University of Kentucky v. Peter Regard ( 2023 )

RENDERED: JUNE 15, 2023
TO BE PUBLISHED
Supreme Court of Kentucky
2022-SC-0129-DG
UNIVERSITY OF KENTUCKY APPELLANT
V. ON REVIEW FROM COURT OF APPEALS
NO. 2021-CA-0020
FRANKLIN CIRCUIT COURT NO. 20-CI-00648
PETER REGARD; LEAH OUSLEY; HALEIGH APPELLEES
ALEXANDRA LONG; MERIDETH MULLIN;
ANNA QUINN CURRAN; MACKENZIE
PUTTEET; AND KEEGAN MCLARNEY
OPINION OF THE COURT BY JUSTICE CONLEY
AFFIRMING
This case is before the Court upon the trial court’s denial of the
University of Kentucky’s (the University) claim of governmental immunity. The
Court of Appeals affirmed the denial. The University filed a motion for
discretionary review, and we granted to determine whether the Student
Financial Obligation (SFO) and accompanying documents are in fact a written
contract per KRS1 45A.245(1) such that governmental immunity has been
waived and the underlying breach of contract claim of the Students2 may
proceed. Although initially under the impression that the Students’ only
1 Kentucky Revised Statutes.
2 We refer to the Appellees collectively as Students.
remaining portion of its breach of contract claim pertained to mandatory fees,
both parties at oral argument represented that the trial court’s dismissal of the
Students’ claim pertaining to tuition is subject to a motion to reconsider, and
requested this Court consider tuition in its analysis.
The record reveals the trial court did make a ruling on governmental
immunity for the breach of contract claim for both tuition and fees, and the
Court of Appeals did as well. Although the trial court also dismissed the breach
of contract claim on the merits insofar as it encompassed tuition, because the
finality of that portion of the trial court’s judgment is not yet achieved, we
believe our jurisdiction to consider the governmental immunity for both tuition
and fees is satisfied. Breathitt Cty. Bd. of Ed. v. Prater, 292 S.W.3d 883, 887
(Ky. 2009). We emphasize, however, that our jurisdiction at this stage of the
proceedings is strictly limited to the issue of governmental immunity. Id.Consequently, we express no opinion whatsoever on the merits of the
underlying claim. For the following reasons, we affirm the Court of Appeals.
I. Facts and Procedural Posture
In January of 2020, the University of Kentucky began its annual spring
semester, which was set to conclude in May 2020. The Students were all
enrolled as full-time, on-campus students. In late February of that same year,
the world gradually became aware of the Covid-19 virus, which more or less
enveloped the entire globe by March. The history of the pandemic certainly
needs no detailed historical overview. Reaction to the pandemic by
governments was varied, but private entities as well, either by compulsion of
2
law or voluntarily, also instituted various measures in an effort to combat
spread of the virus. As part of this voluntary effort, the University, on March
23, 2020, switched all on-campus classes to an on-line format for the
remainder of the Spring semester. The Students also allege in their complaint
that “the campus was effectively shut down for student use and access.”
The University did not make any disbursements to the Students
refunding tuition or mandatory fees as a result of its action.3 On August 7,
2020, the Students filed their putative class action suit against the University
for breach of contract regarding tuition and fees for the Spring 2020 semester.
On August 24, 2020, the Students amended their complaint per CR4 15.01,
attaching numerous documents they allege “taken as a whole, constitute the
written contract for on-campus instruction and use of facilities and other
benefits related to mandatory fees . . . .” The University filed a motion to
dismiss, asserting that the documents submitted by the Students do not
constitute a written agreement therefore, the University is shielded by
governmental immunity. Alternatively, the University argued the Students had
failed to state a claim upon which relief could be granted because they could
not demonstrate a breach of any promise made by the University.
The trial court ruled on the issue of governmental immunity that there
was a written contract within the scope of KRS 45A.245(1) because of the SFO,
3 Notably, however, the University did concede at oral argument that it did
refund monies related to housing and dining, although stating those involved separate
contracts with third-party vendors and are not at issue before the Court.
4 Kentucky Civil Rules of Procedure.
3
and that the other documents submitted by the Students “reinforce[s] the
terms of that contract and the expectations of the parties . . . .” Thus, the
breach of contract claim is not barred by governmental immunity. It further
ruled that the breach of contract claim is not barred by governmental
immunity because the Students were seeking refunds of money paid to the
University, and not money from the state treasury. The trial court dismissed
the Students’ claim for unjust enrichment because governmental immunity has
not been waived for unjust enrichment claims. Finally, it also dismissed the
Students’ breach of contract claim pertaining to tuition—holding the Students
still received instruction, grades, and academic credits despite the shift to an
on-line format.
The SFO was presented to the Students in an on-line format via a
registration portal. They were required to agree to the SFO before proceeding
with registration. In pertinent part, the SFO states
Please read the following statement and then click the accept
button at the bottom of this page to continue the registration
process.
...
Request and completion of registration constitutes a contractual
financial obligation to pay tuition and fees for which I am liable. I
am responsible for reading and understanding the current
Drop/Refund policy of the University as it appears in the current
Schedule of Classes. Permission to cancel enrollment does not
constitute, nor shall it be construed as, a waiver by the University
of my financial obligation. I understand that any financial
assistance I receive will be applied against my billed charges to
reduce my financial obligation.
(Emphasis added).
4
The University Bulletin (the Bulletin) was also provided to the Students
during the registration process. The Bulletin sets out, in pertinent part, the
tuition and mandatory fee rates. These rates vary according to a student’s
status as full-time or part-time student; whether they are an undergraduate,
graduate, or a professional school student; the program enrolled in; whether
they live on-campus or off-campus; and whether they are attending at least one
class on-campus as opposed to taking only on-line classes. Undergraduate,
full-time, resident students were charged $6,180.00 per semester. The on-line
learning rate fee for students with at least one on-campus course were charged
$601.00 per credit hour. Students with no on-campus courses were charged an
online learning rate per credit hour of $570.00. Footnote 2 to the Bulletin
states “Unless stated otherwise, the full-time per semester rates will be charged
to undergraduate students enrolled for 12 credit hours or more . . . .”
