GOLDEN FOODS, INC.; GOLDEN BRANDS, INC.; WILLIAM A. BECKER; AND KAREN K. BECKER v. THE LOUISVILLE & JEFFERSON COUNTY METROPOLITAN SEWER DISTRICT
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RENDERED: NOVEMBER 21, 2007; 2:00 P.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2006-CA-001645-MR
GOLDEN FOODS, INC.; GOLDEN BRANDS,
INC.; WILLIAM A. BECKER; AND KAREN
K. BECKER
v.
APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE LISABETH HUGHES ABRAMSON, JUDGE
ACTION NOS. 00-CI-004445, 00-CI-004448 AND 00-CI-004452
THE LOUISVILLE & JEFFERSON COUNTY
METROPOLITAN SEWER DISTRICT
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: NICKELL, STUMBO, AND THOMPSON, JUDGES.
THOMPSON, JUDGE: Golden Foods, Inc., Golden Brands, Inc., William A. Becker,
and Karen K. Becker (collectively “Golden Foods”) appeal from an opinion and order of
the Jefferson Circuit Court entered on July 11, 2006, denying its motion for attorney fees.
Having concluded that the trial court did not abuse its discretion, we affirm.
The relevant facts of this case were stated by this Court in an unpublished
opinion, No. 2001-CA-001457-MR, which affirmed the trial court's finding that the
Metropolitan Sewer District (MSD) failed to negotiate in good faith for the acquisition
of Golden Foods' property prior to the initiation of condemnation proceedings. We
adopt the facts as stated in No. 2001-CA-001457-MR, as follows:
In the mid-1990's residents of Harold Avenue, an
unincorporated area of Jefferson County, experienced
increasing storm water drainage problems. Several Harold
Avenue residents contacted MSD about the need for storm
water drainage improvements in the area. According to Mr.
Loyiso Melisizwe, MSD's Beargrass Creek Area team leader,
a couple of the residents expressed an interest in also
obtaining sewer service but the primary concern was storm
water drainage. Because construction of storm water
drainage improvements would entail extensive construction
work in the area, MSD deemed it desirable to explore with
the neighborhood residents the possibility of simultaneously
constructing a sewer system.
On April 17, 1997, MSD held a public meeting for the Harold
Avenue residents. At that meeting the residents were
informed that a sewer project was being considered but that to
receive sewers the majority (51%) of the voting property
owners must vote in favor of it. Residents were informed that
the drainage improvements along Harold Avenue would be
constructed regardless of the neighborhood vote on the sewer
project. Residents were given until May 2, 1997, to return
their ballots. Of the 112 property owners in the Harold
Avenue neighborhood only 68 voted; 34 voted in favor of the
sewer project and 34 voted against it. This tie vote was the
third time Harold Avenue residents had been asked to
consider a sewer project. The residents had rejected a sewer
system on two prior occasions beginning sometime in the
mid-1980's.
On May 9, 1997, MSD Executive Director Gordon R. Garner
recommended to the MSD Board that it proceed with the
Harold Avenue project, noting that “of the 68 responses, 50%
were in favor of the installation of sanitary sewers in the
area.” Although the written recommendation in May 1997
accurately reflects that a majority of the residents did not
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approve sewers, when Mr. Garner was deposed in this
condemnation proceeding, he indicated repeatedly that the
Harold Avenue project was undertaken because the majority
of the residents had voted for a sewer system. Mr. Melisizwe
testified that MSD generally does not build a sewer project
unless (1) the Board of Health requires or a court orders
construction due to health and environmental concerns; (2)
MSD receives a request from a small city or other
incorporated area; or (3) the majority of the residents in an
affected area vote in favor of the project. Although Mr.
Melisizwe said that typically this last option entails at least a
51% vote, he alluded to without elaboration, “a couple” of
prior occasions where projects were undertaken without a
majority vote. Carolyn Williams, MSD Project Manager for
the Harold Avenue project, testified in conformity with her
prior representations to Harold Avenue residents that for a
project to proceed a majority of the voting residents must vote
affirmatively.
Even though a majority of the Harold Avenue residents did
not vote affirmatively, the MSD Board approved the project
and moved forward. Although several options were
considered for providing sanitary sewers to Harold Avenue
residents, MSD ultimately focused on two alternatives. The
so-called gravity alignment would connect to an existing 45inch private sewer line which runs across the entire length of
the Golden Foods property and a small portion of the Golden
Brands and Becker properties and then connects to MSD's
existing system. The McCloskey Avenue pump station
option involved building a pump station and pumping the
Harold Avenue wastewater to a McCloskey Avenue sewer
line owned by MSD.
