Court Opinion

ID: 6322298
Source: CourtListenerOpinion
Date Created: 2022-03-11 15:05:41.707299+00
Date Added: 2024-06-11T09:20:44.044060
License: Public Domain

RENDERED: MARCH 4, 2022; 10:00 A.M.
                            NOT TO BE PUBLISHED

                    Commonwealth of Kentucky
                                Court of Appeals

                                   NO. 2020-CA-0284-MR

ANESTHESIA HEALTH
CONSULTANTS, LLC                                                    APPELLANT

                    APPEAL FROM JEFFERSON CIRCUIT COURT
v.                   HONORABLE AUDRA J. ECKERLE, JUDGE
                            ACTION NO. 19-CI-004427

SLEEP EZ ANESTHESIA, PLLC AND
TRAVIS L. SMITH                                                     APPELLEES

                                    OPINION
                     AFFIRMING IN PART, REVERSING IN PART,
                               AND REMANDING

                                         ** ** ** ** **

BEFORE: CALDWELL, GOODWINE, AND LAMBERT, JUDGES.

CALDWELL, JUDGE: Anesthesia Health Consultants, LLC (“AHC”) appeals

from a contempt order and a CR1 12.02 dismissal order. We reverse the dismissal

and remand for further proceedings, but we do not disturb the contempt order.

1
    Kentucky Rules of Civil Procedure.
          RELEVANT FACTUAL AND PROCEDURAL HISTORY

             AHC is an Indiana limited liability company (“LLC”) doing business

in Kentucky. Its membership consists of five other limited liability entities: 1)

SKY Investments LLC, 2) Metric Anesthesia Consultants PLLC (“Metric”), 3)

Sleep EZ Anesthesia PLLC (“Sleep EZ”), 4) Kentuckiana Anesthesia Consultants

PLLC (“KAC”), and 5) Louisville Anesthesia Provision LLC (“LAP”).

             AHC’s operating agreement was signed by each member entity’s

owner: 1) Stephen Young, MD, for SKY Investments LLC, 2) Chad Riddle for

Metric, 3) Travis Smith for Sleep EZ, 4) Elias Murphy for KAC, and 4) Kyle

Goldsmith for LAP. Each member provides anesthesia medical care and is owned

by either a nurse anesthetist or a physician.

             In July 2019, a complaint was filed – purportedly by AHC – against

Goldsmith, LAP, Smith, and Sleep EZ in Jefferson Circuit Court. The complaint

indicated that attorneys Scott Zoppoth and Bradley Zoppoth represented AHC.

The complaint alleged breach of fiduciary duties, breach of AHC’s operating

agreement, intentional interference with a business advantage and relationship,

theft of corporate opportunity, and unjust enrichment. AHC’s operating agreement

was attached as an exhibit to the complaint.

                                          -2-
             In August 2019, two separate but similar motions to dismiss under CR

12.02 were filed by 1) Goldsmith and LAP, and 2) Smith and Sleep EZ. Both

motions argued the complaint should be dismissed due to lack of standing to sue.

They argued the operating agreement required unanimous member approval for

AHC to retain counsel and file the lawsuit. They argued that the unanimous

member approval was lacking for this action as they did not approve.

             Both dismissal motions asserted that other members – KAC and

Metric through their respective owners Murphy and Riddle – hired the Zoppoth

law firm to file suit for AHC without obtaining unanimous approval from AHC’s

members. They argued AHC lacked authority to hire counsel or file the lawsuit

and thus lacked standing to sue. These motions to dismiss were filed in lieu of

answers to the complaint. No counterclaims were filed.

             The plaintiff filed a response to the motions to dismiss. Contrary to

the defendants’ arguments, the plaintiff argued that the operating agreement clearly

gave members authority to hire counsel and to file lawsuits on AHC’s behalf

without unanimous approval of its membership. It also argued that if the trial court

found the operating agreement ambiguous, that any ambiguity must be construed

in its favor when ruling on the motion to dismiss. Thus, it asserted that the trial

court could not properly grant the motion for dismissal.

                                          -3-
              The parties also filed other motions2 before the trial court ruled on the

motion to dismiss. For example, the defendants filed a motion for an accounting.

Before the trial court ruled on the motion to dismiss, the motion for an accounting

was discussed at a hearing. All parties – including plaintiff AHC according to

attorney Scott Zoppoth’s representations – agreed to an accounting.

              On or about September 19, 2019, the trial court entered an order for

an accounting. The accounting order also provided for a partial freeze on

payments from AHC’s bank accounts pending completion of the accounting. The

order prohibited AHC “from making any further payments to any of its members,

or its purported Counsel, from its Company bank accounts.” (Page 2 of order

entered 9/19/2019, Record (“R.”), p. 251.)

