Request By:
Representative Thomas J. Burch
Opinion
Opinion By: Albert B. Chandler III, Attorney General; Christina L. Bradford, Assistant Attorney General
Opinion of the Attorney General
State Representative Thomas Burch has requested our opinion on whether the City of Louisville is permitted to pay the legal defense costs of certain defendants involved in litigation. Based upon the facts presented, it is our opinion that the City of Louisville is legally entitled to pay the legal defense costs of these defendants. This opinion is provided pursuant to KRS 15.
The facts giving rise to this opinion request apparently span over a decade of litigation in both state and federal forums. This opinion does not address the legal merit of these underlying court actions, but merely cites to them for purposes of clarifying the facts giving rise to this opinion request. The litigation involves issues relating to the management of the Policemen's Retirement Fund of the City of Louisville (hereinafter "Retirement Fund").
The City of Louisville has indemnified John Nevin and Andrew Cherry for the claims brought against them in that litigation. More particularly, the City of Louisville has paid the legal defense costs of Mr. Nevin and Mr. Cherry with the consent of the City of Louisville.
Statutory Authority
KRS 65.2005(1) provides that a local government must provide a defense to any employee for any actions in tort arising against him as a result of an act or omission committed by him which occurred within the scope of his employment. Pursuant to this statutory provision, the local government may choose how to provide the legal defense services (i.e., either by the city's attorneys or by outside counsel) . Further, a local government must pay any final judgment or settlement cost as a result of such an action against the employee. However, a local government may refuse to pay a judgment and may recover legal defense costs in certain cases, such as if the employee acted outside the scope of his employment, or acted or failed to act due to malice, fraud, or corruption.
For purposes of KRS 65.2005, a local government includes any city incorporated pursuant to state law. See KRS 65.200(3). Further, an "employee" is defined as follows:
"Employee" means any elected or appointed officer of a local government, or any paid or unpaid employee or agent of a local government, provided that no independent contractor nor employee nor agent of an independent contractor shall be deemed to be an employee of a local government.
See KRS 65.200(2).
Legal Analysis
1. John Nevin is Entitled to be Indemnified for his Legal Representation
The City of Louisville is an incorporated city pursuant to state law. As such, it must provide a provide a legal defense for any employee in any action arising in tort arising out of acts or omissions which occurred within the scope his employment, pursuant to KRS 65.2005(1). KRS 65.200(2) specifically provides that, for purposes of KRS 65.2005(1), an "employee" includes an agent of a local government.
There is no specific test to determine whether an agency relationship exists with a municipality. See McQuillan Mun Corp Section 53.66 (3rd Ed). It is not required that an agency relationship be manifested in writing or by formal ordinance, bylaw, or resolution. Id. at Section 12.129. A municipality may ratify an agency relationship after the services have been performed. Id. ; See also
Blanks v. Toombs, 14 S.W.2d 153 (1929) (wherein the city council's vote to pay for services rendered after performance was deemed a ratification of the person's services on behalf of the city). An agency relationship may be implied, directly or indirectly, from the circumstances, acts, and conduct between the municipality and the alleged "agent." See
Wedding v. Duncan, 220 S.W.2d 564, 568 (1949). The ability of the municipality to control the actions of the person which resulted in a wrong being complained about is also a factor in determining whether the person was an agent on behalf of the municipality. See McQuillan, supra , at Section 53.66.
According to the facts presented, Mr. Nevin was sued as a result of his bringing a lawsuit in the early 1990's relating to the management of the Retirement Fund. The City of Louisville initially attempted to bring that lawsuit, but was found by the trial court to lack standing. Accordingly, the City of Louisville asked Mr. Nevin, a retired member of the Retirement Fund, to bring the lawsuit on the City's behalf. See
Cullinan v. Abramson, 128 F.3d 301, 306 (6th Cir. 1997), cert. denied 523 U.S. 1094 (1998). Mr. Nevin's attorney in that proceeding was the City of Louisville's law director. Id. In addition, in a letter to Mr. Nevin in 1991, the City of Louisville agreed to indemnify Mr. Nevin for any lawsuits against him arising out of his bringing of the lawsuit on the city's behalf. Further, after Mr. Nevin was ultimately sued as a result of his actions on behalf of the public's purpose, the City of Louisville retained outside counsel to defend Mr. Nevin.
The circumstances, acts, and conduct between Mr. Nevin and the City of Louisville indicate that Mr. Nevin was acting as an agent of the City of Louisville. Further, the facts indicate that the City of Louisville had control over Mr. Nevin's actions ( i.e. , the bringing of the lawsuit on behalf of the City of Louisville). For example, Mr. Nevin brought the lawsuit expressly at the request of the City of Louisville. See Cullinan, supra, at p. 306. In addition, the City's law director was the attorney who represented Mr. Nevin in the initial state action. Id. Moreover, the City of Louisville has ratified Mr. Nevin as its agent in the initial lawsuit by the fact that it has retained counsel to defend Mr.Nevin and has agreed to indemnify him in the action brought against him as a result of the initial lawsuit.
By acting as an agent for the City of Louisville, Mr. Nevin was an "employee" for the purposes of KRS 65.2005(1). Accordingly, the City of Louisville is not only legally entitled to provide a legal defense for Mr. Nevin, it was required to do so pursuant to KRS 65.2005(1). Moreover, the City of Louisville was entitled to determine how those legal services were to be provided. In this particular instance, the City of Louisville approved the retention of outside counsel to represent Mr. Nevin, which was specifically permitted by the provisions of KRS 65.2005.
2. Andrew Cherry is Entitled to be Indemnified for his Legal Defense
Under the facts presented, Mr. Cherry was sued by the Plaintiffs as a direct result of his service as an appointed member on the Retirement Fund. Thus, Mr. Cherry was sued in his capacity as an appointed officer of the City of Louisville. As stated above, the City of Louisville is a "local government" pursuant to KRS 65.200(3), and is required to provide a defense to employees for claims arising out activities which occurred within the scope of their employment. Therefore, Mr. Cherry is entitled to be indemnified for his legal expenses incurred in defending the suit against him. Further, the City of Louisville is specifically authorized to pay such legal expenses to outside counsel pursuant to KRS 65.2005.
Conclusion
Pursuant to KRS 65.2005, the City of Louisville is a "local government" which is required to provide a legal defense and pay claims regarding claims filed against employees as a result of activities which occurred during the scope of their employment. Both Mr. Nevin and Mr. Cherry are "employees" of the city for the purposes of this statute, and are being sued by the Plaintiffs as a result of activities which occurred as a direct result of their employment for the City of Louisville. Moreover, both are being represented by counsel obtained with the consent of the City of Louisville, which is permitted by statute. See KRS 61.2005. Accordingly, the City of Louisville is legally required to indemnify Mr. Nevin and Mr. Cherry for their legal defense costs in the litigation referenced in Representative Burch's opinion request.