Newell Enterprises, Inc. v. Bowling

• Decision Date: 20 January 2005
• Docket Number: No. 2004-SC-0263-MR.,2004-SC-0263-MR.
• Citation: 158 S.W.3d 750
• Parties: NEWELL ENTERPRISES, INC.; and Joe Newell, Individually, Appellants, v. Hon. James BOWLING, Jr., Judge, Bell Circuit Court, Appellee, and Concrete Products, Inc., Real Party in Interest.
• Court: United States State Supreme Court — District of Kentucky

158 S.W.3d 750

NEWELL ENTERPRISES, INC.; and Joe Newell, Individually, Appellants, v. Hon. James BOWLING, Jr., Judge, Bell Circuit Court, Appellee, and Concrete Products, Inc., Real Party in Interest.

No. 2004-SC-0263-MR.

Supreme Court of Kentucky.

January 20, 2005.

Rehearing Denied April 21, 2005.

Kenneth A. Smith, Jr., London, Counsel for Appellants.

James Bowling, Jr., Judge, Bell Circuit Court, Pineville, for Appellee.

William A. Watson, Middlesboro, Counsel for Real Party in Interest.

Opinion of the Court by Justice KELLER.

I. INTRODUCTION

In an original action in the Court of Appeals, Appellants petitioned for a writ (1) to set aside the finding by the Bell Circuit Court that an injunction existed against Appellants and (2) to bar pending contempt proceedings against Appellants. The Court of Appeals denied the petition, finding that Appellants had failed to show that they had no adequate remedy by appeal and that they would suffer great and irreparable harm. Appellants now appeal, claiming that because contempt proceedings are different from other proceedings and because the nature of the harm from a contempt order is so great, a writ is necessary. We disagree and affirm the judgment of the Court of Appeals.

II. BACKGROUND

In 1996, Concrete Products, Inc., Real Party in Interest (hereinafter "Concrete Products"), filed a lawsuit in Bell Circuit Court against Newell Enterprises, Inc., Appellant (hereinafter, with Joe Newell, "Appellants"). The parties settled the lawsuit by entering into a non-compete agreement on September 7, 2001. The non-compete agreement set forth geographical limits on Appellants' business of the production and sale of ready-mix concrete in Bell County and was to be in effect for five years.

On August 8, 2003, Concrete Products filed a second lawsuit against Appellants in Bell Circuit Court, Civil Action No. 03-CI-00364. In this second lawsuit, Concrete Products claimed that Appellants had breached the non-compete agreement by engaging in the business of production and sale of ready-mix concrete within the proscribed geographic area. Apparently, Appellants admitted to breaching the agreement, albeit mistakenly, and on September 3, 2003, settled the case by tendering a document signed by both parties and entitled "Judgment Pro Confesso." Although this document is more appropriately termed an "agreed judgment" given that the parties tendered it to the court and agreed to its terms and that it was apparently not the result of a failure to answer the complaint,¹ for the sake of clarity, we will retain the parties' nomenclature.

According to the "Judgment Pro Confesso," Appellants affirmed the non-compete agreement and agreed to observe its terms. The "Judgment Pro Confesso" also dismissed the second lawsuit with prejudice.

On October 30, 2003, Concrete Products filed a motion for an order of contempt and for sanctions against Appellants for alleged further violations of the non-compete agreement. In its motion, Concrete Products claimed that Appellants had done concrete work within the proscribed geographic area during September and October of 2003. Curiously, the motion was filed under the docket number (03-CI-00364) of the lawsuit that had been filed in August 2003 and then was voluntarily dismissed by the parties' agreement with prejudice in September 2003. On December 8, 2003, the Bell Circuit Court entered an order stating that although the "Judgment Pro Confesso" did not meet the technical requirements of CR 65.02, which lists the requirements of a restraining order or an injunction, the court had "determined that [Appellants were] permanently enjoined by the entry of the Judgment Pro Confesso" and scheduled Concrete Products's contempt motion for a hearing on December 22, 2003.

Rather than face a contempt finding and possible sanctions, Appellants filed an original action in the Court of Appeals seeking a writ directing the Bell Circuit Court to "set aside the ... finding of the existence of an injunction and desist from further judicial actions flowing therefrom." Appellants argued that the "Judgment Pro Confesso" was not an injunction because it failed to meet the requirements of CR 65.02, and thus the circuit court was acting improperly. Appellants then argued that they would be irreparably injured and had no adequate remedy by appeal because the trial court had summarily determined that a breach of contract had occurred and had created an ex post facto injunction, and, as a result, Appellants "face[d] impositions of sanctions, all without the benefits and safeguards of due process of law and compliance with procedural steps required by CR 65.02."

