NEWTON (JAMES A.) VS. THE UNIVERSITY OF LOUISVILLE
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RENDERED: NOVEMBER 5, 2010; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2009-CA-002197-MR
JAMES A. NEWTON, JR.
v.
APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE OLU A. STEVENS, JUDGE
ACTION NO. 07-CI-000796
THE UNIVERSITY OF LOUISVILLE
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: ACREE, JUDGE; HENRY AND ISAAC,1 SENIOR JUDGES.
HENRY, SENIOR JUDGE: James Newton appeals from a Jefferson Circuit Court
opinion and order which granted summary judgment to Newton’s former
employer, the University of Louisville. The sole question on appeal is whether the
University of Louisville’s employment handbook, the “Redbook,” and the
personnel policies promulgated on the University’s website constitute a written
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Senior Judges Sheila R. Isaac and Michael L. Henry sitting as Special Judges by assignment of
the Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution and KRS 21.580.
contract for purposes of waiving governmental immunity pursuant to Kentucky
Revised Statutes (KRS) 45A.245. We agree with the Jefferson Circuit Court that
the “Redbook” does not constitute such a contract, and accordingly affirm the
judgment of that court.
James Newton began working for the University as a groundskeeper
on May 10, 2004. On January 19, 2005, he sustained a work-related injury and
was unable to return to work from February 15, 2005 until June 10, 2005. During
that period he exhausted all of his leave time and used additional time from the
University’s shared leave pool. He returned to light-duty work from June 10, 2005
until July 10, 2005 and resumed his regular duties from July 10, 2005, until
September 13, 2005, when he was granted workers’ compensation benefits.
Newton underwent cervical decompression surgery in January 2006, but the
surgery failed to alleviate his severe pain and disability. He returned to work with
restrictions on May 4, 2006, but six days later he left work indefinitely on his
physician’s order. Newton claims that on June 14, 2006, he submitted an
application for long-term disability benefits to his direct supervisor, Greg Gittings.
The University’s Human Resources Department claims that it received only Greg
Gittings’ statement on behalf of the employer in support of Newton’s disability
application in June 2006. In a letter dated June 15, 2006, Newton’s employment
with the University was terminated retroactively from May 10, 2006. In February
2007 Newton completed two additional long-term disability benefits applications
which the University submitted to the insurance carrier.
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Newton claims that the University failed to process his applications
and therefore breached the contract inherent in the University’s disability insurance
policy as it is described in the Redbook. He further argues that he was wrongfully
dismissed because the University’s personnel policy provides that a regular status
employee may be dismissed only for cause, and that he had not committed any of
the offenses which are listed as warranting dismissal.
Newton filed suit against the University on January 23, 2007, alleging
breach of contract and violation of the disability provisions of the Kentucky Civil
Rights Act. See KRS 344. Ultimately, the Jefferson Circuit Court granted
summary judgment to the University on the breach of contract claim2 on the
grounds that the University’s personnel policies do not bear the hallmarks of a
written contract, and that consequently Newton’s breach of contract claims were
barred by the doctrine of sovereign immunity. This appeal followed.
In reviewing a grant of summary judgment, our inquiry focuses on
“whether the trial court correctly found that there were no genuine issues as to any
material fact and that the moving party was entitled to judgment as a matter of
law.” Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996); Kentucky Rules of
Civil Procedure (CR) 56.03. “[T]he proper function of summary judgment is to
terminate litigation when, as a matter of law, it appears that it would be impossible
for the respondent to produce evidence at the trial warranting a judgment in his
2
The circuit court also granted summary judgment to the University on Newton’s claim of
disability discrimination. Newton has not raised this issue in his appeal.
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favor.” Steelvest v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky.
1991).
In 1970, the University of Louisville “became a state institution of
higher education . . . with all the attendant powers and protections, including
immunity from suit except where the Kentucky General Assembly specifically
waives it. . . . The doctrine extends to both actions in tort and contract.”
University of Louisville v. Martin, 574 S.W.2d 676, 677 (Ky. App. 1978). In KRS
Chapter 45A, the Kentucky Model Procurement Code, the General Assembly
waived sovereign immunity on written contracts made with the Commonwealth.