              Shortly thereafter, the plaintiff filed a motion for reconsideration

and/or clarification of the accounting order. The plaintiff argued that no one had

disputed that salaries should be paid and that the accounting order should be

clarified to only prohibit bonus payments pending further court order.

2
  For example, the plaintiff/appellant filed a motion to consolidate this case with other cases
then-pending in other divisions of the Jefferson Circuit Court concerning disputes between AHC
members. After initially reserving ruling on the consolidation motion pending resolution of the
motion to dismiss, the trial court eventually denied the consolidation motion. The appellees
argue in their appellate brief for dismissing the appeal entirely due to other cases pending in
other divisions of Jefferson Circuit Court, but these other cases are not before us. Nor has an
appeal or cross-appeal been taken from the order denying consolidation – which found that the
cases pending in other divisions of the Jefferson Circuit Court involved different factual and
legal questions.

                                              -4-
               The defendants filed a joint response to this motion along with a

motion for contempt sanctions. The defendants agreed that the accounting order

should be modified to the extent that members could be paid for verified clinical

time. But they contended that Murphy should be held in contempt for writing a

$14,544 check to himself on an AHC account a few days after the accounting order

was entered.

               At a hearing, the parties agreed that the accounting order should be

amended to provide that members could be paid for verified clinical time –

although there were disputes about paying bonuses. Attorney Scott Zoppoth

asserted that his “client” Murphy had not received a copy of the court’s accounting

order when Murphy wrote the check to himself for $14,544. Attorney Zoppoth

believed the check was written for clinical time.

               The defendants argued that Murphy had still violated the court’s order

and they disputed that the amount paid was for verified clinical time. The trial

court allowed the plaintiff time to file a written response to the motion for

contempt and the court stated it would enter an amended accounting order soon.

               On or about October 8, 2019, the trial court entered an amended

accounting order. This amended order allowed AHC to pay members for actual

clinical time worked plus associated expenses. But AHC was still prohibited from

                                          -5-
making any other payments to its members or its purported counsel from its

company bank accounts.

             In mid-October 2019, the plaintiff filed its response to the contempt

motion with an attached affidavit from Murphy. Murphy averred that the $14,544

was paid for incentive fees due which were earned in August 2019 before the

accounting order was entered. He also averred that he was not aware of the trial

court’s accounting order when he wrote the $14,544 check.

             The defendants filed a reply, asserting Murphy violated the court’s

orders by writing himself a check on AHC’s account for nonclinical time. They

further asserted AHC had improperly paid KAC over $5,000 for unearned,

nonclinical time in mid-October in violation of the amended accounting order.

             On October 28, 2019, the trial court entered an order dismissing

AHC’s claims against Goldsmith and LAP. The trial court found that the operating

agreement required unanimous approval of AHC members before AHC could

retain counsel and “pursue direct legal action.” (R., p. 488.) It found that because

AHC members LAP and Sleep EZ did not approve of AHC’s retaining counsel and

filing the lawsuit, that KAC and Metric lacked authority to bring a lawsuit for

AHC. So, it concluded that AHC lacked standing to sue.

             Although the October 28, 2019 order dismissed the complaint against

LAP and Goldsmith, no similar order was entered then which dismissed all claims

                                         -6-
against Smith and Sleep EZ – apparently due to clerical error.3 The trial court also

entered an order denying the defendants’ motion for contempt and sanctions.

               Smith and Sleep EZ filed a motion to amend the order of dismissal so

they would be dismissed as well. They also requested that since the trial court

found that KAC and Metric lacked authority to file the lawsuit and that AHC

lacked standing to sue, that the trial court order repayment for amounts paid to the

Zoppoth law firm from AHC accounts for representation in the action.

               Before the trial court ruled on their motion to amend the dismissal

order, Smith and Sleep EZ filed a renewed motion for contempt sanctions in

November 2019. They alleged again that Murphy had paid himself for nonclinical

time in late September 2019 in violation of the trial court’s accounting order.

               Smith and Sleep EZ also alleged again that Murphy had violated the

amended accounting order by paying his company, KAC, about $5,000 from AHC

accounts for unearned, nonclinical time in mid-October 2019. They further alleged

that, in November 2019, Murphy and Riddle paid their respective companies (KAC

and Metric) from AHC accounts tens of thousands of dollars which were not for

verified clinical time.

3
 The trial court’s order denying consolidation – entered the same day – stated the trial court was
dismissing the lawsuit against all defendants by separate order.

