RENDERED: MARCH 11, 2022; 10:00 A.M. NOT TO BE PUBLISHED
Commonwealth of Kentucky Court of Appeals
NO. 2020-CA-1483-MR
GLOBAL SPECTRUM LP, D/B/A SPECTRA VENUE MANAGEMENT APPELLANT
APPEAL FROM DAVIESS CIRCUIT COURT v. HONORABLE JAY A. WETHINGTON, JUDGE ACTION NO. 18-CI-01272
CITY OF OWENSBORO; OFFICER AARON CREAGER; BEAVER DAM EMERGENCY, INC.; JAMISON HUGHES; JEREMY NANCE; OWENSBORO POLICE DEPARTMENT; OWENSBORO SPORTSCENTER; AND UNKNOWN SECURITY GUARDS #1, #2, #3, #4, AND #5 APPELLEES
OPINION AFFIRMING
** ** ** ** **
BEFORE: ACREE, COMBS, AND MAZE, JUDGES. MAZE, JUDGE: Global Spectrum LP (“Global”) appeals from a judgment of the
Daviess Circuit Court awarding the City of Owensboro and Officer Aaron Creager
(collectively, “the City”), attorney fees and costs expended in defending against a
third-party claim and in seeking enforcement of the indemnification clause in the
contract between Global and the City. We agree with the trial court that the
contract clearly obligated Global to defend and indemnify the City from all claims
arising from Global’s performance of the contract. Since the third-party claim
against the City was based primarily on Global’s alleged negligence, the
contractual provision applied to the facts of this case. We further determine that
the provision did not violate any clearly-established public policy. Next, we agree
with the trial court that Global was obligated to indemnify the City for its attorney
fees in defending the claim regardless of any determination of Global’s underlying
liability. Finally, we conclude that Global’s failure to defend amounted to a breach
of its obligations under the contract, thus warranting an additional award of
attorney fees incurred by the City to enforce the contract. Hence, we affirm.
This action arises out of an incident on September 28, 2018, during a
concert at the Owensboro Sportscenter (“Sportscenter”), which is owned by the
City. The City entered into a “Management Agreement” which provided that
Global shall have exclusive control and responsibility to manage the operations of
the Sportscenter. Pursuant to its obligations under the Management Agreement,
-2- Global hired Beaver Dam Emergency, Inc. (“Beaver Dam”) to provide security for
events at the Sportscenter, including the concert involved in this case.
Jamison Hughes attended the concert on September 28, 2018. At
some point, the security guards, employed by Beaver Dam, removed Hughes for
being disruptive. While the facts of that incident are disputed, the security guards
called the police. Officer Aaron Creager of the City Police Department responded
to the call. When he arrived, Officer Creager observed several security guards
holding Hughes on the ground. Officer Creager placed handcuffs on Hughes and
checked him for weapons. Officer Creager then spoke with the security guards,
who relayed their account of Hughes’ disruptive behavior. Officer Creager
observed that Hughes was intoxicated. Hughes also admitted to Officer Creager
that he was intoxicated.
Officer Creager then removed the handcuffs from Hughes and issued
a citation for alcohol intoxication and second-degree disorderly conduct. Hughes
was examined for injuries by EMTs, but he declined to be transported to the
hospital. At Hughes’ arraignment, the Commonwealth agreed to dismissal of the
charges without any stipulation of probable cause.
Thereafter, Hughes filed an action against the City, Officer Creager,
Global, Beaver Dam, Jeremy Nance (an employee of Beaver Dam), and five
unknown security guards. The City filed a motion for summary judgment on
-3- liability. The trial court granted the motion, finding that Officer Creager had
probable cause to detain Hughes based upon his own investigation and the
statements of the witnesses.
Prior to the entry of summary judgment on this issue, the City filed a
cross-claim against Global, noting that the Management Agreement included a
provision requiring Global to defend and indemnify the City from any claims
arising out of Global’s management of the Sportscenter. Following the dismissal
of Hughes’ claims against the City, the City filed a motion for summary judgment
against Global. In the motion, the City sought to recover attorney fees and costs
expended in defending Hughes’ claim. Global filed a cross-motion for summary
judgment to dismiss the cross-claim.
After considering the motions, the trial court granted summary
judgment for the City. The court noted that, under the Management Agreement,
Global is responsible for the acts and omissions of its agents, employees,
contractors, and subcontractors. The court found that Hughes’ claims “arise out
of” Global’s duties under the Management Agreement. The court further found
that those claims were primarily based upon the actions of the security guards in
detaining Hughes and providing information to Officer Creager. The court also
determined that the indemnification agreement did not violate public policy
-4- because it was narrowly focused on Global’s own alleged negligence and not the
alleged negligence of the City or Officer Creager.