The Court of Appeals considered Appellants' original action and found it to be without merit. Specifically, the Court of Appeals held that Appellants "failed to show that they would suffer irreparable harm without the issuance of the writ and ... failed to show that they have no adequate remedy by appeal." Appellants now appeal to this Court as a matter of right.²

III. ANALYSIS

The writ of prohibition is such an "extraordinary remedy" that Kentucky courts "have always been cautious and conservative both in entertaining petitions for and in granting such relief."³ We have divided writ cases into "two classes," which are distinguished by "whether the inferior court allegedly is (1) acting without jurisdiction (which includes `beyond its jurisdiction'), or (2) acting erroneously within its jurisdiction."⁴ Under the first class of cases, if the lower court lacks jurisdiction and relief from an intermediate court is not available, then a writ is appropriate and the higher court may, in its discretion, issue the writ.⁵

Under the second class of cases, a writ "may be granted upon a showing ... that the lower court is acting or is about to act erroneously, although within its jurisdiction, and there exists no adequate remedy by appeal or otherwise and great injustice and irreparable injury will result if the petition is not granted."⁶ "No adequate remedy by appeal" means that any injury to Appellants "could not thereafter be rectified in subsequent proceedings in the case."⁷ Lack of an adequate remedy by appeal is an absolute prerequisite to the issuance of this second class of writ.⁸ "Great and irreparable injury" means "something of a ruinous nature."⁹ "Ordinarily if this cannot be shown, the petition will be dismissed."¹⁰

The basic standard of review of the grant or denial of a writ is abuse of discretion.¹¹ But where the issue presented involves a question of law, we review the question of law de novo.¹² And if the alleged error lies in findings of fact of the Court of Appeals, e.g., the finding regarding irreparable harm,¹³ then we would review for clear error under CR 52.01.

On appeal, Appellants have made two claims: (1) that the Court of Appeals erred in not granting the writ under the usual standard because this case involves a contempt proceeding, thus it is "in a class by itself"; and (2) the adverse effect of a contempt citation on Appellants' reputation in the business community is a special circumstance that requires the extraordinary remedy of a writ. The first of these issues was not raised at the Court of Appeals. Instead, Appellants only argued to the Court of Appeals that the sanctions that could result from the contempt hearing at the circuit court constituted a great and irreparable harm with no adequate remedy on appeal. "It goes without saying that errors to be considered for appellate review must be precisely preserved and identified in the lower court."¹⁴ As such, we cannot properly address Appellants' current claim regarding the "specialness" of contempt proceedings because that matter was not argued to the Court of Appeals, though we must admit that Appellants' implied claim that contempt proceedings require a different writ standard seems without merit.

Appellants' second claim, regarding the negative effect on reputation of a contempt order, could be read as a claim of great and irreparable injury. Though the claim was not presented in exactly this form to the Court of Appeals, where Appellants merely made the blanket assertion that the possible sanctions stemming from a finding of contempt would be great and irreparable injury, it is close enough that we will address it.

First, we would note that Appellants do not appear to claim that a contempt proceeding could not be adequately remedied by appeal. This, in and of itself, is fatal to their appeal because we "have consistently (apparently without exception) required the petitioner to pass the first test; i.e., he must show he has no adequate remedy by appeal or otherwise" before proceeding to the determination of whether great and irreparable harm exists.¹⁵ But because the Court of Appeals addressed the issue, albeit briefly, and because it is arguable that Appellant has, somewhere "between the lines," implied that it has no adequate remedy by appeal, and because the existence of a remedy by appeal, adequate or not, is a question of law, which we review de novo, we will address the issue.

At one time, no appeal was allowed from a judgment of contempt¹⁶ except "to determine whether the punishment declared by the judgment complained of was illegally imposed, and whether such punishment [was] excessive."¹⁷ And for that reason, as a matter of law, no adequate remedy by appeal existed from a contempt judgment and issuance of a writ was the appropriate remedy.¹⁸ But since the adoption of the Judicial Amendment and the enactment of enabling legislation, there has existed a right of appeal from a contempt judgment.¹⁹ Thus, today, possible sanctions for contempt, standing alone, may not mean irreparable harm for which no adequate remedy by appeal exists. A petition to prohibit possible sanctions for contempt stands on its own merits, and a writ will not issue unless it is shown that the standard for the issuance of a writ has been met. On this...