The pertinent provision of the Code states as follows:
Any person, firm or corporation, having a lawfully
authorized written contract with the Commonwealth at
the time of or after June 21, 1974, may bring an action
against the Commonwealth on the contract, including but
not limited to actions either for breach of contracts or for
enforcement of contracts or for both. Any such action
shall be brought in the Franklin Circuit Court[3] and shall
be tried by the court sitting without a jury. All defenses
in law or equity, except the defense of governmental
immunity, shall be preserved to the Commonwealth.
KRS 45A.245(1).
Chapter 45A also provides the following definitions of “contract” and
“writing” or “written”:
“Contract” means all types of state agreements, including
grants and orders, for the purchase or disposal of
3
Although the statutory provision specifies that actions on contracts must be brought in Franklin
Circuit Court, the Jefferson Circuit Court ruled that Newton’s breach of contract claim could be
joined with his claim of wrongful termination under KRS 344.040, which requires filing in the
county of residence. The University has not appealed this ruling.
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supplies, services, construction, or any other item. It
includes awards; contracts of a fixed-price, cost, costplus-a-fixed-fee, or incentive type; contracts providing
for the issuance of job or task orders; leases; letter
contracts; purchase orders; and insurance contracts
except as provided in KRS 45A.022. It includes
supplemental agreements with respect to any of the
foregoing[.]
KRS 45A.030(7).
“Writing” or “written” means letters, words, or numbers,
or their equivalent, set down by handwriting, typewriting,
printing, photostating, photographing, magnetic impulse,
mechanical or electronic recording, or other form of data
compilation.
KRS 45A.030(29). Newton argues that the Redbook, and the personnel policies
which the University posts online, constitute a written employment contract and
that consequently the circuit court erred in ruling that the University is protected
from his breach of contract claims by the doctrine of sovereign immunity. The
sections of the personnel policies which are directly relevant to his claims relate to
termination and the provision of disability benefits. The policy relating to
termination provides in part as follows: “A regular status employee may be
dismissed only for cause and normally, though not necessarily, only after at least
one written warning pointing out areas of deficiency and establishing a reasonable
time limit for improvement.” The policy lists twenty offenses for which
employees may be subjected to disciplinary action in the form of oral warning,
written reprimand, suspension without pay, demotion, or termination.
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The section of policy regarding the long term disability insurance
provides as follows:
The University provides Long Term Disability Insurance
at no cost to you when you participate in the University
of Louisville Retirement Plan. Long Term Disability
(LTD) is designed to provide long term compensation to
employees who, due to disability, are prevented from
being actively employed.
Under LTD, if you become totally disabled while insured
and remain disabled beyond a six-month qualifying
period, the university’s LTD plan will pay the greater of
60 percent of your monthly base salary or 60 percent of
your monthly average earnings from the past two
calendar years just before the start of the period of
disability. The maximum benefit available is $5,000 per
month. Any disability benefits you receive from Social
Security, Veteran’s Benefits or other governmental
disability benefits are offset and are subtracted from your
Long Term Disability monthly benefit amount. In
addition to the income benefit, the university’s LTD plan
also provides a pension accrual benefit. Fifteen percent
of the first $833.33 of your monthly salary, up to $125
per month, is contributed to a retirement account with
TIAA-CREF.
The policy provides a link to the complete certificate of coverage for the benefit,
and provides contact information for the insurance carrier and the benefits office
for employees seeking more information.
In arguing that these provisions constitute a written contract, Newton
relies primarily on Parts Depot, Inc. v. Beiswenger, 170 S.W.3d 354 (Ky. 2005), in
which the Kentucky Supreme Court held that an express personnel policy can
become an implied contract under certain circumstances. In order to qualify as an
implied contract, the language in the policy must not be precatory, or merely an
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expression of policies that the employer will strive to follow. Beiswenger, 170
S.W.3d at 363. Moreover, an employer may avoid having a personnel policy
treated as an employment contract by including an express disclaimer to that effect.
