Court Opinion

ID: 6324632
Source: CourtListenerOpinion
Date Created: 2022-03-18 14:06:31.676699+00
Date Added: 2024-06-11T09:21:53.829472
License: Public Domain

RENDERED: MARCH 11, 2022; 10:00 A.M.
                  NOT TO BE PUBLISHED

           Commonwealth of Kentucky
                  Court of Appeals

                      NO. 2020-CA-1483-MR

GLOBAL SPECTRUM LP,
D/B/A SPECTRA VENUE
MANAGEMENT                                         APPELLANT

            APPEAL FROM DAVIESS CIRCUIT COURT
v.         HONORABLE JAY A. WETHINGTON, JUDGE
                   ACTION NO. 18-CI-01272

CITY OF OWENSBORO;
OFFICER AARON CREAGER;
BEAVER DAM EMERGENCY, INC.;
JAMISON HUGHES; JEREMY NANCE;
OWENSBORO POLICE DEPARTMENT;
OWENSBORO SPORTSCENTER; AND
UNKNOWN SECURITY GUARDS
#1, #2, #3, #4, AND #5                             APPELLEES

                           OPINION
                          AFFIRMING

                         ** ** ** ** **

BEFORE: ACREE, COMBS, AND MAZE, JUDGES.
MAZE, JUDGE: Global Spectrum LP (“Global”) appeals from a judgment of the

Daviess Circuit Court awarding the City of Owensboro and Officer Aaron Creager

(collectively, “the City”), attorney fees and costs expended in defending against a

third-party claim and in seeking enforcement of the indemnification clause in the

contract between Global and the City. We agree with the trial court that the

contract clearly obligated Global to defend and indemnify the City from all claims

arising from Global’s performance of the contract. Since the third-party claim

against the City was based primarily on Global’s alleged negligence, the

contractual provision applied to the facts of this case. We further determine that

the provision did not violate any clearly-established public policy. Next, we agree

with the trial court that Global was obligated to indemnify the City for its attorney

fees in defending the claim regardless of any determination of Global’s underlying

liability. Finally, we conclude that Global’s failure to defend amounted to a breach

of its obligations under the contract, thus warranting an additional award of

attorney fees incurred by the City to enforce the contract. Hence, we affirm.

             This action arises out of an incident on September 28, 2018, during a

concert at the Owensboro Sportscenter (“Sportscenter”), which is owned by the

City. The City entered into a “Management Agreement” which provided that

Global shall have exclusive control and responsibility to manage the operations of

the Sportscenter. Pursuant to its obligations under the Management Agreement,

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Global hired Beaver Dam Emergency, Inc. (“Beaver Dam”) to provide security for

events at the Sportscenter, including the concert involved in this case.

             Jamison Hughes attended the concert on September 28, 2018. At

some point, the security guards, employed by Beaver Dam, removed Hughes for

being disruptive. While the facts of that incident are disputed, the security guards

called the police. Officer Aaron Creager of the City Police Department responded

to the call. When he arrived, Officer Creager observed several security guards

holding Hughes on the ground. Officer Creager placed handcuffs on Hughes and

checked him for weapons. Officer Creager then spoke with the security guards,

who relayed their account of Hughes’ disruptive behavior. Officer Creager

observed that Hughes was intoxicated. Hughes also admitted to Officer Creager

that he was intoxicated.

             Officer Creager then removed the handcuffs from Hughes and issued

a citation for alcohol intoxication and second-degree disorderly conduct. Hughes

was examined for injuries by EMTs, but he declined to be transported to the

hospital. At Hughes’ arraignment, the Commonwealth agreed to dismissal of the

charges without any stipulation of probable cause.

             Thereafter, Hughes filed an action against the City, Officer Creager,

Global, Beaver Dam, Jeremy Nance (an employee of Beaver Dam), and five

unknown security guards. The City filed a motion for summary judgment on

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liability. The trial court granted the motion, finding that Officer Creager had

probable cause to detain Hughes based upon his own investigation and the

statements of the witnesses.

