RENDERED: MARCH 1, 2024; 10:00 A.M. NOT TO BE PUBLISHED
Commonwealth of Kentucky Court of Appeals NO. 2023-CA-0398-ME
UNIVERSITY OF KENTUCKY AND PENNY COX, IN HER OFFICIAL CAPACITY AS TREASURER OF THE UNIVERSITY OF KENTUCKY APPELLANTS
APPEAL FROM FRANKLIN CIRCUIT COURT v. HONORABLE THOMAS D. WINGATE, JUDGE ACTION NO. 18-CI-00627
AMELIA LONG; MARK METCALF, IN HIS OFFICIAL CAPACITY AS KENTUCKY STATE TREASURER; COMMONWEALTH OF KENTUCKY, DEPARTMENT OF REVENUE; KAREN DEVIN; RICHARD HARDY II; SHERRIE TURNER; AND TABITHA MARCUM APPELLEES
AND
NO. 2023-CA-0411-ME
COMMONWEALTH OF KENTUCKY, DEPARTMENT OF REVENUE APPELLANT
APPEAL FROM FRANKLIN CIRCUIT COURT v. HONORABLE THOMAS D. WINGATE, JUDGE ACTION NO. 18-CI-00627 AMELIA LONG, INDIVIDUALLY AND ON BEHALF OF A CLASS OF OTHERS SIMILARLY SITUATED; KAREN DEVIN, INDIVIDUALLY AND ON BEHALF OF A CLASS OF OTHERS SIMILARLY SITUATED; PENNY COX IN HER OFFICIAL CAPACITY AS TREASURER, UNIVERSITY OF KENTUCKY; RICHARD HARDY, II, INDIVIDUALLY AND ON BEHALF OF A CLASS OF OTHERS SIMILARLY SITUATED; SHERRIE TURNER, INDIVIDUALLY AND ON BEHALF OF A CLASS OF OTHERS SIMILARLY SITUATED; TABITHA MARCUM, INDIVIDUALLY AND ON BEHALF OF A CLASS OF OTHERS SIMILARLY SITUATED; AND UNIVERSITY OF KENTUCKY APPELLEES
OPINION AFFIRMING IN PART, REVERSING IN PART, AND REMANDING
** ** ** ** **
BEFORE: ACREE, GOODWINE, AND JONES, JUDGES.
ACREE, JUDGE: Appellants, the University of Kentucky (UK), Penny Cox, in
her official capacity as Treasurer of UK, and the Commonwealth of Kentucky,
Department of Revenue (Department), challenge the Franklin Circuit Court’s
rulings on the issues of class certification and sovereign immunity. In an August
-2- 15, 2022 order granting partial judgment on the pleadings, the circuit court
determined sovereign immunity did not apply to any of Appellees’ claims. In a
March 28, 2023 order, the circuit court granted Appellees’ motion for class
certification. We affirm in part, reverse in part, and remand.
BACKGROUND
Appellees Amelia Long, Karen Devin, Richard Hardy II, and Sherrie
Turner are former patients of UK HealthCare; Appellee Tabitha Marcum is the
parent of a minor child who was a patient at UK. Each Appellee was billed for the
medical care they or their child received. Insurance or another payor did not cover
at least a portion of each Appellee’s amount owed. UK sent each Appellee
statements for the unpaid balances.
At all times relevant to this appeal,1 UK took additional steps to
pursue payment in the event a patient’s balance remained unpaid. UK sent unpaid
accounts to CKMS, an affiliated debt collection corporation, which would send
additional notices to the patient. Should these efforts prove unsuccessful, CKMS
would mail a final notice letter, a “Letter 8,” to the patient. The Letter 8 would
inform the patient as to his or her right to contest the amount owed and how to
1 As UK notes in its brief, UK stopped referring unpaid healthcare balances to the Commonwealth of Kentucky, Department of Revenue in 2020. In 2022, the General Assembly amended Kentucky Revised Statute (KRS) 131.130 to prohibit Department collection of debt for healthcare goods and services. See KRS 131.130(12).
-3- initiate such contest. The contest procedure would include a hearing before a
hearing officer.
The Letter 8 also informed the patient that, should he or she fail to
contest the amount owed, the balance would be referred to the Department for
collection.2 KRS 45.238 empowers executive branch agencies3 to “certify” debts,
and, having done so, must refer their certified debts to the Department for
collection. See KRS 45.238.
None of Appellees requested a hearing, and, therefore, each of their
outstanding balances were referred to the Department for collection. The
Department proceeded to collect the balances via wage garnishment, levies against
bank accounts, and state income tax offsets. The Department imposed statutory
interest and collection fees. All Appellees, except Marcum, entered voluntary
payment plans with the Department. Pursuant to these agreements, the Department
2 UK explains in its brief that referral to the Department is not the exclusive avenue should balances remain unpaid or unchallenged after CKMS sends out a Letter 8. Accounts ineligible for referral to the Department (which were those accounts held by a nonresident of Kentucky or whose information did not include a social security number, date of birth, or mailing address) were instead referred for collection to private companies. Only debts referred to the Department are at issue in this appeal. 3 KRS 45.237(1)(a) defines an “agency” as “an organizational unit or administrative body in the executive branch of state government as defined in KRS 12.010[.]” In University of Kentucky v. Moore, the Kentucky Supreme Court concluded UK is “in the executive branch of government” but remanded to the circuit court to determine whether UK is entitled to refer debts to the Department as an executive branch agency pursuant to KRS 45.238. 599 S.W.3d 798, 810 (Ky. 2019). This same issue is before the circuit court in the instant case, but is not before this Court in this interlocutory appeal.
-4- would agree to cease collection in exchange for regular payments toward the
patient’s outstanding balance.
Appellees filed the underlying lawsuit on June 19, 2018, on behalf of
themselves and “a class of others similarly situated” against UK, UK Treasurer
Susan Krauss in her official capacity, the Department, and Allison Ball in her
official capacity as Kentucky State Treasurer. Record (R.) at 1. Central to their
lawsuit, Appellees (1) argue UK is not an “agency” as defined by KRS 45.237 for
the purpose of debt certification and referral under KRS 45.238 and, therefore,
unlawfully referred Appellees’ medical debts to the Department; and (2) challenge
these statutes and the Department’s debt collection procedures as violative of their
due process rights under both the United States and Kentucky Constitutions.
