CHARLES A. SMITH v. HOUSING AUTHORITY OF MIDDLESBOROUGH AND RANDY EARLE
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RENDERED:
DECEMBER 29, 2005; 2:00 P.M.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2004-CA-002190-MR
AND
NO. 2004-CA-002287-MR
CHARLES A. SMITH
v.
APPELLANT/CROSS-APPELLEE
APPEAL AND CROSS-APPEAL FROM BELL CIRCUIT COURT
HONORABLE JAMES L. BOWLING, JR., JUDGE
ACTION NO. 02-CI-00524
HOUSING AUTHORITY OF
MIDDLESBOROUGH AND
RANDY EARLE
APPELLEES/CROSS-APPELLANTS
OPINION
REVERSING AND REMANDING
WITH DIRECTIONS
ON CROSS-APPEAL
** ** ** ** **
BEFORE:
GUIDUGLI AND HENRY, JUDGES; POTTER, SENIOR JUDGE. 1
GUIDUGLI, JUDGE:
In this retaliatory discharge case, Charles A.
Smith has appealed from the Bell Circuit Court’s October 13,
2004, Amended Judgment and Judgment Notwithstanding the Verdict
on his Intentional Infliction of Emotion Distress claim, while
the Housing Authority of Middlesborough (hereinafter “HAM”) and
1
Senior Judge John Woods Potter, sitting as Special Judge by assignment of
the Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution
and KRS 21.580.
Randy Earl have cross-appealed from the circuit court’s ruling
on its motion to dismiss, from the Final Judgment entered August
12, 2004, from the October 13, 2004, orders denying their motion
to vacate and for a new trial and their motion for a JNOV on
Smith’s retaliation claim, and from the Amended Judgment.
Because we have determined that the circuit court erred in
denying the motion to dismiss on claim preclusion grounds, we
reverse and remand with directions on the cross-appeal.
With his various claims, Smith has amassed a rather
lengthy history with the circuit and appellate courts of this
Commonwealth.
All three levels have considered Smith’s wage and
hour suit, which has some bearing on the present appeal.
In
Parts Depot, Inc. v. Beiswenger, 2 rendered August 25, 2005, the
Supreme Court of Kentucky summarized that case as follows:
On June 10, 1997, a complaint was filed
with the Kentucky Labor Cabinet (now
Department of Labor) alleging that [HAM] was
not paying its “on call” maintenance
employees at the on-call rate established in
HAM’s personnel policy. Pursuant to KRS
337.345, the name of the complainant remains
confidential. An investigator from the
Labor Cabinet investigated the complaint and
reported that the complainant was not an “on
call” employee. The Cabinet took no further
action.
2
170 S.W.3d 354, 355-57 (Ky. 2005). That opinion represents a consolidated
action in which the Supreme Court also addressed on discretionary review the
case of Housing Authority of Middlesborough v. Charles Smith and Eddie
Harrell, 2004-SC-000124-DG.
-2-
On January 20, 1998, Charles Smith and
Eddie Harrell, two of HAM’s maintenance
employees, sued HAM in the Bell Circuit
Court[ 3 ] alleging that HAM had breached its
contractual obligation to compensate them
for their services at the on-call rate. . .
. Smith and Harrell assert[ed] that they
were “on call” maintenance employees and
were neither provided a dwelling unit at
reduced rent nor compensated at the on-call
monetary rate. HAM assert[ed] that Smith
and Harrell were “subject to call”
employees, not “on call” employees. Smith
and Harrell neither asserted a violation of
KRS 337.060 (“No employer shall withhold
from any employee any part of the wage
agreed upon.”) nor purported to file their
action under the authority of KRS
337.385(1). Their complaint can best be
characterized as one for common law breach
of contract.
The Bell Circuit Court initially
granted summary judgment to the employees
and, after a bench trial, awarded damages of
$28,665.70 to Smith and $11,308.26 to
Harrell, plus added contributions to Smith’s
and Harrell’s retirement accounts
commensurate with the unpaid wages. The
Court of Appeals reversed in an unpublished
opinion, No. 1999-CA-000765-MR (August 24,
2000), concluding that there existed a
factual issue as to whether Smith and
Harrell were “on call” or “subject to call”
employees, thus precluding summary judgment.
. . . On remand, the Bell Circuit Court
granted HAM’s belated motion to dismiss the
action for lack of subject matter
jurisdiction. . . . The Court of Appeals
reversed and remanded with directions to
permit Smith and Harrell to proceed with
their action.
3
98-CI-27.
-3-
The Supreme Court affirmed, holding that the circuit court has
original subject matter jurisdiction when an employee chooses to
exercise the judicial remedy to recover unpaid wages pursuant to
KRS 337.385.
In addition, the Supreme Court held that if a jury
were to find that Smith and Harrell were “on call” employees,
HAM’s personnel policy created a contractual obligation
requiring them to be paid at a specific rate.
We now turn our attention to the specific facts
underlying the present appeal.
