Cullman Sec. Servs., Inc. v. United Propane Gas, Inc., 2014-CA-001738-MR

• Decision Date: 30 October 2015
• Docket Number: NO. 2014-CA-001738-MR,2014-CA-001738-MR
• Parties: CULLMAN SECURITY SERVICES, INC., individually and on behalf of all others similarly situated APPELLANT v. UNITED PROPANE GAS, INC. and its subsidiaries and affiliates APPELLEE
• Court: Kentucky Court of Appeals

CULLMAN SECURITY SERVICES, INC., individuallyand on behalf of all others similarly situated APPELLANT¹ v. UNITED PROPANE GAS, INC. and its subsidiaries and affiliates APPELLEE²

NO. 2014-CA-001738-MR

Commonwealth of Kentucky Court of Appeals

OCTOBER 30, 2015

NOT TO BE PUBLISHED

APPEAL FROM MCCRACKEN CIRCUIT COURT

HONORABLE TIMOTHY KALTENBACH, JUDGE

ACTION NO. 14-CI-00331

OPINION

AFFIRMING

BEFORE: COMBS, KRAMER AND STUMBO, JUDGES.

KRAMER, JUDGE:

Cullman Security Services, Inc. ("Cullman") appeals an order of the McCracken Circuit Court dismissing, without prejudice, a breach ofcontract claim it filed against appellee, United Propane Gas, Inc. ("United"). Upon review, we affirm.

FACTUAL AND PROCEDURAL HISTORY

Cullman is an Alabama corporation that contracted to buy 750 gallons of propane gas at the contract price of $1.699 per gallon from United pursuant to a 2013-2014 pre-purchase gas supply agreement. In October of 2013, United delivered 200 gallons of propane gas at the contract price. On January 28, 2014, when Cullman requested a second delivery, United asserted Cullman would have to purchase gas at the rate of $3.599 per gallon. According to the complaint Cullman filed in this matter, Cullman was then forced to buy gas on the open market at the going rate when it was considerably higher than $1.699 per gallon.

Cullman's complaint in this matter alleged that United had violated the implicit covenant of good faith and fair dealing in their agreement and therefore sought damages for breach of contract. Cullman also sought to represent a class of plaintiffs similarly situated pursuant to Kentucky Civil Rule (CR) 23, but no other commercial entity joined Cullman's action. Thereafter, United moved to dismiss Cullman's claim pursuant to CR 12.02 on the basis of subject matter jurisdiction. Specifically, United argued that Cullman had filed a claim for damages not in excess of $5,000, the circuit court's minimum jurisdictional amount. Cullman responded with a number of arguments which will be discussed in the course of our analysis, below. Ultimately, the circuit court granted United'smotion and dismissed Cullman's complaint without prejudice. This appeal followed.

STANDARD OF REVIEW

Our standard for reviewing a circuit court's decision to grant a CR 12.02 motion is as follows:

The court should not grant the motion unless it appears the pleading party would not be entitled to relief under any set of facts which could be proved in support of his claim. In making this decision, the circuit court is not required to make any factual determinations; rather, the question is purely a matter of law. Stated another way, the court must ask if the facts alleged in the complaint can be proved, would the plaintiff be entitled to relief?

James v. Wilson, 95 S.W.3d 875, 883-84 (Ky. App. 2002) (internal quotations and footnote omitted).

ANALYSIS

Cullman begins its appeal by spending much of its brief urging that circuit courts have jurisdiction over class action lawsuits. It is unnecessary to review the several cases Cullman cites in favor of this proposition because United does not dispute this point and because circuit courts are indeed vested by statute with this type of authority. See KRS³ 23A.010(1) ("The Circuit Court is a court of general jurisdiction; it has original jurisdiction of all justiciable causes not exclusively vested in some other court.").

From there, however, Cullman reasons that the circuit court consequently erred in dismissing its breach of contract claim for lack of jurisdiction because (1) Cullman hopes to find other plaintiffs who have different breach of contract claims against United, who are willing to join its action; and (2) Cullman anticipates—if and when it finds those potential co-plaintiffs—that all of their respective claims will be combined into a class action.