Appellees also contest the Department’s application of collection fees.
Appellees seek a variety of relief. In their second amended complaint,
they request declarations that (1) UK may not legally refer debts to the Department
for collection and that the Department may not engage in collection efforts; (2) that
KRS 45.237 to 45.241 are unconstitutional, both facially and as applied; (3) that
the Department was not entitled to impose its collection fees; (4) that Appellees
and class members are entitled to an order and judgment directing the return of all
unlawfully collected funds; and (5) that Appellees are entitled to “the equitable
remedy of restitution of their moneys from the Defendants.” R. at 657-58. They
-5- also seek an order directing the Kentucky State Treasurer and the UK Treasurer to
return Appellees’ and other class members’ funds, as well as prejudgment interest,
and costs and attorneys’ fees. R. at 658.
On August 15, 2022, the circuit court entered an order granting partial
judgment on the pleadings to Appellees. Therein, the circuit court ruled on three
threshold issues in the case, including rulings on the merits of Appellees’ suit
regarding the meaning and application of KRS 45.237, 45.238, and 45.241.
Relevant to this appeal, the circuit court determined UK and the Department were
not entitled to sovereign immunity for any of Appellees’ claims.
On March 28, 2023, the circuit court entered an order granting
Appellees’ motion for class certification. In their motion, Appellees requested
certification of the following class:
All persons who, within ten (10) years preceding the filing of the Complaint herein, were subjected to actions taken or threatened by Defendants to collect UK HealthCare accounts pursuant to KRS 45.237 to KRS 45.238 and KRS 45.241, or any other statutory authority, and who had money seized or collected from them by the Department of Revenue as a result or consequence of such actions, including through payment plans which the class members entered into under threat of Department of Revenue collection activities.
R. at 1500.4
4 We note the circuit court defined the class slightly differently than Appellees requested in their motion. The circuit court certified and defined the class as follows:
-6- UK and the Department now appeal.
ANALYSIS
“[T]he general rule in appellate procedure is that only a trial court’s
final orders are appealable.” Hensley v. Haynes Trucking, LLC, 549 S.W.3d 430,
436 (Ky. 2018) (citing Breathitt Cnty. Bd. of Educ. v. Prater, 292 S.W.3d 883, 886
(Ky. 2009)). However, “select issues” may be appealed in the absence of a final
order. Id. (citing Prater, 292 S.W.3d at 886; Baker v. Fields, 543 S.W.3d 575 (Ky.
2018)). Class certification is one such issue. CR 23.06 (“An order granting or
denying class action certification is appealable within 10 days after the order is
entered.”). Sovereign immunity is another, because immunity “entitles its
possessor to be free ‘from the burdens of defending the action, not merely . . . from
liability.’” Prater, 292 S.W.3d at 886 (citing Rowan Cnty. v. Sloas, 201 S.W.3d
469, 474 (Ky. 2006); Lexington-Fayette Urb. Cnty. Gov’t v. Smolcic, 142 S.W.3d
128, 135 (Ky. 2004)) (modification original).
All persons who, since January 1, 2009, were subjected to actions taken or threatened by Defendants to collect on health care accounts with the University of Kentucky, including Kentucky Medical Services Foundation accounts, pursuant to KRS 45.237, 45.238, 45.241, or any other statutory authority, and who did have money collected from them by the Department of Revenue as a result or consequence of such actions.
R. at 1840.
-7- Appellees argue the sovereign immunity issue is not properly before
this Court for our review. We disagree. The circuit court plainly ruled on
sovereign immunity as a threshold issue in this dispute in its August 15, 2022
order. The Department indicated it would raise the immunity issue in its notice of
appeal. And, analysis of both the interlocutory issues of class certification and
sovereign immunity will promote efficient and economic resolution of this matter.
Because the circuit court has not entered a final judgment, our review
in this interlocutory appeal is limited to the issues of class certification and
sovereign immunity. This requires us to proceed with caution. “We must focus
our analysis on th[ese] limited issue[s] and in so doing scrupulously respect the
limitations of the crossover between” an analysis on the merits of Appellees’ case
and the issues raised on this interlocutory appeal. Hensley, 549 S.W.3d at 436.
While we note the circuit court has made partial rulings on the merits of Appellees’
case, those issues are beyond the scope of our review. We will discuss the issues
of class certification and sovereign immunity in turn.
I. Class Certification
Standard of Review
Appellate courts review class action certifications for abuse of
discretion. Sowers v. Atkins, 646 S.W.2d 344, 346 (Ky. 1983). A circuit court has
abused its discretion when its “decision is arbitrary, unreasonable, unfair, or
-8- unsupported by [sound] legal principles.” Lawson v. Lawson, 290 S.W.3d 691,
694 (Ky. App. 2009) (citing Goodyear Tire & Rubber Co. v. Thompson, 11 S.W.3d
575, 581 (Ky. 2000)). “Under this standard, we review the record and the ruling
while giving deference to the trial court’s factual findings and rulings because the
trial court is in the best position to evaluate the evidence before it.” Nebraska All.
Realty Co. v. Brewer, 529 S.W.3d 307, 311 (Ky. App. 2017) (citing Miller v.
Eldridge, 146 S.W.3d 909, 917 (Ky. 2004)). The abuse of discretion standard
requires appellate courts to be “highly deferential” to a circuit court’s decision. Id.
at 315. “An abuse of discretion exists when the reviewing court is firmly
convinced that a mistake has been made.” Walters v. Moore, 121 S.W.3d 210, 215
(Ky. App. 2003) (quoting Romstadt v. Allstate Ins. Co., 59 F.3d 608, 615 (6th Cir.
1995)).