On December 21, 2001, Randy
Earle, the Director of HAM, summoned Smith to his office and
terminated his employment with HAM by presenting him with the
following letter:
It has come to my attention that in the
presence of several maintenance employees,
one of which being Johnny Brown,[ 4 ] you used
a derogatory racial term repeatedly in a
conversation. This clearly made not only
Mr. Brown uncomfortable but others as well.
The Middlesboro (sic) Housing can not (sic)
and will not tolerate this kind of behavior
by any employee of any race toward others.
Therefore because of this callous disregard
for other (sic) your employment is
terminated immediately.
You will be given your earnings to date
as well as to (sic) Two Weeks severance pay.
In addition you are not to come back onto
any property owned by the Middlesboro (sic)
Housing Authority.
4
It is undisputed that Johnny Brown is an African-American.
-4-
Earle requested that a police unit be present in the building at
the time of the termination in case any problems resulted.
The
police officers then accompanied Smith to his base of employment
at the Hinks Heights office so that he could collect his
personal belongings.
Pursuant to HAM’s personnel policy, Smith
sought and received two hearings before HAM’s Board of
Directors.
After hearing testimony from Smith, his wife, and
other employees of HAM, the Board opted not to reinstate Smith
to his former position.
Smith filed an original, declaratory action with the
Bell Circuit Court 5 seeking judicial review of his termination.
That case was dismissed on December 3, 2002, as HAM was not one
of the administrative agencies whose decisions could be
judicially reviewed under KRS Chapter 13B, having been created
under KRS Chapter 80.
The order goes on to state:
Further, the record clearly reveals no
possible violation of Section 2 of the
Kentucky Constitution. The Plaintiff, an
at-will employee, was terminated by the
executive director for making a racial slur.
Pursuant to the Defendant’s personnel policy
the Plaintiff requested and received two
“hearings” before the Defendant’s board of
directors in which the Plaintiff’s due
process rights were observed. The only
purpose of the hearings is to give a
terminated employee an opportunity to have
the board reverse the decision of its
director. The board heard the evidence and
decided to affirm the decisions of the
5
02-CI-00306.
-5-
director. None of the board’s actions
remotely resembles the exercise of arbitrary
power.
In the same action, Smith filed an amended complaint alleging a
violation of the Kentucky Whistleblower Act, 6 identifying his
participation in the wage dispute litigation as the true reason
for his termination.
The amended complaint was also dismissed
on December 3, 2002, as it was filed outside of the ninety-day
limitations period provided for in KRS 61.103(2).
Smith filed the action presently before this Court on
appeal on December 9, 2002, alleging that he was terminated in
retaliation for the exercise of his lawful and statutory rights,
i.e., his participation in the wage dispute litigation, and that
the circumstances of his termination caused him to suffer
emotional distress.
He sought both compensatory and punitive
damages under each count.
HAM moved to dismiss Smith’s
complaint for failure to state a claim, asserting that his
claims were barred by res judicata as both the present complaint
and his previous complaint and amended complaint arose out of
his termination.
The circuit court denied the motion.
The case proceeded to a trial on the merits on August
3, 2004.
After granting a directed verdict on liability for the
individual Board members and denying Smith’s claim for punitive
damages, the case went to the jury, which returned a verdict in
6
KRS 61.101, et seq.
-6-
favor of Smith on both counts.
The jury awarded Smith $164,290
on his retaliation claim and $200,000 on his IIED claim.
A
Judgment memorializing the verdict and award was entered August
12, 2004.
HAM filed a motion to vacate, for a JNOV, or for a
new trial, arguing that Smith’s claims were barred by claim
preclusion, that the jury did not consider the applicable law,
that there was a Batson 7 violation in jury selection, that the
verdict was against the evidence, that the damages awarded were
against the evidence, and that the special verdict
interrogatories were defective in relation to the question on
retaliation.
After reviewing the motion as well as Smith’s
response, the circuit court granted a JNOV on the emotional
distress claim only, while denying the motion on the retaliation
claim as well as the motion to vacate or to grant a new trial.
An Amended Judgment was entered, awarding Smith $164,290.
Smith
has appealed from the JNOV on his emotional distress claim and
from the Amended Judgment, while HAM and Earle have crossappealed from the Judgment and the orders denying a JNOV on the
retaliation claim and denying their motion to vacate or for a
new trial.
In his brief filed in support of his direct appeal,
Smith argues that the circuit court erred in granting a JNOV on
his emotional distress claim, asserting that the undisputed
7
Batson v. Kentucky, 476 U.S. 79, 106 S.Ct. 1712, 90 L.Ed.2d 69 (1986).
-7-
facts of record supported the jury’s verdict and the original
judgment.
In support of their cross-appeal, HAM and Earle
continue to argue that Smith’s action is barred by claim
preclusion, that the circuit court erred in overruling their
Batson challenge, that the circuit court erred in failing to
grant a JNOV on the retaliation claim because Smith failed to
establish a prima facie case, and that the jury instructions
were incorrect.
Because the resolution of whether Smith’s action is
barred by the doctrine of claim preclusion is determinative of
the case as a whole, we need only address that argument in this
opinion.
As this is a question of law, we shall review the
circuit court’s ruling de novo.
