Court Opinion

ID: 7801654
Source: CourtListenerOpinion
Date Created: 2022-08-18 15:05:31.167978+00
Date Added: 2024-06-11T16:29:19.782595
License: Public Domain

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                                                  RENDERED: AUGUST 18, 2022
                                                       NOT TO BE PUBLISHED

               Supreme Court of Kentucky
                                 2022-SC-0151-I

BHEP GP I, LLC; BHEP GP II, LLC; BHEP                                   MOVANTS
GP II-B, LLC; BHEP GP III, LLC; BAY HILLS
CAPITAL MANAGEMENT, LLC; AND LANCE
MANSBRIDGE

                   ON APPEAL FROM COURT OF APPEALS
V.                  NOS. 2021-CA-1155 & 2021-CA-1524
                 FRANKLIN CIRCUIT COURT NO. 18-CI-00377

KENTUCKY RETIREMENT SYSTEMS                                         RESPONDENT

                    OPINION AND ORDER OF THE COURT

                          DENYING CR 65.09 RELIEF

      BHEP GP I, LLC; BHEP GP II, LLC; BHEP GP II-B, LLC; BHEP GP III,

LLC; Bay Hills Capital Management, LLC; and Lance Mansbridge1 (collectively

referred to as “Bay Hills”) have moved this Court for interlocutory relief

pursuant to Kentucky Rule of Civil Procedure (CR) 65.09. The Movants seek

relief from an order of the Court of Appeals denying their CR 65.07 motion to

vacate a temporary injunction issued by the Franklin Circuit Court. For the

following reasons, we deny their CR 65.09 motion.

     1 Lance Mansbridge is the founder and managing partner of Bay Hills Capital

Management, LLC.
                                    I. BACKGROUND

A. Factual Background

      Beginning in 2007, Kentucky Retirement Systems (Kentucky Retirement)

invested over $180 million to be managed by Bay Hills Capital Management,

LLC.2 To facilitate these investments, Bay Hills Capital Management and

Kentucky Retirement entered into four written limited partnership agreements

(LPAs). Kentucky Retirement is the only limited partner and is the sole investor

of each limited partnership. The limited partnerships are “funds of funds,”

meaning that they invest in other private equity funds. The partnerships are

separate legal entities. The four limited partnerships are: (1) Bay Hills

Emerging Partners I (Fund I); (2) Bay Hills Emerging Partners II (Fund II); (3)

Bay Hills Emerging Partners II-B (Fund II-B); and (4) Bay Hills Emerging

Partners III (Fund III) (collectively referred to as the “Funds”).3

      Bay Hills also established four limited liability companies to run and act

as the general partner for each partnership (collectively referred to as “Fund

GPs”). The general partner for Fund I is BHEP GP I, LLC. The general partner

for Fund II is BHEP GP II, LLC. The general partner for Fund II-B is BHEP GP

II-B, LLC. The general partner for Fund III is BHEP GP III, LLC.

      The Funds also employ Bay Hills Capital Management as an advisor and

pay it annual management fees. Bay Hills Capital Management employees

       2 We note at the outset that because this is before us on a CR 65.09 motion, we

do not have a certified record from the courts below. We only have the portions of the
record that were supplied by the parties, and our review is limited thereto.
      3   The Funds are not parties to this litigation.

                                              2
manage and operate the Funds for the general partners. Each of the Funds are

governed by separate LPAs. Notably, each of the LPAs contain a removal

provision by which the limited partner can remove the general partner for

cause after providing notice to the general partner and an opportunity for the

general partner to cure the alleged cause. The LPAs also contain “Key Person

Event” provisions by which Kentucky Retirement could elect to dissolve and

wind up the Fund if certain key employees of Bay Hills Capital Management

died, became incapacitated, ceased being employed by the company, or failed

to devote a substantial amount of time to the applicable Bay Hills General

Partner or the Fund.

      Under the LPAs, the partners are first paid back the capital they invested

in the private equity fund and then a 12% preferred return on the principal

investment. After the 12% preferred return has been paid to the partners, the

general partner receives an additional 8% of the excess of the return of capital,

called the carried interest. After the carried interest is paid, any excess profit is

distributed in the amounts of 92% to all partners in accordance with their

ownership interests and 8% to the general partner. In each fund, Kentucky

Retirement holds an ownership interest of 98 to 99%.