                                               -7-
               Smith and Sleep EZ asserted that the trial court’s orders had been

willfully violated by AHC, Murphy, Riddle, KAC, and Metric. Smith and Sleep

EZ argued these parties should be found in contempt and ordered to pay monetary

sanctions. They requested reimbursement to AHC for all amounts paid in violation

of court orders and reimbursement to Smith and Sleep EZ for fees and expenses

incurred in trying to enforce the trial court’s accounting orders. They asked for

“attorney’s fees, costs and expenses, in an amount to be determined in post-order

proceedings.” (R., p. 619.)

               At the hearing on the motion to amend the dismissal order and the

renewed motion for contempt, attorney Zoppoth said he thought the accounting

orders were no longer in place after the October 28 dismissal order and that was

why additional amounts continued to be taken out of the AHC accounts. After

hearing further argument and allowing further briefing, the trial court took the

matter under submission.

               On or around December 23, 2019, the trial court entered an order

granting the contempt motion.4 The trial court found that AHC and Murphy had

4
 The trial court stated in this order that it was granting “the joint motion for contempt” (R., p.
674.) The contempt motion filed by the defendants in November 2019 was styled as
“Defendants’ Renewed Motion for Contempt Sanctions[.]” (R., p. 611.)

                                                 -8-
violated its accounting orders and were in contempt.5 The trial court ordered

therein that Murphy immediately repay AHC for the $14,544 check. The trial

court also ordered that Murphy reimburse the defendants for attorney fees and

legal expenses incurred litigating the motions for accounting and contempt. It also

ordered that Murphy’s authority to sign checks for AHC was suspended pending

further court orders.

              On or about December 26, 2019, the trial court entered an amended

order of dismissal which dismissed Smith and Sleep EZ as well as Goldsmith and

LAP. Like the initial dismissal order, this order concluded that unanimous

authorization was required to file suit and that AHC lacked standing to bring the

suit since its members did not unanimously approve bringing suit. So, the trial

court dismissed the complaint entirely pursuant to CR 12.02.

              Unlike the initial dismissal order, the amended dismissal order also

provided that KAC, Metric, and/or Zoppoth must repay to AHC all amounts

previously paid to the Zoppoth law firm for the unauthorized representation of

AHC. The order concluded by stating it was final and appealable and that there

was no just reason for delay.

5
 There was no finding in the order whether Riddle, KAC, or Metric were found in contempt
despite the request to hold them – as well as AHC and Murphy – in contempt in the renewed
contempt motion.

                                             -9-
               AHC filed a motion for reconsideration of the contempt order and the

amended dismissal order. Following further briefing and a hearing, the trial court

denied the motion for reconsideration in February 2020. The written order

specifically required that within five days: 1) Murphy comply with the December

2019 contempt order by repaying $14,544 to AHC, 2) that Murphy pay about

$15,000 to defendants’ attorneys for reimbursement of attorney fees for litigating

the motions for accounting and contempt, and 3) that either the Zoppoth law firm

or KAC or Metric reimburse AHC over $16,000 for all amounts paid to the

Zoppoth law firm for its unauthorized representation of AHC in the action.

               Shortly thereafter, the notice of appeal was filed, naming AHC as the

sole appellant and the appellees as including Smith and Sleep EZ.6 The notice of

appeal indicated that the appeal was from three orders: 1) the February 2020 order

denying reconsideration of dismissal and contempt orders, 2) the December 26,

2019 amended order of dismissal, and 3) the December 23, 2019 contempt order.

6
  Goldsmith and LAP were also originally named as appellees. However, Goldsmith, LAP, and
the appellant later filed a joint motion to dismiss Goldsmith and LAP as parties to the appeal due
to their reaching a settlement. The motion was granted, with the order noting that Smith and
Sleep EZ had not filed a response to the motion.

                                              -10-
                                    ANALYSIS

 We Decline to Strike Appellant Brief or Dismiss Appeal Despite Deficiencies

             We first address deficiencies in the appellant brief as well as some

arguments for dismissing the appeal – some of which were raised in the appellee

brief. No reply brief was filed. An appellant brief was tendered in late August

2020 and returned as deficient. The deficiency notice pointed out two problems:

1) the brief exceeded the 25-page limit, and 2) the brief did not contain the

appealed-from judgment, opinion, or order as the first document in the appendix

after the list of attachments. See CR 76.12(4)(b)(i); CR 76.12(4)(c)(vii). The

deficiency notice also stated: “Acceptance by the Clerk does not prevent a panel

from striking the brief for failure to comply with CR 76.12. For a complete list of

requirements of CR 76.12, please review the rule and the full check list provided

on the Court’s website.”