Next, the trial court found that summary judgment for the City was
appropriate because the Management Agreement required Global to indemnify the
City for its costs in defending the action, and not merely for its liability. And
finally, the trial court determined that the City was entitled to recover its attorney
fees and costs on its cross-claim because Global’s failure to defend amounted to a
breach of its duties under the Management Agreement. After the City filed its
affidavit of attorney fees, the trial court entered a judgment against Global in the
amount of $53,847.88. This appeal followed.1
Global argues that the City was not entitled to summary judgment on
its cross-claim. Rather, Global contends that it was entitled to summary judgment
on the City’s claim for attorney fees and costs. “[T]he proper function of summary
judgment is to terminate litigation when, as a matter of law, it appears that it would
be impossible for the respondent to produce evidence at the trial warranting a
judgment in his favor.” Steelvest, Inc. v. Scansteel Service Center, Inc., 807
S.W.2d 476, 480 (Ky. 1991). Summary judgment is appropriate “if the pleadings,
1 Hughes’ claims against Global and its agents remained pending following entry of the City’s motion for summary judgment on its cross-claim against Global. However, trial court designated its October 21, 2020, order and judgment awarding attorney fees to the City as final and appealable pursuant to CR 54.02(1). Therefore, this appeal properly stands submitted to this Court.
-5- depositions, answers to interrogatories, stipulations, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a matter of
law.” CR2 56.03. The record must be viewed in a light most favorable to the party
opposing the motion for summary judgment and all doubts are to be resolved in his
favor. Steelvest, 807 S.W.2d at 480. The trial court must examine the evidence,
not to decide any issue of fact, but to discover if a real issue exists. Id. Since a
summary judgment involves no fact-finding, this Court’s review is de novo, in the
sense that we owe no deference to the conclusions of the trial court. Scifres v.
Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996).
This matter hinges on the interpretation of the indemnification
provisions in the Management Agreement between the City and Global. The
construction and interpretation of a contract is a matter of law and is reviewed
under the de novo standard. Cinelli v. Ward, 997 S.W.2d 474, 476 (Ky. App.
1998). If no ambiguity exists, “a written instrument is to be strictly enforced
according to its terms which are to be interpreted ‘by assigning language its
ordinary meaning and without resort to extrinsic evidence.’” Allen v. Lawyers
Mutual Insurance Company of Kentucky, 216 S.W.3d 657, 659 (Ky. App. 2007)
(quoting Island Creek Coal Co. v. Wells, 113 S.W.3d 100, 104 (Ky. 2003)). Any
2 Kentucky Rules of Civil Procedure.
-6- issues regarding ambiguity are questions of law to be decided by the court, which
we also review de novo. Frear v. P.T.A. Industries, Inc., 103 S.W.3d 99, 105 (Ky.
2003). A contract is ambiguous if a reasonable person would find it susceptible to
different or inconsistent interpretations. Hazard Coal Corp. v. Knight, 325 S.W.3d
290, 298 (Ky. 2010) (citing Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94
S.W.3d 381, 385 (Ky. App. 2002)).
The indemnification provision is set out in Article 12 of the
Management Agreement. Section 12.1 of the Management Agreement requires
Global “to defend indemnify and hold harmless” the City, its employees, and
agents,
against any claims, causes of action, costs, demands, losses, damages, settlements, charges, professional fees or other expenses (including attorneys’ fees) liabilities, or damages (collectively, “Losses”) of every kind and character suffered by such parties arising out of or in connection with any (a) negligent act or omission, or intentional misconduct, on the part of Manager or any of its employees or agents in the performance of its obligations under this Agreement, or (b) breach by Manager of any of its representations, covenants or agreements made herein.
Section 12.2 qualifies Global’s liability by stating, in pertinent part,
that Global “shall not be responsible for (1) any negligent act or omission, or
intentional misconduct, on the part of City or any of its employees or agents in the
performance of its obligations under this Agreement[.]” The primary question in
-7- this case is whether the City is seeking to enforce the indemnification clause for
the conduct of Global’s agents or Officer Creager.
Global first argues that the security guards were not acting as its
agents. Rather, Global contends that Beaver Dam was acting as an independent
contractor. Therefore, the actions of Beaver Dam’s employees are not attributable
to Global.
But as the City notes, the Management Agreement expressly assigned
the security tasks at the Sportscenter to Global. Global cannot avoid liability for
negligence in the performance of those tasks by assigning the duty to an
independent contractor. Williams v. Kentucky Dep’t of Educ., 113 S.W.3d 145,
151 (Ky. 2003). See also Louisville Cooperage Co. v. Lawrence, 230 S.W.2d 103,
105 (Ky. 1950) and Brown Hotel Co., Inc. v. Sizemore, 303 Ky. 431, 197 S.W.2d
911, 913 (1946). Even if it delegated the security duties to Beaver Dam, Global is
still obligated to indemnify and defend the City for claims arising from those
actions.