             Prior to the entry of summary judgment on this issue, the City filed a

cross-claim against Global, noting that the Management Agreement included a

provision requiring Global to defend and indemnify the City from any claims

arising out of Global’s management of the Sportscenter. Following the dismissal

of Hughes’ claims against the City, the City filed a motion for summary judgment

against Global. In the motion, the City sought to recover attorney fees and costs

expended in defending Hughes’ claim. Global filed a cross-motion for summary

judgment to dismiss the cross-claim.

             After considering the motions, the trial court granted summary

judgment for the City. The court noted that, under the Management Agreement,

Global is responsible for the acts and omissions of its agents, employees,

contractors, and subcontractors. The court found that Hughes’ claims “arise out

of” Global’s duties under the Management Agreement. The court further found

that those claims were primarily based upon the actions of the security guards in

detaining Hughes and providing information to Officer Creager. The court also

determined that the indemnification agreement did not violate public policy

                                         -4-
because it was narrowly focused on Global’s own alleged negligence and not the

alleged negligence of the City or Officer Creager.

              Next, the trial court found that summary judgment for the City was

appropriate because the Management Agreement required Global to indemnify the

City for its costs in defending the action, and not merely for its liability. And

finally, the trial court determined that the City was entitled to recover its attorney

fees and costs on its cross-claim because Global’s failure to defend amounted to a

breach of its duties under the Management Agreement. After the City filed its

affidavit of attorney fees, the trial court entered a judgment against Global in the

amount of $53,847.88. This appeal followed.1

              Global argues that the City was not entitled to summary judgment on

its cross-claim. Rather, Global contends that it was entitled to summary judgment

on the City’s claim for attorney fees and costs. “[T]he proper function of summary

judgment is 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.” Steelvest, Inc. v. Scansteel Service Center, Inc., 807

S.W.2d 476, 480 (Ky. 1991). Summary judgment is appropriate “if the pleadings,

1
  Hughes’ claims against Global and its agents remained pending following entry of the City’s
motion for summary judgment on its cross-claim against Global. However, trial court designated
its October 21, 2020, order and judgment awarding attorney fees to the City as final and
appealable pursuant to CR 54.02(1). Therefore, this appeal properly stands submitted to this
Court.

                                             -5-
depositions, answers to interrogatories, stipulations, and admissions on file,

together with the affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment as a matter of

law.” CR2 56.03. The record must be viewed in a light most favorable to the party

opposing the motion for summary judgment and all doubts are to be resolved in his

favor. Steelvest, 807 S.W.2d at 480. The trial court must examine the evidence,

not to decide any issue of fact, but to discover if a real issue exists. Id. Since a

summary judgment involves no fact-finding, this Court’s review is de novo, in the

sense that we owe no deference to the conclusions of the trial court. Scifres v.

Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996).

                This matter hinges on the interpretation of the indemnification

provisions in the Management Agreement between the City and Global. The

construction and interpretation of a contract is a matter of law and is reviewed

under the de novo standard. Cinelli v. Ward, 997 S.W.2d 474, 476 (Ky. App.

1998). If no ambiguity exists, “a written instrument is to be strictly enforced

according to its terms which are to be interpreted ‘by assigning language its

ordinary meaning and without resort to extrinsic evidence.’” Allen v. Lawyers

Mutual Insurance Company of Kentucky, 216 S.W.3d 657, 659 (Ky. App. 2007)

(quoting Island Creek Coal Co. v. Wells, 113 S.W.3d 100, 104 (Ky. 2003)). Any

2
    Kentucky Rules of Civil Procedure.

                                           -6-
issues regarding ambiguity are questions of law to be decided by the court, which

we also review de novo. Frear v. P.T.A. Industries, Inc., 103 S.W.3d 99, 105 (Ky.