             In mid-September 2020, the appellant filed a motion for permission to

exceed the 25-page limit so that the previously tendered, 26-page brief could be

filed without incurring additional expense. However, the appellant apparently took

no steps to remedy the other noted deficiency – failure to include, as the first

document in the appendix, the appealed-from order or judgment. None of the

                                         -11-
appealed-from orders identified in the notice of appeal were included in the

appendix to the tendered appellant brief.7

               In late October 2020, a motion panel granted the motion to allow

filing a brief in excess of the 25-page limit and ordered the tendered brief filed –

noting that no response had been filed to the motion. Neither the appellant’s

motion nor the motion panel order granting it discussed the other deficiency (not

including any appealed-from order in the appendix) so perhaps this other

deficiency was overlooked. In any event, despite the importance of including the

judgment on appeal in the appendix to allow all merits panel members to easily

access and review the trial court’s judgment, we elect not to strike the brief despite

our authority to strike briefs for substantial noncompliance with CR 76.12. See CR

76.12(8)(a).

               The appellees argue that the appellant brief was not timely filed

because it was not formally filed until over 60 days after the clerk’s notice of the

certification of the record in mid-July 2020.8 But we decline to strike the brief or

to dismiss the appeal on this basis since the motion for permission to exceed page

7
  Another trial court order – which was not one of the appealed-from orders listed in and attached
to the notice of appeal – was included as the second document after the attachment list in the
appendix to the tendered appellant brief.
8
 See CR 76.12(a); CR 75.07(6) (regarding time limits for filing briefs in relation to the clerk’s
notice of certification of the record).

                                               -12-
limits was filed shortly after the deficiency notice and the motion panel ordered the

appellant brief (tendered in August 2020) to be filed in October 2020.

             In addition to these concerns, the appellant brief does not contain any

statement identifying if or how the arguments on appeal were preserved for our

review. See CR 76.12(4)(c)(v). Failure to include preservation statements in

appellant briefs can have dire consequences. For example, our Supreme Court has

recently indicated that appellate courts may assume issues are unpreserved and

thus review only for manifest injustice when an appellant fails to provide a

preservation statement. See Ford v. Commonwealth, 628 S.W.3d 147, 155 (Ky.

2021).

             Nonetheless, as we conclude all or most issues raised on appeal were

raised to the trial court based on our review of the record, we elect not to simply

review solely for manifest injustice. Still, we caution counsel to take greater care

to comply with briefing requirements as we may not be so lenient in the future.

We direct counsel’s attention to our briefing checklists and appellate practice

handbooks available as PDF resources on our court website,

https://kycourts.gov/Courts/Court-of-Appeals/Pages/default.aspx. (Last visited

Jan. 26, 2022.)

             In addition to these briefing deficiencies, we share the appellees’

concern that the arguments advanced in the appellant brief often appear aimed at

                                         -13-
improving the financial interest of other parties rather than that of AHC, the sole

named appellant. We question whether additional appellants should have been

named in the notice of appeal since it appears that court orders directly imposing

obligations on these individuals or entities rather than on AHC are challenged in

the appellant brief. Assuming arguendo that all necessary and indispensable

parties were named in the notice of appeal, we see no reason to disturb the

contempt orders at issue though we conclude the dismissal must be reversed.

              Trial Court’s CR 12.02 Dismissal Must be Reversed

             The trial court’s CR 12.02 dismissal hinges on its interpretation of

AHC’s operating agreement – which is included as the first attachment in the

appendix to the appellant brief. Since the operating agreement was also attached to

the complaint, the trial court’s consideration of the operating agreement did not

convert the CR 12.02 motion into a motion for summary judgment. So, we review

the dismissal order under the appropriate standard of review for an order granting a

CR 12.02 motion. Netherwood v. Fifth Third Bank, Inc., 514 S.W.3d 558, 563-64

(Ky. App. 2017).

             “Whether a court should dismiss an action pursuant to CR 12.02 is a

question of law” subject to de novo review. Morgan & Pottinger, Attorneys,

P.S.C. v. Botts, 348 S.W.3d 599, 601 (Ky. 2011), overruled on other grounds by

Maggard v. Kinney, 576 S.W.3d 559, 570 (Ky. 2019). Applying this non-

                                        -14-
deferential standard of review, we conclude that the trial court’s dismissal of the

lawsuit must be reversed.

             The trial court’s amended dismissal order succinctly found that

unanimous approval of the members was required for AHC to retain counsel and

file an action. The trial court did not explicitly discuss which operating agreement

provisions it relied upon when reaching this conclusion in its written order.

