Com. v. Pendennis Club, Inc.

• Court: Supreme Court of Kentucky
• Writing for the Court: Lambert
• Citation: Com. v. Pendennis Club, Inc., 153 S.W.3d 784 (Ky. 2004)
• Decision Date: 18 November 2004
• Docket Number: No. 2002-SC-0508-DG.,2002-SC-0508-DG.
• Parties: COMMONWEALTH OF KENTUCKY, Kentucky Commission on Human Rights Appellant, v. PENDENNIS CLUB, INC., et. al. Appellee.

153 S.W.3d 784

COMMONWEALTH OF KENTUCKY, Kentucky Commission on Human Rights Appellant, v. PENDENNIS CLUB, INC., et. al. Appellee.

No. 2002-SC-0508-DG.

Supreme Court of Kentucky.

November 18, 2004.

As Modified November 23, 2004.

Rehearing Denied February 17, 2005.

Gregory D. Stumbo, Attorney General of Kentucky, D. Brent Irvin, Assistant Attorney General, Frankfort, Morgan G. Ransdell, Staff Attorney, Kentucky Commission on Human Rights, Louisville, Counsel for Appellant.

D. Patton Pelfrey, Robert W. Dibert, Frost Brown Todd, LLC, Louisville, Counsel for Appellee, Pendennis Club, Inc.

John O. Sheller, Smith & Smith Attorneys, Louisville, Counsel for Appellee, Louisville Country Club.

Richard G. Griffith, Jeffrey J. Chapuran, Stoll, Keenon & Park, LLP, Lexington, Counsel for Appellee, Idle Hour Country Club.

Opinion of the Court by Justice LAMBERT.

Under Kentucky law, tax deductions are disallowed for amounts paid to any club that discriminates on the basis of race in its membership practices or in affording full and equal enjoyment of its benefits. The Kentucky Commission on Human Rights (KCHR) seeks a declaration that it has authority to investigate private clubs to determine if they engage in discriminatory conduct in such a manner that members would be prohibited from deducting club payments. We hold that it does. The General Assembly has expressed its intent to enable the KCHR to investigate any club — public, quasi-public, or private — to determine whether it denies full and equal enjoyment of its membership and benefits on account of race. The opinion of the Court of Appeals is reversed, and this matter is remanded for further proceedings.

The direct question before this Court is whether the Appellant, KCHR, has the statutory authority to investigate the Appellees, private clubs, to determine whether they discriminate on the basis of race. KCHR asserts such authority under a number of statutory provisions, including those disallowing deductions for amounts paid by members to any discriminatory club.

Initially, it is important to identify what this case is not about. This case is not about whether the clubs actually engage in discriminatory practices. Though possible racial discrimination is the underlying allegation of the complaint filed with the KCHR, no evidence on that issue has yet been heard. It is simply not known whether the clubs discriminate because of race. Indeed, the KCHR seeks a declaratory judgment to clarify its power (or lack of power) to investigate that question. Neither is this a case about the rights of clubs nor their members. Bona fide private clubs have the statutory right in this state to discriminate in affording the benefits of membership without fear of legal liability.¹ Private clubs engaged in expressive association also have a constitutional right to be free from "forced inclusion of unwanted person[s]."² Moreover, this case is not about the right of the state to disallow tax deductions to clubs that have a "whites only" or "blacks only" policy. That power is obvious. While a state may not interfere with the associational rights of truly private clubs in the absence of a compelling government interest,³ it may refuse to approve objectionable conduct by withholding state benefits such as tax deductions. Finally, there is no doubt that the General Assembly has the power to grant the KCHR authority to investigate the activities of any club to assure that its members are not taking tax deductions that are unavailable. What this case is about is whether the General Assembly has granted the KCHR authority to so investigate. Resolution of this question depends on construction of statutes that define the breadth of KCHR's investigatory powers when complaints are filed with the agency.

It has been more than ten years since the inception of this litigation. In those ten years, the parties have been heard in three levels of the Kentucky Court of Justice, and in the United States District Court and the United States Circuit Court.

