Kentucky State Police v. Terry Scott, 2016 SC 000303

Background

Terry Scott and Damon Fleming were hired as Arson Investigator II by Kentucky State Police (KSP) in 2002; Mark Boaz was later hired (2004) at a substantially higher starting salary.
Scott and Fleming filed internal grievances alleging pay disparity and political-motivation in Boaz’s hiring; KSP denied the grievances and both appealed to the Personnel Board in 2007.
The Personnel Board dismissed their appeals in September/October 2007; Scott and Fleming did not file the statutory appeal to Franklin Circuit Court within the required time.
In August 2009 Scott and Fleming filed a direct action in Franklin Circuit Court asserting violations of KRS 18A.140, Kentucky and U.S. constitutional equal protection and association claims, and KRS Chapter 15; federal claims were dismissed and state claims remanded.
The trial court found KSP violated equal protection and awarded broad equitable relief (backpay, restoration of retirement benefits); the Court of Appeals affirmed in a split decision.
The Kentucky Supreme Court granted discretionary review and reversed, holding Scott and Fleming failed to exhaust administrative remedies and that their Personnel Board proceeding was final and res judicata.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether exhaustion of administrative remedies was required before filing a direct action	Scott/Fleming argued they could bring a direct constitutional challenge in circuit court to obtain relief (including backpay)	KSP argued plaintiffs failed to timely appeal the Personnel Board decision and thus must exhaust administrative remedies; res judicata bars the direct action	Court held exhaustion was required; no applicable exception; plaintiffs’ failure to timely appeal deprived court of jurisdiction and Personnel Board order is final/res judicata
Whether the facial-invalidity exception to exhaustion applied	Plaintiffs contended constitutional claims permit bypassing the administrative process	Plaintiffs did not challenge any statute or regulation as facially unconstitutional; their claims attacked the application of statutes/regulations	Court held the facial-invalidity exception does not apply where the challenge is an as-applied attack; administrative process must be exhausted
Whether futility or other exceptions to exhaustion applied	Plaintiffs implied administrative remedies would be futile to obtain relief for constitutional injury	KSP argued no statutory authorization excused exhaustion and the record showed plaintiffs did not timely pursue judicial review of the Board's final order	Court found none of the three exceptions (futility, statute authorizing direct relief, facial constitutional challenge) applied
Whether trial court’s award of monetary relief was permissible despite Yanero and Straub	Plaintiffs sought equitable relief including backpay and reinstatement under state constitutional claims	KSP argued monetary relief (backpay) was barred by precedent limiting remedies for constitutional violations and governmental immunity	Supreme Court did not decide this issue on the merits because it resolved the case on exhaustion grounds and declined to reach Yanero/Straub questions

Key Cases Cited

Goodwin v. City of Louisville, 215 S.W.2d 557 (Ky. 1948) (administrative exhaustion ordinarily required; agencies cannot decide constitutional questions)
Commonwealth v. DLX, Inc., 42 S.W.3d 624 (Ky. 2001) (facial constitutional challenges may bypass exhaustion; as-applied challenges require exhaustion)
Popplewell's Alligator Dock No. 1, Inc. v. Revenue Cabinet, 133 S.W.3d 456 (Ky. 2004) (enumerating exceptions to exhaustion rule)
Yanero v. Davis, 65 S.W.3d 510 (Ky. 2001) (governmental immunity principles relevant to suits against state actors)
St. Luke's Hosp., Inc. v. Straub, 354 S.W.3d 529 (Ky. 2011) (declining to recognize a new constitutional tort for state constitutional violations)