Court Opinion

ID: 6329764
Source: CourtListenerOpinion
Date Created: 2022-04-12 22:10:51.836512+00
Date Added: 2024-06-11T09:22:56.486186
License: Public Domain

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                         NOT TO BE PUBLISHED

                Commonwealth of Kentucky
                          Court of Appeals

                             NO. 2021-CA-0396-MR

COURTNEY BACHE                                                      APPELLANT

                APPEAL FROM JEFFERSON CIRCUIT COURT
v.               HONORABLE ANN BAILEY SMITH, JUDGE
                        ACTION NO. 19-CI-006647

PHILIP SALLEE                                                         APPELLEE

                                    OPINION
                                   AFFIRMING

                                  ** ** ** ** **

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

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

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

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

                FACTS AND PROCEDURAL BACKGROUND

            Courtney Bache and Philip Sallee entered into a written agreement,

which included a nondisclosure provision and provided for damages if breached. It
also contained an arbitration clause. Bache believed Sallee breached the

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

repeatedly demanded arbitration – but to no avail. Bache subsequently filed this

action requesting that the trial court compel arbitration. The trial court ultimately

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

apply because the agreement did not involve interstate commerce, and (2) it could

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

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

occur in Kentucky. This appeal followed.

                                 STANDARD OF REVIEW

                An order denying a motion to compel arbitration is appealable under

KRS 417.220(1). Conseco Fin. Servicing Corp. v. Wilder, 47 S.W.3d 335, 340

(Ky. App. 2001). On review,

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

1
    9 United States Code (U.S.C.) §§ 1 et seq.
2
    Kentucky Revised Statutes (KRS) 417.045 et seq.

                                                 -2-
             arbitration clause . . . . Our review, accordingly, is de
             novo.

Id.

                                    ANALYSIS

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

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

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

FAA to apply in state courts and to pre-empt state antiarbitration laws to the

contrary. Stated another way, the FAA, where applicable, preempts all state law.

See Saneii v. Robards, 289 F. Supp. 2d 855 (W. D. Ky. 2003).

             The FAA provides:

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

                                          -3-
9 U.S.C. § 2 (emphasis added).3 Thus, as indicated by the above emphasized

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

involving commerce[.]” Id. See also Allied-Bruce Terminix Cos., Inc. v. Dobson,

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

              Concerning the applicability of the FAA, the Supreme Court of

Kentucky observed:

              The Federal Act applies to arbitration provisions in
              contracts “evidencing a transaction involving [interstate]
              commerce,” 9 U.S.C. § 2, and almost certainly applies
              here. Congress’s commerce power is interpreted broadly,
              and “may be exercised in individual cases without
              showing any specific effect upon interstate commerce if
              in the aggregate the economic activity in question would
              represent a general practice . . . subject to federal
              control.” Citizens Bank v. Alafabco, Inc., 539 U.S. 52,
              56-57, 123 S. Ct. 2037, 156 L. Ed. 2d 46 (2003) (citation
              and internal quotation marks omitted). The Supreme
              Court has held that health care is one such activity.

Ping v. Beverly Enters., Inc., 376 S.W.3d 581, 589 (Ky. 2012).

              Here, the trial court found the FAA inapplicable because the

agreement dealt solely with matters concerning Kentucky parties and activity – or

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

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

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

                                              -4-
distinguishable from Ping because the actions and inactions4 addressed in the

agreement – namely nondisclosure of their relationship, refraining from litigating

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

no further contact with each other – do not represent general practices subject to

federal control, such as healthcare.

                Bache next argues the arbitration clause of the agreement is

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

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

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

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

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

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

4
    The United States Supreme Court has held:

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

Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519, 520, 132 S. Ct. 2566, 2572-73, 183 L. Ed.
2d 450 (2012). Thus, to the extent the agreement addresses inactions, the FAA cannot apply.

                                                -5-
               In the instant action, while the parties’ agreement includes a choice of

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

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

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

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

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

arbitration.

                                    CONCLUSION

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

Circuit Court is AFFIRMED.

               ALL CONCUR.

    BRIEFS FOR APPELLANT:                     BRIEF FOR APPELLEE:

    Steven R. Romines                         Emily W. Newman
    Louisville, Kentucky                      Paul A. Dzenitis
                                              Miranda R. Carter5
                                              Louisville, Kentucky

                                              James L. Deckard
                                              Lexington, Kentucky

5
  Miranda Carter moved the Court of Appeals to withdraw as counsel. Her motion was granted
by order entered January 25, 2022.

                                            -6-