In its brief, HAM argues, as it
did in a motion to dismiss below, that Smith impermissibly split
his cause of action by alleging a violation of the Kentucky
Whistleblower Act in an Amended Complaint and by then filing
another original action alleging common law retaliatory
discharge and the intentional infliction of emotional distress
after the first case was dismissed.
HAM asserts that both
claims arose from the same facts, i.e., his claim that he was
terminated due to his participation in the wage dispute
litigation, rather than for the stated reason of his use of a
racial slur; that the parties are the same in both actions; and
that the whistleblower action was actually litigated.
-8-
On the other hand, Smith first argues that this Court
should ignore HAM’s argument because the record in Action No.
02-CI-00306 was not designated to be included in the certified
record on appeal.
However, this Court ordered the circuit court
clerk to certify the record in that action as a supplement
record in the present appeal.
This supplemental record has been
received and reviewed by the Court.
Smith also argues that he
had no ability to assert his present claims in his first lawsuit
until the court declared that he was an employee-at-will without
the right to judicial review as a governmental employee.
Furthermore, he asserts that the whistleblower action contained
within the amended complaint was dismissed as filed outside of
the applicable statute of limitations, and was therefore not
resolved on the merits.
In Yeoman v. Com., Health Policy Bd., 8 the Supreme
Court of Kentucky addressed the doctrine of res judicata and its
two subparts, claim preclusion and issue preclusion.
“Claim
preclusion bars a party from re-litigating a previously
adjudicated cause of action and entirely bars a new lawsuit on
the same cause of action.” 9
To successfully bar further
litigation, a party must establish identity of the parties and
of the cause of action, and that the action was resolved on the
8
983 S.W.2d 459 (Ky. 1998).
9
Id. at 465.
-9-
merits. 10
The test to determine whether the suits concern the
same controversy is “whether they both arise from the same
transactional nucleus of facts.” 11
If so, “the previous suit is
deemed to have adjudicated every matter which was or could have
been brought in support of the cause of action.” 12
The Yeoman
court went on to state, “[t]he rule that issues which have been
once litigated cannot be the subject matter of a later action is
not only salutary, but necessary to the speedy and efficient
administration of justice.” 13
The Supreme Court of Kentucky
further addressed the doctrine of res judicata in the more
recent opinion of Whittaker v. Cecil: 14
[W]here there is an identity of parties and
an identity of causes of action, the
doctrine precludes further litigation of
issues that were decided on the merits in a
final judgment. . . . [A] corollary of the
doctrine is that a party may not split a
cause of action. As a result, a final
judgment precludes subsequent litigation not
only of those issues upon which the court
was required to form an opinion and
pronounce judgment but also of matters
included within those issues and matters
that, with the exercise of reasonable
diligence, might have been raised at the
time.
10
Id.
11
Id.
12
Id.
13
Id.
14
69 S.W.3d 69, 72 (Ky. 2002).
-10-
In the present matter, there is no dispute that the
parties to both suits are identical.
We also agree with HAM
that the causes of action alleged in the separate suits are
identical.
Both suits allege retaliation, in the first suit as
a violation of the Whistleblower Act and in the second as a
retaliatory discharge claim.
Both arose from the same set of
facts, namely, Smith’s termination and the reason for his
termination.
Finally, we agree that the circuit court’s
dismissal of Smith’s whistleblower complaint operated as a final
judgment on the merits.
We disagree with Smith’s assertion that
a dismissal on a statute of limitations violation is not a
determination on the merits.
In Dennis v. Fiscal Court of
Bullitt County, 15 this Court, after reviewing the applicable
state and federal law, stated that “there is ample authority for
the proposition that the dismissal of a pending action based on
a failure to comply with the applicable statute of limitations
operates as a judgment on the merits for res judicata purposes.”
We also recognize with approval HAM’s citation to Gilles v.
Ware, 16 wherein the District of Columbia Court of Appeals stated
that “the doctrine generally operates to prevent a party from
splitting a single transaction into its several theories of
recovery and ‘holding one in reserve while he [or she] presses
15
784 S.W.2d 608, 609 (Ky.App. 1990).
16
615 A.2d 533, 539 (D.C.App. 1992).
-11-
another to judgment.’”
Smith should, and could, have raised all
of the possible theories in his initial lawsuit alleging a
Whistleblower Act violation.
Therefore, we hold that the circuit court committed
reversible error in denying HAM’s motion to dismiss based upon
claim preclusion.
Because this holding is determinative of the
case, the remaining issues in the direct appeal and cross-appeal
are rendered moot.
For the foregoing reasons, the judgment of the Bell
Circuit Court is reversed, and this matter is remanded with
directions that Smith’s complaint be dismissed.
ALL CONCUR.
BRIEF AND ORAL ARGUMENT FOR
APPELLANT/CROSS-APPELLEE:
BRIEF FOR APPELLEES/CROSSAPPELLANTS:
William D. Stark, Jr.
Barbourville, KY
Jeffrey C. Mando
Jason C. Kuhlman
Covington, KY
Glenn L. Greene, Jr.
Harlan, KY
ORAL ARGUMENT FOR
APPELLEES/CROSS-APPELLANTS:
Jason C. Kuhlman
-12-
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