Court Opinion

ID: 9388679
Source: CourtListenerOpinion
Date Created: 2023-04-21 14:04:27.570425+00
Date Added: 2024-06-11T17:18:21.856291
License: Public Domain

RENDERED: APRIL 14, 2023; 10:00 A.M.
                    TO BE PUBLISHED

           Commonwealth of Kentucky
                  Court of Appeals

                     NO. 2021-CA-1307-MR

KKR & CO., INC. (FORMERLY KKR
& CO., L.P.; GEORGE ROBERTS;
GIRISH REDDY; HENRY KRAVIS;
JANE BUCHAN; PAAMCO PRISMA,
LLC (FORMERLY PACIFIC
ALTERNATIVE ASSET
MANAGEMENT COMPANY, LLC);
AND PRISMA CAPITAL PARTNERS                 CROSS-APPELLANTS
LP

        CROSS-APPEAL FROM FRANKLIN CIRCUIT COURT
v.         HONORABLE PHILLIP J. SHEPHERD, JUDGE
                  ACTION NO. 17-CI-01348

JEFFREY C. MAYBERRY; ALISA
BENNETT; ASHLEY HALL-NAGY;
BLACKSTONE ALTERNATIVE
ASSET MANAGEMENT; BOBBIE D.
HENSON; BOBBY ESTES; BRENT
ALDRIDGE; CAVANAUGH
MACDONALD CONSULTING, LLC;
COMMONWEALTH OF KENTUCKY;
DAVID PEDEN; HON. BRANDY O.
BROWN; ICE MILLER, LLP; J.
TOMILSON HILL; JACOB WALSON;
JANE BUCHAN; JENNIFER ELLIOT;
JIM VOYTKO; MARTHA M.
MILLER; R.V. KUHNS &
ASSOCIATES, INC.; RANDY
OVERSTREET; REBECCA A.
GRATSINGER; STEVE ROBERTS;
STEVEN A. SCHWARZMAN; T.J.
CARLSON; TERESA M. STEWART;
THE BLACKSTONE GROUP L.P.;
THOMAS CAVANAUGH; THOMAS
ELLIOT; TIA TAYLOR; TIMOTHY
LONGMEYER; TODD GREEN;
VINCE LANG; WILLIAM A.
THIELEN; AND WILLIAM COOK                  CROSS-APPELLEES

AND

                    NO. 2021-CA-1312-MR

THE BLACKSTONE GROUP INC.
(FORMERLY THE BLACKSTONE
GROUP L.P.); BLACKSTONE
ALTERNATIVE ASSET
MANAGEMENT L.P.; J. TOMILSON              CROSS-APPELLANTS
HILL; AND STEVEN A.
SCHWARZMAN

        CROSS-APPEAL FROM FRANKLIN CIRCUIT COURT
v.         HONORABLE PHILLIP J. SHEPHERD, JUDGE
                  ACTION NO. 17-CI-01348

JEFFREY C. MAYBERRY; ALISA
BENNETT; ASHLEY HALL-NAGY;
BOBBIE D. HENSON; BOBBY
ESTES; BRANDY O. BROWN;
BRENT ALDRIDGE; CAVANAUGH
MACDONALD CONSULTING, LLC;
COMMONWEALTH OF KENTUCKY;

                               -2-
DAVID PEDEN; GEORGE ROBERTS;
GIRISH REDDY; HENRY KRAVIS;
ICE MILLER, LLP; JACOB WALSON;
JANE BUCHAN; JENNIFER ELLIOT;
JIM VOYTKO; KKR & CO., INC.;
KKR & CO., INC. (FORMERLY KKR
& CO., L.P.); MARTHA M. MILLER;
PAAMCO PRISMA, LLC
(FORMERLY PACIFIC
ALTERNATIVE ASSET
MANAGEMENT COMPANY, LLC);
PRISMA CAPITAL PARTNERS LP;
R.V. KUHNS & ASSOCIATES, INC.;
RANDY OVERSTREET; REBECCA
A. GRATSINGER; STEVE ROBERTS;
T.J. CARLSON; TERESA M.
STEWART; THOMAS CAVANAUGH;
THOMAS ELLIOT; TIA TAYLOR;
TIMOTHY LONGMEYER; TODD
GREEN; VINCE LANG; WILLIAM A.
THIELEN; AND WILLIAM COOK                    CROSS-APPELLEES