             The parties, however, explicitly pointed to particular operating

agreement provisions when making their arguments to the trial court. For

example, the defendants pointed to ¶7.1(a) which provided for member

management of AHC and further stated: “Unless this Agreement requires a

different vote with respect to a particular matter, decisions by the Members shall

be made by unanimous vote of Members.”

             The plaintiff, on the other hand, pointed to ¶7.2(a)(2) which provided

that members had the authority to manage day-to-day operations and that each

member specifically had the authority to: “[o]btain professional services for the

Company, including legal and accounting services.” And they argued that each

member had the authority to execute a contract to obtain legal services under

¶7.2(a)(9) which allowed for each member’s “[e]xecuting, acknowledging, and

delivering any and all instruments to effectuate any and all of the foregoing.”

                                         -15-
             The defendants argued that despite ¶7.2(a)(2)’s providing that

members could obtain legal services for AHC, that this authority was limited to

obtaining legal services only for day-to-day operations and that each member only

had authority to incur less than $1,500 in legal fees for AHC under ¶7.2(a)(6).

¶7.2(a) provided that members have responsibility and authority to manage day-to-

day operations and that each member’s authority included: “[i]ncurring reasonable

expenditures less than $1,500.00 on behalf of the Company in connection with the

day-to-day operation of the Company’s business or as directed by the Company’s

members[.]” ¶7.2(a)(6).

             The defendants also argued that each member was specifically

prohibited from entering into contractual or agency relationships on behalf of AHC

and from approving transactions which might create actual or potential conflicts of

interests between AHC and its members or between the members. It pointed to

provisions in ¶7.2(b) which provide in pertinent part:

             7.2(b) A Member shall not have the authority, without
             first obtaining the unanimous approval of the Members,
             to undertake the following:

             (1) Cause a change in the nature of the Company’s
                 business;

             ...

             (2) Approve a transaction between the Company and a
                 Member or otherwise approving a transaction which
                 might involve an actual or potential conflict of

                                        -16-
                     interest between the Member and the Company or the
                     other Members;

               ...

               (9) Enter into contractual relationships on behalf of the
                  Company;

               (10) Cause the Company to enter into or terminate any
                    employment or agency relationship with any person
                    or legal entity; . . . .

               The plaintiff countered by arguing that these prohibitions were

overridden by the more specific provisions in ¶7.2(a) allowing members to

individually obtain legal services for AHC and to execute instruments to do so.

The plaintiff also recognized that various provisions might contradict one another

as it argued that any ambiguities must be construed in its favor for purposes of

ruling on the motion to dismiss.

               The plaintiff also argued that finding unanimous member approval

necessary for AHC to file a lawsuit to enforce the agreement against members in

breach made no sense because presumably a member would not approve AHC’s

lawsuit against it. AHC further argued it required a vehicle to enforce the duties

recognized in Article 10, such as that unitholders (members or their assignees)9

owed “fiduciary duties of care, loyalty and fair dealing towards the Company and

9
  See definition of Unitholders in Article 15, found at page 24 of operating agreement (first
attachment in appendix to appellant brief): “all holders of Units of Participation, whether such
holders are members or merely assignees with respect to their Units of Participation.”

                                              -17-
the Members” and must “perform the terms of this Agreement in good faith.”

¶10.(1). Article 10 also required that unitholders bring business opportunities

within the scope of the company’s business (provision of healthcare anesthesia

services) and “cannot engage in such business activity outside of the Company

without the prior consent of the unanimous vote of Members.” ¶10.1(b). AHC

asserts the complaint was an attempt to enforce such obligations by filing suit for

the defendants’ engaging in anesthesia business outside of AHC without

unanimous consent and breaching the operating agreement and fiduciary duties.

             In addition to the provisions discussed by the parties, we take note of

an additional provision in the operating agreement as well as the agreement’s lack

of explicit statement about whether unanimous approval – or something else such

as a simple majority vote – is specifically required for AHC to file suit and/or

retain counsel for this purpose. Although the operating agreement does not

specifically and explicitly state whether unanimous approval is required for filing a

lawsuit on AHC’s behalf, the operating agreement contains a provision indicating

that the prevailing party is entitled to attorney fees in the event that a lawsuit to

enforce the agreement is filed:

                14.13 Attorneys fees. Should the Company or any
             Unitholder reasonably retain counsel for the purpose of
             enforcing or preventing breach of any provision of this
             Agreement, including but not limited to any action or
             proceeding to enforce any provision of this Agreement or
             for damages or a declaration of rights, then the prevailing

                                          -18-
             party is entitled, in addition to such other relief as may be
             granted, to be reimbursed by the losing party for all costs
             and expenses incurred.

