RENDERED: APRIL 1, 2022; 10:00 A.M. NOT TO BE PUBLISHED 

# Commonwealth of Kentucky
Court of Appeals

NO. 2021

- CA

- 0396

- MR

COURTNEY BACHE APPELLANT

v. APPEAL FROM JEFFERSON CIRCUIT COURT

HONORABLE ANN BAILEY SMITH, JUDGE ACTION NO. 19

- CI

- 006647

PHILIP SALLEE APPELLEE

OPINION AFFIRMING

**   **  **

BEFORE: ACREE, DIXON, AND K. THOMPSON, JUDGES.

DIXON, JUDGE: Courtney Bache appeals from an order denying her peti tion to

compel arbitration entered by the Jefferson Circuit Court on March 16, 2021.

Following review of the record, briefs, and law, we affirm.

FACTS AND PROCEDURAL BACKGROUND

Courtney Bache and Philip Sallee entered into a written agreement

,

which included a nondisclosure provision and provided for damages if breached. It- 2

-

also contained an arbitration clause. Bache believed Sallee breached the

agreement and demanded he pay her damages. Wh en Sallee refused, Bache

repeatedly demanded arbitration

– but to no avail. Bache subsequently filed this

action request ing that the trial court compel arbitration. The trial court ultimately

denied Bache’s request, finding : (1) the Federal Arbitration Act (FAA) 1 did not

apply because the agreement did not involve interstate commerce

, and (2) it could

not compel arbitration because the agreement did not comply with the mandates of

the Kentucky Uniform Arbitration Act (KUAA) 2 by p roviding that arbitration

occur in Kentucky. This appeal followed.

STANDARD OF REVIEW

A n order denying a motion to compel arbitration is appealable under

KRS 417.220(1). Conseco Fi n. Ser vic ing Corp. v. Wilder , 47 S.W.3d 335, 340

(Ky. App. 2001). On r eview,

we defer to the trial court’s factual findings, upsetting them only if clearly erroneous or if unsupported by substantial evidence, but we review without deference the trial court’s identification and application of legal principles. Apparently the trial court made no factual findings in this case, but based its ruling solely on the application of certain principles of contract law to the

1 9 United States Code (U.S.C.) §§ 1 et seq.

2 Kentucky Revised Statutes (KRS) 417.045 et seq.- 3

- arbitration clause

. . . . Our review, accordingly, is de

novo

.

Id.

ANALYSIS

On appeal, Bache first asserts the FAA applies to the agreement. In

Southland Corp oration v. Keating , 465 U.S. 1, 16, 104 S. Ct. 852, 861, 79 L. Ed.

2d 1 (1984), the United States Supreme Court held that Congress intended the

FAA to apply in state courts and to pre

- empt state antiarbitration laws to the

contrary. Stated another way, the FAA

, where applicable , preempts all state law.

See Saneii v. Robards

, 289 F. Supp. 2d 855 (W. D. Ky. 2003).

The FAA pr ovides:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocat ion of any
contract.- 4

-

9 U.S.C. § 2 (emphasis added)

. 3 Thus, as indicated by the above emphasized

language, the FAA applies where there is “a contract evidencing a transaction

involving commerce [

. ] ” Id. See also Allied

- Bruce Terminix Cos

. , Inc. v. Dobson

,
513 U.S. 265, 277, 115 S. Ct. 834, 841, 130 L. Ed. 2d 753 (1995).

C oncerning the applicability of the FAA, the Supreme Court of

Kentucky observed:

The Federal Act applies to arbitration provisions in contracts “evidencing a transaction involving [interstate] commerce,” 9 U.S.C. § 2, and almost certainly applies here. Congress’s commerce power is interpreted broadly, and “may be exercised in individu al cases without showing any specific effect upon interstate commerce if in the aggregate the economic activity in question would represent a general practice . . . subject to federal control.” Citizens Bank v. Alafabco, Inc. , 539 U.S. 52, 56

- 57, 123 S. C t. 2037, 156 L. Ed. 2d 46 (2003) (citation and internal quotation marks omitted). The Supreme Court has held that health care is one such activity.

Ping v. Beverly Enters

. , Inc. , 376 S.W.3d 581, 589 (Ky. 2012).

Here, the trial court found the FAA inap plicable because the

agreement dealt solely with matters concerning Kentucky parties and activity

– or
inactivity

– and was, therefore, an intrastate contract as opposed to one involving

interstate commerce. The trial court correctly found the case herein is

3 During the pendency of this appeal, this section was amended, effective March 3, 2022, to add the phrase “ or as otherwise provided in chapter 4

. ”- 5

-

distinguishable from Ping because the actions and inactions 4 addresse d in the

agreement

– namely nondisclosure of their relationship

, refraining from litigating

any disputes between themselves, returning one another’s personal property, and

no further co ntact with each other

– do not represent general practice s subject to

federal control, such as healthcare.

Bache next argues the arbitration clause of the agreement is

enforceable under the KUAA. However, the Supreme Court of Kentucky held,

“ [s] ubject ma tter jurisdiction to enforce an agreement to arbitrate is conferred upon

a Kentucky court only if the agreement provides for arbitration in this state. Thus,

an agreement to arbitrate which fails to include the required provision for

arbitration within th is state is unenforceable in Kentucky courts.” Ally Cat, LLC v.

Chauvin , 274 S.W.3d 451, 455 (Ky. 2009) (emphasis added).

4 The United States Supreme Court has held:

The Constitution grants Congress the power to “regulate Commerce.” Art. I, § 8, cl. 3 (emphasis added). The power to regulate commerce presupposes the existence of commercial activity to be regulated. This Court ’ s precedent reflects this understanding: As expansive as this Court ’ s cases construing the scope of the commerce power have been, they uniformly describe the power as reaching “activity.” E.g., United States v. Lopez , 514 U.S. 549, 560, 115 S. Ct. 1624, 131 L. Ed. 2d 626 [(1995)]

.

Nat ’ l Fed ’ n of Indep

. Bus

. v. Sebelius , 567 U.S. 519, 520, 132 S. Ct. 2566, 2572

- 73, 183 L. Ed. 2d 450 (2012) . Thus, to the extent the agreement addresses inactions, the FAA cannot apply.- 6

- In the instant action , while the parties’ agreement includes a choice of

law provision designating Kentucky law to be followed, it failed to include a forum

selection clause

, and absolutely no location was designated for arbitration to occur.

“Such failure is fatal to the arbitration clause’s enforceability in this

Commonwealth.” Padgett v. Steinbrecher , 355 S.W.3d 457, 463 (Ky. Ap p. 2011).

Accordingly, the trial court did not err in its denial of Bache’s motion to compel

arbitration.

CONCLUSION

Therefore, and for the foregoing reasons, the order of the Jefferson

Circuit Court is AFFIRMED.

ALL CONCUR

.

BRIEF S FOR APPELLANT:

Steven R. Romines Louisville, Kentucky BRIEF FOR APPELLEE:

Emily W. Newman Paul A. Dzenitis Miranda R. Carter 5 Louisville, Kentucky

James L. Deckard Lexington, Kentucky

5 Miranda Carter moved the Court of A ppeals to withdraw as counsel. Her mot ion was granted by order entered January 25, 2022.