AND

                      NO. 2021-CA-1313-MR

R.V. KUHNS & ASSOCIATES, INC.;
JIM VOYTKO; AND REBECCA A.
GRATSINGER                                  CROSS-APPELLANTS

         CROSS-APPEAL FROM FRANKLIN CIRCUIT COURT
v.          HONORABLE PHILLIP J. SHEPHERD, JUDGE
                   ACTION NO. 17-CI-01348

                                 -3-
JEFFREY C. MAYBERRY; ALISA
BENNETT; ASHLEY HALL-NAGY;
BLACKSTONE ALTERNATIVE
ASSET MANAGEMENT; BOBBIE D.
HENSON; BOBBY ESTES; BRANDY
O. BROWN; BRENT ALDRIDGE;
CAVANAUGH MACDONALD
CONSULTING, LLC;
COMMONWEALTH OF KENTUCKY;
DAVID PEDEN; GEORGE ROBERTS;
GIRISH REDDY; HENRY KRAVIS;
ICE MILLER, LLP; J. TOMILSON
HILL; JACOB WALSON; JANE
BUCHAN; JENNIFER ELLIOT; KKR
& CO., INC.; KKR & CO., INC.
(FORMERLY KKR & CO., L.P.);
MARTHA M. MILLER; PAAMCO
PRISMA, LLC (FORMERLY PACIFIC
ALTERNATIVE ASSET
MANAGEMENT COMPANY, LLC);
PRISMA CAPITAL PARTNERS LP;
RANDY OVERSTREET; STEVE
ROBERTS; STEVEN A.
SCHWARZMAN; T.J. CARLSON;
TERESA M. STEWART; THE
BLACKSTONE GROUP L.P.;
THOMAS CAVANAUGH; THOMAS
ELLIOT; TIA TAYLOR; TIMOTHY
LONGMEYER; TODD GREEN;
VINCE LANG; WILLIAM A.
THIELEN; AND WILLIAM COOK                 CROSS-APPELLEES

                         OPINION
                  AFFIRMING IN PART AND
                    VACATING IN PART

                       ** ** ** ** **

                            -4-
BEFORE: CETRULO, DIXON, AND TAYLOR, JUDGES.

DIXON, JUDGE: KKR & Co., Inc.; George Roberts; Girish Reddy; Henry

Kravis; Jane Buchan; PAAMCO Prisma, LLC (formerly Pacific Alternative Asset

Management Company, LLC); Prisma Capital Partners LP; the Blackstone Group

L.P.; Blackstone Alternative Asset Management; J. Tomilson Hill; Steven A.

Schwarzman; R.V. Kuhns & Associates, Inc.; Jim Voytko; and Rebecca A.

Gratsinger cross-appeal from the orders of the Franklin Circuit Court entered on

December 28, 2020, and June 14, 2021, deemed final and appealable by order

entered on September 21, 2021. Following a careful review of the record, briefs,

and law, we affirm in part and vacate in part.

                   FACTS AND PROCEDURAL BACKGROUND

                This action began in late 2017 when eight members of the Kentucky

Public Pension Authority’s (“KPPA”)1 defined-benefit retirement plan brought

claims for alleged funding losses sustained by the plan against certain former

KPPA trustees and officers, as well as private investment advisors and hedge funds

and their principals. Plaintiffs provided the Attorney General of Kentucky2

(“OAG”) an advance copy of their complaint, but he declined to join the suit. In

1
    Formerly known as the “Kentucky Retirement System.”
2
    Governor Andy Beshear was Attorney General at that time.

                                              -5-
early 2018, the complaint was amended to include an additional defendant,

bringing the number to 32, including KPPA as a nominal defendant.

