The Kentucky Shakespeare Festival, Inc. v. Brantley Dunaway
2016 Ky. LEXIS 255
| Ky. | 2016Background
- Kentucky Shakespeare Festival (KSF) hired Brantley Dunaway under an Employment Agreement providing base salary plus formula-based bonuses tied to year-over-year increases in certain revenues.
- Section 5(e) required "sound accounting principles" and that the parties "agree to abide by the determination of the independent firm of certified public accountants currently employed by [KSF] ... in case of a dispute as to the true amount of the net profits, and each party agrees to accept such determination as final."
- After Dunaway's 2013 termination and a Severance Agreement promising certain payments, KSF's accountant (DMLO) calculated that no 2013 bonus was due and KSF communicated that result to Dunaway.
- Dunaway sued KSF for breach of contract seeking the bonus. KSF did not initially invoke arbitration but later moved for declaratory relief, arguing the accounting firm’s determination was a binding arbitration award that must be affirmed.
- Jefferson Circuit Court and the Court of Appeals held Section 5(e) was an appraisement/accounting mechanism, not an arbitration clause; KSF sought interlocutory relief in the Supreme Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Section 5(e) is an agreement to arbitrate disputes over Dunaway’s bonus | Section 5(e) delegates bonus-related disputes to a neutral third party (DMLO), constituting an arbitration agreement | Section 5(e) merely binds the parties to the accountant’s determination of KSF’s net profit (an appraisal/accounting result), not arbitration of the bonus amount | Section 5(e) is not an arbitration clause; it resolves only disputes over net profit, not an arbitration of the bonus calculation |
| Whether DMLO’s determination is an "arbitration award" subject to judicial confirmation | DMLO’s final determination of net profits is a binding award that courts should confirm as arbitration | DMLO’s determination is not the product of an arbitration proceeding and thus is not an arbitration award to be confirmed | DMLO’s determination is not an arbitration award; no arbitration occurred and nothing exists to confirm |
Key Cases Cited
- Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581 (Ky. 2012) (party seeking to compel arbitration bears initial burden to establish a valid agreement to arbitrate)
- Extendicare Homes, Inc. v. Whisman, 478 S.W.3d 306 (Ky. 2015) (questions about formation of arbitration agreements are governed by state contract law)
- Wehr Constructors, Inc. v. Assurance Company of America, 384 S.W.3d 680 (Ky. 2012) (contracts are enforced according to plain language absent ambiguity)