Class Certification Analysis
“Taken together, [CR 23.01 and 23.02] provide a comprehensive
roadmap to class certification.” Swearington v. Hagyard Davidson McGee
Assocs., PLLC, 641 S.W.3d 186, 195 (Ky. App. 2022). These rules synthesize to
form a two-step analysis. First, each of CR 23.01’s prerequisites must be met and,
second, one of CR 23.02’s three conditions must apply. Manning v. Liberty Tire
Servs. of Ohio, LLC, 577 S.W.3d 102, 111 (Ky. App. 2019). If one of CR 23.01’s
requirements is not satisfied, or if none of CR 23.02’s requirements are satisfied,
-9- then class certification should be denied. Id. “The party seeking certification bears
the burden of proof.” Summit Med. Grp. Inc. v. Coleman, 599 S.W.3d 445, 449
(Ky. App. 2019) (citations omitted).
A. CR 23.01
As CR 23.01 provides:
Subject to the provisions of Rule 23.02, one or more members of a class may sue or be sued as representative parties on behalf of all only if (a) the class is so numerous that joinder of all members is impracticable, (b) there are questions of law or fact common to the class, (c) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (d) the representative parties will fairly and adequately protect the interests of the class.
CR 23.01. “The four requirements in CR 23.01 to maintaining a class action can
be summed up as numerosity, commonality, typicality, and adequacy of
representation requirements.” Hensley, 549 S.W.3d at 443-44 (citing Brewer, 529
S.W.3d at 311) (emphasis original). Because Appellants do not challenge the
numerosity of Appellees’ proposed class, we will limit our discussion to the
remaining three.
1. Commonality
Commonality exists where “questions of law or fact are common
among the class members.” Brewer, 529 S.W.3d at 312; CR 23.01. Commonality
is not the same as identity; “[i]t is unnecessary to have a ‘complete identity of facts
-10- relating to all members as long as there is a common nucleus of operative facts.’”
Manning, 577 S.W.3d at 113 (quoting Wiley v. Adkins, 48 S.W.3d 20, 23 (Ky.
2001)). Indeed, commonality “does not require that all questions of law or fact be
common.” Wiley, 48 S.W.3d at 23. Instead, the relevant inquiry is “[w]hether the
class plaintiffs’ claims ‘depend upon a common contention . . . that is capable of
class wide resolution – which means that determination of its truth or falsity will
resolve an issue that is central to the validity of each one of the claims in one
stroke.’” Hensley, 549 S.W.3d at 443 (quoting Wal-Mart Stores, Inc. v. Dukes,
564 U.S. 338, 350, 131 S. Ct. 2541, 2551, 180 L. Ed. 2d 374 (2011)) (modification
original).
The circuit court identified several considerations common to the
class. At core, the circuit court noted Appellants used KRS 45.237 to 45.238 to
institute collection actions. It noted the Department used this authority to collect
from Appellees’ bank accounts, wages, and tax refunds, unless the Appellee began
making payments himself or herself. And, the circuit court listed several questions
common to each Appellee and class member, including whether UK had statutory
authority to refer these debts to the Department for collection and whether the
Department had the statutory authority to collect those debts; these questions will
be met with the same defenses from Appellants.
-11- In our view, the commonality requirement has been met in the instant
case. We agree with Appellees that UK and the Department engaged in common
actions to collect unpaid balances: after repeated notices, the final “Letter 8” is
sent, and eligible accounts are referred to the Department for collection should the
Letter 8 prove ineffective. Unpaid balances were either obtained forcefully or by
agreement upon the debtor’s entry into a payment plan. Any ruling by the circuit
court as to the authority of Appellants to collect unpaid debts in this manner would
indeed result in class wide resolution of that issue for each class member. The
circuit court did not abuse its discretion in determining the commonality
requirement had been met.
2. Typicality
“Unlike commonality, which focuses on the group characteristics such
as the relationship of common facts and legal issues related to the class as a whole,
typicality examines the individual characteristics of the named plaintiffs in relation
to the class.” Manning, 577 S.W.3d at 114. Claims or defenses are typical “if they
arise from the same event, practice, or course of conduct that gives rise to the
claims of other class members and if the claims of the representative are based on
the same legal theory.” Hensley, 549 S.W.3d at 443 (citation omitted). In other
words, the legal claims of the class representatives and the individual class
members must share a “sufficient nexus[.]” Brewer, 529 S.W.3d at 312 (quoting
-12- Piazza v. Ebsco Indus., Inc., 273 F.3d 1341, 1346 (11th Cir. 2001)). “As with
commonality, the claims need not be identical, and ‘cases challenging the same
unlawful conduct which affects both the named plaintiffs and the putative class
usually satisfy the typicality requirement irrespective of the varying fact patterns
underlying the individual claims.’” Id. at 313 (quoting Baby Neal for & by Kanter
v. Casey, 43 F.3d 48, 58 (3d Cir. 1994)).
Appellees claims indeed arise from the same event, practice, or course
of conduct that give rise to other class members’ claims: UK and the Department’s
practice of referring unpaid medical debt for collection purposes, which Appellees
assert is done without statutory authority to do so. As discussed in our analysis of
the commonality requirement, the manner in which UK and the Department
interfaced with Appellees was fundamentally the same: repeated notices, a final
notice, referral to the Department, and then either institution of collection action or
a payment plan. The method of communication with each class member prior to
UK’s referral to the department, and the Department’s course of conduct following
referral, was fundamentally the same across Appellees and class members.
Further, Appellees’ claims each rest on the same legal theories.
Chiefly, Appellees argue that UK lacks authority to refer its debts to the
Department because it is not a KRS 45.237 agency, and that KRS 45.237 and
45.238 are violative of both the United States and Kentucky Constitutions. While
-13- trivial differences exist between each Appellee’s particular circumstances – for
instance, each Appellee except Marcum entered a payment plan with the
Department – none of these differences frustrate typicality. Appellees’ claims are
typical of those of the class, and the circuit court ‘s conclusion in this regard was
not an abuse of discretion.
3. Adequacy of Representation
Finally, class representatives must “fairly and adequately protect the
interests of the class.” Manning, 577 S.W.3d at 115; CR 23.01. The adequacy
requirement contains two considerations: “1) the representative must have
common interests with unnamed members of the class[;] and 2) it must appear that
the representatives will vigorously prosecute the interests of the class through
qualified counsel.” Brewer, 529 S.W.3d at 313 (quoting Senter v. Gen. Motors
Corp., 532 F.2d 511, 525 (6th Cir. 1976)). Naturally, this requirement overlaps
with the commonality and typicality requirements; how could class members
ensure named plaintiffs will adequately represent their interests if they do not share
common questions of law or fact, or if the claims of the named plaintiffs’ claims
are not typical of those of the class? However, adequacy additionally requires us
to determine whether named plaintiffs have any significant conflicts of interests
with other class members. Id. (citing Hensley, 549 S.W.3d at 443). While this
prong ordinarily requires our examination of both named class representatives and
-14- class counsel, id., Appellants do not challenge the adequacy of their opponents’
counsel. Therefore, our inquiry will focus upon Appellees themselves.
