438 S.W.3d 303 (Ky. 2014), 2011-SC-000332-DG, Furtula v. University of Kentucky

Docket Nº2011-SC-000332-DG
Citation438 S.W.3d 303
Opinion JudgeVENTERS, JUSTICE.
Party NameVERA FURTULA AND ANTHONY MILLER, APPELLANTS v. UNIVERSITY OF KENTUCKY, UNIVERSITY BOARD OF TRUSTEES, AND PNC BANK, NATIONAL ASSOCIATION, AS SUCCESSOR BY MERGER TO NATIONAL CITY BANK, TRUSTEE (" PNC" ), APPELLEES
AttorneyCOUNSEL FOR APPELLANTS VERA FURTULA AND ANTHONY MILLER: Mendel Austin Mehr, Philip Gray Fairbanks. COUNSEL FOR APPELLEES UNIVERSITY OF KENTUCKY AND UNIVERSITY BOARD OF TRUSTEES: Stephen L. Barker, Barbara Ann Kriz, Joshua Michael Salsburey, Christopher S. Turner. COUNSEL FOR APPELLEE PNC BANK, NA...
Judge PanelOPINION OF THE COURT BY JUSTICE VENTERS. Cunningham and Keller, JJ., concur. Minton, C.J., agrees with Justice Noble's dissent. Noble, J., dissents by separate opinion in which Scott, J., joins. Abramson, J., not sitting. Cunningham and Keller, JJ., concur. NOBLE, J., DISSENTING: Scott, J., joins.
Case DateJune 19, 2014
CourtSupreme Court of Kentucky

Page 303

438 S.W.3d 303 (Ky. 2014)

VERA FURTULA AND ANTHONY MILLER, APPELLANTS

v.

UNIVERSITY OF KENTUCKY, UNIVERSITY BOARD OF TRUSTEES, AND PNC BANK, NATIONAL ASSOCIATION, AS SUCCESSOR BY MERGER TO NATIONAL CITY BANK, TRUSTEE (" PNC" ), APPELLEES

2011-SC-000332-DG

Supreme Court of Kentucky

June 19, 2014

Released for Publication September 18, 2014.

Page 304

ON REVIEW FROM COURT OF APPEALS. CASE NO. 2009-CA-000811-MR AND 2009-CA-000852-MR. FAYETTE CIRCUIT COURT NO. 07-CI-04556 & FRANKLIN CIRCUIT COURT NO. 08-CI-02145.

COUNSEL FOR APPELLANTS VERA FURTULA AND ANTHONY MILLER: Mendel Austin Mehr, Philip Gray Fairbanks.

COUNSEL FOR APPELLEES UNIVERSITY OF KENTUCKY AND UNIVERSITY BOARD OF TRUSTEES: Stephen L. Barker, Barbara Ann Kriz, Joshua Michael Salsburey, Christopher S. Turner.

COUNSEL FOR APPELLEE PNC BANK, NATIONAL ASSOCIATION, AS SUCCESSOR BY MERGER TO NATIONAL CITY BANK, TRUSTEE: Dustin Elizabeth Meek, Jonathan Todd Salomon.

OPINION OF THE COURT BY JUSTICE VENTERS. Cunningham and Keller, JJ., concur. Minton, C.J., agrees with Justice Noble's dissent. Noble, J., dissents by separate opinion in which Scott, J., joins. Abramson, J., not sitting.

OPINION

Page 305

VENTERS, JUSTICE.

In this opinion, we review an opinion of the Court of Appeals holding that the University of Kentucky is shielded by the doctrine of governmental immunity from the claims of employees who assert that the University breached contractual obligations to provide them with benefits under a long-term disability compensation program adopted by the University.

The state universities of this Commonwealth, including the University of Kentucky, are state agencies that enjoy the benefits and protection of governmental immunity except where it has been explicitly waived by the legislature.1 Included within the provisions of KRS Chapter 45A, the Kentucky Model Procurement Code, is KRS 45A.245, by which the General Assembly has explicitly waived the defense of " governmental immunity" for claims based upon " lawfully authorized written contracts with the Commonwealth." 2 The employees cite this provision as the sole statutory authority supporting their position that the legislature

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has expressly waived sovereign immunity in situations involving written contracts between state universities and their employees. Consequently, we must determine whether the employee handbook, personnel policies, and related documents of the University of Kentucky establishing a long-term disability compensation program for its employees constitute a " written contract," and, if so, whether they are " written contracts" that fall within the waiver of governmental immunity set forth in KRS 45A.245.

For the reasons explained below, we conclude that the Appellants did not have a " written contract" with their university employer concerning the long-term disability compensation program. Accordingly, we affirm the decision of the Court of Appeals in dismissing Appellants' claims on the basis of governmental immunity.

Our conclusion that Appellants' claims are not based upon a written contract with their university employer makes it unnecessary for us to address the scope of KRS 45A.245 in detail.3 We therefore decline to do so, leaving the examination of that issue for another day, and for a case, unlike this one, in which the resolution of that controversy would be material to our decision.

I. FACTUAL AND PROCEDURAL BACKGROUND

We begin our discussion by briefly summarizing the employment claims asserted by the Appellants, and the relevant employment documents upon which they rely in support of their claims to disability benefits.

