RENDERED: MARCH 20, 2026; 10:00 A.M. TO BE PUBLISHED
Commonwealth of Kentucky Court of Appeals NO. 2024-CA-0514-MR
FIDELITY BROKERAGE SERVICES LLC APPELLANT
APPEAL FROM PIKE CIRCUIT COURT v. HONORABLE HOWARD KEITH HALL, JUDGE ACTION NO. 17-CI-01194
ESTATE OF NANCY BOLTON APPELLEE
OPINION AFFIRMING
** ** ** ** **
BEFORE: CALDWELL, CETRULO, AND ECKERLE, JUDGES.
CALDWELL, JUDGE: Appellant Fidelity Brokerage Services LLC (“Fidelity”)
appeals the order of the trial court vacating its prior order to compel arbitration and
finding it lacked subject matter jurisdiction to enforce the agreement. BACKGROUND
This appeal arises from disputes regarding a brokerage account that
Nancy Bolton (“Bolton”) first opened with Fidelity in 2009. To open the account,
Bolton signed and submitted a preprinted form account application (“Application”)
that Fidelity had supplied. The Application contained the following language near
the space where Bolton signed:
This account is governed by a predispute arbitration clause which is located on the last page of the Customer Agreement. I acknowledge receipt of the predispute arbitration clause.
Record on Appeal (“R.”) at 18.
On the previous page of the Application, in a section titled
“Signature,” the following language appears:
I acknowledge that I have been furnished with a copy of the Fidelity Account Customer Agreement and that I have read, understood, and agree to be bound by its terms and conditions as they are currently in effect and as they may be amended in the future.
R. at 17 (underlined emphasis in original).
Just below, the same section also contains the statement:
I understand that the Customer Agreement and its enforcement shall be governed by the laws of the Commonwealth of Massachusetts . . . [and] this Agreement shall be binding upon my heirs, executors, administrators, successors, and assigns.
Id. (boldface emphasis in original).
-2- In 2014, Bolton passed away. Sometime during 2013, she took steps
to add her son, James Hamilton (“Hamilton”), whom she had previously listed as
beneficiary, as a tenant in common on the account. Whether Bolton completed the
necessary steps to do so before she passed away is a matter that appears in dispute
by the parties.
The Pike District Court appointed Hamilton as Executor of Bolton’s
Estate in 2014. In October of 2017, the Estate filed suit against Fidelity in Pike
Circuit Court. There, the Estate alleged it had sustained damages after Fidelity had
wrongfully denied it access to the account. In July of 2018, without answering the
complaint, Fidelity filed a Motion to Dismiss or in the Alternative to Stay and
Compel Arbitration, along with a memorandum in support of its motion.
Along with its motion and memorandum, Fidelity submitted exhibits
which included the Application, a nine-page document titled Fidelity Account
Customer Agreement (“Customer Agreement”) to the trial court. On the initial
page, the following language appears:
Disputes between you and Fidelity are settled by arbitration.
As with most brokerage accounts, the parties agree to waive their rights to sue in court, and agree to abide by the findings of an arbitration panel established in accordance with an industry self-regulatory organization.
-3- R. at 27 (boldface emphasis in original).
On the seventh page of the Customer Agreement, there is the
following language:
Governing Laws and Policies
This agreement and its enforcement are governed by the laws of the Commonwealth of Massachusetts, except with respect to its conflicts-of-law provisions.
R. at 33 (boldface emphasis in original).
The ninth and final page of the Customer Agreement contains the
Resolving Disputes—Arbitration
This agreement contains a pre-dispute arbitration clause. Under this clause, which you agree to when you sign your account application, you and Fidelity agree as follows:
...
The rules of some arbitration forums may impose time limits for bringing a claim in arbitration. In some cases, a claim that is ineligible for arbitration may be brought in court.
All controversies that may arise between you and us concerning any subject matter, issue or circumstance whatsoever (including, but not limited to, controversies concerning any account, order or transaction, or the continuation, performance,
-4- interpretation or breach of this or any other agreement between you and us, whether entered into or arising before, on or after the date this account is opened) shall be determined by arbitration in accordance with the rules then prevailing of the Financial Industry Regulatory Authority (FINRA) or any United States securities self-regulatory organization or United States securities exchange of which the person, entity or entities against whom the claim is made is a member, as you may designate. . . . The designation of the rules of a self-regulatory organization or securities exchange is not integral to the underlying agreement to arbitrate.
R. at 35 (boldface emphasis in original).
Fidelity’s motion requested the trial court dismiss the Estate’s claims
“[p]ursuant to Rules 12.02(a), 12.02(c), and 12.02(f) of the Kentucky Rules of
Civil Procedure” or, in the alternative, to stay the litigation and compel arbitration
in accordance with the Federal Arbitration Act (“FAA”) 9 U.S.C.1 §§ 1 et seq. In
Fidelity’s supporting memorandum, it primarily argued the arbitration provision at
issue was valid and enforceable under the FAA and that Kentucky courts were
obligated to enforce such an agreement.
The Estate filed a response in opposition to Fidelity’s motion,
contending that the validity of the arbitration agreement was in dispute and that
Fidelity had not met its burden in establishing its validity. The Estate questioned
1 United States Code.
-5- whether the signature on the Application was in fact that of Bolton and whether
Fidelity placed the signature upon the Application.
Thereafter, Fidelity submitted a reply memorandum in support of its
motion. On November 12, 2018, the Estate filed a responsive memorandum and
argued that the trial court lacked jurisdiction to compel arbitration because the
arbitration agreement did not state where arbitration was to occur and thus did not
satisfy the requirements of KRS2 417.200. The Estate argued that any award from
arbitration could prove unenforceable as a result of the lack of jurisdiction. In the
alternative, the Estate argued that genuine issues of material fact existed as to
whether any agreement had been made.