As already stated, Appellees and other class members were subject to
Appellants’ collection procedures, and it is these procedures which Appellees
challenge. This challenge will require resolution of questions of law common to
all class members, named and unnamed. Accordingly, Appellees have common
interests with the unnamed class members sufficient to certify the class action.
Further, Appellees have no conflicts of interest with other class members which
would prevent Appellees from adequately representing the class. The circuit
court’s ruling on adequacy does not reflect an abuse of discretion.
B. CR 23.02
Again, one of CR 23.02’s three requirements must be met for class
certification to be appropriate. Appellees moved for, and were granted, class
certification under CR 23.02(c). Accordingly, our review will be limited to
whether class certification under CR 23.02(c) was appropriate.
CR 23.02(c) contains two requirements for class certification:
predominance and superiority. See CR 23.02(c); Manning, 577 S.W.3d at 116 (“A
CR 23.02(c) class must satisfy a two-part test of predominance and superiority.”).
As for the predominance prong, the rule requires that “the questions of law or fact
common to the members of the class predominate over any questions affecting
-15- only individual members[.]” CR 23.02(c). “[I]n contrast to CR 23.01’s
commonality requirement, CR 23.02(c)’s predominance criterion is far more
demanding.” Manning, 577 S.W.3d at 118 (citing Amchem Prods., Inc. v.
Windsor, 521 U.S. 591, 624, 117 S. Ct. 2231, 2250, 138 L. Ed. 2d 689 (1997)).
The predominance requirement is satisfied “if resolution of some of
the legal or factual questions for class-wide resolution can be achieved using
generalized proof, and if these particular issues are more substantial than those
requiring individualized proof.” Id. at 116 (citing Thacker v. Chesapeake
Appalachia, L.L.C., 259 F.R.D. 262, 268 (E.D. Ky. 2009)). Conversely, it has not
been satisfied if the claims of individual class members would give rise to
idiosyncratic issues which “would detract from the benefit of a conglomerate
approach.” Id. While this requirement may be met even if unique issues apply to
individual plaintiffs, “[t]he predominance inquiry ‘asks whether the common,
aggregation-enabling, issues in the case are more prevalent or important than the
non-common, aggregation-defeating, individual issues.’” Tyson Foods, Inc. v.
Bouaphakeo, 577 U.S. 442, 453, 136 S. Ct. 1036, 1045, 194 L. Ed. 2d 124 (2016)
(quoting 2 W. RUBENSTEIN, NEWBERG ON CLASS ACTIONS § 4:49, pp. 195-96 (5th
ed. 2012)).
In Manning v. Liberty Tire Services of Ohio, LLC, a tire fire at a
facility operated by Liberty Tire Services deposited soot, ash, and other
-16- particulates onto surrounding neighborhoods. Manning, 577 S.W.3d at 108. An
estimated 2,500 individuals were exposed. Id. at 109. The appellants, residents of
the area, sought class certification. Id. They sought certification of two sub-
classes; the first related to a shelter-in-place order, and the second related to
particulate smoke exposure. Id. The circuit court determined the CR 23.02(c)
requirements were not met, and a panel of this court agreed. Id. at 108-09. The
individualized questions which would have to be resolved for each plaintiff
included:
whether soot and ash actually landed on the property of the individual class member living within the geographical boundaries of the plume; whether the source of the soot and ash was the Appellees’ fire; whether soot and ash caused damage; whether the [shelter-in-place] order impacted the individual putative class member’s ability to enjoy his or her property, and even whether the individual plaintiffs obeyed the [shelter-in-place] order.
Id. at 117. Though common questions existed, several individualized questions
related to causation, impact, and damages would require separate, often differing
answers as to each appellant. Id. For that reason, we determined the circuit court
did not abuse its discretion in determining common issues did not predominate
individual issues. Id. at 118.
The issues relating to the individual class members in Manning
contrast with those presented in the present appeal. Here, Appellees challenge an
identical pattern of conduct in which Appellants engaged for each class member.
-17- Unlike the appellants in Manning, where several individualized questions of fact
regarding pollutant exposure would have frustrated resolution of a class action, the
instant case presents a much higher degree of uniformity. The communications
and notices UK sent each class member were pursuant to a standardized procedure.
The Department’s methods of seeking repayment of referred debts took one of two
forms: collection or a payment plan. And, the legal challenges pertinent to each
class member are the same, as detailed previously. While some variation exists
between the circumstances relevant to each Appellee and class member, the
common questions of law and fact predominate. The circuit court did not abuse its
discretion in this conclusion.
Second, CR 23.02(c) requires class action to be “superior to other
available methods for the fair and efficient adjudication of the controversy.” CR
23.02(c). The rule provides four “matters pertinent to” the superiority inquiry:
(i) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (ii) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (iii) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (iv) the difficulties likely to be encountered in the management of a class action.
CR 23.02(c). In short, “[t]he superiority requirement asks the court to balance, in
terms of fairness and efficiency, the merits of a class action against those of
alternative available methods of adjudication.” In re Prudential Ins. Co. America
-18- Sales Practice Litigation Agent Actions, 148 F.3d 283, 316 (3d Cir. 1998) (internal
quotation marks and citations omitted).
As the circuit court found, the typical class member incurred
relatively minor damages, which, when weighed against the expense required for
an individual class member to litigate his or her claims separately, would promote
interest in the resolution of this matter via class action. It found a class action
would promote efficiency because controlling issues common to each class
member would be resolved at once rather than through separate actions which
could number into the hundreds or thousands. We cannot say these considerations
constitute an abuse of discretion by the circuit court in determining whether a class
action would be the superior vehicle to adjudicate this controversy.