      In 2016, a Kentucky Retirement employee noticed that the Fund GPs

were being paid more than what they were supposed to receive under the LPAs.

The Kentucky Retirement investigation revealed that the Fund GPs received

distributions over several years that were equivalent to 8% of the total amount

distributed from the Funds’ investments rather than 8% of the excess of the

                                          3
return of capital. This resulted in the Fund GPs being overpaid by over $2

million. The Fund GPs eventually repaid this overpayment in mid-2017 but

only did so after Bay Hills obtained a bank loan to facilitate the repayment.

Nonetheless, during its investigation into the overpayment of carried interest,

Kentucky Retirement found multiple other areas where it believed Bay Hills

was improperly taking payments from the Funds.

      By late 2016, a Key Person Event identified in the LPA for Fund III had

occurred. Kentucky Retirement sought to exercise its right to dissolve and wind

up that Fund and provided its intent to do so to BHEP GP III. Kentucky

Retirement alleges that Bay Hills failed to act in good faith in the wind-up

process and obstructed this process.

B. Procedural Background

      Due to the Fund GPs’ overpayment and the alleged obstruction of the

wind-up process for Fund III, as well as other alleged financial

mismanagement, Kentucky Retirement served a notice of removal for cause on

the Fund GPs on May 10, 2017. Kentucky Retirement later withdrew this

notice based on promises made by the Fund GPs. However, when the Fund

GPs allegedly failed to uphold their promises, Kentucky Retirement served a

second notice of removal for cause. This second notice was served on February

8, 2018, and informed the Fund GPs that they would be removed from their

respective partnerships unless they cured the alleged cause within sixty days.

      The Fund GPs did not attempt to cure the alleged cause. Instead, on

April 2, 2018, they filed suit in the Delaware Court of Chancery challenging

                                        4
their removal and seeking a declaration of rights. On April 10, 2018, Kentucky

Retirement filed the underlying action in Franklin Circuit Court seeking

monetary damages and declaratory and injunctive relief to enforce Kentucky

Retirement’s decision to remove the Fund GPs. Kentucky Retirement moved to

dismiss or stay the Delaware action in favor of the Kentucky action, asserting

that Kentucky was the proper forum pursuant to the forum selection clauses in

the LPAs. The Delaware court stayed that action pending the resolution of the

Kentucky action, deferring to Kentucky “in the interests of the orderly and

efficient administration of justice.”

      In its complaint in the Kentucky action, Kentucky Retirement sought a

declaratory judgment of removal of the Fund GPs from the partnerships

alleging cause for removal existed as defined by each of the LPAs including

miscalculations of carried interest, failure to disclose how carried interest was

calculated, and calculation of expenses in a manner contrary to the LPAs.

Kentucky Retirement further alleged that all of the defendants were grossly

negligent, that the Fund GPs breached their fiduciary duties, that Bay Hills

Capital Management and Mansbridge aided and abetted the Fund GPs in

breaching their fiduciary duties, and that the Fund GPs breached their duty of

good faith and fair dealing. Kentucky Retirement also claimed that all the

defendants engaged in fraud and conversion and that the Fund GPs breached

the contract as found in the LPAs. Finally, Kentucky Retirement claimed unjust

enrichment and sought an equitable accounting and a constructive trust.

                                        5
      Contemporaneous with filing its verified complaint in Franklin Circuit

Court, Kentucky Retirement also filed a motion for a temporary injunction

under CR 65.04. Kentucky Retirement sought a temporary “injunction to

remove Bay Hills as general partner of the Funds and to comply with the

Agreements’ requirement for transition of the Funds to a new general partner.”

Bays Hills opposed the motion for a temporary injunction.

      On May 15, 2020, the trial court entered an order granting a temporary

injunction to “preserve the status quo and prevent the improper distribution of

assets pending final adjudication on the merits.” In so doing, the trial court

temporarily enjoined the defendants “from taking further management fees,

distributions, carried interest, tax advances, or other payments from the Funds

without prior approval of either the Court or Plaintiff.” The trial court found

that this relief would “ensure[] that the rights of all litigants will be preserved”

pending “a full consideration of all relevant facts and evidence.” The trial court

did not grant Kentucky Retirement the relief it sought, finding such remedy

would be improper, inequitable to the defendants, and would function as a

substitute for trial.