In 1991, Louis Coleman filed complaints against the Pendennis Club, Inc., the Louisville Country Club, and the Idle Hour Country Club claiming that they engaged in discriminatory membership practices. The KCHR dismissed Coleman's complaints, reasoning that the clubs were exempt from the Kentucky Civil Rights Act (Act)⁴ pursuant to KRS 344.130(1). One month later, then State Representative Anne Northup wrote a letter to the state Attorney General requesting an opinion "with regard to the discriminatory practices of private clubs and organizations." She asserted that in KRS 141.010(11)(d) the legislature had granted the KCHR authority to investigate clubs to assure that the Commonwealth was not enabling discriminatory clubs to benefit from membership tax deductions. Representative Northup, the sponsor of the amendment that altered KRS 141.010, sought clarification of the effect of the amended statute. Shortly after receiving the inquiry, the Attorney General's office rendered an opinion stating that the KCHR was not prohibited from investigating private clubs, even though the clubs cannot be held liable for denying the benefits of club membership because of race.⁵ Two years later, Human Rights Commissioner Mae Cleveland filed complaints alleging unlawful discrimination by the clubs. Those complaints are the genesis of this case. In June of 1994 the clubs moved to dismiss, and their motion was denied.

The clubs then sought a declaratory judgment and injunctive relief in federal court. The United States District Court ruled that KRS 141.010(11)(d)⁶ did not "confer authority upon the Commission to investigate private clubs." This ruling was vacated by the United States Court of Appeals for the Sixth Circuit.⁷ The Sixth Circuit held that the lower court should have abstained from ruling on the case while administrative proceedings were underway.⁸ The case was remanded to the United States District Court for dismissal. The KCHR proceeded to the Jefferson Circuit Court seeking a declaratory judgment as to its power to investigate the clubs. The Jefferson Circuit Court ruled for the clubs, holding that KRS 344.130 "specifically exempted private clubs from the KCHR's domain." The Court of Appeals affirmed, agreeing fully with the circuit court's rationale. We granted discretionary review.

The Kentucky General Assembly established the KCHR to safeguard the rights of citizens to be free from discrimination on the basis of race and other enumerated characteristics.⁹ To fulfill its mandate, the KCHR was empowered, inter alia, to investigate, hold public hearings, and require answers to interrogatories.¹⁰ To further assure that its intent was not frustrated, the Legislature enacted KRS 344.020(2), requiring a statutory interpretation that fulfills the purposes of the Act. This Court has construed the Act liberally.¹¹ The General Assembly has directed that all statutes be construed in a manner that furthers the objectives for which the statute was enacted.¹² Exceptions to the Act's coverage are interpreted narrowly.¹³

The clubs contend that the exemption in KRS 344.130 bars the KCHR from investigating private clubs because they are expressly excluded from KCHR oversight. This is a significant overstatement. KRS 344.130 states that private clubs are not places of public accommodation, resort, or amusement. Consequently, KRS 344.130 exempts private clubs from KRS 344.120,¹⁴ but not from the entire chapter. For example, while a private club that racially discriminates in affording full and equal enjoyment of its benefits may not be held liable for damages, a private club with eight or more employees could be civilly liable if it discriminated on the basis of race in its employment practices.¹⁵ In such a situation the KCHR would have authority to exercise its powers under KRS 344.180 and KRS 344.190,¹⁶ and the club would be held accountable for its iniquitous employment practices. The exemption for private clubs is not all-encompassing. To so hold would be contrary to the purposes of the Act and would frustrate legislative intent.¹⁷

This is not a novel proposition. In Watson v. Fraternal Order of Eagles¹⁸ the United States Court of Appeals for the Sixth Circuit held that the private club exemption in Title II of the federal Civil Rights Act of 1964 prohibiting discrimination in public accommodations does not preclude recovery on an alternative theory of liability, such as 42 U.S.C.1981.¹⁹ This is sound.²⁰ Here, as in Watson, the private club exemption does not "give the clubs carte blanche to violate all other antidiscrimination laws."²¹ Although it protects private clubs from a violation of KRS 344.120, the exemption found in KRS 344.130 is inapplicable to the issue before us.

On the other hand, the KCHR must have statutory authority before it may investigate. KRS 141.010(11)(d) states that no deduction will be allowed for payments made to any club that has been determined by the "agency established by the General Assembly and charged with enforcing the civil rights laws of the Commonwealth, not to afford full and equal membership and full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to any person because of race." Despite this language, the clubs respond that KRS 141.010(11)(d) does not grant the KCHR authority to investigate. The clubs offer numerous arguments to escape from statutory coverage. For one, they argue that the language of KRS 141.010(11)(d) parallels the language in the public accommodation provision found in KRS 344.120. However, KRS 141.010(11)(d) distinguishes itself on two counts. First, it applies to "any club" without limitation. KRS 141.010(11)(d) does not limit the investigation to non-private clubs. It grants authority over "any club." Second, KRS 141.010(11)(d) does not limit itself to clubs that fail to afford full and equal enjoyment of its benefits and public accommodations,...