopt findings of fact which were merely drafted by someone else." Prater v. Cabinet for Human Resources, Commonwealth of Ky., 954 S.W.2d 954, 956 (Ky. 1997) (citation omitted). Moreover, CR 52.01 specifies that findings of fact and conclusions of law are unnecessary on decisions of motions under Rule 12—which is precisely the manner of decision the circuit court made and is under review in this case. Stated differently, the circuit court was not required to provide any findings of fact or conclusions of law, and, to the extent that it did, its findings of fact or conclusions of law are not entitled to any deference from this Court. Accordingly, this is not a basis for reversal.
CONCLUSION
In light of the foregoing, we AFFIRM.
ALL CONCUR. BRIEF FOR APPELLANT: William C. Jacobs
Lexington, Kentucky
BRIEF FOR APPELLEE, ASC: Barry D. Hunter
Kathryn B. Kendrick
Lexington, Kentucky
BRIEF FOR APPELLEE, EKPC: George B. Hocker
John O. Hollon
Lexington, Kentucky