      In its order granting a temporary injunction, the trial court found that,

absent the injunction, Kentucky Retirement would suffer “irreparable injury

attendant to the allege[d] breaches of fiduciary duty that could leave [Kentucky

Retirement] with no meaningful remedy.” The trial court further found there

was “at least a substantial possibility that [Kentucky Retirement] will prevail on

its ultimate claim against [Bay Hills], and [Kentucky Retirement] has without

                                          6
doubt presented a substantial legal question on the merits regarding [Bay

Hills’s] alleged misconduct and misallocation and improper distribution of the

assets of the partnerships.” Relying on the testimony and written report of

Kentucky Retirement’s expert witness, Marti Murray, the trial court concluded

that

       the overcharges by Bay Hills across several categories of fees and
       expenses—including management fees, carried interest, and
       operating expenses—as well as the lack of affirmative steps taken
       to wind-up the business of Funds I, II, and III, constitute conduct
       that would be “well outside the bounds of what a reasonable
       investor in Private Equity would find tolerable, in terms of both
       their magnitude and recurrence.”

Thus, the trial court found that a substantial question exists as to “whether the

lack of affirmative steps to dissolve the Funds and the continued taking of

payments by the General Partners constitutes Cause for removal under the

LPAs.” Specifically, the trial court found that “a substantial legal question”

exists as to whether the Defendants’ behavior constitutes gross negligence and

whether this behavior materially and adversely affected the Funds, thus

providing grounds for removal for cause under the LPAs.

       Finally, the trial court found “continuing harm through breached

fiduciary obligations to Plaintiff that is separate and distinct from any

monetary injury.” The trial court recognized that if only monetary injury was at

issue, Kentucky Retirement would not be entitled to an injunction. However,

the trial court found that “allowing Defendants to continue to award

themselves carried interest, management fees, or expenses represents a breach

of trust and a breach of fiduciary obligations to [Kentucky Retirement]’s

                                         7
interests.” Finally, the trial court found that the breach of trust and breach of

fiduciary obligations “is a present, nonspeculative, nonmonetary harm that

[Kentucky Retirement] would continue to suffer if preliminary injunctive relief

were not granted, and [Kentucky Retirement]’s remedy would thereby be

irreparably impaired.”

      Bay Hills did not seek interlocutory relief from the trial court’s May 15,

2020 order granting a temporary injunction. Instead, on June 19, 2020, Bay

Hills filed a Motion for Approval of Payment of Fees and Expenses Incurred by

the Funds. In this motion, Bay Hills also requested that the trial court “vacate

the May 15 Order or modify that Order in a manner that is not inconsistent

with the terms of the LPAs, including allowing Defendants to pay and collect

reimbursements for entire categories of expenses as provided under the LPAs.”

Bay Hills sought approval to pay expenses

      associated with preparing the Funds’ annual financial reports,
      outside auditors’ fees, tax preparation fees, the legal expenses
      relating to this action, costs associated with investing, monitoring
      or managing the Funds’ capital, costs incurred in investigating or
      evaluating investment opportunities, interest on Fund borrowings,
      costs of reports to the limited partners and insurance premiums.

In its motion, Bay Hills alleged that it was “owed $484,393.32 in fees and

expenses associated with managing the Funds, preparing annual financial

reports, outside auditors’ fees, tax preparation fees and legal expenses, the

later category being the lion’s share of [Bay Hills]’ reimbursement

entitlements.” These expenses were only itemized to the extent that Bay Hills

alleged that it was owed $408,839.39 for “legal expenses” and $60,000 for

“reimbursement” for “audit fees incurred and unpaid.” No additional
                                        8
explanation for those expenses was included in the motion, and proof of those

amounts was not attached to the motion.4

      Kentucky Retirement filed its own motion for an order prescribing the

procedure for enforcement of the injunction order. In its motion, Kentucky

Retirement averred that Bay Hills was withholding information that would

allow Kentucky Retirement to determine whether Bay Hills was complying with

the terms of the injunction and to determine whether to approve distribution.

Kentucky Retirement’s proposed procedure would allow the Funds to continue

to distribute money to Kentucky Retirement, place in an escrow account any

payment to which Bay Hills believed it was entitled, and provide information

received by Bay Hills from the Underlying Funds so that Kentucky Retirement

could monitor compliance with the injunction order.