*****
In June or July of 1997, MSD first contacted Golden Foods to
discuss the possible acquisition of the private sewer line. At
that time MSD proposed that Golden Foods relinquish
ownership of the existing sewer line in exchange for MSD's
installation of a new separate, parallel 8-inch sewer line to be
constructed for the apparent exclusive use of Golden Foods.
Under this proposal, the Harold Avenue residents and
presumably Parallel Products (an upstream neighbor who was
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using the Golden Foods sewage line by virtue of ... [an]
easement agreement) would be serviced by the existing sewer
line. Because of the nature of Golden Foods and Golden
Brands business, food processing, the companies expressed
concern that MSD's excavation and construction would
interfere with their ability to service their clients who require
timely deliveries. Golden Foods was particularly concerned
because the proposed new sewer line and the existing sewer
line would both run “right through the center of its (Golden
Foods') property where numerous utility lines and other
connections exist, and where customers, suppliers, vendors
and employees maintain their main ingress and egress for the
conduct of Golden Food's business.” Other concerns voiced
by Golden Foods representatives included potential
environmental problems with respect to any removed soil and
the location of any sampling points for monitoring Golden
Foods effluent and discharge.
For six and one-half months after this initial overture, the
parties had no contact but they resumed discussions in
January 1997, again discussing MSD assuming ownership of
the existing 45-inch line and constructing a new 8-inch line
for Golden Foods' use. The estimated cost of construction of
the new smaller sewer line was approximately $56,000$60,000.00. Eventually attorneys for MSD and Golden Foods
became involved in exchanging several draft agreements, a
process which continued through the spring and summer of
1998 and into early 1999. On February 25, 1999, Camille
Irwin, attorney for MSD, wrote Alan Linker, counsel for
Golden Foods, to advise that MSD was withdrawing all prior
offers and terminating negotiations. She identified substantial
areas of disagreement which were paragraphs 7(G), 7(H) and
10 of Golden Foods' proposed agreement of February 17,
1999. Paragraph 7(G) dealt with MSD's abatement of testing
of Golden Foods effluent until the new parallel sewer line
was completed. Paragraph 7(H) required MSD to perform
soil sampling of the easement area and if environmental
contaminants were present, to either dispose of the soil or
replace the soil in its original location rendering the parties'
agreement null and void. Paragraph 10 contained a provision
for MSD obtaining adequate insurance coverage to indemnify
Golden Foods against any losses or damages for business
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interruption caused by MSD's construction or maintenance
work on Golden Foods' property.
Documents in MSD's files reflect that after negotiations with
Golden Foods were halted, MSD's engineers deemed the
gravity alignment a “not workable option” and pursued the
McCloskey Avenue pump station option. [Eventually,
however, MSD revived the gravity alignment option and
sought to condemn the appellees' property.]
After Ms. Irwin's February 1999 letter, MSD did not contact
Golden Foods until over fourteen months later when another
MSD attorney, Julia Lundy, sent a May 19, 2000, letter
offering Golden Foods $180.00 for its private sewer line.
This figure was later determined to be a typographical error
and MSD's “last and final good faith offer” for the 45-inch
sewer line was $4,000. Presented with the potential for a
condemnation proceeding in May-June 2000, Mr. Linker
contacted Ms. Irwin and offered to give MSD a sewer
easement entering Golden Foods' property on the west and
proceeding at MSD's election either north or south and then
east. Golden Foods made this proposal to reduce the risk of
business interruption or interference since the construction
would take place on the perimeter of its property as opposed
to through the center. MSD rejected this offer and further
noted that it had withdrawn its prior offer back in February
1999 because of a “substantial change” by Golden Foods
which was “determinative in MSD's decision to withdraw
[its] offer.” The offending paragraph, 4(11), simply stated
“this easement is granted subject to any prior easements on
record.” In her June 26, 2000, letter Ms. Irwin, counsel for
MSD, indicated that “at that point MSD, who had been
dealing in good faith, withdrew its offer.” These
condemnation proceedings were commenced on July 11,
2000. That same date Mr. Linker on behalf of Golden Foods
informed Ms. Irwin that the “substantial change which was
determinative in MSD's decision to withdraw their offer” was
actually language that MSD had included in the agreement.
Following the filing of this action, commissioners were
appointed and their initial report was received on July 31,
2000. An Amended Petition of Condemnation was filed on
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October 24, 2000. On November 22, 2000, [Golden Foods]
filed an answer to the Amended Petition for Condemnation
challenging the right of MSD to condemn their private sewer
line. Discovery was conducted by both parties and a one-day
right to take hearing was conducted by this Court pursuant to
KRS 416.610 on May 2, 2001. The Court heard testimony
from Loyiso Melisizwe and Carolyn Williams of MSD and
Alan Linker on behalf of [Golden Foods]. In addition, the
Court considered deposition testimony of Gordon Garner,
Executive Director of MSD, and Camille Irwin, counsel for
MSD.
