Louisville Arena Authority, Inc. v. RAM Engineering & Construction, Inc.
415 S.W.3d 671
| Ky. Ct. App. | 2013Background
- Louisville Arena Authority (LAA), a nonprofit created by executive order, oversaw financing, construction and ownership of the KFC Yum! Center; Commonwealth provided a $75M grant and conditioned funds on compliance with the Kentucky Model Procurement Code (KMPC).
- LAA selected M.A. Mortenson as Construction Manager-At-Risk (CMAR); Mortenson awarded several subcontracts to Veit & Co.; RAM Engineering submitted unsuccessful subcontract bids and protested under KRS 45A.285.
- Finance and Administration Cabinet denied RAM’s administrative protest, concluding KMPC did not apply to subcontract procurement under CMAR; RAM sought judicial review and monetary relief in Franklin Circuit Court.
- Circuit court: found LAA acted as Finance Cabinet’s “alter ego” for KMPC purposes; dismissed lost-profits claims (no private cause of action) but denied immunity to LAA and Finance Cabinet for monetary claims and allowed attorney-fee claim to proceed; interlocutory appeals followed.
- On appeal, the court limited review to immunity questions: whether KMPC or related statutes waive sovereign immunity for monetary damages and whether LAA enjoys governmental immunity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether KMPC or related statutes waive sovereign immunity for monetary damages based on KMPC violations | RAM: KMPC creates remedies and standing; monetary damages available against Commonwealth for KMPC violations | Finance Cabinet: No express waiver of sovereign immunity in KMPC for monetary damages; only written-contract waiver applies | KMPC contains no clear waiver of sovereign immunity for monetary damages; Commonwealth immune except for claims arising from written contracts |
| Whether taxpayers (the Chiltons) can recover monetary damages on behalf of public for RAM’s lost profits | RAM/Chiltons: Taxpayer suit can challenge improper expenditure and recover funds; relief may include damages to bidder | Finance Cabinet: Taxpayer relief must primarily benefit public; awarding RAM money would not benefit taxpayers | Taxpayer plaintiffs cannot recover monetary damages that benefit a private bidder; such recovery would be private rather than public in nature |
| Whether RAM can recover lost profits and attorney fees under KMPC absent a written contract | RAM: KMPC and protest remedy allow monetary recovery, including lost profits and fees | LAA/Finance Cabinet: KMPC does not create private cause of action for lost profits; attorney fees require bad faith showing | Lost-profits damages are not available absent a valid contract or promissory estoppel; attorney-fee claim may proceed if bad-faith alleged and proven |
| Whether LAA is entitled to governmental immunity for KMPC-related procurement actions | LAA: If treated as alter ego of Finance Cabinet, it should share immunity | RAM: LAA functions (arena development/operation) are proprietary/entertainment and not integral state functions | LAA is a private nonprofit and not entitled to governmental immunity for these acts; denial of its summary-judgment claim on immunity affirmed |
Key Cases Cited
- Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476 (Ky. 1991) (summary-judgment standard; construing record for nonmovant)
- Yanero v. Davis, 65 S.W.3d 510 (Ky. 2001) (sovereign and governmental immunity principles)
- Comair, Inc. v. Lexington-Fayette Urban County Airport Corp., 295 S.W.3d 91 (Ky. 2009) (origin/function test for immunity of intermediate entities)
- Pendleton Bros. Vending, Inc. v. Com. Finance & Admin. Cabinet, 758 S.W.2d 24 (Ky. 1988) (disappointed bidders given administrative protest and judicial-review standing under KMPC)
- Withers v. University of Kentucky, 939 S.W.2d 340 (Ky. 1997) (strict construction of statutory waivers of sovereign immunity)
- Kentucky Ctr. for the Arts v. Berns, 801 S.W.2d 327 (Ky. 1990) (proprietary vs. governmental function analysis for immunity)