Footnote 3 to the Bulletin states, “Mandatory fees are listed separately
above and will be assessed based on the student’s full-time or part-time status,
course delivery mode(s), and whether or not the student is enrolled in at least
one on-campus course.” The “Summary of Mandatory Fees Assessed by
Student Classification” in the Bulletin states undergraduates that are full-time
with at least one course on-campus were charged $674.50. Full time
undergraduates with no on-campus courses were charged $128.50. A total of
eighteen different products or services are listed pertaining to what the
mandatory fee is going towards. The exact breakdown of costs is not pertinent
here, but we highlight some of the more notable products and services
5
including: the Student Government Association; Technology; Johnson Center;
Student Center; Student Center Renovation; Student Services; Transportation;
Student Health Fee; and Student Wellness.
The Bulletin defines an on-campus course as “requires regular or
periodic physical attendance on campus for instruction and/or assessment.” It
notes, however, that the “delivery modes for an on-campus course may include,
but are not limited to, traditional classroom, hybrid (e.g., traditional classroom
and Internet, web-based), compressed video or satellite courses.” An on-line
course is defined as “Internet, web-based delivery mode[,]” in Footnote 4.
The University appealed the ruling of the trial court as to governmental
immunity. The Court of Appeals affirmed the ruling that the Students had a
written contract with the University thus, governmental immunity had been
waived. The Court of Appeals reversed the trial court’s ruling that governmental
immunity was not applicable because the students were only seeking a refund
of money from the University, rather than from the state treasury. The
Students have not appealed this ruling and we will not consider it further.
Finally, the Court of Appeals made clear its ruling only pertained to
governmental immunity so the trial court’s dismissal of the breach of contract
claim as to tuition on the merits was not within its jurisdiction.
Two key passages of the Court of Appeals’ opinion are worth highlighting.
First, the Court of Appeals ruled
The University's Financial Obligation Statement is best described
as a “clickwrap” arrangement, in which the user is required to
“explicitly assent by clicking ‘I agree’ (or something similar) before
using the website or purchasing a product.” Foster v. Walmart, Inc.,
6
15 F.4th 860, 863 (8th Cir. 2021). “Applying ordinary contract law
principles, courts routinely uphold ‘clickwrap’ ... agreements ... ‘for
the principal reason that the user has affirmatively assented to the
terms of agreement by clicking “I agree.” ’ ” Hidalgo v. Amateur
Athletic Union of United States, Inc., 468 F. Supp. 3d 646, 654
(S.D.N.Y. 2020) (quoting Meyer v. Uber Techs., Inc., 868 F.3d 66, 75
(2d Cir. 2017)).
Applying this rule, as well as KRS 369.107(3),5 the Court of Appeals held “the
parties manifested their mutual assent to be bound through their electronic
interchanges with one another.” Applying the doctrine of incorporation by
reference, the Court of Appeals concluded
When the Financial Obligation Statement is considered in
conjunction with the other registration documents, all the
elements necessary for contract formation are met. When boiled
down to its simplest terms, through these written documents, the
students and the University agreed to enter into a contractual
relationship whereby the students agreed to pay the University fees
and tuition in accordance with the University's fee and tuition
schedule as set out in the University Bulletin. In return, the
University agreed to provide the students with access to the
classes selected during registration and to make its facilities
available for the students’ use. The terms are both “definite and
certain” and set forth the “promises of performance to be rendered
by each party.” Energy Home, Div. of Southern Energy Homes, Inc.,
406 S.W.3d [828 (Ky. 2013)] at 834 (citation omitted). Accordingly,
we agree with the circuit court that Appellees and the University
have a written contract with each other for the payment of fees and
tuition for the Spring Semester, and that Appellees’ breach of
contract claim as set forth in their first amended complaint is “an
action against the University on the contract” allowing this suit to
proceed despite the University's governmental immunity. KRS
45A.245.
(Internal footnotes omitted).
5 “If a law requires a record to be in writing, an electronic record satisfies the
law.”
7
The University has not argued the Court of Appeals erred in its holding
as to the nature of the contract as a “click-wrap” agreement or that there was
mutual assent. The University filed a motion for discretionary review in this
Court which we granted, solely to consider whether governmental immunity
bars the Students’ breach of contract claim. We now address that question
below.
II. Standard of Review and Rules of Controlling Law
Our review is de novo. A denial of a claim of governmental immunity is
subject to interlocutory appeal, and whether a party is entitled to governmental
immunity is a question of law. Britt v. University of Louisville, 628 S.W.3d 1, 4-5
(Ky. 2021). The formation and interpretation of contracts are also questions of
law. Id. at 5. Likewise, an order of dismissal for failure to state a claim upon
which relief can be granted is a question of law. Fox v. Grayson, 317 S.W.3d 1,
7 (Ky. 2010). Importantly, a motion to dismiss “admits as true the material
facts of the complaint.” Id. (quoting Upchurch v. Clinton Cnty., 330 S.W.2d 428,
429–30 (Ky. 1959)). Therefore, on our review, we must accept the allegations of
the students as true and liberally construe their pleadings in a light most
favorable to them. Id.A state university of the Commonwealth is a governmental body and
entitled to governmental immunity unless waived by the General Assembly.
Britt, 628 S.W.3d at 5. The General Assembly has passed a general, unqualified
waiver of immunity for all written contracts, to wit:
8
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 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); Univ. of Louisville v. Rothstein, 532 S.W.3d 644, 647 (Ky.
2017).
The essential elements of a valid contract are an offer and
unequivocal acceptance, a certain and complete recitation of the
material terms, and consideration. Under Kentucky law, the terms
of the contract must be sufficiently definite to enable the court to
determine the measure of damages in the event of breach.
Britt, 628 S.W.3d at 5 (internal footnotes and citations omitted). Moreover, “[a]ll
contracts made with the state are subject to the provisions of the existing
law[.]” Armory Com’n v. Palmer, 69 S.W.2d 681, 682 (Ky. 1934). In other words,
the same rules of contract formation and interpretation apply to contracts with
the Commonwealth as they do to contracts between private individuals or
entities. See also Lynch v. United States, 292 U.S. 571, 579 (1934) (holding
“[w]hen the United States enters into contract relations, its rights and duties
therein are governed generally by the law applicable to contracts between
private individuals.”).
It is black letter law that multiple documents, each individually
incomplete, may form a contract, when combined and read as one to provide
the necessary elements of contract formation. Sackett v. Maggard, 134 S.W.