      On December 16, 2020, the trial court held a hearing at which it heard

arguments on both motions. At the outset of the hearing, the court explained

that it had expected Bay Hills to present an itemized list of fees and expenses it

was seeking as well as the justification for those fees and expenses. The court

noted that there was nothing in Bay Hills’s filings to provide this information

and that it “really want[ed] to know the specifics” regarding the monies to

      4  Four months later and after failed mediation, Bay Hills renoticed its Motion for
Approval of Payment of Fees and Expenses Incurred by the Funds and filed a
supplemental memorandum in support of said motion. In the supplemental
memorandum, Bay Hills alleged it was then owed a total of $635,490.93, broken down
as follows: $393,572.17 for legal fees, $69,300.00 for audit fees, $24,000.00 for fund
administration, $119,400.00 for tax preparation, and $9,218.76 for insurance. Bay
Hills further alleged it was owned $238,009.09 in management fees and approximately
$1,050,625.97 in carried interest payments. Again, no proof of these expenses or how
they were calculated was included with the memorandum.

                                           9
which Bay Hills thought it was entitled. Following the hearing, the trial court

took the parties’ motions under submission.

      On April 26, 2021, Bay Hills filed a Motion to Vacate Order Granting

Temporary Injunction. Attached to this motion were spreadsheets that

purported to justify Bay Hills’s calculation of the distributions and carried

interest to which it was entitled. Kentucky Retirement opposed, arguing that

Bay Hills was attempting to improperly relitigate the original injunction, and

sought a status hearing. With three motions then pending, the trial court held

a hearing on June 9, 2021, to hear arguments from both parties.

      On September 14, 2021, the trial court entered an order resolving each

of the motions. The trial court denied Bay Hills’s request for payment of its

attorneys’ fees. The trial court denied Bay Hills’s requests for the court to

amend or vacate its injunction order. The trial court ordered that Bay Hills

could pay from the Funds any outstanding third-party claims after providing

“complete documentation for such payments to” Kentucky Retirement and that

Bay Hills would be required to petition the court for any future third-party

claims before paying those from the Funds. Finally, the trial court ordered that

Bay Hills could petition the court for payments of carried interest, management

fees, or any other amounts to be paid to Bay Hills directly out of the Funds but

that Bay Hills would be required to “provide sufficient documentary proof that

they are entitled to such. Otherwise, the [c]ourt orders that these payments be

deposited in an escrow account during the pendency of this action.”

                                        10
      Specifically, regarding attorneys’ fees for the underlying litigation, the

trial court found that “because the Funds are composed of assets contributed

by [Kentucky Retirement], any payment from the Funds to cover [Bay Hills’s]

legal fees improperly shifts [Bay Hills’s] costs associated with this litigation to

[Kentucky Retirement].” The court found that allowing Bay Hills to recover its

legal fees for the underlying litigation from the Funds would “violate[] the

established rule that each party must bear its own costs during the course of

litigation.” The court found that to do so would be “especially inappropriate” in

this case “given the strong showing made by [Kentucky Retirement] that [Bay

Hills has] misappropriated funds and wrongful [sic] paid out compensation to

themselves in violation of the agreements.” The court went on to say that “[t]his

principle is even more compelling in this case by virtue of the fact that all of the

funds at issue are public funds that are held in trust for the benefit of public

retirees.” Finally, the court concluded that “[t]here is a strong presumption

against indemnification provisions in contracts applying to suits between the

parties to the contract, and the circumstances surrounding the present case—

as well as language of the LPAs themselves—do not overcome that

presumption.”

      On October 4, 2021, Bay Hills filed a Motion for Interlocutory Relief in

the Court of Appeals under CR 65.07. While that motion was pending in the

Court of Appeals, Bay Hills filed a Motion for Approval of Payment of Partner

Distributions, Carried Interest and Management Fees in the trial court. In its

motion, Bay Hills sought over $3.8 million in distributions and close to $1

                                         11
million in management fees. Bay Hills justified these amounts by providing the

trial court with spreadsheets and explanations based on calculations reached

by a third-party fund administrator. Kentucky Retirement responded in

opposition of Bay Hills’s motion, arguing that Bay Hills was not entitled to any

carried interest or management fees after the effective date of the for-cause

removal.