              Shortly after the complaint was amended, half the defendants moved

the trial court to dismiss the action for lack of standing. Other defendants also

moved the trial court to dismiss the action, asserting a variety of defenses. The

trial court found Plaintiffs had standing and denied all motions to dismiss, except

that of the Government Finance Officers Association on other grounds.

              The KPPA trustee and officer defendants filed interlocutory appeals

challenging the trial court’s rulings on standing and sovereign immunity, and the

Supreme Court of Kentucky accepted transfer of those appeals and consolidated

them in Overstreet v. Mayberry, 603 S.W.3d 244 (Ky. 2020).3 The Supreme Court

found “Plaintiffs lack an injury in fact sufficient to support constitutional standing”

and dismissed the case without reaching the immunity issue. Id. at 251. It

concluded its opinion, rendered July 9, 2020, stating:

              Ultimately, this Court recognizes that Plaintiffs allege
              significant misconduct, but, as a matter of law, these
              eight Plaintiffs, as beneficiaries of a defined-benefit plan
              who have received all of their vested benefits so far and
              are legally entitled to receive their benefits for the rest of
              their lives, do not have a concrete stake in this case. And
              without a concrete stake in the case, the Plaintiffs lack
              constitutional standing to bring their claims in our courts.

3
  Other defendants sought writs of prohibition from the Kentucky Court of Appeals, which were
consolidated into what was referred to as the “Writ Case” and later found moot by the Supreme
Court in Overstreet. Id. at 251.

                                             -6-
                We remand this case to the circuit court with direction to
                dismiss the complaint.

Id. at 266. The opinion did not become final until July 30, 2020.

                On July 20, 2020, pursuant to CR4 24, the OAG5 moved the trial court

to intervene on behalf of the Commonwealth of Kentucky. Defendants objected to

the OAG’s intervention, and the trial court did not immediately decide whether to

allow same.

                On July 29, 2020, the plaintiffs moved the trial court for leave to file a

second amended complaint. The proposed modifications to the complaint were

made by the plaintiffs in an attempt to acquire the constitutional standing the

Supreme Court found lacking. In addition to more claims and a new defendant, the

proposed second amended complaint sought to add three plaintiffs – the “Tier 3”

plaintiffs – who enrolled in KPPA after January 1, 2014, claiming they were not

enrolled in a defined-benefit plan and their benefits were not protected by an

inviolable-contract statutory provision. Again, the trial court did not immediately

decide whether to allow the complaint to be amended.

                Meanwhile, the OAG filed a separate action – Franklin Circuit Court

Civil Action No. 20-CI-00590 – which the trial court sua sponte consolidated with

4
    Kentucky Rules of Civil Procedure.
5
    By this time, Daniel Cameron had been elected Attorney General.

                                              -7-
this case on August 5, 2020. On August 13, 2020, a group of defendants objected

to further proceedings and moved the trial court to enforce the Supreme Court’s

mandate in Overstreet – by dismissing the complaint – and to vacate its

consolidation order, which would effectively end litigation in this case. Following

oral argument on August 24, 2020, the trial court vacated its August 5, 2020, order

consolidating the two cases.

             On December 28, 2020, the trial court addressed the pending

intervention motion and motion to file an amended complaint. It entered an order

which allowed the OAG to intervene, but dismissed the plaintiffs’ complaint and

motion to file a second amended complaint.

             Three days later, in another effort to obtain constitutional standing, the

three Tier 3 plaintiffs moved the trial court for leave to file a third amended

complaint, which did not include the original plaintiffs but did contain additional

revisions.

