RENDERED: OCTOBER 23, 2020; 10:00 A.M.

NOT TO BE PUBLISHED

Commonwealth of Kentucky

Court of Appeals

NO. 2018-CA-1053-MR

DANIEL POPA; BLUETONE 

CONNECT, PTY LTD (AUSTRALIA); 

PULSE TELECOM PTY, LTD 

(AUSTRALIA); NECC TELECOM, 

INC.; NECC TELECOM, INC. 

(CANADA); PULSE TELECOM, INC. 

(CANADA); QUICKCALL.COM, LLC 

D/B/A BLUETONE, LLC; AND SRVR, 

LLC APPELLANTS 

v. 

APPEAL FROM JEFFERSON CIRCUIT COURT

HONORABLE CHARLES L. CUNNINGHAM, JR., JUDGE

ACTION NO. 13-CI-002337 

LUCIA TIBERIA POPA; RAMONA 

CEAN; RAUL TURCU; SHERBAN 

APOSTOLINA; AND VICENT 

PETRESCU APPELLEES 

OPINION

AFFIRMING IN PART, 

VACATING IN PART,

AND REMANDING

**   **  **

BEFORE: COMBS, DIXON, AND MAZE, JUDGES.
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COMBS, JUDGE: NECC Telecom, Inc. (Canada); NECC Telecom, Inc.; Pulse 

Telecom, Inc. (Canada); Pulse Telecom PTY, LTD (Australia); SRVR, LLC; 

Quickcall.com, LLC d/b/a Bluetone, LLC; and Bluetone Connect, PTY, LTD 

(Australia) (referred to collectively as “the Transfer Companies”), and Daniel Popa 

appeal several orders of the Jefferson Circuit Court entered as follows: on 

February 8, 2017; on February 2, 2018; on February 5, 2018; on May 3, 2018; and 

an order entered on July 9, 2018, which denied the motion to alter, amend, or 

vacate the final and appealable order of May 3, 2018. After careful review of the 

record and the applicable law, we affirm in part, vacate in part, and remand for 

further proceedings.

This matter has been litigated for many years at every level of our 

court system. In one of its most recent iterations, the Supreme Court of Kentucky 

affirmed our dismissal of Daniel Popa’s petition for a writ of mandamus as moot. 

In its opinion, the Supreme Court provided the following summary of the factual 

and procedural history of the proceedings underlying this appeal: 

Daniel Popa (Daniel) and Lucia Popa (Lucia), a married 

couple, operated several telecommunications businesses 

together. In 2010, their marriage was dissolved, and the 

ownership and control of the companies was divided 

between the two individuals, presumably because a lack 

of liquidity precluded having one individual “buy-out” 

the other. On May 3, 2013, Daniel filed a Complaint 

against Lucia, alleging that one of the companies she 

controlled was not providing his companies with 

software and support they needed, contrary to a 
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commitment she made in the parties’ marital settlement.

Daniel named Lucia, her associates who were managing 

the companies, and several of the companies (Lucia and 

the companies), as defendants in the Jefferson Circuit 

Court action. The Complaint also named companies 

NECC US, SRVR, NECC Canada and Pulse Australia as 

defendants. Lucia was a 51% majority shareholder in 

three of the named companies. Lucia and the companies 

retained attorneys Alan Linker and Paul Hershberg to 

represent the interests of Lucia and the named companies 

in the litigation.

After two years of active litigation, it became clear that 

the only viable solution was for one party to take 

complete control and pay the other for his/her interests in 

the companies. In September 2015, nearly two and a half 

years after the Complaint was filed, the parties entered a 

79-page Settlement Agreement which gave Daniel full 

control and ownership of the companies in exchange for 

making $3.58 million in payments to Lucia over roughly 

three years. Daniel also purchased all of Lucia’s 

ownership interest in three additional companies - SRVR, 

Quickcall/Bluetone, and Bluetone Australia (the Transfer 

Companies). In the Settlement Agreement, Lucia 

warranted that the financial statements delivered to 

Daniel fairly and accurately represented the financial 

condition and operations of the Transfer Companies.

