RENDERED: JUNE 16, 2016 

U " .IS14-7D 

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2016-SC-000002-I 

THE KENTUCKY SHAKESPEARE FESTIVAL, MOVANT 

INC. 

ON REVIEW FROM COURT OF APPEALS 

V. CASE NO. 2015-CA-001547-I 

JEFFERSON CIRCUIT COURT NO. 14-CI-003526 

BRANTLEY DUNAWAY RESPONDENT 

OPINION OF THE COURT BY JUSTICE VENTERS 

DENYING INTERLOCUTORY RELIEF 

Movant, Kentucky Shakespeare Festival, Inc. (KSF), seeks interlocutory 

relief following the Court of Appeals' denial of its CR 65.07 motion for an order 

to compel the Jefferson Circuit Court to confirm what KSF calls an "arbitration 

award" arising from an employment contract between KSF and Respondent, 

Brantley Dunaway. Upon review of KSF's motion and Dunaway's response, we 

decline to grant relief because we are persuaded that the dispute was not 

subject to an arbitration agreement and no "arbitration award" existed to be 

confirmed by the circuit court. 

I. FACTUAL AND PROCEDURAL BACKGROUND 

In May 2011, KSF, a nonprofit theatrical organization, hired Brantley 

Dunaway to serve as its director. KSF and Dunaway entered into an 

Employment Agreement which provided Dunaway with an annual salary to be 

supplemented with bonus payments each fiscal year if certain revenue 
increases were achieved. Two years later, amid accusations of impropriety, 

KSF terminated Dunaway's employment. In connection with the termination, 

the parties negotiated a Severance and Release Agreement (Severance 

Agreement) that included a provision requiring KSF to pay Dunaway the 2013 

fiscal year bonus calculated in accordance with the Employment Agreement. 

Section 5 of the Employment Agreement contained the provisions for 

Dunaway's bonus compensation. Section 5(e) is the provision that KSF 

proffers as an agreement to arbitrate. The following portions of Section 5 are 

relevant to our review: 

5(a): In addition to the Base Salary, [KSF] agrees to pay [Dunaway] 

an amount equal to ten percent (10 %) of the year over year 

increase in net revenues for education programming for each fiscal 

year of this employment agreement, computed beginning October 

1, 2012, for the fiscal year from October 1, 2011, to September 30, 

2011. . . . 

5(b): In addition to the Based Salary, [KSF] agrees to pay 

[Dunaway] an amount equal to ten percent (10%) of the year over 

year increase in net revenues for non-educational, non-grant 

revenues for each fiscal year of this employment agreement, 

computed beginning October 1, 2012, for the fiscal year from 

October 1, 2011, to September 30, 2011 . . . . 

5(e): Sound accounting principles will be used to determine the 

increases for each fiscal year, and state and federal income taxes 

will not be deducted. The parties agree to abide by the 

determination of the independent firm of certified public accountants 

currently employed by [KSF] to prepare the financial statement for 

the fiscal year in question in case of a dispute as to the true amount 

of the net profits, and each party agrees to accept such 

determination as final. 

(Emphasis added). 

2 
The independent accounting firm referred to in Section 5(e) was Deming 

Malone Livesay 85 Ostroff ("DMLO"). It is not clear whether the parties 

attempted to calculate the 2013 bonus before the dispute developed, but it is 

clear that a dispute arose, and pursuant to Section 5(e), DMLO was called 

upon to determine the "true amount of the net profits" from which the bonus 

pay would be calculated.' On February 10, 2014, KSF informed Dunaway by 

letter as follows: 

[DMLO] recently completed their audit of Kentucky Shakespeare's 

financial records for Fiscal Year 2013. As part of that audit, and 

as required by the employment contract in effect between you and 

Kentucky Shakespeare during FY13, DMLO calculated your 

performance bonus in accordance with the net revenue formulas in 

your contract as applied in prior years. They have calculated that 

no bonus is due. The detail of that calculation is attached. 

After KSF informed Dunaway that he was not entitled to a bonus for the 

2013 fiscal year, Dunaway filed suit for breach of contract. 2In response to 

Dunaway's suit, KSF asserted no claim that Dunaway's bonus calculation was 

governed by an arbitration agreement, nor did it assert that the bonus issue 

had already been resolved by binding arbitration. KSF did not file a counterclaim seeking a judicial confirmation of an arbitration award for the 2013 

bonus issue. The first reference to "arbitration" came nearly a year after the 

1It has not escaped our attention that Sections 5(a) and 5(b) base Dunaway's 

bonus pay on "net revenues" while Section 5(e) provides that when a dispute arises, 

DMLO shall determine the "true amount of the net profits." Whether the incongruity 

of "net revenue" and "net profit" is purposeful or inadvertent is not germane to our 

review. 

2Appellant also claimed entitlement under the Severance Agreement to other 

payments, but the validity of those claims is not before us. 

