Kenneth D. Parrish D.M.D., ph.D., P.S.C. v. Hon Ann Bailey Smith Judge, Jefferson Circuit Court, Division 13
2016 SC 000582
| Ky. | Aug 22, 2017Background
- Parrish and Schroering entered an 82-page partnership agreement (Advanced Implant Center, P.S.C.) with an Article 8 buyout procedure requiring two years' written notice and a revaluation process for a Revalued Buyout Price.
- Article 8(E) prescribes a three-appraiser process: each party picks an appraiser, those two pick a third, then the two closest appraisals are averaged and the parties are "bound" by that average.
- Schroering gave retirement notice in 2009; revaluation proceeded under Article 8(E). Parties later disputed the valuation method and result.
- Schroering sued Parrish for breach of contract and later added tort claims (fraud, breach of covenant of good faith and fair dealing, breach of fiduciary duty). Circuit court denied Parrish partial summary judgment on tort claims and denied cross-motions on valuation.
- Parrish sought extraordinary relief (writ of mandamus/prohibition) to compel enforcement of the Agreement’s valuation method (and to treat it as binding arbitration). Court of Appeals denied relief; Kentucky Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Article 8(E)’s "binding valuation" is an arbitration agreement subject to the FAA | Parrish: The binding appraisal/averaging procedure is an arbitration agreement; FAA applies and valuation is enforceable | Schroering/Court: The clause sets a valuation mechanism, not an arbitration process; Agreement expressly waives arbitration and provides for non‑binding mediation | Court: Not arbitration. Plain language binds parties to an averaged appraisal but does not create an arbitration process; Article 17(L) expressly waives arbitration. |
| Whether extraordinary writ (prohibition/mandamus) should issue to preclude jury/compel enforcement | Parrish: Extraordinary writ needed because circuit court erred and no adequate appellate remedy exists; immediate relief required | Court/Schroering: Parrish failed to show the court acted erroneously or that no adequate remedy by appeal exists (CR 65.07 available); mandamus cannot control judicial discretion or compel a particular judgment | Court: Denied writs. Parrish failed burden for writ; mandamus cannot be used to direct the court’s decision. |
| Whether Article 8(E) was ambiguous requiring extrinsic evidence | Parrish: Impliedly argued that dispute over valuation method/right appraisal shows ambiguity | Court/Schroering: Language is unambiguous and prescribes a specific appraisal selection and averaging method | Court: Article 8(E) is unambiguous; valuation clause enforces averaging scheme but does not create arbitration. |
| Timeliness / waiver of arbitration defense | Parrish: Sought arbitration enforcement years after valuations were submitted | Schroering/Court: Delay indicates parties did not treat clause as arbitration; Agreement explicitly disclaims arbitration | Court: Parrish’s delayed assertion and express no-arbitration clause weigh against finding an arbitration agreement. |
Key Cases Cited
- Hoskins v. Maricle, 150 S.W.3d 1 (Ky. 2004) (standards for writs of prohibition/mandamus)
- Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581 (Ky. 2012) (burden to establish existence of valid arbitration agreement)
- Wehr Constructors, Inc. v. Assurance Co. of America, 384 S.W.3d 680 (Ky. 2012) (contract interpretation: unambiguous instruments enforced by ordinary meaning)
- Kentucky Shakespeare Festival, Inc. v. Dunaway, 490 S.W.3d 691 (Ky. 2016) (agreement without express arbitration language is not an arbitration agreement; arbitration is a process not an answer)
- Fannin v. Keck, 296 S.W.2d 226 (Ky. 1956) (mandamus will not control the substantive result or compel a court to grant relief when it has discretion)