In 2016, Daniel learned that, during Lucia’s ownership 

and exclusive control of the companies, the companies 

incurred approximately $8 million in unpaid tax 

liabilities. On February 16, 2017, Daniel filed a Second 

Amended Complaint, alleging, among other things, 

breach of contract, fraud, and negligent 

misrepresentation. Around the same time, Daniel sought 

to formally realign the parties, naming all companies 

involved in this litigation as plaintiffs, and leaving Lucia 

and her associates as the only defendants.
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Shortly before formally realigning the parties in the 

litigation, Daniel filed a motion to disqualify attorneys 

Linker and Hershberg. Since the companies were now 

completely owned by Daniel, and Linker and Hershberg 

previously represented some of the companies when the 

initial Complaint was filed, Daniel alleged an actual 

conflict under Kentucky Supreme Court Rule (SCR) 

3.130(1.9). Daniel argued that because Linker and 

Hershberg were still representing Lucia in the litigation, 

the attorneys could use confidential information they 

obtained through their representation of the companies in 

a way which was adverse to the interest of those 

companies - companies now aligned with Daniel as 

plaintiffs.

Popa v. Cunningham Popa, No. 2018-SC-000399-MR, 2019 WL 2462307, at *1-2

(Ky. Jun. 13, 2019). 

Pursuant to provisions of the parties’ Settlement Agreement, the 

circuit court apparently was vested with authority to resolve disputes that might 

arise with respect to it throughout the term of the payments. To this end, the court 

appointed a telecommunications attorney, Allison Rule, a neutral expert, whose 

role it was to investigate and “to offer a qualitative assessment with regard to 

whether the Transfer Companies’ telecommunications tax issues were real and 

severe. . . .” Findings of Fact, Conclusions of Law, and Order and Judgment 

entered May 3, 2018, at 5. Rule determined that “a significant 

underpayment/nonpayment situation existed . . . potentially a seven-figure 

problem.” Order entered February 2, 2018, at 3. After the scope of the problem 

was confirmed, the circuit court ordered Lucia’s attorney to stop distributing 
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Daniel’s installment payments to Lucia. Those funds had been accumulating in an 

escrow account until Daniel stopped forwarding the installments altogether 

because of his contention that Lucia had materially breached the terms of the 

Settlement Agreement. 

 Meanwhile, Lucia filed a motion on December 8, 2017, to enjoin 

Daniel from re-routing customers from one of the Transfer Companies (NECC) to 

a business that he controlled but operated outside the jurisdiction of the court 

(Apelo). She also sought relief under the provisions of Kentucky’s Voidable 

Transactions Act, KRS1 378A.005, et seq. Lucia indicated that she feared that 

Daniel was allowing the Transfer Companies to become insolvent before she was

paid the full purchase price of the Transfer Companies. 

The circuit court conducted a hearing on a temporary injunction on 

January 29, 2018. Although the hearing was held to take proof on Lucia’s pending 

motion, it was conducted off the record. With respect to that off-the-record 

conduct, the Supreme Court of Kentucky observed that a pattern had emerged in 

the course of the proceedings:

In the early stages of this litigation, the parties requested 

that much of the filings and discussions regarding the 

failure to pay taxes, a large underlying issue in the case, 

be kept off the record in order to avoid providing insider 

information to competitors and to not impair the 

companies’ ability to resolve the problem. 

 

1 Kentucky Revised Statutes.
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Unfortunately, the trial court obliged but it later 

recognized that this was improper and declined to 

continue the practice.

Popa, 2019 WL 2462307, at *2 n.4. 

In an order entered on February 2, 2018, the court noted Rule’s

testimony at the injunction hearing that during the time Lucia had been in control 

of the Transfer Companies, the taxes and fees collected from telecommunications 

customers were not forwarded to taxing authorities. She stated that the problem 

persisted after Daniel took control of the companies and that the companies 

continued to fail to meet their tax obligations. 

Daniel also testified. According to the circuit court, Daniel 

acknowledged that NECC was winding up business and that its customers were 

being advised to transfer their accounts to a new company, Apelo. He admitted 

that the Transfer Companies were not meeting state and federal tax obligations. 

Lucia was also scheduled to testify, but the hearing was adjourned for 

the day. The following morning, the circuit court announced that after considering 

the matter overnight, it had decided to enforce the terms of the Settlement 

Agreement. It concluded that there had been no material breach of the Settlement 

Agreement because the failure of Lucia and her associates to disclose the tax 

liabilities of the Transfer Companies was simply immaterial to Daniel. The court 

indicated that “there’s really nothing for us to discuss” and that “bottom line is, I’m 
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done talking about all of this.” The court released Allison Rule and terminated the 

proceedings. However, it did not make a ruling on the pending motion for a 

temporary injunction filed by Lucia and her associates. 

The court memorialized its oral remarks in an order entered on 

February 2, 2018, determining: (1) that all further proceedings would be

conducted on the record; and (2) that Daniel could not prove -- as a matter of law --

that Lucia breached the Settlement Agreement because his actions indicated that 

the Transfer Companies’ timely payment of taxes was not a material fact upon 

which he had relied at the time the Settlement Agreement was executed. See Popa

v. Popa, No. 2019-SC-000115-1, 2019 WL 4072977, at *2 (Ky. Aug. 29, 2019).