For reasons that are not clear from the record, the trial court did not
rule upon the motion. In late 2019, a CR3 77.02(2) notice issued requiring the
parties to show cause why the case should not be dismissed for lack of prosecution.
Fidelity submitted a memorandum requesting the trial court dismiss the matter and
also renewed its motion to compel arbitration. The Estate argued otherwise; the
matter remained on the active docket. Another CR 77.02(2) notice issued in March
of 2021. The parties again submitted pleadings which referenced the pending
motion to compel arbitration. The parties argued before the trial court at a hearing
2 Kentucky Revised Statutes. 3 Kentucky Rules of Civil Procedure.
-6- in July of 2021. Thereafter, the trial court ordered that the parties could
supplement the file within ten days and rebut any supplemental filing within the
following five days; otherwise, a ruling would be made in twenty days. Both
parties filed supplemental memorandums. However, no order of the trial court
ruling on the motion to compel arbitration followed. In August of 2022, a third CR
77.02(2) notice issued. Fidelity again renewed its motion to compel arbitration. A
show cause hearing on the notice occurred in September of 2022.
The trial court granted Fidelity’s motion in an order that was entered
on June 26, 2023. There, the trial court ordered the parties’ dispute be determined
“under the terms and conditions of the parties’ Arbitration Agreement” and placed
the case in abeyance pending the outcome of arbitration. R. at 190.
Thereafter, the Estate made a motion to alter, amend, or vacate the
order placing the case in abeyance. The parties argued before the trial court at a
hearing on August 11, 2023.
In March of 2024, two conflicting orders issued regarding the Estate’s
motion on the same date. One order (“the Order”), R. at 230, indicated the trial
court had granted the motion. In this Order, the trial court found that the Estate
had presented a question as to the existence of a contract that was for a jury to
answer. However, the Order also concluded that, “even if a jury [were] to
determine a valid arbitration agreement exist[s] as urged by [Fidelity], it would be
-7- unenforceable as Kentucky Courts do not have subject matter jurisdiction under
Ky. Rev. Stat. Ann. 417.200 to enforce same.” Order, p. 2. The other order from
March 2024 denied the motion to alter, amend, or vacate.
On April 16, 2024, the trial court ruled that the order which had
denied the Estate’s motion to alter, amend, or vacate was set aside, as it had been
inadvertently signed and entered. The trial court further ruled the Order which
granted the Estate’s motion to alter, amend, or vacate would stand. Accordingly,
the trial court effectively denied the motion to compel arbitration. This appeal
follows.
ANALYSIS
Fidelity argues that the trial court erred by refusing to enforce the
arbitration agreement. Fidelity maintains the agreement was valid and enforceable
and that the Estate failed to meet its burden of establishing otherwise. Fidelity
contends that the trial court abdicated its responsibility to construe the validity of
the agreement when it accepted an erroneous argument by the Estate that a
question as to the existence of a contract was a matter for jury determination.
Furthermore, Fidelity argues, the trial court erroneously determined that, pursuant
to Ally Cat, LLC v. Chauvin, 274 S.W.3d 451 (Ky. 2009), it lacked jurisdiction to
compel arbitration under the terms of the tendered agreement.
-8- STANDARD OF REVIEW
Fidelity appeals the trial court’s Order of March 27, 2024, which
concluded Fidelity’s tendered arbitration agreement was unenforceable. In
discussing the standard of review of an order denying a motion to compel
arbitration, this Court has stated:
Ordinarily, such orders [which do not completely resolve the parties’ rights in an action or contain a CR 54.02 recitation] are interlocutory and are not immediately appealable. However, an order denying a motion to compel arbitration is immediately appealable.
Golden Gate Nat’l Senior Care, LLC v. Rucker, 588 S.W.3d 868, 870 (Ky. App.
2019) (quoting Genesis Healthcare, LLC v. Stevens, 544 S.W.3d 645, 648–49 (Ky.
App. 2017)). See also CR 54.01.
When reviewing an order that has denied a motion to compel
arbitration, we review the trial court’s legal conclusions de novo “to determine if
the law was properly applied to the facts.” Padgett v. Steinbrecher, 355 S.W.3d
457, 459 (Ky. App. 2011). However, factual findings of the trial court “are
reviewed under the clearly erroneous standard and are deemed conclusive if they
are supported by substantial evidence.” Id.
Disputes concerning arbitration agreements may implicate either, or
both, the Kentucky Uniform Arbitration Act (“KUAA”), KRS 417.045 et seq., and
the FAA. Jackson v. Legacy Health Servs., Inc., 640 S.W.3d 728, 732 (Ky. 2022).
-9- The KUAA and the FAA govern the enforcement and effect of an arbitration
agreement. Masonic Homes of Kentucky, Inc. v. Est. of Leist By & Through Leist,
699 S.W.3d 868, 871 (Ky. App. 2024). “Both Acts evince a legislative policy
favoring arbitration agreements, or at least shielding them from disfavor.” Id.
(quoting Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581, 588 (Ky. 2012)).
Under either the KUAA or the FAA, a party seeking to compel
arbitration has the initial burden of establishing the existence of a valid agreement
to arbitrate. Ping, 376 S.W.3d at 590 (citing First Options of Chicago, Inc. v.
Kaplan, 514 U.S. 938, 115 S. Ct. 1920, 131 L. Ed. 2d 985 (1995); Louisville
Peterbilt, Inc. v. Cox, 132 S.W.3d 850, 857 (Ky. 2004)).
“[T]he existence of a binding agreement to arbitrate is necessarily a
threshold consideration for a trial court faced with a motion to compel arbitration.”