             This provision recognizes the possibility that either the company or a

unitholder (member or member’s assignee) could file a lawsuit to enforce the

agreement – which was entered into and executed by its members through their

individual owners. Logically, no member would agree to be sued by AHC. In

other words, if one member was engaging in conduct prohibited by the agreement,

it would be functionally impossible for AHC to file a suit to enforce the agreement

if unanimity to so act is required.

             Furthermore, given the provision that the prevailing party is entitled to

attorney fees from the losing party, it suggests that a lawsuit – even one filed by

AHC – might proceed despite a lack of unanimity between members. On the other

hand, however, it does not specifically provide that AHC’s filing a lawsuit to

enforce the agreement requires something other than unanimous approval – such as

a simple majority vote – despite another provision (¶7.1(a)) stating that company

decisions generally required unanimous approval unless specifically stated

otherwise in the agreement.

             The parties have each argued that the operating agreement either

clearly did or clearly did not require unanimous member approval to hire counsel

and file the lawsuit here, based on the various provisions just cited. The appellant

                                         -19-
has also argued, in the alternative, that the operating agreement is ambiguous

regarding requirements for members to file a lawsuit on AHC’s behalf. We agree

with the alternative argument that the agreement is ambiguous on this point and

reject both parties’ arguments to the contrary.

             “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) (quoting Cantrell Supply, Inc. vs. Liberty

Mut. Ins. Co, 94 S.W.3d 381, 385 (Ky. App. 2002)).

             The trial court’s interpretation of the operating agreement as calling

for unanimous member approval to file a lawsuit is not a totally unreasonable

interpretation – especially given the general provision that decisions be made by

unanimous vote unless specifically stated otherwise and specific prohibitions

against approving conflict-creating transactions or entering into agency or

contractual relationships for AHC without unanimous approval. But we cannot

conclude that the trial court’s interpretation is the only reasonable interpretation of

the agreement – since other provisions provide that each member individually has

authority to obtain legal services for AHC and that the prevailing party (either

AHC or a member) in a lawsuit to enforce the agreement between members is

entitled to attorney fees from the losing party.

                                         -20-
               The trial court should have viewed the pleadings (which here included

the attached operating agreement) in the light most favorable to the opposing party

when ruling on the CR 12.02 motion to dismiss for failure to state a claim for

which relief could be granted.10 Netherwood, 514 S.W.3d at 563. With this in

mind and given the de novo standard of review, we conclude the trial court erred in

concluding that the operating agreement unambiguously required unanimous

approval for retaining counsel and filing a lawsuit. At the very least, the operating

agreement by itself is ambiguous on this issue.

               Specifically, the agreement allows each member to obtain legal

services as part of AHC’s day-to-day operations (a term which is undefined). And

it provides that when either a member or AHC retains counsel to enforce this

agreement between its members, the prevailing party is entitled to attorney fees

from the losing party.

               On the other hand, the agreement requires unanimous consent to enter

into contractual relationships or enter into agency relationships with any person or

entity – both of which are necessary to retain counsel – and limits each single

member from spending $1,500 or more on behalf of AHC in day-to-day expenses.

10
  Although the trial court’s order did not specifically state under which ground in CR 12.02 it
granted dismissal, at least one of the motions for dismissal indicated that dismissal was sought
for failure to state a claim upon which relief can be granted. See CR 12.02(f).

                                               -21-
              Thus, the dismissal of the action based on the stated ground of AHC’s

lacking standing to sue must be reversed because the agreement does not

unambiguously require unanimous member approval to file suit on behalf of AHC

to enforce the agreement.11

             Attorney Fee Repayment Provision in Amended Order of
                              Dismissal Reversed

              As the dismissal of the lawsuit is hereby reversed, we also summarily

reverse the provision in the amended dismissal requiring that KAC and Metric

and/or the Zoppoth law firm must “repay all amounts paid to the Zoppoth Law

Firm out of AHC’s Company bank accounts related to the Zoppoth Law Firm’s

improper representation of AHC in this matter . . . .” (R., p. 677.) This repayment

obligation stems from the trial court’s determination that unanimous approval to

file the lawsuit was required resulting in AHC’s lacking standing to sue. As we

conclude that the operating agreement by itself was ambiguous regarding the

necessary approval for retaining counsel to file the lawsuit, this specific repayment

provision cannot stand at the present juncture.