In sum, we detect no reversible error in the circuit court’s decision to
certify this class. As the circuit court found, questions of law or fact are common
across class members, Appellees’ claims are typical of the class, and Appellees
would adequately represent class interests. Further, it found common issues
predominate over individual issues, and a class action would be the superior
method of resolution of this dispute. None of these conclusions demonstrate an
abuse of discretion, and we therefore affirm the circuit court’s order granting class
certification.
-19- II. Sovereign Immunity5
Whether sovereign immunity applies is a question of law. Ohio v.
Great Lakes Minerals, LLC, 597 S.W.3d 169, 171 (Ky. 2019) (citing Rowan Cnty.
v. Sloas, 201 S.W.3d 469, 475 (Ky. 2006)). Questions of law are reviewed de
novo. Id. (citing Cumberland Valley Contractors, Inc. v. Bell Cnty. Coal Corp.,
238 S.W.3d 644, 647 (Ky. 2007)).
Sovereign Immunity Analysis
Before we begin our review, we note the similarity between this
appeal and its companion consolidated appeal, University of Kentucky, et al. v.
Kimberly Bennett, et al., No. 2022-CA-1276-MR, Commonwealth of Kentucky, et
al. v. Kimberly Bennett, et al., No. 2022-CA-1321-MR, and Commonwealth of
Kentucky, Dep’t of Revenue v. Kimberly Bennett, et al., No. 2022-CA-1321-MR.
Therein, the same circuit court determined sovereign immunity was waived for
suits challenging referral of educational debts held by public educational
5 “Sovereign immunity” and “governmental immunity” are different concepts. Governmental immunity is derived from sovereign immunity. Yanero v. Davis, 65 S.W.3d 510, 519 (Ky. 2001) (citing 57 AM.JUR.2D Municipal, County, School and State Tort Liability § 10 (2001)). “However, to the extent that the agency is performing a governmental function, as a state university does, its governmental immunity is functionally the same as sovereign immunity.” Furtula v. Univ. of Kentucky, 438 S.W.3d 303, 305 n.1 (Ky. 2014) (citing Yanero, 65 S.W.3d at 519). Because these immunities are “functionally the same” in the context of this appeal, id., and the terms are often used interchangeably, see Yanero, 65 S.W.3d at 519, we will refer to the form of immunity at issue in this appeal as “sovereign immunity.”
-20- institutions to the Department via the same KRS 45.237 et seq. procedure.
However, the circuit court identified a different sovereign immunity waiver in
Bennett than it did in the present appeal. Therefore, our analysis herein will cover
much of the same ground as in Bennett, but will not be identical.
“Sovereign immunity is a bedrock component of the American
governmental ideal, and is a holdover from the earliest days of the Commonwealth,
having been brought over from the English common law.” Caneyville Volunteer
Fire Dept. v. Green’s Motorcycle Salvage, Inc., 286 S.W.3d 790, 799 (Ky. 2009).
Legal actions may only be maintained against the Commonwealth where immunity
has been waived. Yanero, 65 S.W.3d at 518 (citing RESTATEMENT (SECOND) OF
THE LAW OF TORTS § 895B(1) (A.L.I. 1979); 72 AM.JUR.2D States, Territories, and
Dependencies § 99 (1974)).
Immunity is not simply a defense. Where it applies, it “affords the
state absolute immunity from suit[.]” Transit Auth. of River City v. Bibelhauser,
432 S.W.3d 171, 173 (Ky. App. 2013). This means, rather than simply absolving
the state from liability, the immune party is free “from the burden of defending
oneself altogether.” Smolcic, 142 S.W.3d at 135 (quoting Fralin & Waldron, Inc.
v. Henrico Cnty., Va., 474 F. Supp. 1315, 1320 (D.C. Va. 1979)). By extension,
those afforded sovereign immunity do not have to incur the expenses arising from
trial and discovery. Id. (citing Harlow v. Fitzgerald, 457 U.S. 800, 817-18, 102 S.
-21- Ct. 2727, 2738, 73 L. Ed. 2d 396 (1982)). Indeed, “the essence of absolute
immunity is its possessor’s entitlement not to have to answer for his conduct in a
civil damages action.” Mitchell v. Forsyth, 472 U.S. 511, 525, 105 S. Ct. 2806,
2815, 86 L. Ed. 2d 411 (1985) (citations omitted).
UK and its officers who were sued in their official capacities are
subject to the protections of sovereign immunity, so long as immunity has not been
waived. “The state universities of this Commonwealth, including the University of
Kentucky, are state agencies that enjoy the benefits and protection of governmental
immunity except where it has been explicitly waived by the legislature.” Furtula,
438 S.W.3d at 305; see also Withers v. Univ. of Kentucky, 939 S.W.2d 340, 344
(Ky. 1997) (“[The] University of Kentucky is entitled to sovereign immunity.”).
And because the Commonwealth is the real party against which relief is sought,
immunity “extends to public officials sued in their representative (official)
capacities[.]” Yanero, 65 S.W.3d at 518 (citations omitted).
“[T]he granting of waiver is a matter exclusively legislative.”
Withers, 939 S.W.2d at 344. “It is an inherent attribute of a sovereign state that
precludes the maintaining of any suit against the state unless the state has given its
consent or otherwise waived its immunity.” Yanero, 65 S.W.3d at 517 (citing
RESTATEMENT (SECOND) OF THE LAW OF TORTS § 895B(1) (A.L.I. 1979); 72
AM.JUR.2D States, Territories, and Dependencies § 99 (1974)). Waiver of
-22- immunity must be “specific and explicit[.]” Commonwealth v. Whitworth, 74
S.W.3d 695 (Ky. 2002) (citing Withers, 939 S.W.2d 340). Purported statutory
waivers are strictly construed in favor of the government, and waiver will only be
identified where “the intention of the legislature to effect this object is clearly
expressed.” Lexington-Fayette Urb. Cnty. Gov’t Bd. of Health v. Bd. of Trustees of
Univ. of Kentucky, 879 S.W.2d 485, 486 (Ky. 1994) (citations omitted). Waivers
of immunity are construed narrowly. Commonwealth, Just. & Pub. Safety Cabinet,
Dep’t of Kentucky State Police v. Gaither, 539 S.W.3d 667, 676 (Ky. 2018). “We
will find waiver only where stated ‘by the most express language or by such
overwhelming implications from the text as [will] leave no room for any other
reasonable construction.’” Withers, 939 S.W.2d at 346 (quoting Murray v. Wilson
Distilling Co., 213 U.S. 151, 171, 29 S. Ct. 458, 464-65, 53 L. Ed. 742 (1909))
(modification original).