Jackson, 640 S.W.3d at 732. State law rules of contract formation will determine
whether the movant has met its burden to establish the existence of a valid
agreement. Ping, 376 S.W.3d at 590; see also Jackson, 640 S.W.3d at 732
(“Disposition of” the determination of whether a binding agreement to arbitrate
exists “implicates state law contract principles.”).
After the movant meets the burden and presents prima facie evidence
of a valid arbitration agreement, “the heavy burden of avoiding the agreement
-10- shifts to the other party.” Green v. Frazier, 655 S.W.3d 340, 345 (Ky. 2022)
(citing Louisville Peterbilt, 132 S.W.3d at 857).
The Scope Of Review Is Limited To The Trial Court’s Dispositive Determination
In its Appellant brief, Fidelity contends that the Estate has already
received the relief it seeks in its initiating complaint. We decline to address any
substantive issues as to the underlying claim. The scope of interlocutory appellate
review should be limited to the issue presented in the interlocutory appeal itself
and should not extend to substantive issues. Baker v. Fields, 543 S.W.3d 575, 578
(Ky. 2018) (citing Commonwealth v. Samaritan Alliance, 439 S.W.3d 757, 760
(Ky. App. 2014)). “Otherwise, interlocutory appeals would be used as vehicles for
bypassing the structured appellate process.” Baker, 543 S.W.3d at 578.
Furthermore, we limit our review to the dispositive issue of whether
the trial court properly determined it lacked subject matter jurisdiction to compel
arbitration. The parties devote some arguments to commentary in the Order
regarding jury determination as to the existence of a contract. We decline to
address this as the finding is not critical to the result reached by the Order. In fact,
the Order determines a jury’s determination, were any questions as to contract
formation here subject to such review, would make no difference to the question of
the agreement’s enforceability.
-11- Nonetheless, we are compelled to point out here that this case has now
been pending in our Court system for more than eight years. The Estate’s
arguments as to disputed facts concerning arbitrability remain undeveloped. It is
difficult to discern specific factual allegations in dispute that the Estate asserts
would be determinative of contract formation and/or arbitrability. On two
occasions the case came before the trial court following notices issued pursuant to
CR 77.02(2). On both occasions, the Estate filed a response. In the second, the
Estate included an argument that it had not had any opportunity to conduct
discovery.
Where an answer is provided following a CR 77.02(2) notice, a trial
court has a wide degree of discretion in deciding whether a party has shown good
cause to allow the action to remain on the court’s docket. Wildcat Prop. Mgmt.,
LLC v. Reuss, 302 S.W.3d 89, 93 (Ky. App. 2009). We discern no abuse of the
trial court’s wide discretion in allowing the action to remain active, particularly
given there was a pending motion before the trial court which ultimately turned
upon interpretation of law unrelated to any factual dispute alleged by the Estate.
Furthermore, Fidelity does not pursue appellate relief on this issue and alleges no
abuse of discretion by the trial court in allowing the matter to remain active.
Nonetheless, our review of the record revealed no noteworthy effort
by the Estate to engage in discovery on the issue of the disputed facts it alleges.
-12- The Estate was not without recourse. A trial court may appropriately order limited
discovery on the issue of arbitrability while a motion to compel arbitration is
pending. Stanton Health Facilities, LP v. Fletcher, 454 S.W.3d 312, 315 (Ky.
App. 2015). However, nowhere does the record indicate that the Estate ever
pursued such an order.
While, pursuant to the trial court’s initial briefing schedule, Fidelity’s
motion to compel arbitration was deemed submitted relatively early in the case
history, the Estate continued to argue that multiple factual matters relevant to
formation were in dispute and remained undetermined. Nonetheless, when a party
such as Fidelity moves to compel arbitration, the circuit court must “decide under
ordinary contract law whether the asserted arbitration agreement actually exist[ed]
between the parties and, if so, whether it appli[ed] to the claim raised in the
complaint.” Fletcher, 454 S.W.3d at 315 (citing N. Fork Collieries, LLC v. Hall,
322 S.W.3d 98, 102 (Ky. 2010)). Going forward, we encourage the trial court to
utilize the wide latitude Kentucky courts possess in the management of its docket
for a more expeditious resolution of a motion to compel arbitration. See Love v.
Walker, 423 S.W.3d 751, 758 (Ky. 2014). The setting and enforcement of
deadlines for submission by the parties in any future disputed motion to compel
arbitration, including an order of limited discovery where the trial court determines
it is appropriate, would likely avoid excessive delays in the determination of
-13- whether the parties entered into a binding agreement to arbitrate. See Fletcher, 454
S.W.3d at 315.
The Trial Court Correctly Concluded That It Lacked Subject Matter Jurisdiction to Enforce the Arbitration Agreement
The Order concludes that the trial court is without jurisdiction to
enforce the arbitration agreement because of the agreement’s failure to provide that
arbitration would occur in Kentucky:
Kentucky Courts only have subject matter jurisdiction to enforce an agreement to arbitrate if the agreement provides for arbitration in this state (Kentucky). Further, the agreement must unequivocally provide for arbitration in Kentucky. Padgett v. Steinbrecher, 355 S.W.3d 457, 458 (Ky. App. 2011). An agreement to arbitrate that fails to include the required provision for arbitration within this state (Kentucky) is unenforceable, absent that provision. Id. and Ally Cat, LLC v. Chauvin, 274 S.W.3d 451, 452 (Ky. 2009).
Here, Fidelity presents a Customer Agreement and the Customer Application, but neither document specifies that arbitration shall occur in Kentucky, which is required by Padgett and Ally Cat. Therefore, even if a jury were to determine a valid arbitration agreement exist[ed] as urged by Defendant, it would be unenforceable as Kentucky Courts do not have subject matter jurisdiction under Ky. Rev. Stat. Ann. 417.200 to enforce same.