2003). A contract is ambiguous if a reasonable person would find it susceptible to

different or inconsistent interpretations. Hazard Coal Corp. v. Knight, 325 S.W.3d

290, 298 (Ky. 2010) (citing Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94

S.W.3d 381, 385 (Ky. App. 2002)).

             The indemnification provision is set out in Article 12 of the

Management Agreement. Section 12.1 of the Management Agreement requires

Global “to defend indemnify and hold harmless” the City, its employees, and

agents,

             against any claims, causes of action, costs, demands,
             losses, damages, settlements, charges, professional fees
             or other expenses (including attorneys’ fees) liabilities, or
             damages (collectively, “Losses”) of every kind and
             character suffered by such parties arising out of or in
             connection with any (a) negligent act or omission, or
             intentional misconduct, on the part of Manager or any of
             its employees or agents in the performance of its
             obligations under this Agreement, or (b) breach by
             Manager of any of its representations, covenants or
             agreements made herein.

             Section 12.2 qualifies Global’s liability by stating, in pertinent part,

that Global “shall not be responsible for (1) any negligent act or omission, or

intentional misconduct, on the part of City or any of its employees or agents in the

performance of its obligations under this Agreement[.]” The primary question in

                                          -7-
this case is whether the City is seeking to enforce the indemnification clause for

the conduct of Global’s agents or Officer Creager.

             Global first argues that the security guards were not acting as its

agents. Rather, Global contends that Beaver Dam was acting as an independent

contractor. Therefore, the actions of Beaver Dam’s employees are not attributable

to Global.

             But as the City notes, the Management Agreement expressly assigned

the security tasks at the Sportscenter to Global. Global cannot avoid liability for

negligence in the performance of those tasks by assigning the duty to an

independent contractor. Williams v. Kentucky Dep’t of Educ., 113 S.W.3d 145,

151 (Ky. 2003). See also Louisville Cooperage Co. v. Lawrence, 230 S.W.2d 103,

105 (Ky. 1950) and Brown Hotel Co., Inc. v. Sizemore, 303 Ky. 431, 197 S.W.2d

911, 913 (1946). Even if it delegated the security duties to Beaver Dam, Global is

still obligated to indemnify and defend the City for claims arising from those

actions.

             Global next argues that the express language of the Management

Agreement only required it to defend and indemnify the City from claims arising

from its agents’ actions, not from actions by the City’s agents, such as Officer

Creager. Global concedes that the security guards detained and restrained Hughes

during the concert. However, Global contends that Hughes’ claims against the

                                         -8-
City arose from Officer Creager’s investigation and his decision to issue a citation

to Hughes. Because the Management Agreement specifically excludes negligence

of the City’s agents, Global argues that its indemnification duties were never

implicated prior to the City’s dismissal.

             As the trial court noted, Hughes alleged that the guards gave a false

account to Officer Creager, which provided Officer Creager with probable cause to

issue the citation for disorderly conduct. Officer Creager based the citation for

public intoxication on the security guards’ account, as well as his own observations

and Hughes’ admissions. In any event, we agree with the trial court that there was

a direct causal connection between the conduct of the security guards and Officer

Creager’s actions. This connection is sufficient to support the conclusion that

Hughes’ claims against the City “arise out of” Global’s duties under the

Management Agreement.

             Furthermore, Section 12.2(a) of the Management Agreement only

exempts indemnification for acts of the City or its employees “in the performance

of its obligations under this Agreement.” Officer Creager’s actions were not part

of the City’s obligations under the Management Agreement but were part of his

official duties as a police officer. Therefore, we agree with the trial court that the

exception to liability in Section 12.2(a) does not apply.

                                            -9-
             Global next argues that the provision is unenforceable as against

public policy. Courts will not disregard the plain terms of a contract between

private parties on public policy grounds absent a clear and certain statement of

strong public policy in controlling laws or judicial precedent. State Farm Mut.