After the hearing, the trial court dismissed MSD's petition for
condemnation. The court ruled that MSD's conduct during negotiations did not meet the
good faith standard required of condemnors. Specifically, the trial court wrote that MSD
had failed to accommodate the reasonable requests of Golden Foods and had
impermissibly taken the position that it did not have to negotiate due to its condemnation
authority by dramatically reducing the amount it would spend for the property from
approximately $60,000 to $4,000. Following this dismissal, MSD appealed.
During the pendency of the appeal of the dismissal, MSD and Golden
Foods began a second round of negotiations regarding the acquisition of the disputed
property. After these negotiations proved unsuccessful, on June 11, 2002, MSD filed a
second petition to condemn the disputed portion of Golden Foods' property. After a
right-to-take hearing, the trial court granted MSD's condemnation petition after finding
that it had proceeded in good faith in attempting to acquire the disputed property. Golden
Foods appealed and this Court affirmed the trial court's ruling in an unpublished opinion,
No. 2004-CA-000688-MR.
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As the second condemnation action was proceeding, Golden Foods filed a
motion for an award of attorney fees relating to its successful defense of MSD's first
petition to condemn its property. Golden Foods contended that Bernard v. Russell
County Air Board, 747 S.W.2d 610 (Ky.App. 1987), and Northern Kentucky Port
Authority, Inc. v. Cornett, 700 S.W.2d 392 (Ky. 1985), supported its claim for attorney
fees. In its order denying Golden Foods' motion, the trial court ruled that while MSD's
initial negotiation efforts were not sufficient to meet good faith standards so as to allow
for the taking, they were not so egregious to justify the extraordinary award of attorney
fees. This appeal follows.
Golden Foods' sole assignment of error is that the trial court failed to award
it attorney fees after MSD was adjudged to have acted in bad faith. We disagree.
First, we observe that attorney fees are generally not recoverable without a
specific contractual provision or a fee-shifting statute. AIK Selective Self-Insurance
Fund v. Minton, 192 S.W.3d 415, 420 (Ky. 2006). However, there is an exception to this
general rule which permits an award of attorney fees in condemnation proceedings under
certain circumstances. Com., Dept. of Transp., Bureau of Highways v. Knieriem, 707
S.W.2d 340, 341 (Ky. 1986).
Under this exception, after the successful defense of a condemnation
proceeding, a trial court may award attorney fees if the court determines that the
condemnor has acted in bad faith or caused unreasonable delay. Id. If a trial court finds
such improper conduct, it should determine the extent that the condemnee has been
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prejudiced and whether he can be made reasonably whole by the imposition of costs and
fees. Northern Kentucky Port Authority, Inc. v. Cornett, 700 S.W.2d at 394. However,
an award of attorney fees is within the sound discretion of the trial court, and its decision
will not be disturbed absent a finding of abuse of discretion. Ford v. Beasley, 148
S.W.3d 808, 813 (Ky.App. 2004). “The test for abuse of discretion is whether the trial
judge’s decision was arbitrary, unreasonable, unfair, or unsupported by sound legal
principles.” Commonwealth v. English, 993 S.W.2d 941, 945 (Ky. 1999).
After applying the applicable law, we conclude that the trial court did not
abuse its broad discretion in denying Golden Foods’ motion for attorney fees. We
disagree with Golden Foods that a finding of bad faith requires a court to award attorney
fees as a matter of law. In condemnation proceedings, trial courts are granted broad
discretion in awarding attorney fees based on their analysis of the unique facts of each
case and that discretion will not be disturbed unless equity demands that we do so.
Bernard v. Russell County Air Board, 747 S.W.2d at 612.
Although the trial court found that MSD had exercised legitimate authority
in attempting to take land for public use, it recognized that MSD had failed to bargain in
good faith during pre-condemnation negotiations. However, noting the condemnors'
extremely deliberate bad faith conduct in Bernard and Cornett, the trial court ruled that
MSD's conduct was not so prejudicial to justify the extraordinary award of attorney fees.
The trial court ruled that MSD's improper conduct, which consisted of its
suddenly inadequate last offer of $4,000 when it had previously offered $60,000, did not
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warrant an award of attorney fees to Golden Foods. Because the trial court's ruling was
based on a proper application of the law and within its broad discretion, the trial court did
not err.
For the foregoing reasons, the opinion and order of the Jefferson Circuit
Court is affirmed.
ALL CONCUR.
BRIEFS FOR APPELLANTS:
BRIEF FOR APPELLEE:
Paul J. Hershberg
Glenn A. Cohen
Alan N. Linker
Louisville, Kentucky
John H. Dwyer, Jr.
Louisville, Kentucky
JOHN H. DWYER JR
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