11
  Similarly, we reject appellees’ argument that the operating agreement unambiguously
required unanimous member approval for filing an appeal on behalf of AHC. As the operating
agreement does not explicitly and specifically address appeals and given the other contradictory
provisions discussed, the operating agreement is ambiguous concerning approval requirements
for appeal as well as for filing a lawsuit. We do not definitively conclude that unanimous
approval is NOT required for filing a lawsuit or an appeal; we simply conclude that the operating
agreement is ambiguous on these matters. We express no opinion concerning any resolution of
such ambiguities in further proceedings.

                                              -22-
               Attorney fee issues may be revisited later in further proceedings and

in no way do we intend to constrain the trial court’s power to enforce its orders –

including orders suspending certain payments by AHC pending further

proceedings. But as the dismissal itself is reversed, the attorney fee repayment

provision is likewise reversed pending further proceedings.

     AHC Lacks Standing to Appeal from Trial Court’s Contempt Finding and
                            Sanctions as to Murphy

               Though we conclude that the dismissal must be reversed, we need not

disturb the December 2019 contempt order despite arguments in the appellant brief

to the contrary. The appellant brief challenges the trial court’s finding of contempt

against Murphy,12 pointing out that the trial court had earlier denied the initial

12
  Curiously, the trial court’s finding AHC in contempt does not appear to be explicitly
challenged in the appellant brief. But, as no contempt sanctions were imposed on AHC, any
error in finding AHC in contempt appears harmless. See CR 61.01 (“The court at every stage of
the proceeding must disregard any error or defect in the proceeding which does not affect the
substantial rights of the parties.”). The appellant brief may (somewhat unclearly) challenge the
general prohibition against AHC making payments to its members except for verified clinical
time in the December 2019 contempt order in addition to the more specific provision suspending
Murphy’s ability to write checks for AHC. (The provision suspending AHC’s payments to
members except for verified clinical time appears to be a reiteration of a statement in the October
2019 amended accounting order, rather than a contempt sanction.) But shortly after the
December 2019 contempt order was entered, the trial court then entered a final and appealable
order dismissing the lawsuit entirely – making the continued application of its order suspending
such payments questionable. And the February 2020 order denying the motion for
reconsideration of contempt and dismissal did not explicitly provide for the continued suspension
of AHC’s payments. In short, as we reverse the dismissal of the action, the trial court and parties
may revisit issues regarding any need for an accounting and/or suspension of payments. Our
understanding is that such payments had been initially, generally suspended pending completion
of an accounting. The record reflects that a mutually agreeable accountant had been selected by
the parties to perform the accounting in early October 2019 – about the same time that the trial
court issued its amended accounting order. There appears to be no indication in the written
record that the accounting was completed before the lawsuit was ultimately dismissed.

                                               -23-
motion to hold in contempt. But the appellant brief fails to cite any authority

indicating why the trial court was bound by its ruling on the initial contempt

motion in ruling on the renewed motion for contempt with its new allegations of

further contumacious action – including further improper payments and failures to

comply with court orders.

                More importantly, the appellant brief fails to cite any authority

indicating how the appellant – purportedly AHC – has standing to appeal from the

trial court’s finding Murphy to be in contempt and sanctioning him. Kentucky

law clearly provides: “A limited liability company is a legal entity distinct from its

members.” KRS13 275.010(2). Logically, AHC is also a separate entity from an

individual owner of one of its member LLCs. As a separate entity from Murphy,

AHC is not injured by contempt findings and sanctions against Murphy –

especially sanctions requiring him to repay it certain amounts.

                Precedent indicates that courts are hesitant to afford litigants relief for

judgments which have not caused the litigants any injury. See American States Ins.

Co. v. Audubon Country Club, 650 S.W.2d 252, 254 (Ky. 1983) (affirming

judgment despite an error due to lack of prejudicial effect: “If one is not injured by

a judgment, he cannot complain of its irregularity.”). And we question how any

contempt finding or sanction against Murphy was not harmless to AHC. See CR

13
     Kentucky Revised Statutes.

                                            -24-
61.01 (“The court at every stage of the proceeding must disregard any error or

defect in the proceeding which does not affect the substantial rights of the

parties.”).

              We recognize that the appellee brief did not specifically argue that

AHC (as a separate entity) lacked standing to appeal from Murphy’s contempt

sanctions – using these particular terms.14 But they asserted that the appellant brief

arguments advanced others’ financial interests instead of AHC’s – essentially

challenging AHC’s standing to appeal from sanctions against others. The

appellant did not respond to this assertion as no reply brief was filed.

               Furthermore, we have authority and even a responsibility to affirm

judgments for any reason supported by the record. Mark D. Dean, P.S.C. v.