Id. Once an employer establishes an express policy that is not precatory and
contains no disclaimer, however,
and the employee continues to work while the policy
remains in effect, the policy is deemed an implied
contract for so long as it remains in effect. If the
employer unilaterally changes the policy, the terms of the
implied contract are also thereby changed.
Id.
Thus, an employer’s statement of policy can create contractual rights
in an employee even if the statement was not signed by either party, makes no
reference to the specific employee, and can be amended unilaterally by the
employer. Id., citing Toussaint v. Blue Cross & Blue Shield of Mich., 408 Mich.
579, 292 N.W.2d 880, 885 (1980).
The University argues that the Redbook and the personnel policies do
not display the hallmarks of a contract, and that the policy which explains the
availability of long-term disability benefits is precatory, and neither promises nor
guarantee such benefits to employees.
We disagree. The portions of the Redbook and the personnel policies
which have been provided in the record and set forth above contain sufficiently
specific and contractual language to create an implied contractual obligation under
Beiswenger. The passage relating to dismissal plainly states that a regular status
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employee may be dismissed only for cause. The portion relating to long term
disability insurance plainly states that the University provides long term disability
(LTD) insurance at no cost to participants in the University’s retirement plan. It
outlines in detail the amounts the University’s LTD plan will pay, it specifies that
these amounts will be reduced by the amount of other benefits received, and that a
pension accrual benefit is available. Moreover, the University has not drawn our
attention to any disclaimer of contractual status contained in the Redbook or
elsewhere in the personnel policies.
The University further contends, however, that even if the Redbook
and the personnel policies meet the criteria of an “implied contract” under
Beiswenger, an “implied contract” is not a “written contract” for purposes of
waiving sovereign immunity under KRS 45A.245(1). An implied contract is by
definition unwritten in whole or in part. “An implied contract is one neither oral
nor written - but rather, implied in fact, based on the parties’ actions.” Hammond
v. Heritage Communications, Inc., 756 S.W.2d 152, 154 (Ky. App. 1988).
A contract implied in fact . . . differs from an “express
contract” only in the mode of proof required; and it is
implied only in that it is to be inferred from the
circumstances, the conduct, and the acts or relations of
the parties, rather than from their spoken words. In short,
from the evidence disclosed the court may conclude the
parties entered into an agreement, although there is no
proof of an express offer and a definite acceptance.
Victor’s Executor v. Monson, 283 S.W.2d 175, 176 -177 (Ky. 1955).
To establish an implied contract,
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the evidence must disclose an actual agreement or
meeting of the minds although not expressed and such is
implied or presumed from the acts or circumstances
which according to the ordinary course of dealing and the
common understanding of men shows a mutual intent to
contract.
Rider v. Combs, 256 S.W.2d 749, 749 (Ky. 1953). Under Beiswenger, Newton’s
continuing to work was the additional act or conduct from which the existence of
an implied contract could be inferred. The existence of the contract, therefore,
depended on something beyond the written terms of the Redbook and personnel
policies.
In Garcia v. Middle Rio Grande Conservancy District, 918 P.2d 7
(N.M. 1996), the Supreme Court of New Mexico addressed whether an implied
employment contract is a written contract for purposes of waiving sovereign
immunity. In that case, the employer, Middle Rio Grande Conservancy District,
contended that because the employment contract could only be implied, it could
not be said to be written as required under the pertinent section of the statute
(N.M.S.A. § 37-1-23(A)) waiving sovereign immunity. Garcia, 918 P.2d at 11.
The state Supreme Court ultimately ruled that the implied contract constituted a
valid written contract as required to waive sovereign immunity, but did so based on
public policy concerns relating specifically to the welfare of public employees. As
the state’s intermediate appellate court later explained, in refusing to extend the
Garcia ruling to other types of implied contracts,
[a]s a practical matter, most employment agreements in
the public sector are implied-in-fact, rooted in the
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conduct of the parties and in a maze of personnel rules
and regulations, as well as employee manuals that apply
generically to all employees. Because such employee
manuals are issued to government employees in a
unilateral manner and must be accepted by an employee
as a condition of employment, they become the binding
surrogates for an express employment contract in public
sector employment situations.