The flaw of this argument, apart from its speculative nature, is that it ignores the circuit court's minimum jurisdictional amount. In Kentucky, class actions such as the one apparently contemplated by Cullman (i.e., merely involving parties with separate and distinct claims that involve common questions of law or fact)⁴ are subject to the rule that each plaintiff in the class must show that its individual claim exceeds the jurisdictional amount. See Kentucky Dept. Store, Inc. v. Fidelity-Phenix Fire Ins. Co. of N. Y., 351 S.W.2d 508, 509 (Ky. 1961) ("The crucial question in this court is whether in a 'spurious'[⁵] class action the claims ofthe members of the suing class may be aggregated in determining jurisdictional amount. They cannot."). Here, Cullman has conceded that its claim against United is for a sum less than the circuit court's $5,000 jurisdictional minimum amount. See KRS 24A.120(1).⁶ Thus, the circuit court had no jurisdiction to consider Cullman's claim, irrespective of whether Cullman wishes to designate its singular claim as a potential class action.⁷

Nevertheless, Cullman argues that this Court should ignore the aforementioned rule stated in Kentucky Dept. Store; hold that aggregation is permitted in every kind of class action; and, in anticipation that Cullman will eventually find other co-plaintiffs to aggregate its damages with, direct the circuit court to allow Cullman's claim to proceed as a potential class action. In support, Cullman cites three cases which it asserts illustrate that this Court and the Kentucky Supreme Court have, on previous occasions, decided to ignore the jurisdictional minimum amount applicable to circuit courts in the context of class action lawsuits.

Cullman's argument has no merit for a number of reasons. To begin, it is not the prerogative of this Court to ignore statutes and the precedent of the Kentucky Supreme Court or its predecessor Court. See Supreme Court Rule (SCR) 1.030(8)(a); Fields v. Lexington-Fayette Urban County Gov't, 91 S.W.3d 110, 112 (Ky. App. 2001); Buckler v. Mathis, 353 S.W.3d 625, 631 (Ky. App. 2011).

Moreover, the three cases Cullman relies upon provide its argument with no legal support. The first case Cullman cites is Schnuerle v. Insight Communications Co., L.P., 376 S.W.3d 561 (Ky. 2012). However, in Schnuerle, the jurisdictional minimum amount applicable to circuit court actions was never at issue or even discussed. Also, the claims at issue in Schnuerle involved alleged violations of the Kentucky Consumer Protection Act, KRS 367.170 et seq. Id. at 565. Pursuant to statute, such claims are required to be filed in circuit court. See KRS 367.220(1).

The second and third cases Cullman relies upon are City of Bromley v. Smith, 149 S.W.3d 403 (Ky. 2004), and City of Somerset v. Bell, 156 S.W.3d 321 (Ky. App. 2005), which respectively involved groups of litigants who individually claimed monetary losses far less than the applicable jurisdictional minimum, but who were nevertheless granted class certification. What Cullman misses in relying upon these cases is (1) both cases involved groups of litigants who were seeking, as a class, refunds of money they had paid pursuant to an allegedly illegal or unconstitutional tax; and, (2) in both cases, it was determined that established legal authority—expressly limited to litigants seeking refunds of money collected as theresult of allegedly illegal or unconstitutional taxes—permitted the class action suits in question to proceed. For example, Bell determined that a specific statute, KRS 134.590, provided statutory authority for circuit court jurisdiction. See Bell, 156 S.W.3d at 327. Smith, on the other hand, reviewed the same statute and, to the contrary, determined that a class action was actually available to aggrieved taxpayers as a matter of "common law." Smith, 149 S.W.3d at 406.

As an aside, a brief discussion of the "common law" to which the Kentucky Supreme Court was referring offers an explanation of why taxpayers, who typically have monetary claims for refunds far less than the jurisdictional minimum amount, have traditionally been entitled to bring their claims in circuit court as class actions. As explained in Commonwealth v. Scott, 23 Ky. L. Rptr. 1488, 65 S.W. 596 (1901),

Text writers and courts have had frequent occasion to analyze the character of proceeding here involved, and have, with general unanimity, brought it within that ancient rule of equity that [the circuit court's] jurisdiction exists in order to prevent a multiplicity of suits concerning the same subject-matter, as affecting the same litigants or the same title. They find that the subject-matter is the tax levy, or, when collected, the fund arising from such levy. He who has collected or who holds it, or who is asserting the lawful right to collect it, is one of the necessary parties to the controversy; and, when collected, the fund is called and treated as a trust fund, the beneficiaries of which are all who contributed to it. They, consequently, are the other necessary party to the litigation for its recovery. Thus, in this state, in Blair v. Turnpike Co., 4 Bush, 157, it was expressly held that the "sheriff of Nicholas county holds the money collected by illegal taxation on a voidsubscription to turnpikes as a trust fund for the benefit of the taxpayers who contributed to that fund." From the foregoing it necessarily follows: The subject-matter of the litigations is the trust fund, the amount of which determines the question of jurisdiction.

(Emphasis added.)

Thus, in the context of the claims at issue in Smith and Bell, the circuit court's minimum jurisdictional amount remained in effect and was not, as Cullman asserts, simply ignored.

Moreover, the common law rule described in Scott and applied in Smith is the rule that has been traditionally applied to "true" class actions, as opposed to "spurious" class actions such as the one contemplated by Cullman. See note 5. That is, it allows a class action to go forward where the separate claims of the different parties to the action are below the jurisdictional amount if (1) such parties have a common or...