Padgett v. Steinbrecher
355 S.W.3d 457
Ky. Ct. App.2011Background
- Padgett is the majority owner and managing member of Claysville Landing, LLC, a Kentucky LLC, with 32.5% ownership.
- Steinbrecher is a Claysville Landing member with 11.11% ownership; the LLC built, operated, and sold an 88-unit complex in Elizabethton, Kentucky.
- On May 1, 2006, members signed an Amended and Restated Operating Agreement requiring arbitration for disputes.
- Section 13.11 of the agreement provides arbitration conducted under AAA rules in Kentucky for expedited matters, with three arbitrators for disputes over $200,000, and other specifics.
- On November 2, 2009 Steinbrecher filed suit for breach of contract and fiduciary duties; Padgett moved to dismiss in favor of arbitration on November 23, 2009; the circuit court denied.
- Padgett appeals, challenging the circuit court’s lack of jurisdiction under KRS 417.200 because the arbitration clause did not expressly require arbitration in Kentucky.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject-matter jurisdiction to enforce arbitration under KRS 417.200 | Padgett argues no jurisdiction due to no explicit Kentucky venue. | Steinbrecher contends the clause fails KRS 417.200 and Ally Cat controls. | Lacks subject-matter jurisdiction; clause does not explicitly require Kentucky arbitration. |
| Whether the arbitration clause satisfies Ally Cat by designating Kentucky | Clause expressly requiring Kentucky arbitration exists via AAA rules. | Ally Cat requires an explicit designation of arbitration in Kentucky, not mere reference to Kentucky. | Not satisfied; mere reference to Kentucky is insufficient to confer jurisdiction. |
Key Cases Cited
- Ally Cat, LLC v. Chauvin, 274 S.W.3d 451 (Ky. 2009) (arbitration enforcement requires explicit arbitration in Kentucky)
- Cavalier Homes of Alabama v. Coleman, 181 S.W.3d 558 (Ky. 2005) (Interlocutory appeal right under KRS 417.220)
- American General Home Equity, Inc. v. Kestel, 253 S.W.3d 543 (Ky. 2008) (distinguishes appealability of arbitration-related orders)
- Wilder v. Conseco Fin. Servicing Corp., 47 S.W.3d 335 (Ky. App. 2001) (standards for reviewing arbitration-related factual findings)
- Kentucky High School Athletic Ass'n v. Edwards, 256 S.W.3d 1 (Ky. 2008) (courts determine jurisdiction sua sponte when needed)
- Turi v. Main Street Adoption Services, LLP, 633 F.3d 496 (6th Cir. 2011) (recognizes treatment of motions to compel arbitration across circuits)