888, 890 (Ky. 1911) (“It is well settled that, where a contract is contained in
9
two separate and distinct papers, they will be read together for the purpose of
ascertaining the true contract.”). At common law, one writing can refer to
another writing and incorporate the latter’s contents into the contractual
bargain; this is known as incorporation by reference. Dixon v. Daymar Colleges
Group, LLC, 483 S.W.3d 332, 344 (Ky. 2015). “For a contract validly to
incorporate other terms, ‘it must be clear that the parties to the agreement had
knowledge of and assented to the incorporated terms.’ In addition, there must
be ‘clear language expressing the incorporation of other terms and conditions.’”
Id. (internal footnotes and citations omitted); Britt, 628 S.W.3d at 8. “Terms
and conditions incorporated by reference are enforceable.” Home Lumber Co. v.
Appalachian Reg’l Hosps., Inc., 722 S.W.2d 912, 914 (Ky. App. 1987).
In Baumann Paper Co., Inc. v. Holland, this Court cited as authority the
Restatement of Contracts (Second) § 132, which elucidates the general rule of
incorporation by reference. 554 S.W.3d 845, 849 (Ky. 2018). Although that
case dealt with the incorporation by reference for purposes of the Statute of
Frauds, its endorsement of the Restatement is relevant here. See also Lonnie
Hayes & Sons Staves, Inc. v. Bourbon Cooperage Co., 777 S.W.2d 940, 942 (Ky.
App. 1989) (applying the Restatement of Contracts (Second) § 132 in a Statute
of Frauds context).6 The Restatement states contracts “may consist of several
6 The dissent seems to suggest that because the Restatement of Contracts
(Second) § 132 discussing the doctrine of incorporation by reference occurs within the
general discussion of the Statute of Frauds, that section is not applicable to this case.
We cannot help the editorial preferences of the authors of the Restatement. Suffice to
say, there is no doubt the doctrine of incorporation by reference is a general common
law doctrine, and applies outside the Statute of Frauds context. Because both KRS
10
writings if one of the writings is signed and the writings in the circumstances
clearly indicate that they relate to the same transaction.” Restatement of
Contracts (Second) § 132. In comment c, it is explained that
It is sufficient that the signed writing refers to the unsigned writing
explicitly or by implication, or that the party to be charged
physically attaches one document to the other or encloses them in
the same envelope. Even if there is no internal reference or physical
connection, the documents may be read together if in the
circumstances they clearly relate to the same transaction and the
party to be charged has acquiesced in the contents of the unsigned
writing.
Id. (emphasis added).
Confusion has arisen in this case as to what this Court has meant by
“clear language expressing the incorporation of other terms and conditions[,]”
as a necessary element of incorporation by reference. Dixon, 483 S.W.3d at
344. While the factual circumstances and legal arguments of prior cases have
not brought this issue to the fore, here the University believes this requirement
specifically means clear language of incorporation—that the incorporated
document shall control or decide the relation of the parties to the contract. To
the contrary, what the law demands is a clear reference to the document being
incorporated.
As long as the contract makes clear reference to the document and
describes it in such terms that its identity may be ascertained
beyond doubt, the parties to a contract
may incorporate contractual terms by reference to a
separate, noncontemporaneous document, including a separate
45A.245(1) and KRS 371.010 share a common requirement that a contract be written,
we are satisfied that § 132 is illustrative of the general rule.
11
agreement to which they are not parties, and including a separate
document which is unsigned.
11 Williston on Contracts § 30:25 (4th ed.) (emphasis added); see also Dixon,
438 S.W.3d at 344 nn.38-40 (quoting Williston, supra). As the Restatement
demonstrates though, this “clear reference” can be entirely circumstantial,
without internal linguistic reference or even physical connection between the
documents, so long as the documents clearly pertain to the same subject and
the party to be charged has acquiesced to the contents of the unsigned,
incorporated document.
Application of the rule as described by the Restatement is not a
significant doctrinal evolution in Kentucky law. Unfortunately, there is a dearth
of precedent explaining the doctrine of incorporation by reference for contracts
in detail. What little that does exist, however, goes back as far as 1812, just
twenty years after the creation of Kentucky as an independent state in 1792.
These early cases demonstrate that our rule of incorporation by reference has
never been so formulaic as now advocated by the University.
In the earliest case7 we can find, McDowell v. Hall, a bill of sale and
article of agreement were read as one contract because the documents were
“executed at the same time, with reference to each other, and in relation to the
7 The further we go back in time we reach a point when chattel slavery existed
and often formed the nucleus of controversies that the courts were called upon to
adjudicate. We cannot change that fact and must accept history as it is handed down
to us. Citations to such cases should in no way be seen as approval of the institution
of slavery and, obviously, such cases are overruled insofar as they contravene the 13th
amendment of the federal Constitution. We cite these cases only for extrapolation of
the rule of incorporation by reference in the Commonwealth, a rule that is otherwise
unconnected to and independent of the institution of slavery.
12
same subject, and form essential parts of one entire agreement.” 5 Ky. 610,
611 (Ky. 1812). But the only language cited by the court evincing incorporation
was the language of the article of agreement which referred to “a bill of sale
now given . . .” Id. Such language on its face is not language of incorporation; it
does not say the bill of sale will control or decide the relationship of the parties.
Instead, it is simply a reference to another document in existence.
Nevertheless, the court looked to the surrounding circumstances—execution at
the same time and mutuality of the subject matter—to find the documents to
be one contract. Id. In Dillingham v. Estill, the rule was stated,
One writing can not be connected with another unless it refer to it.
But where there are words of reference to the subject matter . . .
though there be no description of the writing referred to, it is
sufficient[,] and proof aliundi (consistent with the writings) may be
used to show that they were both simultaneously executed, and
are part of the same contract.
33 Ky. 21, 22 (Ky. 1835) (emphasis added). In Dillingham, a bill of sale with
warranty was executed by the parties for that which was purchased, but one
party simultaneously delivered a writing stating he would not be responsible
for the things sold. Id. at 23. That language essentially defeated the warranty in
the bill of sale. Id. Despite that, the court found that even though neither the
bill of sale nor latter writing contained any reference to one another, because
they related to the same subject matter and were delivered simultaneously,
they constituted one contract. Id.The above cases refer to “executed” documents, which likely means all
the documents were signed by the parties. Executed, Black’s Law Dictionary
13
(11th ed. 2019). But our decision in Britt approved of incorporation by
reference to an unsigned document. 628 S.W.3d at 8. With equal clarity, the
Restatement and Williston, as cited above, both demonstrate that not all
documents need be signed for incorporation to be found. McDowell and
Dillingham show that the common law in Kentucky has never required clear
and unequivocal language of incorporation—that an incorporated document will
control or decide the relationship of the parties. Instead, mutuality of subject
matter, and surrounding circumstances not inconsistent with the writings, is
sufficient so long as the document to be incorporated is not in doubt.