The existence of the personnel manual became the
driving force behind the result reached in Garcia. If not
for the vision of the Garcia opinion, few public
employees could ever sue for breach of contract, no
matter how egregious the breach and no matter how welldocumented the implied-in-fact relationship with the
employer. The legislative drafters of Section 37-1-23(A)
could not have intended such an injustice. Given the
particular nature of employment law, we decline to
expand the Supreme Court’s holding in Garcia, beyond
the employment arena.
Campos de Suenos, Ltd. v. County of Bernalillo, 28 P.3d 1104, 1112 (N.M.Ct.App.
2001).
Although we are sympathetic to the public policy concerns which
motivated the holding in Garcia, we decline to extend the definition of written
contract in our Model Procurement Code to include the implied contract which
may have been created between Newton and the University.
When interpreting a statute, “[o]ur main objective is to construe the
statute in accordance with its plain language and in order to effectuate the
legislative intent.” Cabinet for Families and Children v. Cummings, 163 S.W.3d
425, 430 (Ky. 2005). Our General Assembly did not include the term “implied
contract” in the waiver provision although it was free to do so; under the Tucker
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Act, for example, Congress has waived sovereign immunity with respect to “any
claim against the United States founded . . . upon any express or implied contract
with the United States[.]” 28 U.S.C. § 1491(a)(1). Similarly, in New Hampshire,
“[j]urisdiction has been conferred upon the superior court ‘to enter judgment
against the state of New Hampshire founded upon any express or implied contract
with the state.’ RSA 491:8.” Lorenz v. New Hampshire Administrative Office of
the Courts, 883 A.2d 265, 267 (N.H. 2005).
Furthermore, the inclusion of implied employment contracts does not
appear to further the underlying purposes and policies of the Model Procurement
Code, which appear to be limited “to the procurement of items of hardware and
services subject to bidding procedures[.]” Ashley v. University of Louisville, 723
S.W.2d 866, 867 (Ky. App. 1986). Those purposes and policies are as follows:
(a) To simplify, clarify, and modernize the law governing
purchasing by the Commonwealth;
(b) To permit the continued development of purchasing
policies and practices;
(c) To make as consistent as possible the purchasing laws
among the various states;
(d) To provide for increased public confidence in the
procedures followed in public procurement;
(e) To insure the fair and equitable treatment of all
persons who deal with the procurement system of the
Commonwealth;
(f) To provide increased economy in state procurement
activities by fostering effective competition; and
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(g) To provide safeguards for the maintenance of a
procurement system of quality and integrity.
KRS 45A.010(2).
Other jurisdictions have been reluctant to extend the waiver of
sovereign immunity to implied contracts.4 “The State is only subject to a lawsuit
for breach of contract if the contract is in writing. . . . An ‘implied’ contract does
not satisfy this requirement.” Fedorov v. Board of Regents for University of
Georgia, 194 F.Supp.2d 1378, 1394 (S.D.Ga. 2002). In Florida, the state Supreme
Court held that the legislature’s grant of authority to the state to enter into contracts
implicitly waived the immunity bar, but “qualified the newly-minted rule,
‘emphasiz[ing] that [its] holding here is applicable only to suits on express, written
contracts into which the state agency has statutory authority to enter.’” Financial
Healthcare Associates, Inc. v. Public Health Trust of Miami-Dade County, 488
F.Supp.2d 1231, 1236 (S.D.Fla. 2007), quoting Pan-Am Tobacco v. Department of
Corrections, 471 So.2d 4, 7 (Fla. 1984).
For the foregoing reasons, the summary judgment of the Jefferson
Circuit Court is affirmed.
ALL CONCUR.
4
The waiver of sovereign immunity on contract claims varies widely from state to state. See
Windsor Ave, LLC v. State, 875 A.2d 506-509 (Conn. 2005), for a detailed survey.
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BRIEFS AND ORAL ARGUMENT
FOR APPELLANT:
BRIEF FOR APPELLEE:
Donna King Perry
Wendy C. Hyland
Louisville, Kentucky
Kenneth J. Henry
Louisville, Kentucky
ORAL ARGUMENT FOR
APPELLEE:
Wendy C. Hyland
Louisville, Kentucky
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