Rmi, Inc. v. City of Leitchfield, Kentucky

• Court: Court of Appeals of Kentucky
• Decided: February 29, 2024
• Docket: 2023 CA 000730
• Status: Unknown

Opinion

RENDERED: MARCH 1, 2024; 10:00 A.M. NOT TO BE PUBLISHED

Commonwealth of Kentucky Court of Appeals NO. 2023-CA-0730-MR

RMI, INC. APPELLANT

APPEAL FROM GRAYSON CIRCUIT COURT v. HONORABLE BRUCE T. BUTLER, JUDGE ACTION NO. 20-CI-00114

CITY OF LEITCHFIELD, KENTUCKY; CITY COUNCIL OF LEITCHFIELD; BILLY DALLAS; CLAYTON MILLER; HAROLD MILLER; KELLY STEVENSON; MARGIE DECKER; RAYMOND “TOOTY” COTTRELL; AND MAYOR FOR THE CITY OF LEITCHFIELD, RICK EMBRY APPELLEES

OPINION AFFIRMING

** ** ** ** **

BEFORE: THOMPSON, CHIEF JUDGE; EASTON AND GOODWINE, JUDGES.

THOMPSON, CHIEF JUDGE: RMI, Inc. (“Appellant”) appeals from an order of

the Grayson Circuit Court granting summary judgment in favor of the City of Leitchfield, et al. (“Appellees”) on its claim for a declaratory judgment and

monetary damages. It argues that the circuit court erred in finding that Appellant

did not have standing to seek monetary damages and in its conclusion that the

declaratory action was moot. After careful review, we find no error and affirm the

order on appeal.

FACTS AND PROCEDURAL HISTORY

In 2019, the City of Leitchfield (“the City”) sought bids for property

and general insurance to take effect in the middle of the fiscal year beginning on

January 1, 2020. On October 24, 2019, the City published in the local newspaper a

Request for Proposals (“RFP”) soliciting bids, with the RFP describing the nature

and scope of the insurance the City sought.

On November 22, 2019, three insurance agencies, one of which is

Appellant, submitted proposals in response to the RFP. Appellant submitted two

proposals, underwritten by Travelers and Zurich, respectively. Insurance agency

E.M. Ford submitted a proposal underwritten by Tokio Marine, and Kinkade

Cornell Insurance Agency (“Kinkade Cornell”) proposed a policy underwritten by

Kentucky Leagues of Cities. The City’s general liability and property insurance in

effect at the time of the RFP was also underwritten by Kentucky League of Cities.

Appellant’s submission underwritten by Travelers was the lowest bid.

The RFP, however, expressly stated that the City reserved the right to choose or

-2- reject any bid. It further stated that its acceptance, if any, would be based solely on

its consideration of all relevant factors and not merely the lowest bid.

The City’s Mayor, Rick Embry, and the Utility Commission requested

that the City Clerk/Treasurer, Lori Woosley, and Utility Commission attorney,

David Vickery, review the bids. Woosley and Vickery received input from the

bidders, and attended a December 16, 2019 meeting of the City Council where the

bids were discussed. At the meeting, Mayor Embry proposed executing a six-

month policy so that a subsequent one-year policy could be coordinated with the

fiscal year.

On December 16, 2019, Woosley and Vickery produced a written

memorandum recommending that the City extend the current policy through

Kentucky League of Cities for an additional six months, followed by a new RFP

for the 2021-2022 fiscal year. The recommendation noted that Tokio Marine and

Travelers had not quoted Island Marine insurance separately as set out in the RFP,

and that Travelers and Zurich had not complied with other requirements. Another

factor in supporting the recommendation of Woosley and Vickery was that they

needed more time to fully evaluate the proposals.

Another meeting was conducted on December 23, 2019, where Mayor

Embry advocated adopting the recommendation of Woosley and Vickery. After

-3- discussion, the City Council voted to extend the City’s existing policy with

Kentucky League of Cities for six months.

On January 6, 2020, the sole shareholder of Appellant, Aubrey Beatty,

alleged that the Council’s vote was not valid for at least two reasons. First, Beatty

noted that Steve Kinkade, who had an interest in Kinkade Cornell, had a conflict of

interest because he sat on the City’s Planning and Zoning Commission and the

City’s Board of Adjustments. Beatty also believed that Vickery had drafted the

articles of incorporation for Kinkade’s business.

