Coppage Construction Co. v. Sanitation District No. 1
459 S.W.3d 855
| Ky. | 2015Background
- Coppage Construction performed work on a sewer line for DCI as part of the Manhattan Harbour development; SD1 (Sanitation District No. 1) agreed with DCI to pay ~70% of the project and was identified as owner of the finished sewer line.
- Coppage sued/was sued after DCI terminated its contract for convenience; Coppage later brought a third-party complaint against SD1 asserting contract, tort, and statutory claims (including partnership-by-estoppel/third-party beneficiary/novation theories).
- SD1 moved to dismiss on sovereign-immunity grounds; the Kenton Circuit Court converted the motion to summary judgment and granted it; the Court of Appeals affirmed, treating SD1 as an “arm” of three counties and performing an integral state function.
- The Supreme Court granted review to apply the Comair two-prong test (origin and function) and reversed: it held SD1 is not entitled to sovereign immunity and remanded for further proceedings.
- Key factual/legal bases: SD1 is a sanitation district (a special district/municipal corporation) formed by petition of landowners/municipalities under KRS Ch. 220, governed by an independent board, fiscally separate, and performs local sewer/stormwater functions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SD1 is entitled to sovereign immunity based on origin | Coppage: SD1 was not created by counties and is not immune (plaintiff seeks to proceed) | SD1: Created/controlled by Boone, Kenton, Campbell counties; therefore an arm of immune counties | Held: SD1 was not created by sovereign counties; formed by petition of landowners/municipalities under KRS Ch. 220 and is not an alter ego of counties — no immunity on origin ground |
| Whether SD1 performs a function integral to state government | Coppage: Sewer/stormwater services are local/proprietary, not integral state functions | SD1: Its statutory purposes (stream pollution prevention, sewage management) further statewide water-quality policy and are integral to state government | Held: SD1 performs local, proprietary sewer/stormwater functions (like MSD in Calvert), not traditional statewide functions (e.g., highways, airports) — no immunity on function ground |
| Whether Calvert precedent distinguishing sewer entities remains controlling | Coppage: Calvert controls and supports no immunity for sewer/sanitation districts | SD1: Comair supersedes Berns/Calvert and supports immunity where entity is integral to state | Held: Calvert remains sound insofar as it holds sewer/sanitation districts performing local functions are not immune; Comair’s framework applied and SD1 fails both prongs |
| Whether exposure to liability would imperil public treasury (concurring emphasis) | Coppage: SD1’s liabilities do not implicate state treasury; suits may proceed | SD1: (implicit) immunity needed to protect public resources | Held (concurring): No threat to public treasury from subjecting SD1 to suit — historical fiscal rationale for sovereign immunity is absent; supports denial of immunity |
Key Cases Cited
- Comair, Inc. v. Lexington-Fayette Urban Cnty. Airport Corp., 295 S.W.3d 91 (Ky. 2009) (two-prong test: origin and whether entity performs a function integral to state government)
- Calvert Investments, Inc. v. Louisville & Jefferson Cnty. Metro. Sewer Dist., 805 S.W.2d 133 (Ky. 1991) (metropolitan sewer district performing local sewer functions not entitled to sovereign immunity)
- Kentucky Ctr. for the Arts Corp. v. Berns, 801 S.W.2d 327 (Ky. 1990) (discussion of sovereign immunity and legislative appropriation constraints)
- Yanero v. Davis, 65 S.W.3d 510 (Ky. 2001) (sovereign-immunity jurisprudence context)
- Phelps v. Louisville Water Co., 103 S.W.3d 46 (Ky. 2003) (appointment power alone does not create agency/alter-ego relationship)
- Gas Service Co., Inc. v. City of London, 687 S.W.2d 144 (Ky. 1985) (repair and maintenance of sewers is a local, proprietary function)
- Chisholm v. Georgia, 2 U.S. (2 Dall.) 419 (U.S. 1793) (historical exposition on sovereign immunity and protection of the public treasury)