In University of Kentucky v. Moore, the Kentucky Supreme Court
recognized exceptions to sovereign immunity for declaratory and injunctive relief.
599 S.W.3d 798, 811 (Ky. 2019) (citing Beshear v. Haydon Bridge Co., Inc., 416
S.W.3d 280, 293-94 (Ky. 2013)). As noted above, Appellees seek a variety of
declaratory and injunctive relief. However, as explained below, application of
sovereign immunity requires a closer look at the nature of the specific relief
sought.
-23- The circuit court determined sovereign immunity does not apply
because Appellees do not actually seek monetary damages, but instead seek the
return of money to which UK and the Department were never entitled. The circuit
court determined the funds at issue “never vested with the state treasury[,]” R. at
1366, and, therefore, Appellees actually seek a return of their own private funds
rather than withdrawal of public funds. And, the circuit court finds further support
for its blanket waiver in KRS 45.111, which provides that “[a]ny funds received
into the State Treasury which are later determined not to be due to the state may be
refunded to the person who paid such funds into the Treasury.” KRS 45.111.
The cases that the circuit court cites for its distinction between
lawsuits seeking return of private funds as opposed to payment out of public funds
– Ross v. Gross, 188 S.W.2d 475 (Ky. 1945), Barnes v. Levy Bros., 175 S.W.2d
495 (Ky. 1943), Barnes v. Stearns Coal & Lumber Company, 175 S.W.2d 498 (Ky.
1943), and Great Atlantic & Pacific Tea Company v. Lexington, 76 S.W.2d 894
(Ky. 1934) – make no mention of sovereign immunity or any waiver thereof.
Instead, the circuit court provides these cases as an analogy to the relief sought in
the present case. For instance, in Great Atlantic & Pacific Tea Co., Great Atlantic
sued the city of Lexington for its payment of $2,106.20 in cigarette license taxes
which no ordinance required. 76 S.W.2d at 894. Lexington argued “that there is
no implied promise of a municipality to refund money paid to it and that there is no
-24- authority of a statute – the source of all its powers – for such refund.” Id. at 895.
Ultimately, the Court of Appeals, then the highest court in Kentucky, concluded
that “[m]oney paid without consideration and which in law, honor, or good
conscience was not payable ought in law, honor, and good conscience to be
recoverable, and that rule applicable to transactions between individuals should be
generally made applicable to municipalities and other governments.” Id. We find
these cases less helpful to resolve the sovereign immunity issue than did the circuit
court.
Instead, more recent jurisprudence directly discusses the sovereign
immunity issue and provides more helpful guidance. Ultimately, upon exploration
of this jurisprudence and its application to the various relief Appellees seek, we
conclude, in sum, that sovereign immunity bars monetary relief but does not bar
declaratory relief. However, where a plaintiff seeks a declaration that they are
entitled to monetary relief –as Appellees seek here – such monetary relief is
disguised as declaratory relief and is similarly barred. And, because Appellees
have not yet obtained any final judgment declaring that Appellants’ debt referral
and collection scheme is contrary to law for any of the reasons that Appellees
argue, the question of whether sovereign immunity bars monetary relief sought
pursuant to such declaratory judgment is unripe.
-25- A. Sovereign Immunity Bars Appellees’ Requested Monetary Relief and Declarations that Appellees are Entitled to Monetary Relief.
The circuit court believes Beshear v. Haydon Bridge Co. Inc., 416
S.W.3d 280 (Haydon Bridge II)6 to be so factually disanalogous to the present case
that it provides no guidance. We disagree. Haydon Bridge II is quite instructive
and makes plain that the nature of the relief which a plaintiff seeks must be closely
examined to determine whether sovereign immunity applies. Further still, Haydon
Bridge II is helpful for its discussion of KRS 45.111 – the statute upon which the
circuit court partially relies in concluding sovereign immunity does not apply.
In Haydon Bridge II, the plaintiffs contested the suspension of
appropriations from the General Fund to the Kentucky Workers’ Compensation
Funding Commission’s Benefit Reserve Fund (BRF) and transferring money from
the BRF to other state funds. 416 S.W.3d at 283-84. The Governor argued
sovereign immunity barred: (1) injunctive relief prohibiting movement of funds
out of the BRF into the General Fund or to other state agencies; and (2)
“retroactive injunctive relief” returning “any and all monies that had been
6 Haydon Bridge II is the second appeal arising from a lawsuit filed by Haydon Bridge Company, Inc., Greater Louisville Auto Dealers Association, Kentucky Automobile Dealers Association, M & M Cartage Co., Inc., Springfield Laundry & Dry Cleaners, Inc., and Usher Transport, Inc. against the Governor and the State Budget Director. Haydon Bridge II, 416 S.W.3d at 284. The plaintiffs requested a declaration that provisions in budget bills suspending an annual appropriation from the General Fund to the BRF and transferring money out of the BRF were unconstitutional. The Kentucky Supreme Court determined the suspension of appropriations to the BRF was constitutional, but that the bills’ transfers of money out of the BRF were not. Id. The second appeal resulted from the plaintiffs’ amended complaint upon remand. Id. at 285-86.
-26- transferred from the BRF to the General Fund in the decade from 2000-2010.” Id.
at 284.
The plaintiffs in Haydon Bridge II argued KRS 45.111 waived
sovereign immunity against their claims because it provides for repayment of funds
not due to the state. Id. at 289. However, the workers’ compensation insurance
premiums at issue were “literally ‘due to the state’” because they were lawfully
subject to assessment. Id. And, because the plaintiffs did not seek a refund of their
premiums directly but, rather, requested the amounts moved from the BRF be
restored, the Kentucky Supreme Court determined KRS 45.111 did not apply to the
funds at issue. Id. at 289-91. Though the Supreme Court did determine that KRS
45.111 supplied “a limited waiver of sovereign immunity,” id. at 291, it was not
required to explain the parameters of this waiver due to the inapplicability of KRS
45.111. This marks an important distinction between Haydon Bridge II and the
instant appeal, as Appellees assert the amounts collected for healthcare services
were not due to the state.