             About one month later, the Tier 3 plaintiffs moved to intervene and

tendered a proposed intervening complaint in a last-ditch effort to insert

themselves back into this case. Naturally, the defendants objected to the

intervention. On June 14, 2021, the trial court entered an order denying the Tier 3

                                          -8-
plaintiffs’ motions to intervene and to file a third amended complaint.6 Thus, the

only remaining plaintiff in this circuit court action is the OAG.

                 On September 21, 2021, the trial court entered an order deeming its

orders entered on December 28, 2020, and June 14, 2021, final and appealable.7

Plaintiffs appealed but later voluntarily dismissed their appeal. Defendants cross-

appealed, and their combined appeals are now before us.

                                      LEGAL ANALYSIS

                 These cross-appeals consist of two over-arching arguments: (1) the

trial court exceeded the Supreme Court’s mandate, and (2) the trial court lacked

subject-matter jurisdiction to adjudicate any motions for relief.

                 Concerning the first issue, the mandate rule, a tenet of the law-of-the-

case doctrine, dictates that trial courts are bound by opinions of the Supreme Court

and are, therefore, required to follow its mandate. Thus, the mandate rule

“provides that on remand from a higher court a lower court must obey and give

effect to the higher court’s express or necessarily implied holdings and

instructions.” Brown v. Commonwealth, 313 S.W.3d 577, 610 (Ky. 2010)

(citations omitted). In addition to serving litigants’ interests in finality, the

6
  On August 31, 2021, five original plaintiffs and a new Tier 3 plaintiff moved the trial court to
intervene.
7
    This order also denied the intervention motion of the original and Tier 3 plaintiffs.

                                                  -9-
mandate rule serves “the equally important interest courts have in judicial

economy[] by preventing the drain on judicial resources that would result if

previous decisions were routinely subject to reconsideration.” Id. “In a

subsequent appeal following remand, this Court’s role is limited to whether the

trial court properly construed and applied the mandate.” James v. James, 636

S.W.3d 549, 554 (Ky. App. 2021) (citations omitted).

             There are two types of mandates: limited and general. See Monroe v.

FTS USA, LLC, 17 F.4th 664, 669 (6th Cir. 2021), cert. denied, 142 S. Ct. 1232,

212 L. Ed. 2d 236 (2022). Limited mandates direct the lower court to do a specific

action, such as require the dismissal of a complaint, as occurred herein. See

Hutson v. Commonwealth, 215 S.W.3d 708, 713-14 (Ky. App. 2006). “With such

a mandate, the trial court’s authority is only broad enough to carry out that

specific direction.” Id. at 714 (emphasis added).

             General mandates, however, give the lower court broader discretion as

to how to proceed. They may, for example, include wording such as, “this case is

remanded with instructions to conduct further proceedings not inconsistent with

this opinion” or similar language. Id.

             Here, the Supreme Court mandated that since Plaintiffs did not have

standing, the complaint must be dismissed. Ultimately, the trial court complied

with this directive and dismissed the complaint; however, the trial court exceeded

                                         -10-
its authority when it entertained various motions to amend and to intervene, and

more specifically by permitting the OAG to intervene.8

               It has often been held “where the court does not direct a certain

judgment, the circuit court has the same power to permit amended pleadings to be

filed that it had before the reversal of the judgment.” Culton v. Napier, 242 Ky.

683, 687, 47 S.W.2d 519, 521 (1932). But, “[a] different rule prevails if [an

appellate] court orders the entry of a certain judgment. In such event no further

pleading to avoid a mandate can be filed except such as would justify a review of

the judgment.” Id.

               It is also well-established, “[t]he circuit court has not power after an

interlocutory decree made or directed by the mandate of this court to admit new

parties to make the same defen[s]e, or to allow the same parties to introduce

another defen[s]e existing before the first decree.” Kennedy’s Heirs v.

Meredith, 20 Ky. (T.B. Mon.) 409, 411 (1827) (emphasis added). That is precisely

what the plaintiffs attempted to do in the case herein, and it is simply

impermissible.