Auto. Ins. Co. v. Hodgkiss-Warrick, 413 S.W.3d 875, 880 (Ky. 2013). In the

absence of legislation expressly forbidding enforcement, a contract term is

unenforceable on public policy grounds only if the policy asserted against it is

clearly manifested by legislation or judicial decision and is sufficiently strong to

override the very substantial policies in favor of the freedom of contract and the

enforcement of private agreements. Id. (citing RESTATEMENT (SECOND) OF

CONTRACTS § 178 (1979)).

             Global’s asserted public policy does not meet this standard.

Essentially, Global contends the contractual provision requires it to assume

liability for the performance of public duties that are exclusively within the scope

of the City’s authority. But as the trial court noted, the Management Agreement

only requires Global to defend and indemnify claims against the City arising from

Global’s performance of the Management Agreement.

             Given the express qualification in Section 12.2, we conclude that the

Management Agreement does not exempt the City from liability for the

performance of a duty of public service. See Cobb v. Gulf Refining Co., 284 Ky.

                                         -10-
523, 145 SW.2d 96, 99 (1940). Rather, the Agreement only requires Global to

assume the City’s vicarious liability for purported negligence of Global’s agents.

In this case, the Agreement requires Global to assume liability for Officer

Creager’s actions only to the extent he responded to the actions or representations

of Global’s agents. Even if the Agreement could be read to require Global to

defend and indemnify the City for Officer Creager’s alleged negligence in issuing

the citation, we cannot find that the requirement would contravene a clearly

established public policy because the City and Global were of equal bargaining

power. Speedway Superamerica, LLC v. Erwin, 250 S.W.3d 339, 343 (Ky. App.

2008).

             In the alternative, Global argues that summary judgment was

premature. Global contends that the Management Agreement only requires it to

indemnify the City for damages arising out of Global’s liability. Since there has

been no finding that Global or its agents were negligent, then the indemnification

provision is not yet applicable.

             The City responds that the Management Agreement required Global

to defend and indemnify the City for claims arising out of its performance of the

Agreement. The City takes the position that the Agreement requires Global both to

defend and to indemnify the City for Hughes’ claims, irrespective of Global’s own

liability. The trial court agreed, focusing on the language requiring Global to

                                        -11-
defend the City from any claims arising from Global’s performance of the

Management Agreement.

             We agree with the trial court’s reading of the Agreement. Global

refers to ARA Servs., Inc. v. Pineville Cmty. Hosp., 2 S.W.3d 104, 107 (Ky. App.

1999), in which the contract required a food service vendor “to indemnify, defend

and hold harmless” the Hospital from any claims attributable to the vendor’s

negligence in performing the contract. Id. at 106. This Court held the vendor must

be found liable before the contractual indemnification clause would apply. Id. at

107. The Sixth Circuit, applying Kentucky law, followed the same analysis in

Thompson v. The Budd Co., 199 F.3d 799, 807 (6th Cir. 1999). Based on this

reasoning, Global maintains that its duties to defend and indemnify the City do not

arise until it is found liable for negligence in performing the Management

Agreement at issue.

             However, the courts in ARA Services and Thompson only addressed

the respective duties to indemnify under Kentucky law. A duty to defend is both

distinct from and broader than a duty to indemnify. James Graham Brown Found.,

Inc. v. St. Paul Fire & Marine Ins. Co., 814 S.W.2d 273, 279-80 (Ky. 1991).

Thus, the holdings in those cases do not purport to limit the scope of a contractual

duty to defend.

                                        -12-
             We agree with Global that it had no duty to defend against claims

which arose from actions which were clearly outside of the scope of its duties

under the Management Agreement. See Cincinnati Ins. Co. v. Motorists Mut. Ins.

Co., 306 S.W.3d 69, 79 (Ky. 2010). But under the clear language of the

Agreement, Global had a duty to defend the City from claims which could

reasonably be construed to arise from its obligations under the Agreement. As

previously noted, Hughes’ claims were based, in significant part, upon the guards’

performance of the security duties allocated to Global under the Management

Agreement. Under the circumstances, we agree with the trial court that the duty to

defend was not contingent upon a finding of Global’s liability for the underlying

claims. Therefore, we conclude that there were no genuine issues of material fact

precluding the entry of summary judgment for the City and Officer Creager.