Britt’s holding fits within the framework of this rule, both historically and
as currently applied. Nothing in Britt supports the notion that this Court has
departed from two centuries of common law precedent, nor did we add an
additional element to the common law rule. In Britt, the Appellant had been
sent a letter offering her a position at the University of Louisville. That letter’s
offer included the material terms of the duration of the position and salary. 628
S.W.3d at 3. It “further stated other terms and conditions applicable to the
appointment, such as the policies governing personnel reviews and
termination, were set out in the University's governance document,
The Redbook, and other relevant college-level policy statements.” Id. From
2006-09, she received “substantially identical” letters of employment annually,
each one stating “the terms and conditions of employment in the University of
Louisville herein specified include all rules and regulations promulgated on the
authority of the University of Louisville Board of Trustees and the governance
14
document known as The Redbook.” Id. Significantly, none of the three
continuation letters contained the terms of salary or tasks she was to perform.
Id. at 7. But because the original employment letter did contain those terms,
and Britt had been employed for several years, we held “the parties intended
for Dr. Britt to perform substantially similar tasks for the same compensation
due under her prior appointment. A reviewing court could determine if breach
occurred, and if so, the measure of damages, by reference to the parties’ prior
performance.” Id. at 7 (emphasis added). In other words, by reference to
surrounding circumstances, despite the fact that none of the continuation
letters specifically referenced or incorporated the original employment letter,
the material terms were definite and enforceable as a written contract.
As to The Redbook, we held “the University, in its written agreements,
has stated that The Redbook shall control, decide, or affect its relationship with
Dr. Britt. As a result, we find the provisions of The Redbook . . . to be validly
incorporated into each of the foregoing contracts.” Id. at 8. The University has
seized on the “control, decide, or affect” language to argue that absent such
language there can be no incorporation by reference. As we have demonstrated
above, that is simply not the law under any rational reading of Kentucky
precedent, the Restatement, or Williston. Britt merely held that such language
was specific enough to find incorporation, contrary to the ruling of the Court of
Appeals. Id. We did not intend thereby to reverse two centuries of precedent or
depart from the Restatement by so holding.
15
Moreover, to read Britt as requiring explicit language in one document
that another document shall “control, decide, or affect”, or similar language,
the relationship of the parties would render Britt internally contradictory. How
could we have found that the continuation letters of employment, which did
not state the material term of salary, were nonetheless a written contract for
purpose of KRS 45A.245(1), when they did not have any language to the effect
that the original employment letter’s salary term would “control, decide, or
affect” the on-going employment relation between Britt and the University of
Louisville? To ask the question is to answer it. Britt does not require in all
cases for incorporation by reference to apply that there be language that the
incorporated document will “control, decide, affect” the parties’ relationship
because Britt did not even apply that standard in its own analysis. Instead, we
held the language of the latter three employment letters “that the University
intends to continue Dr. Britt's employment . . .” was sufficient to determine “the
parties intended for Dr. Britt to perform substantially similar tasks for the
same compensation due under her prior appointment.” Id. at 7. And because
the salary term had been written in the original letter of employment, the
requirement that the terms be definite and in writing was satisfied; thus, we
held Britt had “executed valid written contracts[,]” and governmental immunity
had been waived. Id.
The dissent’s reading of Britt does not ultimately contradict what we just
stated. We are one in agreeing that Britt held reference to the prior performance
of the parties was a legitimate way to calculate damages. Id. The dissent
16
believes, however, the fact that the continuation letters did not mention either
the material term of salary or the original employment letter has no relevance
to the doctrine of incorporation by reference. Nor indeed does the dissent
address how the lack of recitation of a material term—which salary obviously is
in a breach of contract claim against an employer by its employee—has no
bearing on what is necessary for a material term to be written per KRS
45A.245(1).8 The dissent agrees in Footnote 3 that “stating that a prior
contractual relationship will ‘continue’ is sufficiently clear language to refer to
and actually incorporate that contract [the original employment letter] into a
subsequent agreement.” That is what we just explained in the above
paragraph. But how does the dissent square its own footnote with its other
statement, that “nowhere in the Britt opinion did the Court even consider,
much less suggest or hold, that the subsequent letters incorporated the initial
letter.” Infra, at 7. This is illogical. Thus, the dissent has inadvertently agreed
with us—the doctrine of incorporation by reference is necessary to understand
Britt.
If we were to insist that the doctrine has no relevance to the validity of
the continuation contracts under KRS 45A.245(1), then Britt is transformed
into a much broader rule than anyone on the Court now suggests: that a
“The measure of damages for breach of contract is ‘that sum which will put
8
the injured party into the same position he would have been in had the contract been
performed’”. Hogan v. Long, 922 S.W.3d 368, 371 (Ky. 1995) (quoting Perkins Motors,
Inc. v. Autotruck Fed. Credit Union, 607 S.W.2d 429, 430 (Ky. App. 1980)). Salary is the
sine qua non of making that determination in the employment context such as Britt.
17
material term regarding the value of the contracts could be supplied by
reference to prior performance. How would that not be a material term implied
in fact? It obviously would be. The dissent then is in a Catch-22; either Britt’s
ruling that the continuation letters constituted valid, written contracts must be
understood within the context of the doctrine of incorporation by reference or
Britt must be understood as implying in fact a material term. No one on this
Court agrees with the latter proposition. Therefore, the dissent is compelled to
agree with us in a footnote lest it collapse under the weight of its own
contradiction.
III. Analysis
The University presents three separate arguments, but the latter two are
closely intertwined. First, the University argues that the only contract it has
with the Students (and all its students generally) is a “contract for registration.”
In other words, in exchange for a promise of payment of thousands of dollars in
tuition and hundreds of dollars in mandatory fees on the part of the student,
the University obligates itself to do nothing more than provide that student
with the opportunity to register or enroll for classes. Beyond that, the
University argues it has no written contractual obligation to the students.