Appellees seek two kinds of relief to which Haydon Bridge II’s
distinction between prospective declaratory relief and retroactive injunctive relief
applies. They seek prospective declaratory relief in the form of a declaration that
Appellants’ referral and collection program is illegal, whether statutorily,
constitutionally, or both. They also seek the sort of “retroactive injunctive relief”
-27- that Haydon Bridge II contemplates in the form of an order directing the return of
their money. The Supreme Court determined the retroactive injunctive relief at
issue in Haydon Bridge II – an order directing money transferred out of the BRF be
returned to it – is barred by sovereign immunity “regardless of whether it is labeled
a retroactive injunction, equitable restitution, or some other type of remedy.” Id. at
294-95. This is because such relief “would require the Commonwealth to
withdraw monies from the General Fund, an action the Commonwealth has not
consented to through waiver of its sovereign immunity.” Id. at 294.
In its discussion of sovereign immunity, the circuit court in the
present appeal concluded that KRS 45.111 “confirms that the funds paid into the
Treasury that are not due to the state should be refunded[.]” R. at 1367. While
Haydon Bridge II mentions that KRS 45.111 provides a limited waiver of
sovereign immunity, 416 S.W.3d at 291, the Supreme Court was not required to
explain the parameters of this waiver. However, we cannot read Haydon Bridge II
to arrive at two opposite conclusions: that sovereign immunity does not apply to
claims for monetary relief – including claims for equitable restitution or for an
injunction ordering the return of money – while also concluding sovereign
immunity applies to relief which would require withdrawal from the state treasury.
See Haydon Bridge II, 416 S.W.3d at 292-94.
-28- Central to the circuit court’s conclusions that sovereign immunity
does not apply here is its determination that Appellees’ collected money had not
vested with the Commonwealth. This is indeed an important factual distinction
between this case and Haydon Bridge II. In Ross – a case upon which the circuit
court relies and the Supreme Court discusses in Haydon Bridge II – money was
paid into the state treasury pursuant to a statute requiring such payment should the
population of a county total 75,000 or greater. Ross, 188 S.W.2d at 476. Because
Harlan County had a population of less than 75,000, plaintiffs sought the return of
money mistakenly paid pursuant to that statute. Id. Ultimately, the Ross court
concluded that “since the money belonged to the appellees or the County, its
payment into the State Treasury did not vest the State with title thereto or a right to
its custody” and, therefore, that Section 230 of the Kentucky Constitution’s
prohibition against drawing money from the State Treasury absent an appropriation
made by law did not apply. Id. at 477.
Ross makes no mention of sovereign immunity, however. In effect,
therefore, the circuit court concluded that, because the source of Appellees’ relief
would be repayment of their own money rather than withdrawal from the state
treasury, sovereign immunity does not apply. We disagree, as sovereign immunity
is not waived simply because relief would not be drawn from the state treasury.
Again, sovereign immunity “is an inherent attribute of a sovereign state that
-29- precludes the maintaining of any suit against the state unless the state has given its
consent or otherwise waived its immunity.” Yanero, 65 S.W.3d at 517.
Because sovereign immunity is an inherent attribute of the state,
Sections 230 and 231 of the Kentucky Constitution do not imply that sovereign
immunity does not apply to suits against the Commonwealth seeking to recover
funds from sources other than the treasury.
[C]ontrary to assertions sometimes found in our case law, Sections 230 and 231 of our Constitution are not the source of sovereign immunity in Kentucky, but are provisions that permit the General Assembly to waive the Commonwealth's inherent immunity either by direct appropriation of money from the state treasury (Section 230) and/or by specifying where and in what manner the Commonwealth may be sued (Section 231).
Yanero, 65 S.W.3d at 524. The characterization of the money collected from
Appellees as having vested with the Commonwealth or not is not relevant to the
sovereign immunity issue. Because there has been no direct appropriation
directing the return of Appellees’ money, and, as discussed above, the general
assembly has not waived sovereign immunity against suits seeking repayment of
money wrongfully paid – by enacting KRS 45.111 or otherwise –sovereign
immunity bars Appellees’ requested relief in the form of an order directing the
return of the money at issue.
As for Appellees’ requested declarations that they are entitled to an
order and judgment which returns the collected funds, as well as to the “equitable
-30- remedy of restitution,” R. at 657-58, we conclude such relief is monetary relief
disguised as declaratory relief. The rationale in Haydon Bridge II applies: we
must look to the nature of the requested declarations to determine whether
sovereign immunity prohibits it. The Kentucky Supreme Court determined
requests for equitable restitution and retroactive injunctive relief were effectively
requests for monetary damages, and therefore barred. By extension, Appellees’
requested declarations that they are entitled to an order and judgment returning
money they paid and that they are entitled to equitable restitution is also barred.
Therefore, Appellees’ requested monetary relief – both their requests
for injunctive relief and those requests for declaratory relief discussed above – is
barred by sovereign immunity and the circuit court erred in applying a blanket
waiver of sovereign immunity.
B. Sovereign Immunity Does Not Bar Appellees’ Remaining Requested Declaratory Relief.
Appellees seek other declarations from the circuit court. They seek
declarations that UK is not statutorily authorized to refer debt to the Department
for collections, that the challenged KRS Chapter 45 referral and collection scheme
is unconstitutional both facially and as applied, and that the Department was not
entitled to impose collection fees. Rather than requests for monetary relief, these
declarations, if granted, would declare Appellees’ legal rights, and sovereign
immunity does not bar such relief.
-31- The distinction again lies in the nature of the requested relief. “[A]
declaratory judgment action is not a claim for damages, but rather it is a request
that the plaintiff’s rights under the law be declared.” Commonwealth v. Kentucky
Ret. Sys., 396 S.W.3d 833, 838 (Ky. 2013). “There is no harm to state resources
from a declaratory judgment.” Id. Despite the above discussion of sovereign
immunity in relation to money damages, “[w]e do not have a government that is
beyond scrutiny.” Id. at 839. Rather, the government is “subject to appropriate
scrutiny[,]” because “[i]f sovereign immunity can be used to prevent the state,
through its agencies, from being required to act in accordance with the law, then
lawlessness results.” Id.