      On December 9, 2021, the trial court entered an order denying Bay

Hills’s motion and ordering “that the disputed amounts be held in escrow until

this litigation has concluded, or the [c]ourt after notice and hearing approves

full or partial distribution of those sums.” The trial court again noted that

Kentucky Retirement had “made an extremely strong showing that [Bay Hills]

took compensation that [it was] not entitled to, and, in fact, [Bay Hills has]

acknowledged that [it] overcharged the funds by over a million dollars in

carried interest payments.” The court further noted that Bay Hills’s “right to

the compensation requested is highly disputed” and that if Kentucky

Retirement ultimately prevailed on the underlying claims for breach of fiduciary

duty claims, Bay Hills “may not be entitled to the requested compensation at

all.” On December 29, 2021, Bay Hills filed a second Motion for Interlocutory

Relief in the Court of Appeals under CR 65.07.

      On April 14, 2022, the Court of Appeals entered an order denying both of

Bay Hills’s CR 65.07 motions for interlocutory relief. The Court of Appeals held

that the trial court did not abuse its discretion in entering either its September

10, 2021 order or its December 9, 2021 order. The Court of Appeals further

                                        12
noted that Bay Hills’s failure to seek relief from the trial court’s May 15, 2020

injunction order effectively waived any objection it had to that order. Therefore,

the Court of Appeals deemed waived any arguments Bay Hills made that went

to the substantive decisions the trial court made in the first injunction order

that were subsequently implicitly incorporated into the trial court’s later

orders. Thereafter, Bay Hills filed a Motion for Interlocutory Relief with this

Court pursuant to CR 65.09.

                   II. INJUNCTION STANDARD OF REVIEW

      A preliminary injunction is an “extraordinary remedy” and should only be

issued “where absolutely necessary to preserve a party’s rights pending a trial

on the merits.” Commonwealth ex rel. Cowen v. Wilkinson, 828 S.W.2d 610, 612

(Ky. 1992) (emphasis added), overruled on other grounds by Commonwealth ex

rel. Conway v. Thompson, 300 S.W.3d 152 (Ky. 2009); see also Bartman v.

Shobe, 353 S.W.2d 550, 554 (Ky. 1962) (explaining that courts “frequently

withhold[] the granting of an injunction when the benefit to the plaintiff will be

small in comparison to the injury to the defendant”). “[A] temporary injunction

is designed merely to hold the status quo until the merits can be decided.”

Curry v. Farmers Livestock Mkt., 343 S.W.2d 134, 135 (Ky. 1961).

      Injunctive relief is governed by CR 65.04, which states that a temporary

injunction may be granted if

      it is clearly shown by verified complaint, affidavit, or other evidence
      that the movant’s rights are being or will be violated by an adverse
      party and the movant will suffer immediate and irreparable injury,
      loss, or damage pending a final judgment in the action, or the acts

                                        13
      of the adverse party will tend to render such final judgment
      ineffectual.

This rule effectively requires that a trial court only grant injunctive relief if each

of the following is met: first, that the movant presents a “substantial question”

in the case (“i.e. that there is a substantial possibility that the movant will

ultimately prevail”); second, that the injury resulting absent injunctive relief

would be immediate and irreparable; and third, that the temporary injunction

“will not unduly harm other parties or disserve the public.” Price v. Paintsville

Tourism Com’n, 261 S.W.3d 482, 484 (Ky. 2008) (citing Cyprus Mountain Coal

Corp. v. Brewer, 828 S.W.2d 642 (Ky. 1992)). “Realizing that the elements of CR

65.04 must often be tempered by the equities of any situation, injunctive relief

is basically addressed to the sound discretion of the trial court.” Maupin v.

Stansbury, 575 S.W.2d 695, 697–98 (Ky. App. 1978) (citations omitted).

However, “mere injuries, however substantial, in terms of money, time and

energy necessarily expended in the absence of a stay, are not enough.”

Norsworthy v. Ky. Bd. of Med. Licensure, 330 S.W.3d 58, 62 (Ky. 2009) (quoting

Sampson v. Murray, 415 U.S. 61, 90 (1974)).

      Under CR 65.07, a party adversely affected by a temporary injunction

may seek relief from the Court of Appeals. “In requesting interlocutory relief

pursuant to 65.07, a party is arguing that, by granting or denying an

injunction under CR 65.04, the trial court’s decision is not based on

substantial evidence and is clearly erroneous.” Kindred Hosps. Ltd. P’ship v.

Lutrell, 190 S.W.3d 916, 919 (Ky. 2006) (citation omitted). However, the Court

                                         14
of Appeals may only reverse the trial court’s decision to grant or deny a

temporary injunction if the movant shows that “injury or loss will occur in light

of the trial court’s decision.” Id.