To use a colloquial phrase, that dog just won’t hunt. We reject the
interpretation advanced by the University that it has nothing more than a
contract for an opportunity to register. Such a position is illogical. Instead, it is
clear the Students and the University entered into a written contract offered by
the University, to receive a collegiate-level education in exchange for the
18
payment of an applicable tuition, based on the registered classes, at a rate
determined by the University; and to the use of ancillary services offered by the
University such as (but not limited to) health services and recreational facilities
in exchange for the mandatory fees.
The University next argues that even if it does have a contractual
obligation beyond merely providing an opportunity for registration, such
obligation is not written in any of the documents provided by the Students,
specifically the SFO and Bulletin. It claims that because there are no express
provisions in those documents obligating the University to provide in-class
instruction or access to other ancillary services, any contractual obligation the
University might have to provide those things are at best implied, thus, there is
no written contract and governmental immunity has not been waived.
Additionally, because obligations to provide those services are not written, the
Students’ claims are not brought “on the contract” therefore, governmental
immunity has not been waived. Finally, the University argues, because the SFO
does not contain the terms of the applicable tuition and fees rate, the Bulletin
must be clearly incorporated by the SFO to be a part of the contract, which the
University asserts is not the case.
Once again, the University is arguing a much too narrow understanding
of its own contract. By offering students to enter into a contractual agreement
to pay tuition and fees in the SFO and then identifying what those tuition and
fees would be in the Bulletin—based on whether the students were registering
for on-campus class instruction or on-line classes, as well as differing fee rates
19
for students taking or not taking on-campus courses—the University could not
have but understood that definite, unambiguous material terms existed in
writing that it was contractually bound to adhere to once the offer was
accepted. “A promise is an express undertaking or agreement to carry the
purpose into effect . . . It is a declaration which gives to the person to whom
made a right to expect or claim the performance of some particular thing.”
Hoskins v. Black, 226 S.W. 384, 385 (Ky. 1920). The purposes to be carried
into effect, the things to be performed, were delineated by the University in the
Bulletin. Specifically, the University defined on-campus and on-line classes
differently. The former requires “regular or periodic physical attendance on
campus for instruction and/or assessment.” The latter is exclusively “Internet,
web-based.” It then charged differing rates of tuition per credit hour for these
classes based on whether the students were registered only for on-line classes
or had at least one on-campus course. The same applies to on-campus or off-
campus students, who were charged substantially different mandatory fees
based on that distinction, and the University clearly identified eighteen
different services to which those fees would be applied.
The fact that the SFO does not expressly mention, point to, or adopt the
Bulletin insofar as the Bulletin contains the requisite tuition and fee rates is
not dispositive under Kentucky law. “[W]here there are words of reference to
the subject matter . . . though there be no description of the writing referred to, it
is sufficient[.]” Dillingham, 33 Ky. at 22 (emphasis added). The SFO clearly
mentioned tuition and fees and the Bulletin clearly set out the differing rates of
20
tuition and fees, required to determine the dollar amount of the financial
obligation the Students had agreed to per the clickwrap agreement in the SFO.
Thus, there is mutuality of subject matter. Moreover, the University has not
submitted any other document purporting to set different tuition and fee rates
than those identified in the Bulletin for the Spring 2020 semester thus, there
cannot be any doubt that the Bulletin is the appropriate document to refer to
when discussing incorporation. Finally, the overwhelming implication and
surrounding circumstances confirms that the Bulletin is correctly incorporated
by reference. The students allege, and the University concedes, that the
Bulletin was provided to them when they registered for classes online through
an on-line registration portal.9 In the digital age, this is the equivalent of
physical attachment. Nor can there be any doubt that under these
circumstances, the University had “knowledge of and assented to the
incorporated terms[.]” Dixon, 483 S.W.3d at 344. The University’s knowledge
and assent is demonstrated by it being the author of the Bulletin and
responsible for its contents. The University obviously knew the tuition and fee
rates described in the Bulletin, informed the students of said rates by providing
the Bulletin in the registration process, and intended those terms to apply to
its contract with the students. It is absurd to suggest otherwise. Indeed, it is
only by referencing the Bulletin that the University could determine what
9Concededly, the students were also provided numerous other documents but
none purporting to contain the material terms of tuition and fee rates.
21
amount of tuition and fees the Students promised to pay it, per the clickwrap
agreement of the SFO.
As for the contention that the University is nowhere bound by clear and
explicit language to provide in-person classroom instruction, we find that
argument untenable. The Bulletin sets different tuition rates for the different
categories of students. Students with at least one on-campus class as a rule
get a higher tuition rate than those students enrolled only on-line. The
definition of an on-campus course, as the University determined, requires
“regular or periodic physical attendance[.]” The University is offering two
different products/services between on-campus and on-line courses, and
charges two different prices accordingly. The same logic applies for mandatory
fees: on-campus students are charged a higher rate than those students off-
campus. We simply cannot credit the sophistic argument that by defining a
product or service in writing and then charging a price for those products or
services in writing, the University nonetheless has no reciprocal contractual
obligation to provide said products and services as defined once the offer has
been accepted.
It has been noted by the dissent that the University does not in fact set
the tuition price. Per KRS 164.020(8)(a), the Council on Postsecondary
Education in Kentucky was empowered to determine tuition rates.10 As true as
that is, the University was still the offeror of the contract, was the beneficiary of
KRS 164.020(8)(a) was amended at the General Session of 2023, but that
10
amendment is immaterial.
22
the tuition, and intended the Students to be obliged to pay the applicable
tuition rates set by the Council. Nonetheless, “[i]t is a rule of general
application that contracts of public bodies, like those of individuals, are made
with reference to existing statutes and that statutory provisions enter into the
contracts by operation of law.” Moore v. Babb, 343 S.W.2d 373, 376 (Ky. 1960).
In Babb, it was held that when a teacher had become eligible to be employed
under a continuing service contract, “his or her subsequent employment may
be only under a continuing contract, and that the Board of Education cannot
enter into any other kind of contract with those teachers.” Id. This was
contrary to the one- or two-year limited term contracts that were being offered.
Id. Thus, the statute controlled the material terms—duration of employment—
the government could enter into. In Grayson Rural Electric Corp. v. City of
Vanceburg, we held “rights accorded to parties by statute become a part of the
operative facts which govern their relationships.” 4 S.W.3d 526, 531 (Ky. 1999).