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suit was filed when, in June 2015, KSF filed a "Motion for Partial Summary 

Judgment and Declaratory Relief." The declaratory judgment component of 

KSF's motion requested a declaration that, pursuant to the terms of the 

Employment Agreement and the Severance Agreement, the parties must abide 

by KSF's accounting firm's "determination that Dunaway is not entitled to a 

Fiscal Year 2013 bonus" because that determination was a binding "arbitration 

award." 

Neither Section 5 nor any other part of the Employment Agreement 

specifically refers to "arbitration," nor does it mention submitting bonus 

disputes to an arbitrator or any other process of alternative dispute resolution. 

The Severance Agreement explicitly provided that the venue for any proceeding 

involving the Severance Agreement would be a "court of competent jurisdiction 

for Jefferson County, Kentucky." 

The Jefferson Circuit Court denied KSF's motion for declaratory relief, 

holding that Section 5(e) was not an agreement to forgo litigation and arbitrate 

any bonus dispute, and thus KSF was not entitled to an order of the court 

confirming DMLO's "arbitration award." KSF then sought interlocutory relief in 

the Court of Appeals pursuant to CR 65.07. The Court of Appeals agreed with 

the circuit court, concluding that Section 5(e) constituted an agreement for an 

appraisement rather than an agreement to arbitrate. 3Unsuccessful at the 

3 Black's Law Dictionary (10th ed. 2014) defines appraisement as "An 

alternative-dispute-resolution method used for resolving the amount or extent of 

liability on a contract when the issue of liability itself is not in dispute. Unlike 

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Court of Appeals, KSF brought this action pursuant to CR 65.09, which 

provides: "Any party adversely affected by an order of the Court of Appeals in a 

proceeding under Rule 65.07 or Rule 65.08 may . . . move the Supreme Court 

to vacate or modify it." KSF petitions this Court for a "declaration confirming 

the arbitration award rendered by the accounting firm[ .]" For the reasons 

stated below, we decline to do so. 

II. ANALYSIS 

KSF petitions this Court for an order compelling the Jefferson Circuit 

Court to "issue a declaration confirming the arbitration award rendered by the 

accounting firm of Deming, Malone, Livesay 86 Ostroff." Based upon our review 

of the record, we are persuaded that no arbitration agreement existed between 

KSF and Dunaway. We are satisfied that no arbitration proceeding occurred, 

and there is no arbitration award to be confirmed. 

As it did before the Court of Appeals, KSF claims before this Court that 

Section 5(e) of the Employment Agreement contains an agreement to arbitrate 

any dispute about Dunaway's annual salary bonus. The critical language of 

Section 5(e) is this sentence: 

The parties agree to abide by the determination of the independent 

firm of certified public accountants currently employed by [KSF] to 

prepare the financial statement for the fiscal year in question in 

case of a dispute as to the true amount of the net profits, and each 

party agrees to accept such determination as final. 

arbitration, appraisement is not a quasi-judicial proceeding but instead an informal 

determination of the amount owed on a contract." 

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KSF argues that Section 5(e) is a "delegation of the calculation of 

Dunaway's bonus to a third-party decision maker" which "constitute[s] an 

agreement to arbitrate, not litigate, any dispute related to Dunaway's bonus 

calculation." KSF bears the burden of proving that Section 5(e) was intended 

by the parties as an arbitration agreement, and further, that the DMLO 

determination of net profit constitutes an "arbitration award" that qualifies for 

judicial confirmation. "[A] party seeking to compel arbitration has the initial 

burden of establishing the existence of a valid agreement to arbitrate." Ping v. 

Beverly Enterprises, Inc., 376 S.W.3d 581, 590 (Ky. 2012) (citations omitted). 

"Questions concerning the formation of an arbitration agreement are resolved 

in accordance with the applicable state law governing contract formation." 

Extendicare Homes, Inc. v. Whisman, 478 S.W.3d 306, 320 (Ky. 2015). 

We accordingly apply here the same fundamental principles of contract 

interpretation that would apply for interpreting any other type of contract. Our 

review must begin with an examination of the plain language of the 

instrument. "'In the absence of ambiguity, a written instrument will be 

enforced strictly according to its terms,' and a court will interpret the contract's 

terms by assigning language its ordinary meaning and without resort to 

extrinsic evidence." Wehr Constructors, Inc. v. Assurance Company of America, 

384 S.W.3d 680, 687 (Ky. 2012) (quoting Frear v. P.T.A. Industries, Inc., 103 

S.W.3d 99, 106 (Ky. 2003). "A contract is ambiguous if a reasonable person 
would find it susceptible to different or inconsistent interpretations." Hazard 

Coal Corporation v. Knight, 325 S.W.3d 290, 298 (Ky. 2010) (citation omitted). 