       “A party adversely affected by the Court of Appeals’ ruling may, under

CR 65.09(1), move this Court for further review. We grant such review only

upon a showing of ‘extraordinary cause.’” Boone Creek Props., LLC v. Lexington-

Fayette Urban Cnty Bd. of Adjustment, 442 S.W.3d 36, 38 (Ky. 2014) (quoting

Nat’l Collegiate Athletic Ass’n v. Lasege, 53 S.W.3d 77, 84 (Ky. 2001)).

Extraordinary cause is a high bar. “While additional review by this Court is

limited to those cases which demonstrate ‘extraordinary cause,’ abuses of

discretion by the courts below can supply such cause.” Lasege, 53 S.W.3d at

84 (footnote omitted). This Court reviews the circuit court’s decisions on

temporary injunctions for an abuse of discretion. Boone Creek, 442 S.W.3d at

38. “Unless a trial court has abused that discretion, this Court has no power to

set aside the order below.” Maupin, 575 S.W.2d at 698 (citations omitted).

Thus, “we give considerable deference to the circuit court’s evaluation of the

dispute, the issues involved, the weighing of the equities, and whether an

injunction is proper under the particular circumstances at hand.” Boone Creek,

442 S.W.3d at 38.

                                      III. ANALYSIS

      Bay Hills moves this Court to vacate the order of the Court of Appeals

which denied relief from the September 14 and December 9 orders issued by

the trial court. Bay Hills first argues that the injunctions they challenge were

                                           15
improperly granted because they provide only monetary relief. Although the

trial court justified its order as an injunction related to fiduciary duties and not

monetary relief, Bay Hills argues that the order’s effect is to withhold money

from Bay Hills. As a matter of law, injunctions may not be granted solely for

monetary relief. Bay Hills contends that because economic harm is not

irreparable, Kentucky Retirement failed to meet its burden before the trial

court for a temporary injunction. As such, Bay Hills argues that the trial court

clearly abused its discretion.

      Second, Bay Hills argues that the trial court abused its discretion by

“rewriting the LPAs” at issue in the case. By this, it appears that Bay Hills

disputes the trial court’s interpretation of the Funds’ indemnity clauses

through the trial court’s orders. The LPAs for three of the Funds require that

the “General Partner . . . shall be indemnified to the fullest extent permitted by

law by the Partnership against any cost, expense (including attorneys’ fees),

judgment and/or liability incurred by or imposed upon them in connection

with any action, suit or proceeding” stemming from their participation as

General Partner.

      The LPAs contain an exception to this indemnity clause where “as

determined by a final judgment, order or decree” a party was found to have

breached fiduciary duties. Despite no determinative finding of a breach of

fiduciary duties, the trial court through one of its contested orders granting a

temporary injunction denied attorneys’ fees for Bay Hills. In so doing, Bay Hills

contends, the trial court “did violence” to the parties’ contracts in its indemnity

                                        16
provisions and provisions complimentary to indemnity.5 Bay Hills additionally

argues that the requirement to gain approval for costs is directly counter to

these provisions of the LPAs.

      Kentucky Retirement, in response, makes four arguments. First,

Kentucky Retirement argues that Bay Hills waived any arguments regarding

the LPAs’ terms because Bay Hills failed to seek relief from the first injunction.

Similarly, it next argues that Bay Hills also waived any arguments regarding

irreparable harm. Kentucky Retirement contends that neither of the orders

before this Court modified the original injunction ordered by the trial court,

and accordingly if Bay Hills were to challenge irreparable harm, it would have

needed to do so on the first injunction.

      Third, Kentucky Retirement contends that Bay Hills’s arguments on

irreparable harm fail on the merits because the trial court’s order was not for

monetary relief, but rather addressed the threat Bay Hills posed as fiduciaries

if permitted to continue in that role unchecked. It was in part on these grounds

that the Court of Appeals affirmed the trial court’s orders, writing that

“Kentucky Retirement seeks to enforce a bargained-for right to remove the

general partner upon ‘cause’ or breach of fiduciary duty—a right that is

difficult, if not impossible, to value and could be meaningless or substantially

diminished in value by the end of the litigation absent injunctive relief.”

      5 The “complimentary” provisions include sections “Authority of the General
Partner,” “Obligations of General Partner,” “Liability of General Partner and Adviser,”
and “Expenses.” Bay Hills’s arguments related to these complimentary provisions are
that they support Bay Hills’s interpretation of the indemnity clause in the LPAs, as
they require the Funds to pay all partnership expenses.