In clear and unequivocal language in the order of February 2, 2018, 

the court emphasized its reliance on the equitable doctrine of “unclean hands” on 

Daniel’s part (i.e., the ongoing failure to pay taxes on the various businesses) as a 

basis for denying him the relief he sought.

There is a second, and perhaps more readily 

grasped, reason the court can no longer entertain a 

motion to essentially declare the September, 2015, 

agreement breached. Daniel’s acknowledgment that he is 

not paying the taxes the businesses owe as they come due 

presents a fundamental problem with any effort to relieve 

him of an obligation to pay for those businesses because 

his seller did not do so either. The common law has long 

had a doctrine, and it has been adopted in Kentucky, that 

one seeking an equitable remedy (i.e., relief from a 

financial obligation) must come into court with clean 

hands. Time Finance Co. v. Varney, 253 S.W.2d 233 
-8-

(Ky. 1953). The courts withhold their aid from those 

who transgress the law in and about a matter regarding 

which redress is sought. Munn v. Munn, 291 S.W.2d 560 

(Ky. 1956).

In the context of this case, Daniel has “unclean” 

hands. He asks the court to alleviate his obligation to 

complete his payment for the businesses (or, more 

precisely, to place its stamp of approval on his decision 

to not complete the payment). But his basis for doing so 

– Lucia’s alleged failure to pay taxes owed – is behavior 

manifested with equal or possibly greater impact by his 

own conduct since taking the reins. The Court must 

therefore withhold its aid. 

Order entered February 2, 2018, at 7-8.

Consequently, the court ordered that the escrowed funds be released 

to Lucia and that the balance owed on the purchase price of the Transfer 

Companies be paid. The court advised the parties that they might ask for the 

court’s assistance “[i]f there is disagreement on this rather simple math. 

Otherwise, the Court will expect this matter to progress to a conclusion in a 

businesslike manner without the need for further Court assistance.” Order entered

February 2, 2018, at 8. Furthermore, the circuit court advised Daniel’s counsel “to 

be cautious in deciding whether to file [a motion to reconsider].” Id. It instructed 

that “any such motion must include a list of all [taxing authorities], with contact 

information, for all of the transferred companies.” Id. at 9 (emphasis original). It 

warned that if counsel filed a motion asserting that Daniel has a right to proceed, it 
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would consider sanctions pursuant to the provisions of CR

2 11. Comparing 

Daniel’s operation of the Transfer Companies to a “bust-out” scheme, the court 

warned that “an attorney [] assisting a client in such a scheme” must be reported to 

the bar association. 

In a separate order, the circuit court reiterated its earlier determination 

that disqualification of Lucia’s attorneys was not warranted. The court found that 

Daniel had not shown an actual conflict of interest and that it would be inequitable 

to remove Linker and Hershberg from the representation. These orders were 

interlocutory because the other claims asserted by Daniel and the Transfer 

Companies against Lucia and her associates remained outstanding. 

On February 15, 2018, Daniel and the Transfer Companies filed a 

petition for a writ of mandamus and a writ of prohibition in this Court. They 

asserted that the circuit court’s summary judgment, sua sponte, in favor of Lucia 

and her associates had been entered without due process. They sought to prohibit 

the circuit court from enforcing its orders and to compel the court to disqualify 

Linker and Hershberg. 

While the writ petitions were pending in this Court, Lucia’s counsel 

filed a motion to supplement the record with correspondence between the circuit 

court and Allison Rule. The circuit court conducted a lengthy hearing on February 

 

2 Kentucky Rules of Civil Procedure.
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27, 2018, during which the parties and the court attempted to interpret the nature of 

the orders entered only a few weeks earlier and to find a way forward. As part of 

the discussion, counsel conceded that both parties had wanted at least some of the 

hearing to be conducted off the record, and the court agreed that it had determined

that the entirety of the proceedings would remain off the record. The parties 

struggled to devise a means by which a record of the testimony taken at the 

January 29, 2018, hearing could be obtained to allow for adequate appellate 

review.

During this hearing (February 27, 2018), the court acknowledged that 

its February orders “smelled” like summary judgment and indicated that it 

anticipated that its ruling would come as a complete surprise to Daniel and the 

Transfer Companies. It also recognized that there were other issues in the case to 

be resolved. Counsel for Lucia and her associates contended that the court’s order

-- as entered -- could not be enforced as a judgment, however, and they complained 

that Daniel and the Transfer Companies intended to continue litigating the case. 