Appellants Vera Furtula and Anthony Miller were employed for several years by the University of Kentucky. During the time of their employment, the University provided, at no cost to the employee, a self-funded, long-term disability (LTD) benefits program for its regular full-time employees. The program consisted of two complementary plans: (1) the University of Kentucky Initial Salary Continuation Long-Term Disability Plan (" Salary Continuation Plan" ); and (2) the University of Kentucky Long-Term Disability Plan (" LTD Plan" ).

The LTD program is governed by three sets of documents: an employee handbook titled " Staff Handbook" ; Human Resources Policies and Procedures (HRP& P) Sections 90.0 and 95.0; and documents adopted by the Board of Trustees that create and govern the programs. The handbook is provided to employees who sign an acknowledgement of having received it. As stated in the University's HRP& P, the " LTD program is intended to make monetary benefits available to an employee in the event of long term total disability."

The Salary Continuation Plan and the Long-Term Disability Plan each provide that " [a participating employee] who becomes totally disabled as a result of accidental bodily injury or sickness . . . shall be entitled to [the payments specified by the respective plan.]" Independently of each other, both Furtula and Miller applied for disability benefits, each claiming to have become totally disabled while working at the University. In each case, the University denied the claim after concluding that Furtula and Miller were not " totally disabled."

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Following the rejection of their claims, Furtula and Miller each filed suit in the Fayette Circuit Court against the University alleging that, by rejecting their applications for disability benefits, the University breached a written contract consisting of the Staff Handbook and the associated personnel policy documents that define the disability compensation programs.

In Furtula's case, the University moved for summary judgment, arguing that it was entitled to sovereign immunity because it had no contract with Furtula, and that even if the disability program could be construed as a contract, the action on it was barred because it was not in writing. The Fayette Circuit Court denied the University's motion for summary judgment, concluding that there existed " a material issue of fact with regard to whether there has been a waiver of sovereign immunity for this breach of contract claim by the state legislature pursuant to KRS Chapter 45A [the Kentucky Model Procurement Code]." However, based upon the requirement of KRS 45A.245 that actions brought pursuant to the Model Procurement Code " shall be brought in the Franklin Circuit Court," the Fayette Circuit Court also transferred the case to the Franklin Circuit Court.4 Before the transfer could be completed, the University filed an interlocutory appeal from the order denying immunity as allowed by Breathitt County Board of Education v. Prater, 292 S.W.3d 883, 887 (Ky. 2009).

In Miller's case, the University moved to dismiss on grounds of improper venue and sovereign immunity. The Fayette Circuit Court denied the motion and transferred the case to Franklin Circuit Court pursuant to KRS 45A.245. The Franklin Circuit Court denied the University's motion to dismiss Miller's claim on the grounds of sovereign immunity, though the basis for the decision is unclear. Again invoking Prater, the University appealed the rejection of its claim of sovereign immunity.

The Court of Appeals addressed the Furtula and Miller cases together and reversed both circuit court decisions. The court held that the documents establishing the University of Kentucky's employee disability compensation did not create an implied contract under Parts Depot, Inc. v. Beiswenger, 170 S.W.3d 354 (Ky. 2005). Specifically, the Court of Appeals held that " none of the plan documents provided to this Court evidence [the] intent to create a contract on the part of the University." 5 The Court also noted that, unlike the relevant documents in Parts Depot, which used specific and unequivocal contractual language, rather than precatory language, the University documents cited by Furtula and Miller as the basis of their contract claim were replete with precatory language and express contractual disclaimers to the effect that the relevant documents specifically were not intended to form a contract. After noting that the University was a state agency entitled to sovereign immunity from suit absent a legislative waiver, the Court of Appeals held that even if the documents gave rise to an implied contract, the claims would not be allowed because the state's immunity was waived under KRS 45A.245 only for written contracts. And, while the Court of

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Appeals did not explicitly say so, implicit in its holding is the recognition that an implied contract is not a written contract.

We granted discretionary review to address whether the various documents in this case gave rise to a written contract that fits within the legislative waiver of sovereign immunity provided within the Model Procurement Code.

II. FURTULA AND MILLER DO NOT HAVE AN IMPLIED CONTRACT FOR THE UNIVERSITY OF KENTUCKY'S EMPLOYEE DISABILITY COMPENSATION PLANS

Fundamental to our review of a contractual claim premised upon an employee handbook is our holding in Parts Depot, 170 S.W.3d at 354. In that case, we considered whether a contractual obligation could be implied, thus vesting the employee with an equitable contract claim for the employer's failure to follow certain wage provisions contained in the employer's personnel policies. We held that " [o]nce an employer establishes an express personnel policy and the employee continues to work while the policy remains in effect, the policy is deemed an implied contract for so long as it remains in effect. If the employer unilaterally changes the policy, the terms of the implied contract are also thereby changed." Id. at 363.

Basic contract law provides that, as in the case of an express contract, an implied contract6 requires the agreement of the promisor to be bound.7

[A] contract may be inferred wholly or partly from such conduct as justifies the promise in...

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