Order, p. 1–2.
Fidelity argues the trial court’s determination here that it lacked
jurisdiction to compel arbitration was in error, asserting that “Ally Cat . . . does not
apply when, as here, a party seeks to compel arbitration under the FAA.” This
-14- argument conflates a party seeking to compel arbitration under the FAA with a
court’s determination that an arbitration agreement is governed by the FAA.
KRS 417.060 provides that where a party opposing an application
to arbitrate “denies the existence of the agreement to arbitrate, the court shall
proceed summarily to the determination of the issue so raised.” However, Fidelity
at no time made any formal application under KRS 417.060 to compel
arbitration. Fidelity’s motion requested the trial court dismiss the Estate’s claims
“[p]ursuant to Rules 12.02(a), 12.02(c), and 12.02(f) of the Kentucky Rules of
Civil Procedure[.]” Fidelity’s motion did request, in the alternative, that the trial
court stay the litigation and compel arbitration in accordance. However, in that
motion as well as thereafter, Fidelity appears to have consistently and intentionally
confined the procedural authority under which it sought a stay to § 3 and § 4 of the
FAA (9 U.S.C. §§ 3, 4).
We have recognized that 9 U.S.C. § 3 is enforceable in Kentucky state
courts. PSC Indus., Inc. v. Toyota Boshoku Am., Inc., 649 S.W.3d 288, 292 (Ky.
App. 2022) (citing Kodak Min. Co. v. Carrs Fork Corp., 669 S.W.2d 917, 919 (Ky.
1984); North Fork Collieries, LLC, 322 S.W.3d at 102 n.2). Where the FAA is
applicable, the federal statute requires that a trial court, “upon being satisfied that
the issue involved in such suit or proceeding is referable to arbitration under such
an agreement, shall . . . stay the trial of the action until such arbitration has been
-15- had[.]” 9 U.S.C. § 3. However, Fidelity tendered a document which indicated
“[t]his agreement and its enforcement are governed by the laws of the
Commonwealth of Massachusetts[.]”
In Ally Cat, the Kentucky Supreme Court held that, pursuant to KRS
417.200, the Commonwealth’s courts lack jurisdiction to enforce arbitration
agreements which fail to designate Kentucky as the site for arbitration. 274
S.W.3d at 455–56. Subsequently, however, in Ernst & Young, LLP v. Clark, our
Supreme Court examined arbitration agreements which “explicitly require[d] that
disputes be governed by the [FAA].” 323 S.W.3d 682, 687 (Ky. 2010)
(emphasis added). In a footnote, the Court clarified its prior holding, stating that,
“Ally Cat has no applicability to an arbitration agreement governed exclusively
by the Federal Arbitration Act.” Id. at 687 n.8 (emphasis added).
Shortly after our Supreme Court’s rendering of Ernst & Young, in an
unpublished opinion, this Court considered a trial court’s order denying arbitration
pursuant to Ally Cat and which also failed to specifically address the applicability
of the FAA.4 There, the trial court mentioned a Massachusetts choice-of-law
provision in the brokerage agreement.5 At that time, we determined that remand to
4 Fid. Brokerage Servs. v. Folk, No. 2009-CA-001725-MR, 2010 WL 4295827, at *2 (Ky. App. Oct. 29, 2010) (unpublished). 5 Id.
-16- the trial court for consideration of FAA was appropriate.6 Although the choice-of-
law provision in the arbitration agreement and the trial court’s conclusions of law
were similar to those in the present matter, that unpublished case does not provide
binding precedent. RAP7 41(A). Furthermore, in the interim following that
opinion, significant developments in our jurisprudence have occurred.
Following its rendering of Ernst & Young, our Supreme Court has
consistently held that Kentucky courts “need not consider Kentucky’s Uniform
Arbitration Act when the agreement[] explicitly require[s] that disputes be
governed by the Federal Arbitration Act.” MHC Kenworth-Knoxville/Nashville v.
M & H Trucking, LLC, 392 S.W.3d 903, 906 (Ky. 2013) (citing Ernst & Young,
323 S.W.3d at 687) (internal quotation marks omitted); see also JPMorgan Chase
Bank, N.A. v. Bluegrass Powerboats, 424 S.W.3d 902, 907 (Ky. 2014). M & H
Trucking, 392 S.W.3d at 906 (quoting Hathaway v. Eckerle, 336 S.W.3d 83, 87
(Ky. 2011) (holding that where an agreement “includes a ‘choice of law’ provision
selecting the Federal Arbitration Act as the law governing any dispute between the
parties . . . the Federal Arbitration Act governs the arbitration clause”)) (internal
quotation marks omitted).
6 Id. 7 Kentucky Rules of Appellate Procedure.
-17- However, where the applicability of the FAA is disputed, a different
analysis applies. In Frankfort Medical Investors, LLC v. Thomas By & Through
Thomas, this Court reviewed the denial of a motion to compel arbitration where the
agreement contained a choice-of-law provision specifying it would be “governed
by and interpreted in accordance with the laws of the State of Tennessee, including
the Tennessee Uniform Arbitration Act.” 577 S.W.3d 484, 487 (Ky. App. 2019)
(internal quotation marks omitted).
Fidelity’s brief argues that the matter “clearly evidences a transaction
in interstate commerce and is thus subject to the FAA.” Our Supreme Court has
found the FAA applies “to actions brought in the courts of this state where the
purpose of the action is to enforce voluntary arbitration agreements in contracts
evidencing transactions in interstate commerce.” Fite & Warmath Constr. Co. v.
MYS Corp., 559 S.W.2d 729, 734 (Ky. 1977). Fidelity’s motions sought
arbitration pursuant to the FAA and made no assertion that the KUAA was
applicable.