Counsel for Lucia argued that all the claims asserted by Daniel and the Transfer 

Companies warranted dismissal by virtue of the unclean hands doctrine. Counsel 

suggested that a final and appealable judgment could be entered upon that basis 

rendering moot Daniel’s petition for writ of mandamus and writ of prohibition to 
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this Court. Counsel also contended that provisions of the Voidable Transactions

Act applied. 

Daniel and the Transfer Companies argued that only a trial could 

resolve the issues surrounding the failure of Lucia and her associates to see that the 

Transfer Companies’ taxes had been paid and their alleged breaches of the 

Settlement Agreement and of the express warranty included in the Settlement 

Agreement. Counsel for Daniel argued that a trial date should be set. They 

explained how damages could be calculated based upon the cost to the Transfer 

Companies of resolving the undisclosed tax liabilities that they inherited from

Lucia and her associates. The circuit court acknowledged that Daniel and the 

Transfer Companies might well be entitled to an award of damages based upon the 

alleged material misrepresentations concerning the financial well-being of the 

companies made by Lucia and her associates. 

Ultimately, the court proposed that Lucia’s counsel file a motion for 

summary judgment and suggested that the proposed judgment include findings of 

fact incorporating references to the unrecorded testimony. The court anticipated 

that the findings of fact included therein would be an adequate compilation of the 

record. The proposed judgment was to incorporate a figure based upon the parties’

computations of Daniel’s delinquent payments toward the purchase price of the 

Transfer Companies and an acceleration of the remaining balance. 
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Lucia and her associates filed a motion for final judgment on March 

22, 2018. They requested an order: (1) dismissing the second amended complaint 

filed by Daniel and the Transfer Companies; (2) declaring a default under the 

parties’ 2015 Settlement Agreement; and (3) accelerating the balance of the unpaid 

installment payments. They sought judgment in an amount that included the 

outstanding balance of the purchase price of the Transfer Companies. No rule of 

civil procedure was cited in support of the motion. 

Daniel and the Transfer Companies strenuously objected to the 

motion. They observed that Lucia and her associates had not denied that they had 

caused the Transfer Companies to incur several million dollars in unpaid tax 

liabilities and that they had failed to disclose this fact to Daniel -- despite an 

obligation to do so under the terms of the Settlement Agreement. They argued that 

they were entitled to pursue their claims for damages through discovery and trial. 

At a hearing conducted in April 2018, Daniel and the Transfer 

Companies contended that Lucia and her associates had never asserted a claim 

under the Voidable Transactions Act. In response, counsel moved orally to amend 

the counterclaims that they had asserted in March 2017. These counterclaims had 

been filed in response to the amended complaint filed by Daniel and the Transfer 

Companies in February 2017 in which Daniel asserted claims of breach of contract, 

fraud, and negligent misrepresentation; and the Transfer Companies alleged that 
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Lucia and her associates as owners and directors of the Transfer Companies had 

breached their fiduciary duties to the business entities. Lucia and her associates 

sought to include in the amendment to their counterclaims a specific claim for 

relief under the provisions of the Voidable Transactions Act, KRS 378A.005, et 

seq. 

On May 3, 2018, the circuit court entered its findings of facts, 

conclusions of law, order, and judgment, granting the motion of Lucia and her 

associates to amend their counterclaim. Additionally, it reiterated its earlier 

conclusion that the failure of Lucia and her associates to include the Transfer 

Companies’ unpaid tax liability in the financial statements warranted and delivered 

to Daniel could not have been material to Daniel’s decision to enter into the 

Settlement Agreement. Next, the court dismissed Daniel’s claims for breach of 

contract, fraud, negligent misrepresentation, and breach of warranty; it also 

dismissed the claims of the Transfer Companies against Lucia and her associates.

3

 

It denied Daniel’s equitable claims for rescission, unjust enrichment, and 

promissory estoppel. 

The judgment provided that Lucia and her associates were entitled to 

immediate judgment against Daniel in the amount of $1,525,000, to be paid within 

 

3 At this point, the Transfer Companies no longer had a viable claim or interest in this case. All 

of the claims were dismissed and were not raised in this appeal. (Nor were they mentioned in the 

prehearing statement). See Appellees’ brief, page 2, footnote 1.
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ten days of entry. If not paid within ten days, Daniel’s obligation to pay the 

purchase price would be accelerated, and he would owe the full amount of the 

remaining purchase price from the Settlement Agreement, totaling $1,749,964.20,

plus prejudgment interest. Daniel was enjoined and prohibited from re-routing 

customers from the Transfer Companies to Apelo, and he was ordered to provide 

an itemization of all the bank accounts of the Transfer Companies. The order 

restored Lucia’s right to monitor the business activities of the Transfer Companies 

pursuant to the terms of the Settlement Agreement, and Daniel was ordered not to 

interfere with or to frustrate her ability to do so. The court explained that its 

decision to dismiss the claims asserted against Lucia and her associates was 

bolstered by its inherent power to sanction bad-faith conduct. It concluded that 

Daniel’s second amended complaint and the litigation that followed were “part of 

an apparent strategy to ‘bust out’ the assets of the Transfer Companies, and 

perpetrate a fraud on [Lucia and her associates].” Order entered May 3, 2018, at

15. The subsequent motion to alter, amend, or vacate was denied, and this appeal 

followed. 