               Accordingly, while the trial court did not err in dismissing the

complaint, it did err in entertaining and ruling upon the motions to amend and

8
 In fact, had the circuit court not permitted the OAG to intervene all issues raised would be
moot.

                                              -11-
intervene as same exceeded its authority on remand in view of the Supreme

Court’s limited mandate. Therefore, while we must affirm the dismissal of the

complaint, we are equally obligated to vacate the orders resulting from the trial

court’s actions taken outside its authority on remand.9

              Further, the cross-appellants’ second contention of error that the trial

court lacked subject-matter jurisdiction to adjudicate any motions for relief is

essentially moot. Because “[t]he scope of a lower court’s authority on remand of a

case is not measured in terms of its jurisdiction, but by the direction or discretion

contained in the appellate court’s mandate,” we need not discuss this second

argument as the result remains the same. Hutson, 215 S.W.3d at 713-14.

                                      CONCLUSION

              Therefore, and for the foregoing reasons, the orders entered by the

Franklin Circuit Court are AFFIRMED in part, as they relate to the dismissal of the

Overstreet plaintiffs’ claims, and VACATED in part, as they purport to grant or

deny motions – including but not limited to those to amend and intervene – made

after the Court’s opinion in Overstreet.

              ALL CONCUR.

9
  We note that this Opinion has no effect on the OAG’s separate case, Franklin Circuit Court,
Civil Action No. 20-CI-00590, as it was unconsolidated from the case herein by order entered
August 26, 2020, and remains active and pending.

                                             -12-
BRIEFS FOR CROSS-APPELLANTS       BRIEF FOR CROSS-APPELLEE
PRISMA CAPITAL PARTNERS,          THE COMMONWEALTH OF
L.P.; GIRISH REDDY; PACIFIC       KENTUCKY:
ALTERNATIVE ASSET
MANAGEMENT COMPANY, LLC;          Daniel Cameron
AND JANE BUCHAN:                  Attorney General of Kentucky

Barbara Edelman                   Victor B. Maddox
Grahmn Morgan                     Deputy Attorney General
John M. Spires
Seth T. Church                    Brett R. Nolan
Lexington, Kentucky               Principal Deputy Solicitor General

Michael J. Garvey                 Daniel J. Grabowski
Peter E. Kazanoff                 Alexander Y. Magera
David Elbaum                      Assistant Solicitors General
Sarah A. Ricciardi
New York, New York             Aaron J. Silletto
                               Assistant Attorney General
BRIEFS FOR CROSS-APPELLANTS Frankfort, Kentucky
R.V. KUHNS & ASSOCIATES, INC.;
JIM VOYTOKO; AND REBECCA A.
GRATSINGER:

Philip Collier
Thad M. Barnes
Jeffrey S. Moad
Louisville, Kentucky

Robin E. McGuffin
Lexington, Kentucky

BRIEFS FOR CROSS-APPELLANTS
BLACKSTONE ALTERNATIVE
ASSET MANAGEMENT L.P.; THE
BLACKSTONE GROUP L.P.;
STEVEN A. SCHWARZMAN; AND
J. TOMILSON HILL:

                                -13-
 Donald J. Kelly
 Jordan M. White
 Louisville, Kentucky

 Brad S. Karp
 Lorin L. Reisner
 Andrew J. Ehrlich
 Brette Tannenbaum
 David P. Friedman10
 New York, New York

 BRIEFS FOR CROSS-
 APPELLANTS, KKR & CO., INC.;
 HENRY KRAVIS; AND GEORGE
 ROBERTS:

 Barbara Edelman
 Grahmn Morgan
 John M. Spires
 Seth T. Church
 Lexington, Kentucky

 Barry Barnett
 Abigail Noebels
 Ryan Weiss
 Houston, Texas

 Steven Shepherd
 New York, New York

10
   Mr. Friedman’s name does not appear on the briefs for the cross-appeals. He was admitted
pro hac vice via separate order entered on March 13, 2023.

                                            -14-