Carter v. Smith

• Court: Supreme Court of Kentucky
• Citation: Carter v. Smith, 366 S.W.3d 414, 280 Ed. Law Rep. 1152 (Ky. 2012)
• Decision Date: 24 May 2012
• Docket Number: No. 2010–SC–000295–DG.,2010–SC–000295–DG.
• Parties: Arnold W. CARTER, Appellant, v. Jamie D. SMITH and Bourbon County Board of Education, Appellees.

366 S.W.3d 414

280 Ed. Law Rep. 1152

Arnold W. CARTER, Appellant,

v.Jamie D. SMITH and Bourbon County Board of Education, Appellees.

No. 2010–SC–000295–DG.

Supreme Court of Kentucky.

May 24, 2012.

Joe Francis Childers, Jr., Getty & Childers, PLLC, Lexington, KY, Counsel for Appellant.

Neil Edward Duncliffe, Georgetown, KY, Counsel for Appellee, Jamie D. Smith.

Sam Preston Burchett, Lexington, KY, Counsel for Appellee, Bourbon County Board of Education.

Opinion of the Court by Justice ABRAMSON.

After serving eighteen months as the superintendent of Bourbon County public schools, Appellant Arnold Carter transferred into the position of consultant to the school district pursuant to a so-called “exit strategy.” The details of Carter's resignation and consulting contract were discussed and determined in a closed session during the last regular meeting of the Bourbon County Board of Education in December 2002. Appellee Jamie Smith, a parent and concerned citizen, challenged the Board's actions as violative of Kentucky's Open Meetings Act. After careful review, we hold the Board did violate the Open Meetings Act when it discussed Carter's resignation and consulting contract in closed session. Carter's consulting contract was voidable as a matter of law and was properly voided by the Circuit Court. While Carter may retain the monies already paid him pursuant to the contract, as ordered by the Circuit Court, he is not entitled to recover any additional payments. The funds held in escrow are to be remitted to the Bourbon County public schools.

RELEVANT FACTS

On July 1, 2001, Carter became Superintendent of the Bourbon County public schools, a position in which he was to serve until June 30, 2005. In July 2002, the five-member school board increased Carter's starting salary of $89,500.00 by 2.7 percent to $91,916.50. The Bourbon County public school system was experiencing difficulties during this time and in 2002 two Board members resigned and were replaced by appointees Lonnie Conley and Gus Koch. In November 2002, Koch was elected to retain his position and Gary Linville was elected to Conley's position after Conley decided not to run for the seat.

This change in Board membership was significant for Carter because he had previously enjoyed a favorable relationship with the Board but was now facing a difficult year with an incoming Board whose majority was dissatisfied with his performance as superintendent. It is unclear from the record as to who broached the subject, but Carter's resignation and change to a “consultant” position became the topic of discussion in the fall of 2002. At that time, several informal meetings were held on the matter, including one between Koch, Conley, Linville and Carter. At this meeting, the Board members indicated their interest in hiring their own superintendent and Carter, in turn, made it clear he would be willing to transition into a consultancy position. Koch and Conley testified that during this meeting Carter went on a “fishing expedition” to see what he could get in exchange for his willingness to resign as superintendent and become a consultant. Carter also met and discussed his exit strategy with each Board member and with the Board's attorney, Robert Chenoweth, who had experience arranging similar transitions for several other superintendents. According to Carter, all five Board members were amenable to the idea, though his compensation and the length of his consulting contract were in dispute.

On December 19, 2002, the Board met in regular session for the last time before the new members assumed office. The agenda for the meeting, which Carter and Chenoweth prepared, indicated the Board would go into executive session “to discuss pending litigation and personnel.” Prior to the meeting, the Board members were made aware that the purpose of the closed session was to discuss Carter's resignation and his appointment as a consultant. During the closed session, in which Carter and Chenoweth participated, Board Chairperson Geraldine Summay presented the Board with a draft of Carter's consulting contract, which she and Chenoweth had fully prepared prior to the meeting. After meeting for several hours, the Board returned to open session and, without discussion, voted 3–2 to accept Carter's resignation as superintendent and to authorize Summay to sign the agreement appointing Carter as a consultant for one year, from January 1, 2003 to December 31, 2003, at $133,063.09 plus $3,000.00 in moving expenses. Though Carter performed only about two weeks of consulting work in all of 2003, he received the monthly payments provided for in the consulting contract for January and February 2003, totaling $20,536.92. Further payments were suspended upon issuance of the temporary injunction by the circuit court.