One week later, on January 13, 2020, the City Council called a special

session to discuss rescinding the December 23, 2019 vote in favor of continuing

the existing Kentucky League of Cities coverage for six months. After discussion,

the Council unanimously voted to rescind the December 23, 2019 vote. After the

vote, the Council heard from Kinkade, who stated that he was an owner of Kinkade

Cornell Insurance Agency; was a member of the City’s Board of Adjustments and

Planning Commission; that he had no input on the City’s decision to purchase

insurance from Kinkade Cornell Insurance Agency nor had tried to influence any

official; and, that he would not personally benefit from the City’s purchase of

insurance though his insurance agency would. Kinkade also noted that Vickery

had filed corporate paperwork for Kinkade Cornell Insurance Agency some two

years before Kinkade became a member of the City’s Board of Adjustments and

-4- Planning Commission. It appears from the record that Kinkade’s connection to

Kinkade Cornell Insurance Agency was well-known to all parties, not only by the

name of the insurance agency, but because Kinkade had regularly filed financial

interest disclosures with the County Clerk after joining the Board of Adjustments

and Planning Commission.1

Following Kinkade’s disclosure, a motion was made to extend the

existing KLC insurance policy for six months. The Council approved the motion

by a vote of 3-2.

On June 16, 2020, Appellant filed the instant action in Grayson

Circuit Court against the City, the Mayor, and the City Council members in their

individual capacities. The complaint alleged violations of the City’s Code of

Ordinances; that the approval of the Kentucky League of Cities’ bid was improper

based on Kinkade’s conflict of interest; that the approval of the bid violated

Kentucky Revised Statutes (“KRS”) 65A.080 and the Kentucky Constitution; and,

that Appellant be awarded a declaratory judgment holding the defendants liable in

their individual capacities. Appellant sought monetary damages and a ruling that

the City’s six-month extension of the existing contract was void.

1 Kinkade’s public disclosures were required because the City was considering extending its insurance contract with Kinkade Cornell Insurance Agency. Though the City’s Code of Ordinances generally prohibited a City official or employee from benefitting from a City contract, the benefit was allowed if the nature of the official or employee’s interest in the contract was disclosed at a public meeting an entered into the record.

-5- The matter proceeded in Grayson Circuit Court, culminating in

Appellees’ motion for summary judgment. While the motion was pending,

Appellant dismissed its claims against the Mayor and Council members in their

individual capacities, and also its statutory and constitutional claims. After

additional briefing, the circuit court entered an order on May 16, 2023, sustaining

Appellees’ motion for summary judgment. In support of the order, the court

determined that Appellant lacked standing to seek monetary damages. The circuit

court also ruled that Appellant’s claim for a declaratory judgment was moot. This

appeal followed.

STANDARD OF REVIEW

Summary judgment “shall be rendered forthwith if the pleadings,

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.” Kentucky Rule of Civil Procedure (“CR”) 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, Inc. v.

Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991). Summary

judgment should be granted only if it appears impossible that the nonmoving party

will be able to produce evidence at trial warranting a judgment in his favor. Id.

-6- “Even though a trial court may believe the party opposing the motion may not

succeed at trial, it should not render a summary judgment if there is any issue of

material fact.” Id. Finally, “[t]he standard of review on appeal of a summary

judgment is whether the trial court correctly found that there were no genuine

issues as to any material fact and that the moving party was entitled to judgment as

a matter of law.” Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996).

ARGUMENTS AND ANALYSIS

Appellant argues that the Grayson Circuit Court committed reversible

error in granting Appellees’ motion for summary judgment. It first argues that the

circuit court improperly determined that Appellant does not have standing to seek

monetary damages. In support of this argument, Appellant maintains that an action

seeking a declaratory judgment may be brought alone or may be brought with the

substantive claim seeking recompense. Appellant argues that he brought his action

for a declaratory judgment in conformity with KRS 418.040, that this statute and

the supportive case law establish his standing, and that the circuit court erred in

failing to so rule. Appellant also asserts that, while a disappointed bidder may not

have standing to challenge the award of a municipal contract to another bidder, the

presence of fraud, collusion, or dishonesty in the bidding process creates standing

for the disappointed bidder. Appellant argues that it pleaded and argued fraud,

collusion, or dishonesty sufficient to establish standing and overcome Appellees’

-7- motion for summary judgment. Appellant requests an opinion reversing the order

of summary judgment on appeal.

In ruling on this issue below, the circuit court relied on Ohio River

Conversions, Inc. v City of Owensboro, 663 S.W.2d 759 (Ky. App. 1984), for the

proposition that competitive bidding statutes are primarily intended to benefit the

public rather than to benefit or enrich bidders. The panel of this Court in Ohio

River Conversions noted that Kentucky has adopted the view that a person or entity

does not have standing to request the judicial award of a municipal contract, nor to

seek damages from a municipality arising from the bidding process.2

Further, the circuit court stated that it was “skeptical, to be sure” as to

whether Appellant had pleaded fraud, collusion, or dishonesty. It determined,

arguendo, that even if Appellant had properly pleaded or argued fraud, collusion or

dishonesty, Appellant nevertheless did not have standing to pursue an award of

monetary damages because Appellant’s claim did not benefit the public rather than

an aggrieved bidder.