However, to the trial court as well as to this Court, Fidelity has
provided no explanation or argument as to the appropriate consideration of the
choice-of-law provisions within the documents it has tendered.
The facts here are similar to Frankfort Med. Invs., in that there is a
choice-of-law provision specifying the laws of another state. 577 S.W.3d at 487.
-18- Here, the Customer Agreement which contains the arbitration agreement specifies
“[t]his agreement and its enforcement are governed by the laws of the
Commonwealth of Massachusetts, except with respect to its conflicts-of-law
provisions.” There is a distinction to be noted from Frankfort Med. Invs.; in that
case, the agreement not only stated that Tennessee law applied but further specified
that the Tennessee Uniform Arbitration Act would be applicable. 577 S.W.3d at
487. In this case, there is a Massachusetts choice-of-law provision but no specific
statement which explicitly identifies the Massachusetts Arbitration Act (“MAA”)
as applicable. On the other hand, there is no mention of the FAA applying to the
agreement. And neither the Application nor Customer Agreement contains
language suggesting the parties intended to exclude arbitration issues from the
general Massachusetts choice-of-law provision.
There are other provisions to consider. One within the Customer
Agreement states that arbitration would occur: “in accordance with the rules then
prevailing of the Financial Industry Regulatory Authority (FINRA) or any United
States securities self-regulatory organization or United States securities exchange
of which the person, entity or entities against whom the claim is made is a member,
as you may designate.” However, the agreement also states that this “designation
of the rules of a self-regulatory organization or securities exchange is not integral
to the underlying agreement to arbitrate.”
-19- Our Supreme Court has stated that “choice of law provisions are
generally valid in arbitration clauses[.]” Hathaway, 336 S.W.3d at 87. However,
the sole question before this Court is whether arbitration should have been
compelled by the trial court. We examine the choice-of-law provisions in the
Application and Customer Agreement only because they are inconsistent with
Fidelity’s argument that the FAA governs that question. Certainly, the arbitration
agreement here cannot be said to “explicitly require that disputes be governed by
the [FAA].” Ernst & Young, 323 S.W.3d at 687 (emphasis added). Moreover, the
Customer Agreement containing the arbitration agreement specifies that “[t]his
agreement and its enforcement are governed by the laws of the Commonwealth of
Massachusetts[.]” R. at 33 (emphasis added). Accordingly, we cannot conclude
that the documents tendered by Fidelity reflect an agreement by the parties that
enforcement of the arbitration agreement would be governed exclusively by the
FAA. See Ernst & Young, 323 S.W.3d at 687 n.8 (“Ally Cat has no applicability to
an arbitration agreement governed exclusively by the Federal Arbitration Act.”)
(emphasis added).
The Supreme Court of the United States has stated that:
[I]n cases falling within a court’s jurisdiction, the [FAA] makes contracts to arbitrate “valid, irrevocable, and enforceable,” so long as their subject involves “commerce.” And this is so whether an agreement has a broad reach or goes just to one dispute, and whether enforcement be sought in state court or federal.
-20- Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 582, 128 S. Ct. 1396, 1402,
170 L. Ed. 2d 254 (2008) (emphasis added) (citations omitted).
Nonetheless, as the Supreme Court also recognized, parties “may
contemplate enforcement under state statutory or common law[.]” Hall St. Assocs.,
552 U.S. at 590, 128 S. Ct. at 1406. And while the United States Supreme Court
has “held that the FAA pre-empts state laws which require a judicial forum for the
resolution of claims which the contracting parties agreed to resolve by
arbitration[,]” it has also determined that “it does not follow that the FAA prevents
the enforcement of agreements to arbitrate under different rules than those set forth
in the Act itself.” Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior
Univ., 489 U.S. 468, 478–79, 109 S. Ct. 1248, 1255–56, 103 L. Ed. 2d 488 (1989)
Arbitration under the [FAA] is a matter of consent, not coercion, and parties are generally free to structure their arbitration agreements as they see fit. Just as they may limit by contract the issues which they will arbitrate, . . . so too may they specify by contract the rules under which that arbitration will be conducted.
Id. at 479, 109 S. Ct. at 1256 (citation omitted).
The Court further determined in Volt that:
Where . . . the parties have agreed to abide by state rules of arbitration, enforcing those rules according to the terms of the agreement is fully consistent with the goals of the FAA, even if the result is that arbitration is stayed
-21- where the Act would otherwise permit it to go forward. By permitting the courts to “rigorously enforce” such agreements according to their terms, . . . we give effect to the contractual rights and expectations of the parties, without doing violence to the policies behind by the FAA.
489 U.S. at 479, 109 S. Ct. at 1256 (citation omitted).
The Order here makes the determination that the arbitration agreement
tendered by Fidelity was unenforceable because neither the Customer Agreement
nor the Application specified that arbitration would occur in Kentucky. Relying on
Padgett and Ally Cat, the trial court determined that, as a Kentucky court, it lacked
subject matter jurisdiction to enforce any arbitration agreement, pursuant to KRS
417.200.
The Order does not explicitly conclude that the FAA is inapplicable as
to governing enforcement because of the parties’ contractual agreement that the
laws of Massachusetts would instead apply. However, we may affirm a trial court
for any reason supported by the record. Univ. Med. Ctr., Inc. v. Beglin, 375
S.W.3d 783, 799 (Ky. 2011); see also Emberton v. GMRI, Inc., 299 S.W.3d 565,
576 (Ky. 2009) (“[A]n appellate court may affirm a lower court’s decision on other
grounds as long as the lower court reached the correct result.”).