That case held Grayson had superior rights to supply electrical utilities by
statute over Vanceburg. Id.Therefore, because the material term of tuition was not supplied by
either party of their own volition in this case but was imposed upon them by
operation of statute, the fact that the SFO did not expressly define the tuition
rate is immaterial to whether a written contract exists per KRS 45A.245(1). We
must proceed as if the tuition term was already and expressly incorporated into
the contract. “[I]n construing a contract which rests upon statute, the statute
must be read into the contract[.]” Personal Indus. Bankers v. Citizens Budget
23
Co. of Dayton, OH, 80 F.2d 327, 328 (6th Cir. 1935). We fail to see how KRS
164.020(8)(a) does not support our decision.
That being said, we are not inferring or implying any material terms by
our holding. The Bulletin in plain, written English defines on-campus and on-
line classes; in plain, written English it sets out the tuition rates between on-
campus and on-line courses and the students knew by registering for such
classes they would be charged accordingly; and in plain, written English it sets
out the differing rates of mandatory fees and the students knew they would
have to pay said fees according to their status as on-campus or off-campus
students. The Bulletin informed the students unambiguously and in writing
what they were paying for, and the students had a legitimate expectation to
receive it. Thus, a reviewing court can determine if a breach occurred and the
concomitant measure of damages by reference to the Bulletin. Britt, 628
S.W.3d at 5.
The dissent argues that we are implying material terms and,
consequently, expanding the scope of KRS 45A.245(1) to include implied in fact
contracts. That charge is most unwarranted. We have not expanded the
General Assembly’s waiver to implied contracts. We have made painfully clear
that all the material terms related to tuition and fees are written down in plain
English that the University of Kentucky was clearly aware of and assented to.
Indeed, the dissent fails to reckon with the fact that
The terms ‘express contract’ and ‘contract implied in fact’ indicate
a difference only in the mode of proof. A contract implied in fact is
implied only in that it is to be inferred from the circumstances, the
24
conduct, acts, or relation of the parties, rather than from their
spoken words.
Kellum v. Browning’s Adm’r, 21 S.W.2d 459, 465 (Ky. 1929). That fact that a
contract is implied in fact does not make it any less of a contract. The General
Assembly’s waiver of sovereign immunity for all written contracts then is
properly understood as a waiver for all contracts with the Commonwealth that
can be proved by writing. We have not held that any of the material terms—
tuition and fees—are based on circumstances, conduct, acts, or relations of the
parties with one another. We have looked to circumstances to find incorporation
but that is distinct from the material terms themselves. The dissent is simply
confusing concepts.
The University has cited the case of University of Florida Board of
Trustees v. Rojas, 351 So.3d. 1167 (Fl. Dist. Ct. App. 2022) for support that
sovereign immunity11 bars the students’ claims. This is a decision of an
intermediate court from a foreign jurisdiction and only persuasive authority for
this Court. We find the decision rather unpersuasive. First, the court accepted
the “contract for registration” theory that we have firmly rejected. Id. at 1171.
Additionally, nowhere in the majority opinion is there mentioned the doctrine of
incorporation by reference or other authority relating to that doctrine. In fact,
the only implied discussion of the doctrine of incorporation by reference came
11 Kentucky law maintains a difference between sovereign and governmental
immunity, but “to the extent that the agency is performing a governmental function,
as a state university does, its governmental immunity is functionally the same as
sovereign immunity.” Furtula v. Univ. of Kentucky, 438 S.W.3d 303, 305 n.1 (Ky.
2014).
25
from Judge Makar’s partial dissent. Id. at 1174-75. Consequently, Judge
Makar concluded “Rojas has adequately alleged sufficient facts—buttressed by
relevant documentation—to demonstrate that an express agreement exists
such that the university has potential liability on a breach of contract claim.”
Id.
Although Judge Makar concurred in the majority’s ruling to certify a
question of law regarding sovereign immunity to the Florida Supreme Court, he
clearly believed that the decision to dismiss the case based on sovereign
immunity was premature—"erring on the side of caution, as courts are required
to do at this initial stage of this lawsuit, countenances against dismissal in
light of the written documentation and allegations presented.” Id. at 1175. In
short, the Rojas opinion does not apply the same rules of law as we do in
Kentucky; and to the extent it does, it is the dissent, which agreed “that an
enforceable written contract of some sort exists[,]” id., that more closely
comports with Kentucky law.
Finally, the University has made arguments pertaining to the millions of
dollars in potential damages it could face if the students were successful on
their claim. It has pointed time and again to the emergency nature of the
Covid-19 pandemic. It has also argued the “reasonable expectations” of the
contract with its students and prophesied a flood of litigation on diverse and
sundry issues should this Court fail to find it has governmental immunity. No
doubt, these are all serious concerns for the University. While courts must be
able to determine the measure of damages, the vastness of those damages has
26
no relevance to the question of whether the University has a written contract
with its students sufficient for waiver of governmental immunity under KRS
45A.245(1). The argument is essentially that because the damages may be
really high, we should find governmental immunity. Kentuckians, however,
have a higher expectation of this Court as impartial arbiters of the law than to
accept such a blatantly results-oriented argument. The emergency nature of
Covid-19 as the underlying motivation behind the University’s decision to
switch to all on-line classes and essentially shut down its campus is properly a
defense to the breach of contract claim, and it is irrelevant to our analysis as to
whether a written contract exists within the waiver of KRS 45A.245(1). Lastly,
this Court has heard the “parade of horribles” argument before in a variety of
contexts. Rarely has the party making it proved to be a Cassandra.12
IV. Addressing Dixon
The dissent’s main point of contention is that this case is controlled by
our ruling in Dixon, 483 S.W.3d 332 (Ky. 2015). Indeed, Dixon is the rock upon
which the dissent has built its argument, but the gates of reason must prevail
against it here. First, Dixon does not deal with governmental immunity but with
the enforceability of an arbitration agreement. Id. at 336. The students were
given a Student Enrollment Agreement, a one-page document, front and back.
Id. The signature line was at the bottom of the front page, and directly above it
there was a space for the students to initial, acknowledging they had “READ
12 Cassandra was a Trojan princess blessed with the gift of prophecy but cursed
to never be believed.
27
BOTH PAGES OF THIS STUDENT ENROLLMENT AGREEMENT”. Id. at 345.
The arbitration provision was contained on the back page of the document. Id.
at 337. Two provisions were argued by Daymar in favor of incorporation by
reference, the passage just quoted, id. at 345, and a provision which read, in
part: “This Agreement and any applicable amendments, which are incorporated
herein by reference, are the full and complete agreement between me and the
College.” Id. This provision was also contained on the front page of the
agreement.