 On appeal, Daniel and the Transfer Companies argue that the circuit 

court erred by granting summary judgment and by failing to disqualify opposing 

counsel. We agree in part. Thus, we vacate in part and remand for further 

proceedings. 
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Summary judgment is proper where there exists no material issue of 

fact, and the movant is entitled to judgment as a matter of law. CR 56; Steelvest,

Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476 (Ky. 1991). We review de

novo the trial court’s grant of a motion for summary judgment. Caniff v. CSX

Transp., Inc., 438 S.W.3d 368 (Ky. 2014).

Daniel and the Transfer Companies first argue that the circuit court 

erred by ordering summary judgment, sua sponte, after the first day’s testimony at 

the injunction hearing. They contend that they were deprived of a meaningful 

opportunity to be heard before the court issued its order. Furthermore, they argue 

that the order resolved an issue that was not the focus of the injunction hearing;

namely, Daniel’s contention that his non-performance of the Settlement Agreement 

was excused by Lucia’s breach of its terms. 

In Storer Communications of Jefferson County, Inc. v. Oldham County

Board of Education, 850 S.W.2d 340 (Ky. App. 1993), we considered the decision 

of a trial court to award a judgment on the merits without notice to the parties and 

without the benefit of briefing or opportunity for arguments. We held that this 

procedure violated the appellant’s right to due process. We observed as follows:

While a court might be justified in using its inherent 

powers to dismiss sua sponte for lack of subject matter 

jurisdiction, it is fundamental that a trial court has no 

authority to otherwise dismiss claims without a motion, 

proper notice and a meaningful opportunity to be heard. 

CR 56.01 and CR 56.02 clearly provide that a “party” 
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may seek a summary judgment. The rules do not 

contemplate such a proceeding on the court’s own 

motion. CR 56.03 provides that one will have a 

minimum of ten days to respond to such a motion. This 

requirement is mandatory unless waived. Even if it is 

appropriate for the trial court to enter a summary

judgment on its own motion, the trial court’s failure to 

afford the appellant the most basic procedural 

protections, notice of its intention and an opportunity to 

respond, is unjustifiable, constitutionally defective, and 

requires reversal.

Id. at 342 (citation omitted).

In this case, the circuit court heard testimony concerning Daniel’s 

operation of the Transfer Companies during a hearing conducted for the purpose of

evaluating the claim of Lucia and her associates that Daniel was wrongfully rerouting customers from NECC to Apelo. Based on this evidence, the court 

concluded that Daniel was not entitled to suspend his performance of the 

Settlement Agreement by withholding his installment payments -- despite the

failure of Lucia and her associates to disclose the massive tax liabilities of the 

Transfer Companies. Reviewing the day’s testimony, the court determined that 

Daniel’s failure to bring the Transfer Companies’ outstanding tax bills current 

proved -- as a matter of law -- that the undisclosed tax liabilities were immaterial to 

his decision to purchase the businesses. It concluded that Daniel’s bad conduct 

(failure to pay taxes and decision to wind up NECC’s business) precluded him 

from seeking any equitable remedy for Lucia’s breach of the parties’ Settlement 
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Agreement. However, these arguments were not propounded by any party. And 

no party requested a summary judgment with respect to Daniel’s claims. 

Nevertheless, the court terminated the proceedings, and its written orders were 

entered a few days later. 

We cannot agree with the contention of Lucia and her associates that 

the court’s order of February 2, 2018, was not a “sua sponte summary judgment.” 

After precluding the presentation of further testimony and explaining its rationale 

for terminating the proceedings, the circuit court announced from the bench that it 

would “put all of that in a ruling that will allow either side, if they’re unhappy with 

what we’re doing, . . . to take everything up. . . .” It suggested that Daniel’s 

counsel “take some time and think about it – you got thirty days – but it, it . . . I 

guess I could call it a final ruling although it really isn’t a final and appealable 

kinda ruling. . . .” (The orders were eventually made final and appealable by entry 

of the court’s final judgment on May 3, 2018). The court substantively made a 

summary disposition of the issues set forth in the order. 