Fidelity argues that the Estate did not meet its heavy burden to
establish that the arbitration agreement was not enforceable, citing M & H
Trucking, 392 S.W.3d at 906. The M & H Trucking decision resulted from a
-22- choice-of-law provision that specifically designated the FAA as the governing law,
unlike here. Id. (citing Hathaway, 336 S.W.3d at 87). Here, Fidelity did not
tender an arbitration agreement “governed exclusively by the Federal Arbitration
Act.” Ernst & Young, 323 S.W.3d at 687 n.8 (emphasis added). Instead, by their
express terms, the documents tendered by Fidelity reflected an unequivocal
agreement between the parties that matters related to enforcement would be
governed by the laws of Massachusetts without stating “except for the
Massachusetts Arbitration Act (MAA).” (The only exception stated to the
applicability of Massachusetts law was for conflict-of-law provisions.)
The MAA provides that:
An initial application shall be made to the superior court for the county in which the agreement provides the arbitration hearing shall be held or, if the hearing has been held, in the county in which it was held. Otherwise the application shall be made in the county where the adverse party resides or has a place of business or, if he has no residence or place of business in this state, to the superior court for any county. All subsequent applications shall be made to the court hearing the initial application unless the court otherwise directs.
Mass. Gen. Laws Ann. ch. 251, § 17 (West).
This language tracks closely to that of Tennessee Code Annotated
(T.C.A.) § 29-5-318 as it stood when Frankfort Med. Invs. was rendered.8 577
8 At the time of this writing, the Venue statute for the Tennessee Arbitration Act is found at T.C.A. § 29-5-328 (West).
-23- S.W.3d at 487–88. Furthermore, as used in the Venue statute of the MAA, the
definition of “court” is limited to a court in Massachusetts. See Mass. Gen. Laws
Ann. ch. 251, § 16 (West) (“The term ‘court’ means any court of competent
jurisdiction of this state.”); see also Frankfort Med. Invs., 577 S.W.3d at 488 (“The
circuit court held [that]: ‘[t]he definition of “court” is limited to that of a court of
Tennessee, which, of course, this Court is not.’”).
As with Frankfort Med. Invs., the overlapping statutory language
likewise rendered the trial court here without subject matter jurisdiction to compel
arbitration, as the agreement reflects an election by the parties to proceed under the
MAA rather than under the FAA as regards matters of enforceability. 577 S.W.3d
at 488.
This agreement here fails to specify that arbitration would occur in
Kentucky and does not state that arbitration is governed by the FAA. Instead, it
indicates that matters related to enforcement would be governed by Massachusetts
law. Assuming the MAA applies, it would dictate that any arbitration take place in
that state.
Yet, KRS 417.200 requires that the arbitration take place in Kentucky. “When the issue arises prior to the arbitration hearing, as it has in this case, and the agreement upon which arbitration is sought fails to comply with the literal provisions of KRS 417.200, the courts of Kentucky are, pursuant to KRS 417.200, without jurisdiction to enforce the agreement to arbitrate.” Ally Cat, LLC v. Chauvin, 274 S.W.3d 451,
-24- 455–56 (Ky. 2009). See also Padgett, 355 S.W.3d at 462 (“Accordingly, unless an arbitration clause or agreement explicitly states the arbitration is to be conducted in Kentucky, Kentucky courts lack jurisdiction to compel arbitration.”).
Frankfort Med. Invs., 577 S.W.3d at 488.
Here, Fidelity tendered to the trial court an agreement with no explicit
indication it would be governed by the FAA but, rather, containing a choice-of-law
provision pointing to Massachusetts law for matters of enforcement. Because the
agreement does not state that arbitration shall take place in Kentucky, the trial
court correctly concluded that it lacked subject matter jurisdiction to compel
arbitration under the KAA. See Ally Cat, 274 S.W.3d at 455–56. Moreover,
because the agreement does not explicitly provide that the FAA applies and even
indicates that another state’s arbitration act applies instead, we cannot conclude
that the trial court had subject matter jurisdiction under the FAA. See Ernst &
Young, 323 S.W.3d at 687; M & H Trucking, 392 S.W.3d at 906. Under these
facts, we conclude that the trial court’s subject matter jurisdiction “is governed by
the [KUAA] and . . . not the statutes and constitutional provisions delineating the
general subject matter jurisdiction of the circuit court.” Artrip v. Samons Const.,
Inc., 54 S.W.3d 169, 171 (Ky. App. 2001) (citing Tru Green Corporation v.
Sampson, 802 S.W.2d 951, 953 (Ky. App. 1991)).
-25- Thus, we discern no reversible error in the trial court’s denying the
motion to compel arbitration for lack of subject matter jurisdiction.
CONCLUSION
For the foregoing reasons, the Order of the Pike Circuit Court is
affirmed.
CETRULO, JUDGE, CONCURS.
ECKERLE, JUDGE, DISSENTS AND FILES SEPARATE OPINION.
ECKERLE, JUDGE, DISSENTING: Respectfully, I dissent from the majority’s
decision to affirm the Trial Court’s Order granting the Estate’s motion to alter,
amend, or vacate and denying Fidelity’s motion to compel arbitration. The Trial
Court, having concluded that it lacked subject-matter jurisdiction to enforce the
arbitration agreement, should have remanded the motion, dismissed the lawsuit
outright, and advised the parties that they should sue in Massachusetts, the choice-
of-law-state. And it should have made that determination many years ago.
As addressed by the majority opinion, the procedural history of the
case is anything but clear. In addition to allowing multiple, lengthy procedural
delays and issuing conflicting orders, the Trial Court rendered the subject Order,
which can only be described as incongruous at best. First, the Trial Court seems to
agree with the Estate that there are genuine issues of material fact for a jury to
consider, specifically as to the existence of a valid arbitration agreement.