Global next argues that the express language of the Management
Agreement only required it to defend and indemnify the City from claims arising
from its agents’ actions, not from actions by the City’s agents, such as Officer
Creager. Global concedes that the security guards detained and restrained Hughes
during the concert. However, Global contends that Hughes’ claims against the
-8- City arose from Officer Creager’s investigation and his decision to issue a citation
to Hughes. Because the Management Agreement specifically excludes negligence
of the City’s agents, Global argues that its indemnification duties were never
implicated prior to the City’s dismissal.
As the trial court noted, Hughes alleged that the guards gave a false
account to Officer Creager, which provided Officer Creager with probable cause to
issue the citation for disorderly conduct. Officer Creager based the citation for
public intoxication on the security guards’ account, as well as his own observations
and Hughes’ admissions. In any event, we agree with the trial court that there was
a direct causal connection between the conduct of the security guards and Officer
Creager’s actions. This connection is sufficient to support the conclusion that
Hughes’ claims against the City “arise out of” Global’s duties under the
Management Agreement.
Furthermore, Section 12.2(a) of the Management Agreement only
exempts indemnification for acts of the City or its employees “in the performance
of its obligations under this Agreement.” Officer Creager’s actions were not part
of the City’s obligations under the Management Agreement but were part of his
official duties as a police officer. Therefore, we agree with the trial court that the
exception to liability in Section 12.2(a) does not apply.
-9- Global next argues that the provision is unenforceable as against
public policy. Courts will not disregard the plain terms of a contract between
private parties on public policy grounds absent a clear and certain statement of
strong public policy in controlling laws or judicial precedent. State Farm Mut.
Auto. Ins. Co. v. Hodgkiss-Warrick, 413 S.W.3d 875, 880 (Ky. 2013). In the
absence of legislation expressly forbidding enforcement, a contract term is
unenforceable on public policy grounds only if the policy asserted against it is
clearly manifested by legislation or judicial decision and is sufficiently strong to
override the very substantial policies in favor of the freedom of contract and the
enforcement of private agreements. Id. (citing RESTATEMENT (SECOND) OF
CONTRACTS § 178 (1979)).
Global’s asserted public policy does not meet this standard.
Essentially, Global contends the contractual provision requires it to assume
liability for the performance of public duties that are exclusively within the scope
of the City’s authority. But as the trial court noted, the Management Agreement
only requires Global to defend and indemnify claims against the City arising from
Global’s performance of the Management Agreement.
Given the express qualification in Section 12.2, we conclude that the
Management Agreement does not exempt the City from liability for the
performance of a duty of public service. See Cobb v. Gulf Refining Co., 284 Ky.
-10- 523, 145 SW.2d 96, 99 (1940). Rather, the Agreement only requires Global to
assume the City’s vicarious liability for purported negligence of Global’s agents.
In this case, the Agreement requires Global to assume liability for Officer
Creager’s actions only to the extent he responded to the actions or representations
of Global’s agents. Even if the Agreement could be read to require Global to
defend and indemnify the City for Officer Creager’s alleged negligence in issuing
the citation, we cannot find that the requirement would contravene a clearly
established public policy because the City and Global were of equal bargaining
power. Speedway Superamerica, LLC v. Erwin, 250 S.W.3d 339, 343 (Ky. App.
2008).
In the alternative, Global argues that summary judgment was
premature. Global contends that the Management Agreement only requires it to
indemnify the City for damages arising out of Global’s liability. Since there has
been no finding that Global or its agents were negligent, then the indemnification
provision is not yet applicable.
The City responds that the Management Agreement required Global
to defend and indemnify the City for claims arising out of its performance of the
Agreement. The City takes the position that the Agreement requires Global both to
defend and to indemnify the City for Hughes’ claims, irrespective of Global’s own
liability. The trial court agreed, focusing on the language requiring Global to
-11- defend the City from any claims arising from Global’s performance of the
We agree with the trial court’s reading of the Agreement. Global
refers to ARA Servs., Inc. v. Pineville Cmty. Hosp., 2 S.W.3d 104, 107 (Ky. App.
1999), in which the contract required a food service vendor “to indemnify, defend
and hold harmless” the Hospital from any claims attributable to the vendor’s
negligence in performing the contract. Id. at 106. This Court held the vendor must
be found liable before the contractual indemnification clause would apply. Id. at
107. The Sixth Circuit, applying Kentucky law, followed the same analysis in
Thompson v. The Budd Co., 199 F.3d 799, 807 (6th Cir. 1999). Based on this
reasoning, Global maintains that its duties to defend and indemnify the City do not
arise until it is found liable for negligence in performing the Management
Agreement at issue.