                                           17
      Finally, Kentucky Retirement contends that Bay Hills’s contractual

arguments also fail on the merits. Kentucky Retirement claims that neither the

indemnification provision, nor any other provision, provides for fee-shifting.

Kentucky Retirement alleges that indemnification such as that within the LPAs

applies only to third-party claims, not first-party indemnification. Since

Kentucky Retirement and Bay Hills are the parties to the LPAs, Kentucky

Retirement argues that the indemnification provisions do not apply. We

address the parties’ arguments regarding both irreparable harm and indemnity

in turn.

A. Irreparable Harm

      Bay Hills first argues that “the Court of Appeals erred in upholding

injunctions that are purely monetary in nature and not fashioned to address

any risk of irreparable harm.” Generally, injunctions should not be issued to

provide purely monetary relief, as monetary injury is generally not irreparable.

Norsworth, 330 S.W.3d at 62 (“[M]ere injuries, however substantial, in terms of

money, time and energy necessarily expended in the absence of a stay, are not

enough.” (quoting Sampson, 415 U.S. at 90)); see also Zirkle v. District of

Columbia, 830 A.2d 1250, 1256–57 (D.C. 2003) (“[F]or it is well established that

economic and reputational injuries are generally not irreparable.”). However,

these arguments go to the merits of the trial court’s May 15, 2020 injunction

order, not the modifications made to that injunction order in the trial court’s

September 14, 2021 and December 9, 2021 orders. Significantly, Bay Hills did

not seek relief from the May 15 injunction order.

                                        18
      In its May 15 injunction order, the trial court found “irreparable injury

attendant to the allege[d] breaches of fiduciary duty that could leave [Kentucky

Retirement] with no meaningful remedy.” The court further found that the

breach of trust and breach of fiduciary obligations “is a present,

nonspeculative, nonmonetary harm that [Kentucky Retirement] would continue

to suffer if preliminary injunctive relief were not granted, and [Kentucky

Retirement]’s remedy would thereby be irreparably impaired.” If Bay Hills

believed these findings were in error, it should have sought relief from this

injunction order. It cannot now complain about those findings.

      Relatedly, Bay Hills argues that “the injunction orders below still violate

Kentucky law because there is no nexus between the monetary relief . . . and

the so-called harm that the lower courts purport to address.” The monetary

relief ordered, however, absent the attorneys’ fees issue discussed below, was

the same in each of the trial court’s three orders. All of the orders required Bay

Hills to petition the trial court for any payments it wished to make from the

Funds. Although the Court of Appeals described the December 9 order as

“foreclose[ing] Bay Hills from petitioning the court for approval of payments

from the Funds,” we do not view the trial court’s order in the same way.

      In its December 9 order, the trial court ordered “that the disputed

amounts be held in escrow until this litigation has concluded, or the [c]ourt

after notice and hearing approves full or partial distribution of those sums.”

(Emphasis added). Although the trial court appears unlikely to allow Bay Hills

to pay itself carried interest and management fees from the Funds while the

                                        19
litigation is ongoing, the trial court did not foreclose that possibility entirely, as

it still allows Bay Hills to present those sums to it for approval.6 This is the

same relief provided in the initial May 15 injunction order from which Bay Hills

did not seek relief. Accordingly, Bay Hills cannot not now allege that the trial

court erred.

      Because Bay Hills did not seek relief from the trial court’s May 15

injunction order, we must assume, without deciding, that the trial court did

not abuse its discretion in entering said order. We must further assume that

none of the trial court’s factual findings in its May 15 order were clearly

erroneous. We cannot hold that the trial court abused its discretion in entering

its September 14 and December 9 orders, as they were primarily applications

or enforcements of the original May 15 injunction order.

B. Indemnity

      Unlike Bay Hills’s arguments regarding irreparable harm, its contractual

arguments regarding indemnity stem from an order that is properly before us.

In the trial court’s September 14 order appealed to this Court, the trial court

denied Bay Hills’s request for attorneys’ fees and indemnity from the Funds.