By the time of the December 19, 2002 meeting, Appellee Jamie Smith had already filed six challenges to the Board's conduct with the Kentucky Attorney General, claiming the Board had repeatedly violated Kentucky's Open Meetings Act (OMA), codified at Kentucky Revised Statutes (KRS) 61.800–61.850. The Attorney General had resolved five of the challenges in Smith's favor. When the Board failed to take corrective action, Smith filed a Complaint against the Board in Bourbon Circuit Court, which she amended to include the December 19, 2002 meeting. Following a hearing in early 2003, the circuit court found the evidence may establish “the actions taken by the Bourbon County Board of Education at its December 19, 2002 meeting violated the Kentucky Open Meetings Law” and therefore temporarily enjoined the Board from paying Carter further sums under the contract. The court ordered that money instead be placed in an escrow account. The Board and Smith then both moved for summary judgment.

In granting summary judgment, the circuit court found KRS 61.810(1)(f) permitted the Board's closed session discussion of Carter's resignation but not its discussion of Carter's consulting contract. The court consequently voided the consulting contract, held the Board was not liable to Carter for further payments under the contract and ordered the funds held in escrow be released to the Board. The Court of Appeals, in an opinion consolidating Carter's appeal and Smith and the Board's cross-appeals, affirmed the trial court on all issues.

Now on discretionary review to this Court, Carter argues the Board was permitted, under the personnel and litigation exceptions, to enter closed session to discuss his resignation and consulting contract. In the alternative, Carter asserts his consulting contract is valid because, even if the Board did not strictly adhere to the letter of the law when it discussed his resignation and consulting contract in closed session, it nevertheless ratified its actions and “substantially complied” with the OMA by taking a vote in open session pursuant to KRS 61.815(1)(c).¹

Upon review, we reverse in part, affirm in part and remand to the trial court for proceedings consistent with this opinion. The trial court and the Court of Appeals correctly found the Board violated the Open Meetings Act when it discussed Carter's consulting contract in closed session. However, the trial court and the Court of Appeals erred in holding the Board could discuss Carter's resignation in closed session. These discussions were not proper under either the personnel or litigation exceptions of the OMA. Further, the Board could neither ratify action taken in an improper closed session nor be found in substantial compliance with the law where it acted in complete contravention of the statute. As such, Carter's consulting contract is voidable and was nullified by the circuit court's injunction and final judgment. Although Carter may retain the payments he has already received under the consulting contract, the funds held in escrow belong to the school district.

ANALYSIS

The standard of review on appeal of summary judgment is whether the trial court correctly found there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Hammons v. Hammons, 327 S.W.3d 444 (Ky.2010); CR 56.03. The record must be viewed in a light most favorable to the nonmoving party and all reasonable doubts must be resolved in that party's favor. Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476, 480 (Ky.1991). The material facts here are undisputed. We review the trial court's summary judgment ruling and the Court of Appeals opinion de novo. Giddings & Lewis, Inc. v. Industrial Risk Insurers, 348 S.W.3d 729 (Ky.2011).

The General Assembly has declared the “formation of public policy is public business and shall not be conducted in secret.” KRS 61.800. The few exceptions to this open meetings requirement are located in KRS 61.810. These exceptions must be strictly construed “so as to avoid improper or unauthorized closed, executive or secret meetings.” Floyd County Bd. of Educ. v. Ratliff, 955 S.W.2d 921, 923 (Ky.1997); KRS 61.800 (“[T]he exceptions provided for by KRS 61.810 or otherwise provided for by law shall be strictly construed.”). Carter maintains the Board's retreat to closed session to discuss his resignation and consulting contract was permissible under two of the exceptions to open meetings: (1) the “personnel exception,” located at KRS 61.810(1)(f); and (2) the “litigation exception,” located at KRS 61.810(1)(c). We first address the applicability of the latter exception.

I. The Litigation Exception Does Not Apply Where There is Insufficient Threat of Litigation.

Under the litigation exception, a public agency may enter closed session for “discussions of proposed or pending litigation against or on behalf of the public agency.” KRS 61.810(1)(c). This exception covers discussions of strategy, tactics, possible settlement and other matters pertaining to the case. Though the exception may be invoked when litigation is not currently pending but is only...