-26- However, as the majority points out, it then concludes that, “even if a jury [were]
to determine a valid arbitration agreement exist[s] as urged by [Fidelity], it would
be unenforceable as Kentucky Courts do not have subject matter jurisdiction under
[KRS] 417.200 to enforce same.” Order, p. 2. These conclusions of law are in
reverse order and inherently conflicting, as a Court without subject-matter
jurisdiction cannot then proceed to litigate a controversy.
The very first obligation of a Trial Court, or this Court for that matter,
is to determine whether jurisdiction exists such that a legitimate ruling can be
made.
“It is fundamental that a court must have jurisdiction before it has authority to decide a case. Jurisdiction is the ubiquitous procedural threshold through which all cases and controversies must pass prior to having their substance examined.” Wilson v. Russell, 162 S.W.3d 911, 913 (Ky. 2005). Each court or administrative body “must determine for itself whether it has jurisdiction.” Id. at 914 (quoting Hubbard v. Hubbard, 303 Ky. 411, 197 S.W.2d 923 (1946)).
Liquor World of Corbin, LLC v. Commonwealth Dep’t of Alcoholic Beverage
Control, 458 S.W.3d 814, 816 (Ky. App. 2014). As explained by our Supreme
Court:
Subject matter jurisdiction is not for a court to “take,” “assume,” or “allow.” “‘[S]ubject-matter jurisdiction cannot be born of waiver, consent or estoppel,’” but it is absent “‘only where the court has not been given any power to do anything at all in such a case . . . .’” Duncan
-27- v. O’Nan, 451 S.W.2d 626, 631 (Ky. 1970) (quoting In Re Estate of Rougeron, 17 N.Y.2d 264, 271, 270 N.Y.S.2d 578, 217 N.E.2d 639, 643 (N.Y. 1966)). A court either has it or it doesn’t, though admittedly there are times when more than one court may have subject matter jurisdiction or it is difficult to determine which court does.
Nordike v. Nordike, 231 S.W.3d 733, 737–38 (Ky. 2007). Our review of the Trial
Court’s determination that it possesses or lacks subject-matter jurisdiction is de
novo. Davis v. Davis, 563 S.W.3d 105, 108 (Ky. App. 2018).
The Trial Court Order and majority opinion rely on Ally Cat, LLC v.
Chauvin, in which our Supreme Court strictly construed KRS 417.200, holding
that the KUAA confers subject-matter jurisdiction on a Kentucky Court “only if
the agreement provides for arbitration in this state.” 274 S.W.3d 451, 455 (Ky.
2009). If “the agreement upon which arbitration is sought fails to comply with the
literal provisions of KRS 417.200, the courts of Kentucky are . . . without
jurisdiction to enforce the agreement to arbitrate.” Id. at 455–56; see also Padgett
v. Steinbrecher, 355 S.W.3d 457, 462 (Ky. App. 2011) (“[U]nless an arbitration
clause or agreement explicitly states the arbitration is to be conducted in Kentucky,
Kentucky Courts lack jurisdiction to compel arbitration.”). Moreover, the Supreme
Court held that “the Court of [] Appeals in Tru Green and Artrip got it right.” Ally
Cat, 274 S.W.3d at 455 (citing Tru Green Corp. v. Sampson, 802 S.W.2d 951, 953
-28- (Ky. App. 1991) and Artrip v. Samons Constr., Inc., 54 S.W.3d 169, 172 (Ky. App.
2001)). As we stated in Tru Green:
The plain meaning of [KRS 417.200] is that the agreement, wherever made, must provide for the arbitration itself to be in the Commonwealth in order to confer subject matter jurisdiction on a Kentucky court; at that point, one looks to Kentucky Constitution § 112(5) and KRS 23A.010 to determine that the circuit court is the “court of competent jurisdiction of this state.”
802 S.W.2d at 953 (quoting KRS 417.200) (emphasis in original). Kentucky
Constitution § 112(5), which is restated in KRS 23A.010(1), provides in pertinent
part that: The Circuit Court shall have “original jurisdiction of all justiciable
causes not . . . vested in some other court.” (Emphasis added.)
Following Ally Cat and Tru Green, we must subject the arbitration
agreement and related contractual terms between Fidelity and the Estate to the
mandated, two-step analysis. First, by “failing to designate a situs in Kentucky for
the arbitration to take place, a step critical to conferring subject matter jurisdiction
over the arbitration upon a Kentucky court[,]” the Trial Court is prevented from
enforcing arbitration. Artrip, 54 S.W.3d at 172 (citing Tru Green, 802 S.W.2d at
953). Second, the choice-of-law-provision vests original jurisdiction over the
subject matter of the controversy with Massachusetts Courts; thus, this provision
also deprives the Trial Court of statutory and constitutional jurisdiction. As the
Trial Court is not a “court of competent jurisdiction,” it also is prevented from
-29- compelling arbitration, declining to order arbitration, or even taking any dispositive
action other than dismissal. Tru Green, 802 S.W.2d at 953; KRS 417.200.
I do agree with the majority’s findings that the Federal Arbitration Act
is inapplicable, and that the agreement’s choice-of-law-provision clearly makes the
Massachusetts Arbitration Act (“MAA”) the governing law. See 9 U.S.C. § 1 et
seq.; Mass. Gen. Laws Ann. ch. 251 § 1 et seq. (West). But it follows that, if the
MAA applies, only a Massachusetts Court has subject-matter jurisdiction over the
dispute. See Mass. Gen. Laws Ann. ch. 251, § 16 (West) (“The term ‘court’ means
any court of competent jurisdiction of this state.”). While I concur with this part of
the majority’s reasoning, I disagree with the majority’s conclusion to affirm,
because that ruling results in upholding the Trial Court’s unauthorized assuming of
jurisdiction of this lawsuit despite that jurisdiction being vested in another state.
We simply cannot lawfully affirm a decision on the merits reached without proper
jurisdiction.