Although our ruling in Dixon certainly depended on incorporation by
reference, it is wholly out of context with the peculiarities of the Student
Enrollment Agreement at issue in that case to insist that it was the
predominant reason. First, we noted that KRS 446.060 states when the law
requires a writing to be signed, that signature must be at the “end or close of
the writing.” Id. at 343. We then held the Statute of Frauds was applicable
because “when the Students signed the Agreement, they contemplated an
obligation that could not be performed within a year.” Id. at 344. Having made
those determinations, we held the students signed their name on the bottom of
the front page therefore there could no assurance they assented to the terms of
the back page. Id. Unless those terms were validly incorporated, the Statute of
Frauds would prevent enforcement.
As to incorporation by reference, we held “[i]t is beyond dispute that the
arbitration provision, an original term in the Agreement, cannot be an
‘applicable amendment.’” Id. at 345. Thus, the only true incorporation
28
provision by its plain terms did not apply to the back page of the document.
The provision that the students had read the document, front and back, did
not incorporate the back page terms because the word “read” cannot be
understood to mean that the “Students actually assent to the terms
referenced,” nor could it be understood to mean “that any terms are actually
being incorporated.” Id. at 346. We then stated,
the provision immediately preceding the “read” provision contains
clear incorporation language—obviously, if Daymar had wished
plainly to incorporate the terms on the reverse side of the
Agreement, it knew how to do so. But with the “read” provision,
Daymar seemingly attempted to notify the Students that the
Agreement continued past their signature, rather than incorporate
the back-page language above the signature. KRS 446.060 does
not allow this—if it did, it would be rendered null.
Id. “In the end, Daymar's language is simply not clear enough to overcome KRS
446.060 and the requirement that parties show assent to be bound by terms of
a contract.” Id. Thus, our decision in Dixon was that the students had only
assented to the terms on the front page of the document, and the words used
by Daymar in an attempt to incorporate the back page of the document failed
to do so either because the language was too specific—“applicable
amendments”—or too vague—“read.” Such distinctions are inapplicable in this
case because the SFO stated the Students were entering a contractual
obligation for tuition and fees, and the Bulletin plainly identified what those
tuition and fees were.
The dissent attempts to avoid these legal and factual distinctions by
simply stating the arbitration provision applied to the subject matter of the
agreement. It did not. The Student Enrollment Agreement’s terms on the front
29
page pertained to “what program the student is registering for; how many
credits are required for that degree; an estimation of how long it will take to
achieve those credits; and how much the program will cost with tuition, books,
and fees.” Id. at 337. Simply because an arbitration provision is included in a
contract to resolve disputes arising under that contract does not mean it
shares mutuality of subject matter with other provisions. Nothing about an
arbitration provision is intrinsically related to a program being registered for,
number of credits for a degree, or the cost of tuition, books, and fees.
Indeed, as Dixon succinctly stated, an arbitration agreement within a
contract can be challenged “specifically [as to] the validity of the agreement to
arbitrate” or the contract as a whole can be challenged. Id. at 340. Obviously, if
it is possible that an arbitration provision within a contract can be invalid but
not the contract as a whole, then it cannot be stated that arbitration provisions
share mutuality of subject matter with the general contract simply by being
contained within it.
Dixon thus applied and was overarchingly controlled by the Statute of
Frauds. The facts of its Student Enrollment Agreement are not shared by the
facts under the current case. The application of incorporation by reference
depended on holding the words used to incorporate were either too specific or
too vague. The arbitration provision sought to be incorporated does not share
mutuality of subject matter. And the fact that it was physically attached to the
back page of the contract was obviated by both the Statute of Frauds and KRS
30
446.060. Dixon does not apply to the case at hand hence we have no need to
reconcile our present holding with it.
V. Conclusion
The University offered its students a contract. It required them to agree
to a “contractual financial obligation to pay tuition and fees[,]” in writing, in the
Student Financial Obligation. Contemporaneously, it delivered to the Students
the University Bulletin that set forth, in writing, the material terms of the
tuition and fees according to, inter alia, whether the students were registering
for on-campus classes or on-line classes. In exchange for the payments of the
tuition and fees, the students had a legitimate expectation to receive what they
paid for. These two documents were delivered together, share mutuality of
subject matter, and the overwhelming implication and surrounding
circumstances leave no doubt that they were meant to be read together,
thereby forming one binding contract. Because the General Assembly has
waived governmental immunity for all written contracts with the
Commonwealth, the contract at issue is within the scope of the waiver.
Therefore, the University is not entitled to assert governmental immunity and
the breach of contract claim may proceed for adjudication on its merits. The
Court of Appeals is affirmed.
All sitting. VanMeter, C.J.; and Lambert, J., concur. Thompson, J.,
concurs in result only by separate opinion. Bisig, J., dissents by separate
opinion in which Nickell, J., joins and Keller, J., joins in result only. Nickell, J.,
31
dissents by separate opinion in which Bisig joins, and Keller, J., joins in result
only.
THOMPSON, J., CONCURRING IN RESULT ONLY: The only issue for our
Court to decide is whether there is a contract. The answer is yes. The
University of Kentucky portal’s Student Financial Obligation says in pertinent
part: “Request and completion of registration constitutes a contractual
financial obligation to pay tuition and fees for which I am liable.”
I join in Justice Conley’s majority opinion which rejects the University’s
contention that the only contract it had with the students is a “contract for
registration” providing that in exchange for paying tuition and fees students are
only granted an opportunity to register for classes. I write separately to clarify
my understanding that our Court is only ruling upon the specific facts before it
and not providing a wholesale endorsement to contract formation (and, thus,
waiver of sovereign immunity) based on documents implicitly or explicitly
referred to in an online agreement.
My sense of fundamental fairness is offended by the state retaining the
additional money paid by these students for promised in-person classroom
instruction and services that were abruptly terminated and not provided.
It is the specific facts in this specific case that warrant the conclusion
that the case should proceed below. Whether the students will ultimately be
entitled to some sort of reimbursement, or the amount of such payment, if any,
is yet to be determined by the trial court.
32
BISIG, J., DISSENTING: Less than ten years ago, this Court made clear
in Dixon v. Daymar Colleges Group, LLC, 483 S.W.3d 332 (Ky. 2015), that a
contract’s mere reference to another writing is insufficient to incorporate that
writing into the contract absent additional clear “language indicating [the other
writing is] actually being incorporated.” 483 S.W.3d at 346 (emphasis added).