Specifically, the trial court wrote that the LPAs “contain only broad language

regarding indemnification and do not specifically contemplate indemnification

       6 Bay Hills also argues that the trial court “rewrote the LPAs” by refusing to

allow Bay Hills to collect management fees, compensation, and distributions. However,
as noted, the trial court did not prohibit Bay Hills from collecting these monies all
together and for all time, but instead merely required Bay Hills to obtain the trial
court’s approval first. Further, this argument goes to the trial court’s May 15
injunction order from which Bay Hills did not seek relief.

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by the Funds of the General Partners or any of the Defendants in suits against

[Kentucky Retirement].” In doing so, Bay Hills argues that the trial court

violated Bay Hills’s bargained-for right to indemnity.

        The Funds provide that they will indemnify their General Partner, Bay

Hills, in any litigation.7 Bay Hills claims that this should include litigation

between the parties to the contract. In essence, Bay Hills would have this Court

interpret general indemnity provisions such as the one in this case to apply to

first-party indemnity (in which a Partnership indemnifies the parties to the

contract when litigation arises between those partners regarding their

partnership) in addition to third-party indemnity.

        This Court has not yet interpreted the application of general indemnity

provisions to first-party claims. However, when this Court has interpreted

contractual disputes, we have been careful not to nullify the purpose of the

contract: “In order to carry out the intent of the parties, it is our duty to

disregard the broad language used which would have the effect to defeat the

purpose of the contract and render it a nullity.” Henderson v. Cont’l Cas. Co.,

239 Ky. 93, 39 S.W.2d 209, 211 (1931).

        Here, requiring Kentucky Retirement to secure and protect Bay Hills for

its own alleged breaches of contract even where they stem from a breach of

fiduciary duties—one of the exceptions to the indemnity provisions—would

“operate effectively to relieve their agent of any obligation to perform [its]

        7   Only three of the four Funds include the indemnity provisions at issue in this
case.

                                              21
duties” by invalidating the exception, eliminating incentives to act in good faith,

and compensating Bay Hills for their own malfeasance.8 R.&J. Oil v. Rodgers,

No. 3:18-CV-00117-GNS-CHL, 2020 WL 201053, *3 (W.D. Ky. Jan. 13, 2020).

This cannot have been the intention of the parties in drawing their contract,

since it would effectively nullify Bay Hills’s duty to act as a fiduciary. The trial

court, in issuing its September 14 order, saw this contradiction and issued its

order accordingly.

      The complimentary provisions that Bay Hills cites as providing additional

support for their argument in favor of attorneys’ fees similarly fail. The

“Authority of the General Partner” and “Obligations of General Partner”

provisions each give the General Partner the “power and authority” to

“commence or defend litigation that pertains to the Partnership;” as such, the

same analysis applied to the indemnity provision also applies to these

provisions. The “Liability of General Partner and Adviser” provision states that

General Partners may not be liable to Limited Partners. This provision, since it

relates to Partnership liability, does not speak to the issue of indemnity on this

appeal. Finally, in the “Expenses” provision, the contract provides that the

Partnership must pay litigation fees for “expenses and liabilities incurred by or

on behalf of the Partnership or for its benefit.” This provision clearly does not

apply, since the purpose of the underlying suit is to dissolve said Partnership

      8   The “finality” language in the exception does not alter our analysis.

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and hold Bay Hills accountable for their alleged failure to act appropriately as

General Partner.

      As such, the trial court did not abuse its discretion by denying Bay

Hills’s request for the payment of fees incurred in the course of litigation.

                                 IV. CONCLUSION

      For the foregoing reasons, we deny Bay Hills’s Motion for Interlocutory

Relief pursuant to CR 65.09.

      All sitting. All concur.

                                       _________________________________________
                                        CHIEF JUSTICE MINTON

COUNSEL FOR APPELLANTS: BHEP GP I, LLC; BHEP GP II, LLC; BHEP GP II-
B, LLC; BHEP GP III, LLC; BAY HILLS CAPITAL MANAGEMENT, LLC; AND
LANCE MANSBRIDGE:

William A. Hoskins, III
Patrick Flanagan Estill
Jackson Kelly PLLC

Mark Craig Goodman
Christina Wong
Baker & McKenzie LLP

COUNSEL FOR APPELLEE, KENTUCKY RETIREMENT SYSTEMS:

Paul Christopher Harnice
Christopher Edward Schaefer
Sarah Jackson Bishop
Connor Bailey Eagan
Stoll, Keenon & Ogden, PLLC

Mark A. Cameli
Ryan S. Stippich
Reinhart Boerner Van Deuren s.c
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