The Kentucky Declaratory Judgment Act, found in KRS Chapter 418,
contemplates that a declaratory judgment may be obtained even if other kinds of
relief are foreclosed:
In any action in a court of record of this Commonwealth having general jurisdiction wherein it is made to appear that an actual controversy exists, the plaintiff may ask for a declaration of rights, either alone or with other relief; and the court may make a binding declaration of rights, whether or not consequential relief is or could be asked.
KRS 418.040. The Declaratory Judgment Act “is intended to be remedial in
nature, and its purpose is to make courts more serviceable to the people by way of
settling controversies and affording relief from uncertainty and insecurity with
-32- respect to rights, duties and relations.” Mammoth Med., Inc. v. Bunnell, 265
S.W.3d 205, 209 (Ky. 2008).
The same statutory referral and collection program challenged in the
present appeal was at issue in the recent University of Kentucky v. Moore, 599
S.W.3d 798. In the exact manner as the present appeal, UK certified healthcare
debt and referred it to the Department for collection using the KRS 45.237 et seq.
mechanism. 599 S.W.3d at 800-01. Ultimately, and unlike the current case,
Moore amended her complaint to only seek declaratory relief. Id. at 801-02.
Moore therefore did not seek monetary relief, and instead requested the following
declaration:
UK and UK HealthCare may not legally refer Moore’s debt to the Enterprise Collections Office for collection and consequently the Department of Revenue and/or the Enterprise Collections Office may not legally undertake efforts to collect debt owed to UK, including efforts such as garnishing Moore's bank accounts, wages and tax refunds.
Id. at 801 (footnotes omitted).
Relevant to the current appeal, the Supreme Court determined
Moore’s declaratory relief was not barred by sovereign immunity. Id. at 810.
Consistent with Retirement Systems, the Supreme Court determined a declaratory
judgment action may be sustained “when a person’s rights are affected by a statute
or other government regulation.” Id. It noted that, following a declaratory
-33- judgment, “further relief based upon that declaration may be granted whenever
necessary or proper” whether in the same proceeding or by separate action. Id.
(citing KRS 418.055). And, whether relief derived from a declaratory judgment
will be or may be pursued, “declaratory relief is not predicated on whether
associated future consequential relief may be requested.” Id. at 812.
Therefore, Appellees’ requested declaratory relief – except for that
relief identified previously as being, in truth, monetary relief – is not barred by
sovereign immunity. Though the circuit court erred in exempting Appellees’
claims from sovereign immunity on a wholesale basis, it did not err in exempting
Appellees’ requested declaratory relief.
C. Whether or Not Sovereign Immunity Bars Monetary Relief Flowing from a Declaratory Judgment is an Unripe Issue.
Both Moore and Retirement Systems are distinct from the present
appeal in an important respect: here, Appellees seek relief other than declaratory
relief, while the plaintiffs in Moore and Retirement Systems only sought
declaratory relief. Id. at 801-02, Ret. Sys., 396 S.W.3d at 836. However,
sovereign immunity bars the monetary relief Appellees immediately request but
does not bar their sought-after declaratory relief – except as previously discussed.
Because Appellees request multiple forms of relief, we are required to apply
sovereign immunity in relation to each form of relief, rather than using an all-or-
nothing approach.
-34- This leads us to the next issue, which the Moore Court discussed:
whether sovereign immunity functions as a bar to monetary relief flowing from a
declaratory judgment. Moore, 599 S.W.3d at 813. Despite noting “it is also true
that in subsequent . . . actions to enforce declared rights, the immunity issue could
be relevant if the revenue or property of the state would be affected[,]” the
Supreme Court determined this issue to be unripe. Id. at 813 (modification
original) (quoting Ret. Sys., 396 S.W.3d at 838). It observed several necessary
questions were not yet resolved, including UK’s status as an agency for purposes
of KRS 45.237 et seq. Id.
The circuit court in Moore had already entered a declaratory judgment
in the underlying action, which the Supreme Court determined was an act within
the circuit court’s jurisdiction. Id. In the instant case, the circuit court has ruled on
select issues on the merits, including holding that UK was not entitled to refer
debts to the Department for collection. R. at 1360-69. However, Appellees’
challenges to the constitutionality of KRS 45.237 et seq. are still pending. And,
Appellees have yet to pursue monetary relief flowing from a declaratory judgment
– which the circuit court has yet to enter. “The Court will not render advisory
opinions or consider matters which may or may not occur in the future.” Id. at 812
(quoting Nordike v. Nordike, 231 S.W.3d 733, 739 (Ky. 2007)). Because this issue
is unripe, we decline to examine it.
-35- CONCLUSION
Based on the foregoing, we affirm the Franklin Circuit Court’s March
28, 2023 order granting class certification. Additionally, we affirm in part and
reverse in part the Franklin Circuit Court’s August 15, 2022 order granting partial
judgment on the pleadings regarding the sovereign immunity issue. We remand
for proceedings consistent with this Opinion.
ALL CONCUR.
BRIEFS AND ORAL ARGUMENTS BRIEF AND ORAL ARGUMENTS FOR APPELLANT FOR APPELLEES AMELIA LONG, COMMONWEALTH OF KAREN DEVIN, RICHARD KENTUCKY DEPARTMENT OF HARDY, II, SHERRIE TURNER, REVENUE: TABITHA MARCUM, AS REPRESENTATIVES OF A CLASS: R. Campbell Connell Frank L. Dempsey E. Douglas Richards Austin T. Greene Lexington, Kentucky Frankfort, Kentucky Brian C. Hicks BRIEF AND ORAL ARGUMENTS Frankfort, Kentucky FOR APPELLANT UNIVERSITY OF KENTUCKY AND PENNY COX IN HER OFFICIAL CAPACITY AS TREASURER OF THE UNIVERSITY OF KENTUCKY:
Bryan Beauman Lexington, Kentucky
-36-