The majority compares the case sub judice to Frankfort Medical
Investors, LLC v. Thomas By & Through Thomas, in which we upheld a Trial
Court’s denial of an elder-care facility’s motion to dismiss a negligence suit. 577
S.W.3d 484 (Ky. App. 2019). In Frankfort Med., we affirmed the Trial Court
because the arbitration agreement in question was unenforceable as a result of
multiple deficits. Id. at 489. Only one of the intrinsic problems in the Frankfort
-30- Med. agreement was its recitation that it was governed by the laws of Tennessee,
including the Tennessee Uniform Arbitration Act (“TUAA”). Id. at 487–88; see
Tenn. Code Ann. § 29-5-302 et seq. (West). The TUAA provides: “An initial
application shall be made to the court of the county in which the agreement
provides the arbitration hearing shall be held or, if the hearing has been held, in the
county in which it was held. Otherwise the application shall be made in the county
where the adverse party resides or has a place of business or, if the adverse party
has no residence or place of business in this state, to the court of any county. All
subsequent applications shall be made to the court hearing the initial application
unless the court otherwise directs.” Frankfort Med. Invs., 577 S.W.3d at 487–88
(quoting Tenn. Code Ann. § 29-5-318 (West)). Citing Ally Cat, we found no error
in the Trial Court’s analysis that the Frankfort Med. agreement’s choice of
Tennessee law limited the agreement’s definition of “Court” to a Court in
Tennessee. Id. at 488. But we affirmed the Trial Court’s determination that “no
valid contract existed.” Id. at 489. There, the elder-care facility’s poorly drafted
agreement omitted the resident’s name to bind it to the agreement, and the
company failed to disclose essential information to an unsophisticated
counterparty, which rendered the agreement unenforceable in any jurisdiction. Id.
at 488–89. Therefore, we affirmed the Trial Court’s order denying the elder-care
facility’s motion to dismiss or stay the proceedings, thereby allowing the Trial
-31- Court to retain jurisdiction and reach the merits, which could have ultimately led to
a finding of improper forum. Id. at 489. The specific language that the Trial Court
used, and that we quoted and affirmed was “that no valid contract existed, and,
therefore, [the facility’s] Motion to Dismiss or Stay must be denied.” Id.
Importantly, Frankfort Med. cites Ally Cat and Padgett, but not Artrip or Tru
Green. That omission is likely due to the irrelevance of the choice-of-law
provision there, as the entire agreement was unenforceable. Furthermore, the
TUAA is different from KUAA and MAA in that its jurisdictional language could
be interpreted to allow another state’s jurisdiction. And the appellant in Frankfort
Med. was registered as a foreign corporation in Kentucky. Accordingly, under the
particular facts of that case, a Kentucky Court could exercise limited jurisdiction to
find the agreement was “unenforceable.” Thus, Frankfort Med. is highly
distinguishable from the case at hand.
Still, Frankfort Med. notwithstanding, it is imperative to note that
generally Trial Courts cannot avoid or sidestep the threshold issue of subject-
matter jurisdiction and proceed to address the merits of arguments that arbitration
provisions, or any other contract provisions for that matter, are invalid. If any
Court, anywhere can decide the viability of any contract provisions, then all
principles of jurisdiction are lost. And parties are stripped of their freedom to
-32- contract as to choice-of-law and forced to litigate in unanticipated and
unauthorized forums. This far-reaching proposition has no support in our laws.
Rather, jurisdiction is always the preliminary inquiry. And if we do
not possess the requisite jurisdiction in this Commonwealth, we are not invested or
entitled to opine as to the disposition of disputes that belong to another
jurisdiction’s Courts of law, even as regards our own citizens. And we would not
approve of another jurisdiction’s Courts encroaching into our territory.
Kentuckians are free to contract with those from another jurisdiction, and they
possess the liberty to agree by written contract to subject themselves to another
state’s laws to resolve their disputes. Jurisdiction is paramount, and where we do
not possess it, as here, we cannot bypass this prerequisite by delving into questions
as to whether the contractual terms are valid.
The dispute between Fidelity and the Estate is distinguishable from
Frankfort Med. on its facts and procedure. Of paramount importance, even the
Trial Court itself here conceded that it could not reach the question of whether the
arbitration agreement was valid because it lacked subject-matter jurisdiction. The
jurisdictional component of the subject agreement has always been the central
dispute here. That was not the case in Frankfort Med., where the enforceability of
the agreement in any respect and in any forum was at issue.
-33- The Trial Court below lacks jurisdiction not just regarding the
arbitration agreement in isolation. It is not a competent Court of jurisdiction and
cannot adjudicate any of the merits of the controversy, and we cannot assume
jurisdiction to adjudge those merits either. The Trial Court’s conclusion that it
lacked the jurisdictional authority to enforce arbitration was correct and should
have been the end of the matter. Its subsequent decision to deny the motion to
arbitrate is clearly erroneous. The Trial Court lacked the authority to deny or grant
the motion for arbitration. The required course was to remand the motion and
dismiss the case here. After eight years of uncertainty and languishing in an
improper forum, the only acceptable result is dismissal so that the parties can
finally proceed in a Court of competent jurisdiction elsewhere and achieve
resolution of their dispute on the merits. As the majority noted, the Customer
Agreement containing the arbitration agreement specifies that “[t]his agreement
and its enforcement are governed by the laws of the Commonwealth of
Massachusetts[.]” R. at 33 (emphasis added).
Accordingly, I would reverse and remand the Trial Court’s Order, with
instructions to dismiss the case and inform the parties that they should seek redress
in the proper forum, the Commonwealth of Massachusetts.
-34- BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Alex E. Wallin Jonah L. Stevens Cincinnati, Ohio Pikeville, Kentucky
-35-