We agree with the sound reasoning of the circuit court that Daniel was 

not entitled to equitable relief in the form of an injunction because he indeed 

approached the tribunal with “unclean hands.” Therefore, we affirm that portion of 

the February 2, 2018, order denying Daniel’s motion for a temporary injunction. 
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However, as to the remaining substantive issues, the court’s sua 

sponte summary judgment denied Daniel a meaningful opportunity to be heard 

with respect to its conclusions. Consequently, the remainder of that order must be 

vacated and remanded for further proceedings. 

Next, Daniel and the Transfer Companies argue that the circuit court 

erred by granting the motion of Lucia and her associates for judgment filed on 

March 22, 2018. 

In their motion filed pursuant to the circuit court’s suggestion, Lucia 

and her associates sought an order: (1) dismissing the second amended complaint 

filed by Daniel and the Transfer Companies; (2) declaring a default under the 

parties’ Settlement Agreement; and (3) accelerating the balance of the installment 

payments. In their response, Daniel and the Transfer Companies argued that there 

was no basis in the law to summarily dismiss their claims. 

In its order entered on May 3, 2018, the circuit court granted Lucia’s

motion and dismissed Daniel’s claims for breach of contract, fraud, negligent 

misrepresentation, and breach of warranty -- as well as the Transfer Companies’

claims against Lucia and her associates. While the circuit court specifically 

acknowledged Daniel’s request for trial, it concluded that “any such effort will do 

little (or nothing) to bring closure to the case.” Instead, it sought to “sav[e] [the] 
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litigants from each other” by “mov[ing] [the] matter on” and granting a final 

judgment. Order entered May 3, 2018, at 19. It observed that a trial would be:

in a practical sense, not really possible [because] key 

witnesses on how the companies have been run will be 

required, assuming they have competent counsel advising 

them, to decline to answer many questions lest they 

incriminate themselves in sworn testimony as having 

participated in criminal misconduct. 

Id. The court further mused as follows: “why have a trial just so Daniel can take 

the stand and admit (or imply by his silence) that he has broken the law?” Finally, 

the court concluded that if Daniel had been “actually interested in airing all of this 

at trial, he would have been negotiating settlements with various taxing entities and 

thus be prepared to offer real evidence of the actual cost to the companies of their 

unpaid tax liabilities.” Id. According to the judgment, its entry was based upon 

Daniel’s inability to show that he relied to his detriment upon the representations 

and express warranty of Lucia and her associates. The circuit court also stated that 

the dismissal of the claims included in the second amended complaint was 

consistent with its inherent authority to sanction Daniel’s bad-faith conduct -- his 

decision to file a second amended complaint and to engage in litigation as a 

strategy to strip the Transfer Companies of their assets and thereby to perpetrate a 

fraud upon Lucia and her associates. 
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We are persuaded that the circuit court erred by substituting its 

judgment in lieu of granting a trial. In Steelvest, Inc., 807 S.W.2d at 483, the 

Supreme Court of Kentucky held as follows: 

We adhere to the principle that summary judgment is to 

be cautiously applied and should not be used as a 

substitute for trial. As declared in Paintsville Hospital, it 

should only be used “to terminate litigation when, as a 

matter of law, it appears that it would be impossible for 

the respondent to produce evidence at the trial warranting 

a judgment in his favor and against the movant.” It is 

vital that we not sever litigants from their right of trial, if 

they do in fact have valid issues to try, just for the sake of 

efficiency and expediency.

Summary judgment could not have been properly entered upon the basis of the 

court’s desire to “save the litigants from one another” or to “move the matter on.” 

Order entered May 3, 2018, at 1. Nor could it have been entered based upon the 

circuit court’s inability to see any sense in a trial or its perception that a litigant is 

not sufficiently interested in resolving the issues. None of these justifications 

legally supports entry of summary judgment, although its human motivation is 

clearly understandable under the circumstances of this case. 

The circuit court also concluded that Daniel could not prove the 

claims included in his second amended complaint because he was unable to show 

that he relied to his detriment upon Lucia’s representations and express warranty 

concerning the financial condition and operations of the Transfer Companies. 

Summary judgment can be granted where it appears that it would be impossible --
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as a matter of law -- for the non-movant to produce evidence at trial warranting a

judgment in his favor. 

Daniel argues that the circuit court erred by granting judgment in 

favor of Lucia with respect to his breach-of-contract claim because reliance is not 

an element of this claim. We agree.