However, the courts in ARA Services and Thompson only addressed
the respective duties to indemnify under Kentucky law. A duty to defend is both
distinct from and broader than a duty to indemnify. James Graham Brown Found.,
Inc. v. St. Paul Fire & Marine Ins. Co., 814 S.W.2d 273, 279-80 (Ky. 1991).
Thus, the holdings in those cases do not purport to limit the scope of a contractual
duty to defend.
-12- We agree with Global that it had no duty to defend against claims
which arose from actions which were clearly outside of the scope of its duties
under the Management Agreement. See Cincinnati Ins. Co. v. Motorists Mut. Ins.
Co., 306 S.W.3d 69, 79 (Ky. 2010). But under the clear language of the
Agreement, Global had a duty to defend the City from claims which could
reasonably be construed to arise from its obligations under the Agreement. As
previously noted, Hughes’ claims were based, in significant part, upon the guards’
performance of the security duties allocated to Global under the Management
Agreement. Under the circumstances, we agree with the trial court that the duty to
defend was not contingent upon a finding of Global’s liability for the underlying
claims. Therefore, we conclude that there were no genuine issues of material fact
precluding the entry of summary judgment for the City and Officer Creager.
Finally, Global argues that the Management Agreement only requires
it to indemnify the City for attorney fees and costs incurred in defending Hughes’
claim. Consequently, Global contends the additional award of fees incurred in
enforcing the indemnification agreement was not authorized. In response, the City
states that the Agreement requires Global to indemnify the City for all costs
associated with the claim, including fees incurred in enforcing the Agreement.
The general rule in Kentucky is that, “with the exception of a specific
contractual provision allowing for recovery of attorneys’ fees or a fee-shifting
-13- statute, . . . each party assumes responsibility for his or her own attorneys’ fees[.]”
Aetna Cas. & Sur. Co. v. Com., 179 S.W.3d 830, 842 (Ky. 2005). Thus, any
authorization for attorney fees must be found in the plain language of the
Management Agreement. Section 12.1 requires Global to indemnify the City for
any claims or losses, including attorney fees, either “arising out of” (a) any
negligent act on the part of Global; or “(b) [any] breach by Manager of any of its
representations, covenants or agreements made herein.” Furthermore, under
Section 12.3, Global “shall be responsible, at its sole cost and expense, for
controlling litigating defending and/or otherwise attempting to resolve any
proceeding, claim, or cause of action underlying such matter,” except that the City
may elect to participate or assume control of the defense under specified
circumstances.
Under Section 12.1(a), Global’s obligation to defend and indemnify
clearly applies to the City’s attorney fees and costs accrued during proceedings
involving Hughes’ claims against the City. Global does not dispute the trial
court’s award of the City’s attorney fees and costs incurred in defending Hughes’
claim. The City further argues, and the trial court agreed, that Global’s actions
amounted to a breach of its duty to defend, thus implicating its obligation to pay
attorney fees under Section 12.1(b).
-14- Global takes the position that the language of Section 12.1(b) is
ambiguous and should be construed against the City as the drafter of the
Management Agreement. Global notes that the Management Agreement does not
clearly define failure to defend as a breach of the Agreement. Consequently,
Global argues that the Agreement does not expressly allow the City to recover its
attorney fees expended in seeking summary judgment to enforce the
indemnification provision.
However, Global does not argue that the trial court clearly erred in
finding that its failure to defend the City on Hughes’ claims amounted to a breach
of its duties under the Management Agreement. Similarly, Global does not
contend that its decision not to defend the City from Hughes’ claims was justified
under the Management Agreement. Lastly, Global does not argue that the City
improperly exercised its option to defend itself from Hughes’ claims.
Therefore, we conclude that the additional award of attorney fees was
supported by the terms of Section 12.1(b). Where the contract authorizes the
award of attorney fees under these circumstances, the trial court’s award of
attorney fees is largely a matter of discretion. See Superior Steel, Inc. v. Ascent at
Roebling’s Bridge, LLC, 540 S.W.3d 770, 787 (Ky. 2017). Since the trial court
found that Global breached its duty to defend, we find no abuse of discretion in the
additional award of attorney fees to the City.
-15- Accordingly, we affirm the judgment of the Daviess Circuit Court
awarding attorney fees to the City.
ALL CONCUR.
BRIEFS AND ORAL ARGUMENT BRIEF FOR APPELLEES CITY OF FOR APPELLANT: OWENSBORO AND OFFICER AARON CREAGER: David T. Klapheke Louisville, Kentucky Patrick D. Pace Stephen C. Pace Owensboro, Kentucky
ORAL ARGUMENT FOR APPELLEES CITY OF OWENSBORO AND OFFICER AARON CREAGER:
Patrick D. Pace Owensboro, Kentucky
-16-