2 The Kentucky Model Procurement Code (“KMPC”) grants standing to aggrieved bidders to seek judicial review of a municipality’s decision to award a contract to another bidder. See generally Pendleton Bros. Vending, Inc. v. Commonwealth Finance & Adm. Cab., 758 S.W.2d 24 (Ky. 1988). The KMPC, however, only applies to municipalities that have adopted it. Laurel Constr. Co. v. Paintsville Util. Comm’n, 336 S.W.3d 903 (Ky. App. 2010). The Grayson Circuit Court and the parties agree that the City of Leitchfield has not adopted the KMPC. Per Pendleton Bros., when a municipality has not adopted the KMPC, an aggrieved bidder has no standing to challenge the award of a public contract absent a showing of fraud, collusion, or dishonesty.

-8- After closely examining the record and the law, we agree with the

Grayson Circuit Court that Appellant does not have standing to seek judicial

intervention in the City’s six-month extension of its existing insurance contract.

“A disappointed bidder has no interest in a contract entered into in good faith with

his competitor. Relief could be granted only at the instance of a taxpayer or the

state agency.” HealthAmerica Corp. of Kentucky v. Humana Health Plan, Inc.,

697 S.W.2d 946, 948 (Ky. 1985) (citation omitted). The record does not support

Appellant’s claim that it should be characterized as a taxpayer rather than an

aggrieved bidder for purposes of establishing standing. Appellant submitted

proposals to the City in response to the RFP requesting qualified bidders. It

entered the bidding process as a bidder and its grievance arose from the resolution

of that process. Its status as taxpayer is only ancillary to its role as bidder.

In addition, we do not conclude that Appellant pleaded fraud,

collusion, or dishonesty sufficient to establish an exception to the general rule that

aggrieved bidders have no standing to challenge municipal contracts. Further, the

record, even when viewed in a light most favorable to Appellant, does not establish

fraud, collusion, or dishonesty. It cannot reasonably be argued that Appellant was

fraudulently denied the contract it sought, as none of the other bidders were

awarded the contract either. The reasoning for the Council’s decision to postpone

a new one-year contract to coincide with the fiscal year is supported by the record.

-9- Furthermore, Kinkade made a full disclosure of potential conflicts on the record

before the final vote to extend the then-existing insurance contract for six months.

When the record is considered in its totality, we find no error in the circuit court’s

determination that Appellant did not have standing based on the fraud, collusion,

or dishonesty exception.

Appellant goes on to argue that the circuit court erred in ruling that

Appellant’s declaratory action was non-justiciable due to mootness. Citing

Commonwealth v. Hughes, 873 S.W.2d 828, 830-31 (Ky. 1994), Appellant

maintains that though the circuit court correctly found that the six-month extension

of the City’s existing insurance contract expired during the course of the instant

litigation, Appellant should benefit from an exception to the doctrine because there

is a reasonable expectation that the Appellant would be subject to the same action

again in the future. That is to say, Appellant asserts that an exception to the

mootness doctrine is found herein because Appellant could easily be subject to the

same whims or self-serving desires of City officials again in the future. It argues

that without judicial guidance, the City is free to conduct the same improper

activity again in the future.

The six-month extension of the existing insurance contract expired

during the pendency of the circuit court proceeding, rendering Appellant’s claim

moot. Appellant’s argument as to what could occur in the future is at best

-10- speculative or hypothetical, and does not establish that Appellant is entitled to an

exception to the mootness doctrine. If such speculation were sufficient to support

the exception, the mootness doctrine would itself become moot because any

aggrieved party could hypothesize as to what the future might hold. We do not

believe that such speculation establishes a reasonable expectation that Appellant

would be subject to the same action again in the future as required by Hughes,

supra. As such, we find no error.

CONCLUSION

The circuit court correctly found that there were no genuine issues as

to any material fact and that Appellees were entitled to judgment as a matter of

law. Scifres, supra. Accordingly, we affirm the order of the Grayson Circuit

Court granting summary judgment in favor of Appellees.

ALL CONCUR.

BRIEFS FOR APPELLANT: BRIEF FOR APPELLEES:

C. Mike Moulton Jeffrey C. Mando Elizabethtown, Kentucky Jennifer L. Langen Covington, Kentucky

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