In their response to the motion of Lucia and her associates for final 

judgment, Daniel and the Transfer Companies explained that upon the sale of the 

Transfer Companies, Lucia attested that she had provided financial documents that 

“fairly present the financial condition and operating results of the Transfer 

Companies . . . in all material respects. . . .” Referring to evidence procured 

through discovery, they argued that her promise was patently breached because 

Lucia concealed from Daniel the fact that the Transfer Companies had accrued 

massive liabilities for unpaid state and federal taxes and other items during the 

time that she managed the companies.

Actions for fraud, negligent misrepresentation, breach of warranty, 

and promissory estoppel require the plaintiff to prove his justifiable reliance upon 

the defendant’s representation. However, an action for breach of contract requires

only proof of the existence of a contract, breach of that contract, and that the 

breach caused damages. EQT Prod. Co. v. Big Sandy Co., L.P., 590 S.W.3d 275

(Ky. App. 2019). The circuit court erred by granting summary judgment to Lucia 
-22-

and her associates with respect to Daniel’s claim for breach of contract because 

Daniel was not required to show his detrimental reliance upon the representations.

In their brief, Lucia and her associates suggest that the circuit court’s 

judgment can be affirmed on the basis of Daniel’s attempt to use the judicial 

process to authorize a fraud. To the extent that the court’s dismissal of Daniel’s 

breach-of-contract claim was based upon its inherent power to protect the integrity 

of its judgments, it must be reversed. 

Conduct that works a fraud or constructive fraud on a tribunal and has 

a detrimental effect on the accuracy or integrity of a judgment does warrant a 

remedy that prevents a party from benefitting from his misconduct. Zurich Am.

Ins. Co. v. Journey Operating, LLC, 323 S.W.3d 696 (Ky. 2010). In this case, 

Lucia and her associates argued that Daniel’s decision to file a complaint and to 

pursue his claims for Lucia’s failure to disclose the massive tax debt of the 

Transfer Companies constituted just such conduct. The circuit court accepted the 

argument and found that litigation that lasted for a period of less than one year was 

“part of an apparent strategy to ‘bust out’ the assets of the Transfer Companies, 

and perpetrate a fraud on [Lucia and her associates.]” Order entered May 3, 2018,

at 15. We see nothing in the facts and circumstances of this case which would 

support a decision of the circuit court to dismiss Daniel’s claims as a sanction for 

misconduct. 
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The terms “break out” or “bust out” scheme have been used broadly to 

describe various plans implemented by bad actors: to dupe creditors into 

extending credit; to incur substantial debt; and, ultimately, to leave creditors 

unpaid. In this case, the circuit court concluded that Daniel engaged in a 

premeditated scheme to buy out Lucia’s interest in the Transfer Companies; to loot 

the companies; and then to disappear before he completed making the installment 

payments for their purchase. It found that the claims included in Daniel’s 

complaint had never had merit and were “an apparent pretext to conceal the 

fraudulent and unlawful scheme to defraud [Lucia and her associates] as well as 

the Transfer Companies’ other creditors.” Id. at 16. With respect to the litigation 

aimed at having the Transfer Companies’ former lawyers disqualified from 

representing Lucia and her associates in litigation adverse to the companies’

interests, the court concluded that that litigation was simply a “cover for a series of 

fraudulent and voidable transfers” designed to drain the companies’ assets. Id. at 

17. Finally, it observed that:

to the extent that Daniel and his counsel have insisted on 

keeping evidence of Daniel’s misconduct out of the 

record, based on the unsupported assertion that doing so 

would be necessary to protect proprietary information 

and the interests of all parties, Daniel has invited the 

Court to become an active participant, at least in 

shielding this fraud from the light of day. 

Id. at 15. However, the record does not support these findings. 
-24-

The circuit court concluded that Daniel devised a scheme to loot the 

Transfer Companies before he purchased them. The court’s findings overlook the 

fact that Daniel acquired the Transfer Companies only after an extended period of 

wrangling with Lucia following their divorce about the operations of their 

interconnected companies. The findings overlook evidence indicating that Daniel 

discovered the massive tax debt that the Transfer Companies had incurred under 

Lucia’s management only after the Settlement Agreement had been executed and 

that Daniel’s inability to bring current the substantial tax arrearage was a function, 

in part, of the Transfer Companies’ income. The findings did not adequately 

assess the viability of Daniel’s claims for breach of contract and fraud against 

Lucia and her associates or the claims of the companies against their former 

owners and directors. The court summarily discounted arguments concerning the 

conflict of interest of opposing counsel in their representation of Lucia and her 

associates against their former clients. 