             Finally, Global argues that the Management Agreement only requires

it to indemnify the City for attorney fees and costs incurred in defending Hughes’

claim. Consequently, Global contends the additional award of fees incurred in

enforcing the indemnification agreement was not authorized. In response, the City

states that the Agreement requires Global to indemnify the City for all costs

associated with the claim, including fees incurred in enforcing the Agreement.

             The general rule in Kentucky is that, “with the exception of a specific

contractual provision allowing for recovery of attorneys’ fees or a fee-shifting

                                        -13-
statute, . . . each party assumes responsibility for his or her own attorneys’ fees[.]”

Aetna Cas. & Sur. Co. v. Com., 179 S.W.3d 830, 842 (Ky. 2005). Thus, any

authorization for attorney fees must be found in the plain language of the

Management Agreement. Section 12.1 requires Global to indemnify the City for

any claims or losses, including attorney fees, either “arising out of” (a) any

negligent act on the part of Global; or “(b) [any] breach by Manager of any of its

representations, covenants or agreements made herein.” Furthermore, under

Section 12.3, Global “shall be responsible, at its sole cost and expense, for

controlling litigating defending and/or otherwise attempting to resolve any

proceeding, claim, or cause of action underlying such matter,” except that the City

may elect to participate or assume control of the defense under specified

circumstances.

             Under Section 12.1(a), Global’s obligation to defend and indemnify

clearly applies to the City’s attorney fees and costs accrued during proceedings

involving Hughes’ claims against the City. Global does not dispute the trial

court’s award of the City’s attorney fees and costs incurred in defending Hughes’

claim. The City further argues, and the trial court agreed, that Global’s actions

amounted to a breach of its duty to defend, thus implicating its obligation to pay

attorney fees under Section 12.1(b).

                                          -14-
             Global takes the position that the language of Section 12.1(b) is

ambiguous and should be construed against the City as the drafter of the

Management Agreement. Global notes that the Management Agreement does not

clearly define failure to defend as a breach of the Agreement. Consequently,

Global argues that the Agreement does not expressly allow the City to recover its

attorney fees expended in seeking summary judgment to enforce the

indemnification provision.

             However, Global does not argue that the trial court clearly erred in

finding that its failure to defend the City on Hughes’ claims amounted to a breach

of its duties under the Management Agreement. Similarly, Global does not

contend that its decision not to defend the City from Hughes’ claims was justified

under the Management Agreement. Lastly, Global does not argue that the City

improperly exercised its option to defend itself from Hughes’ claims.

             Therefore, we conclude that the additional award of attorney fees was

supported by the terms of Section 12.1(b). Where the contract authorizes the

award of attorney fees under these circumstances, the trial court’s award of

attorney fees is largely a matter of discretion. See Superior Steel, Inc. v. Ascent at

Roebling’s Bridge, LLC, 540 S.W.3d 770, 787 (Ky. 2017). Since the trial court

found that Global breached its duty to defend, we find no abuse of discretion in the

additional award of attorney fees to the City.

                                         -15-
             Accordingly, we affirm the judgment of the Daviess Circuit Court

awarding attorney fees to the City.

             ALL CONCUR.

BRIEFS AND ORAL ARGUMENT                 BRIEF FOR APPELLEES CITY OF
FOR APPELLANT:                           OWENSBORO AND OFFICER
                                         AARON CREAGER:
David T. Klapheke
Louisville, Kentucky                     Patrick D. Pace
                                         Stephen C. Pace
                                         Owensboro, Kentucky

                                         ORAL ARGUMENT FOR
                                         APPELLEES CITY OF
                                         OWENSBORO AND OFFICER
                                         AARON CREAGER:

                                         Patrick D. Pace
                                         Owensboro, Kentucky

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