Commonwealth Bank & Trust Co., 434 S.W.3d 489, 496 (Ky. 2014) (“If an

appellate court is aware of a reason to affirm the lower court’s decision, it must do

so, even if on different grounds.”).

              Though prior precedent held that appellate courts could not properly

raise questions of standing on their own motion, our Supreme Court has since

limited this prior holding to questions of statutory standing – namely, whether one

had standing to sue under particular statutes. Commonwealth, Cabinet for Health

14
  The appellees argued in their brief that AHC lacked standing to appeal due to lack of
unanimous approval of its membership.

                                              -25-
and Family Services, Department for Medicaid Services v. Sexton by and through

Appalachian Regional Healthcare, Inc., 566 S.W.3d 185, 191-92 (Ky. 2018)

(citing Harrison v. Leach, 323 S.W.3d 702, 703 (Ky. 2010)). Our Supreme Court

specifically held that all Kentucky courts had authority to ascertain whether

litigants had constitutional standing to sue. Id. at 192. And without our going into

detailed discussion of constitutional standing, our Supreme Court recognized that

generally constitutional standing to sue required that the plaintiff have suffered

some type of injury. Id. at 196.

              Our Supreme Court also discussed other types of standing such as

prudential standing – a principle recognized in federal courts that: “a party

generally may assert only his or her own rights and cannot raise the claims of third

parties not before the court, i.e. the prohibition against ‘third-party standing[.]’”

Id. at 193.

              Our Supreme Court did not directly discuss issues of standing to

appeal – aside from issues stemming from disputes about standing to sue – in

Sexton, despite alluding to a law review article about standing to appeal in federal

courts. See id. at 192 n.16 (citing Joan Steinman, Shining a Light in a Dim

Corner: Standing to Appeal and the Right to Defend a Judgment in the Federal

Courts, 38 GA. L. REV. 813 (2004)). Nonetheless, we perceive nothing in Sexton

to forbid our application of principles of prudential standing in appeals –

                                          -26-
particularly not allowing parties to assert the rights of others not before the court as

parties to the appeal.

             AHC may have had standing to file its lawsuit as previously

discussed. However, AHC lacked standing to challenge contempt findings or

sanctions against Murphy either in the trial court or on appeal due to lack of

apparent injury to AHC from Murphy’s contempt sanctions. And, as previously

discussed, AHC and Murphy are distinct entities, not one indivisible entity. In

short, AHC lacks standing to appeal from Murphy’s contempt sanctions and we

decline to hear AHC’s appeal from Murphy’s contempt sanctions since AHC is the

sole appellant. We do not issue advisory opinions as to the propriety of contempt

sanctions against a person who is not a party to the appeal.

             In the alternative, the appeal from Murphy’s contempt sanctions could

arguably necessitate dismissal for failure to name an indispensable party as an

appellant – Murphy, the subject of the contempt sanctions on appeal. Typically,

dismissals of appeals for failure to name indispensable parties concern failure to

name appellees. See, e.g., City of Devondale v. Stallings, 795 S.W.2d 954 (Ky.

1990). But here dismissal of the appeal from contempt sanctions seems

appropriate as Murphy (a separate legal entity from AHC) did not appeal from the

contempt sanctions entered against him.

                                         -27-
             Despite the lone appellant being identified as AHC on the notice of

appeal, the appellant brief challenges provisions in the trial court’s December 2019

contempt order which impose obligations on Murphy to repay AHC for certain

expenses and which suspend Murphy’s ability to write checks on AHC accounts.

But Murphy was not named as an appellant in the notice of appeal nor did he

separately, personally appeal from the contempt finding and sanctions against him.

Given AHC’s lack of standing to appeal from Murphy’s contempt sanctions and

Murphy himself not appealing from the contempt sanctions entered against him,

we decline to reach the merits of these provisions regarding Murphy’s

responsibilities in the trial court’s contempt order.

             Having concluded that the dismissal of the action under CR 12.02 for

lack of standing was reversible error but that AHC lacks standing to challenge

Murphy’s contempt sanctions, we decline to address other arguments in the briefs

as unnecessary to our resolution of this appeal or as lacking in merit.

                                   CONCLUSION

             For the reasons stated herein, we AFFIRM the trial court’s contempt

order but REVERSE the dismissal of the action and REMAND for further

proceedings in conformity with this Opinion.

             ALL CONCUR.

                                          -28-
BRIEF FOR APPELLANT:     BRIEF FOR APPELLEE:

Scott P. Zoppoth         Craig C. Dilger
Louisville, Kentucky     Thomas G. French
                         Stephen Sherman
                         Louisville, Kentucky

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