Daniel and the Transfer Companies have also argued that the circuit 

court erred by failing to disqualify opposing counsel. Having acquired the 

Transfer Companies, Daniel and the companies filed a motion in early 2017 to 

disqualify Alan Linker and Paul Hershberg, the companies’ former attorneys, from 

representing Lucia and her associates. The Supreme Court of Kentucky provided 

the following summary of the events that followed: 
-25-

The trial court conducted a hearing on February 3, 2017 

and determined that the September 2015 Settlement 

Agreement contemplated that Linker and Hershberg 

would continue to represent Lucia in this case, and 

therefore Daniel waived any perceived conflict. In 

denying the motion to disqualify, the trial court stated it 

was conceivable that Linker and Hershberg’s continued 

representation of Lucia would implicate SCR 3.130(1.9) 

if they actually used or threatened to use confidential 

information they obtained through their representation of 

the companies in a way adverse to the interest of those 

companies. But since Daniel was not alleging that such 

misconduct had occurred, and the court did not expect it 

to arise, disqualification was not warranted. Notably, 

Daniel did not seek a writ following this February 2017 

denial of the attorney disqualification motion.

Over the next few months, the parties engaged in 

ongoing discovery efforts. On August 23, 2017, Daniel 

filed a renewed motion to disqualify Linker and 

Hershberg. The trial court conducted another hearing, 

where Daniel’s expert, an attorney specializing in legal 

ethics, testified that the Settlement Agreement could not 

constitute a waiver. Linker and Hershberg did not 

present any evidence at the hearing. On December 12, 

2017, the trial court orally indicated that it intended to 

deny the renewed motion to disqualify. 

Popa, 2019 WL 2462307, at *2. 

In its order entered February 5, 2018, the circuit court reiterated its 

earlier determination that disqualification of Lucia’s attorneys was not warranted. 

The court found that Daniel had not shown an actual conflict of interest and that it

would be inequitable to remove Linker and Hershberg from the representation. 
-26-

On February 15, 2018, Daniel and the Transfer Companies filed a 

petition for a writ of mandamus with this Court. They sought to compel the circuit

court to disqualify Linker and Hershberg. On May 3, 2018, while the petition was 

pending, the circuit court entered its Findings of Fact, Conclusions of Law, Order 

and Judgment. Because the judgment disposed of the case on its merits, we 

dismissed the writ petition as moot. We reasoned that a writ is an extraordinary 

remedy used to prevent potential injury -- not to remedy injuries that have already 

occurred. Concluding that Daniel and the Transfer Companies have an adequate 

opportunity for recourse through this direct appeal, the Supreme Court of 

Kentucky affirmed our decision. Popa, 2019 WL 2462307, at *4-5. 

On appeal, Daniel and the Transfer Companies now contend that the 

circuit court abused its discretion by failing to disqualify Linker and Hershberg 

from the representation because the attorneys have an ethical conflict of interest. 

They argue that Linker and Hershberg represent interests in direct opposition to the 

interests of the Transfer Companies (their former clients) and that they failed to 

secure a written waiver for such conduct. Daniel and the Transfer Companies 

argue that Linker and Hershberg obtained confidential and proprietary information 

about the companies during their former representation and that they have used and 

likely will continue to use that information to the companies’ disadvantage and 

extreme prejudice. Those allegations may be true. However, the Transfer 
-27-

Companies have raised no argument on appeal with respect to the dismissal of their 

claims against Lucia and her associates. Consequently, the Transfer Companies 

have no interest in the proceedings to be conducted on remand. The existence of 

an actual conflict of interest between Linker and Hershberg and their former clients 

that might require disqualification of the attorneys is moot.

In summary, we AFFIRM the denial of the motion for a temporary 

injunction in the order of February 2, 2018. We VACATE the summary judgment 

entered on February 2, 2018, and REMAND the issues contained therein for 

additional proceedings. We AFFIRM the dismissal of the second amended 

complaint (Findings of Fact, Conclusions of Law, and Order and Judgment of May 

3, 2018) -- with the sole exception of Daniel’s claim for breach of contract, an 

issue which also must be resolved on REMAND. We DENY AS MOOT the 

arguments related to the disqualification of counsel (Linker and Hershberg) 

because the Transfer Companies will not be parties to the litigation on remand, 

their claims having been dismissed in the second amended complaint, that portion 

of which we have hereby AFFIRMED.

ALL CONCUR.
-28-

BRIEFS FOR APPELLANTS:

Jill F. Endicott

Jeremy S. Rogers

Philip E. Cecil

Bryan J. Dillon

Louisville, Kentucky

BRIEF FOR APPELLEES:

David Tachau

Paul Hershberg

Alan N. Linker

Louisville, Kentucky