"When no ambiguity exists in the contract, we look only as far as the four 

corners of the document to determine the parties' intentions." 3D Enterprises 

Contracting Corporation v. Louisville and Jefferson County Metropolitan Sewer 

District, 174 S.W.3d 440, 448 (Ky. 2005) (citation omitted). If the language is 

ambiguous, the court's primary objective is to effectuate the intentions of the 

parties. Cantrell Supply, Inc. v. Liberty Mutual Insurance Company, 94 S.W.3d 

381, 384 (Ky. 2002). "The fact that one party may have intended different 

results, however, is insufficient to construe a contract at variance with its,plain 

and unambiguous terms." Abney v. Nationwide Mutual Insurance Company, 

215 S.W.3d 699, 703 (Ky. 2006) (quoting Cantrell, 94 S.W.3d at 385). The 

interpretation of a contract, including determining whether a contract is 

ambiguous, is a question of law to be determined de novo on appellate review. 

Id. 

Section 5 of the Employment Agreement has ambiguities, such as the 

one identified above in Footnote 1. However, the critical passage proffered by 

KSF as the arbitration clause is free of ambiguity: "The parties agree to abide 

by the determination of the independent firm of certified public accountants 

currently employed by [KSF] to prepare the financial statement for the fiscal 

year in question in case of a dispute as to the true amount of the net profits, 

and each party agrees to accept such determination as final." By its plain 

language, Section 5(e) directs that if the parties disagree on the net profit figure 

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to be used for calculating Dunaway's bonus, KSF's accounting firm, (now 

DMLO), will "prepare the financial statement for the fiscal year in question" 

based upon "sound accounting principles" and its calculation of KSF's net 

profit shall be binding. No reasonable reading of Section 5 supports the 

conclusion that DLMO will calculate Dunaway's bonus, or that the parties are 

in any way bound by a final calculation of the bonus rendered by DMLO. 

Section 5(e) provides a resolution only for disputes about KSF's "net profit" for 

whatever effect that figure may have on bonus calculation as otherwise set 

forth in the contract. 

Significantly, Section 5(e) makes no express reference to "arbitration," 

nor does it employ words of similar import connoting an arbitrational process 

before a tribunal of decision makers from which we might imply the parties' 

intention to arbitrate. The fact that KSF did not promptly assert the arbitration 

award as an affirmative defense against that portion of Dunaway's lawsuit 

certainly suggests that KSF did not immediately think of Section 5(e) as an 

arbitration clause and did not immediately regard the DMLO calculation as a 

binding arbitration award. 

Even more telling is the fact that the Severance Agreement expressly 

guarantees Dunaway the right "to be paid . . . bonus amounts earned under 

the terms of [his] employment agreement with [KSF]" and has the additional 

provision that the "[v]enue for any proceedings regarding this Agreement shall 

be in a court of competent jurisdiction for Jefferson County, Kentucky." Thus, 

the Severance Severance Agreement that afforded Dunaway the contractual right to the 

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bonus pay for which he filed suit contains the further provision for litigation of 

the dispute in a court of Jefferson County, Kentucky. The language of Section 

5 does not expressly or implicitly provide for arbitration of the bonus dispute, 

and the Severance Agreement explicitly militates against an arbitration of the 

dispute. 

We are mindful of the Kentucky Uniform Arbitration Act (KUAA), KRS 

417.045-417.240, and specifically KRS 417.050, which excludes from the 

provisions of the Act "arbitration agreements between employees and 

employers." 4Consequently, the fundamental due process provisions governing 

arbitration proceedings which are set forth in KRS 417.090 and KRS 417.100 

may not directly apply to arbitration clauses in employment contracts. 5 

 Nevertheless, those provisions reflect the common perception that arbitration is 

an adversarial process with the fundamental components of due process 

including a hearing with an opportunity to present evidence and cross-examine 

witnesses, and to have representation by counsel if desired. 

An agreement to abide by a "net profit" calculation of a particular 

accounting firm is fundamentally different than having the accounting firm 

serve as the binding arbitrator of the broader question of the bonus amount. 

4In pertinent part, KRS 417.050 provides: "This chapter does not apply to: (1) 

Arbitration agreements between employers and employees or between their respective 

representatives . . . ." 

5Generally, KRS 417.090 and KRS 417.100 provide that unless otherwise 

agreed, arbitration proceedings shall be conducted upon reasonable notice with an 

opportunity for each party to be heard by presenting evidence and witnesses and by 

examining opposing evidence and witnesses, and to be represented by counsel if 

desired. 

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Arbitration is a process, not an answer. We believe the trial court and the 

Court of Appeals correctly regarded Section 5(e) as something other than an 

arbitration clause. In summary, section 5(e) is unambiguous and contains 

• none of the characteristics normally included in an arbitration clause or 

otherwise associated with the process of arbitration. 

III. CONCLUSION 

Since we conclude that Section 5(e) is not an arbitration agreement, it 

follows that the DMLO's bonus calculation is not an "arbitration award" that 

can be confirmed by an appropriate court. Accordingly, the petition of The 

Kentucky Shakespeare Festival, Inc. for interlocutory relief pursuant to Cr 

65.09 is denied. 

All sitting. All concur. 

COUNSEL FOR APPELLANT: 

Steven Clark 

John 0. Sheller 

Stoll Keenon Ogden, PLLC 

COUNSEL FOR APPELLEE: 

Callie Elizabeth Walton 

Gwin, Steinmetz 86 Baird, PLLC 

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