In this case, the Student Financial Obligation (SFO) relied on by the Appellees
is devoid of any language even referring to the tuition and fees information
contained in the Bulletin, much less “clear language” indicating that the
Bulletin’s tuition and fees information was “actually being incorporated” into
the SFO.
Yet today the majority opinion reaches the exact opposite conclusion
from Dixon, relying on nineteenth-century cases to find the Bulletin
incorporated into the SFO on the basis that “clear language of incorporation” is
not required—rather, incorporation may be accomplished by a mere “clear
reference to the document being incorporated.” Indeed, the majority decision
goes even further, holding that even where parties do not reference other
writings in their agreement, such writings may nonetheless be incorporated by
“implication” and “circumstance.”
The majority thus concludes the University enjoys no governmental
immunity against Appellees’ claims that they are entitled to a refund of tuition
and fees because the University temporarily offered remote rather than in-
person classes and services in the early stages of the global COVID-19
pandemic. This despite the fact that the SFO—the only purported written
33
contract relied upon by Appellees—contains no term guaranteeing in-person
classes or services or promising the refund sought by the Appellees. And
despite the fact that the SFO makes only the following reference to the
University’s Bulletin, the sole other writing relied upon by Appellees to support
their claims—and which likewise contains no terms guaranteeing in-person
classes or services or promising the refund sought by Appellees:
Note: Copies of the Drug-Free Policy can be found in the UK
Bulletin and Schedule of Classes which can be obtained from the
Registrar’s Office.
(Web addresses removed).
In so deciding, the majority opinion deeply undercuts the law of
governmental immunity for our state colleges and universities. It also
expressly disregards the significant impact of its conclusion, opening a
floodgate of large-scale litigation against state universities—and indeed all state
agencies entitled to governmental immunity—on the flimsy basis of alleged
terms contained in non-contractual documents allegedly incorporated by
“implication” and “circumstance.” Because the majority decision marks a
significant and unreasoned departure from current Kentucky law regarding
incorporation by reference, and because it judicially expands the scope of the
Commonwealth’s waiver of governmental immunity far beyond the plain
language of KRS 45A.245(1) which limits that waiver to claims on a “written
contract,” I respectfully dissent.
I. Under Current Kentucky Law, A Contract May Incorporate
Another Writing Only By Clear Language Indicating The Other
Writing Is Actually Being Incorporated.
34
As a state agency, the University is entitled to “the benefits and
protection of governmental immunity except where it has been explicitly waived
by the legislature.” Furtula v. Univ. of Kentucky, 438 S.W.3d 303, 305 (Ky.
2014). In KRS 45A.245(1) the General Assembly has provided such a waiver of
governmental immunity for “claims based upon ‘lawfully authorized written
contracts with the Commonwealth.’” Id. (quoting KRS 45A.245(1)). However,
because this statutory waiver is explicitly limited to claims on written
contracts, “any provision that [the plaintiff] claims is breached must be
included or incorporated in a written . . . agreement to be actionable.” Britt v.
Univ. of Louisville, 628 S.W.3d 1, 7 (Ky. 2021).
For other terms to be incorporated into a contract, first “‘it must be clear
that the parties to the agreement had knowledge of and assented to the
incorporated terms.’” Id. at 8 (quoting Dixon, 483 S.W.3d at 344). Second,
there also must be “clear language expressing the incorporation of [the] other
terms and conditions.” Id. (quoting Dixon, 483 S.W.3d at 344) (cleaned up)
(emphasis added). The majority opinion posits that confusion has arisen in
this case as to the meaning of the phrase “clear language expressing the
incorporation of other terms and conditions.” The majority turns to M’Dowell v.
Hall, 5 Ky. 610 (1812), and Dillingham v. Estill, 33 Ky. 21 (1835), and concludes
that what is required is not “clear language of incorporation—that the
incorporated document shall control or decide the relation of the parties to the
contract,” but rather only “a clear reference to the document being
incorporated.”
35
I disagree. One need not travel with the majority back to 1812 to resolve
the alleged confusion. Our 2015 decision in Dixon makes clear that under
current Kentucky law, a mere reference to another writing in a contract does
not incorporate that writing absent additional clear language indicating the
writing is actually being incorporated.
In Dixon, the defendant college sought to compel arbitration based on an
arbitration provision on the reverse side—and beneath the signature line—of a
student enrollment agreement. Dixon, 483 S.W.3d at 336-37. The college
argued the arbitration provision had been incorporated into the agreement by
virtue of a paragraph on the front page of the agreement stating “I HAVE READ
BOTH PAGES OF THIS STUDENT ENROLLMENT AGREEMENT BEFORE I
SIGNED IT.” Id. at 345.13
In considering the college’s incorporation argument, this Court first
noted that “[f]or a contract validly to incorporate other terms, . . . there must be
‘clear language expressing the incorporation of [the] other terms and
conditions.’” Id. at 344 (cleaned up) (quoting Bartelt Aviation, Inc. v. Dry Lake
Coal Co., Inc., 682 S.W.2d 796, 797 (Ky. App. 1985)). The Court then disagreed
that the statement “I HAVE READ BOTH PAGES” satisfied this standard
because it indicated only that the students had read the terms, without “any
language indicating . . . that any terms are actually being incorporated.” Id. at
346 (emphasis added). In other words, because the statement merely referred
Under KRS 446.060, the arbitration provision was not automatically part of the
13
agreement because it appeared after the signature line. Dixon, 483 S.W.3d at 344.
36
to the other writing but did not include any language actually incorporating
that writing into the agreement, the other writing was not incorporated by
reference. The Court reasoned that absent clear language explicitly
incorporating a referenced writing rather than merely pointing to it, “the
requirement that parties show assent to be bound by terms of a contract” could
not be satisfied. Id.
Dixon thus plainly held that under Kentucky law, mere reference to
another writing in a contract is not sufficient to incorporate and bind the
parties to that writing. Rather, the contract must use clear “language
indicating” that the other writing is “actually being incorporated.” Id.; see also,
e.g., Big Sandy Co., L.P. v. EQT Gathering, LLC, 545 S.W.3d 842, 843-45 (Ky.
2018) (noting map was incorporated into contract where contract stated map
was “made a part hereof”); Buck Run Baptist Church, Inc. v. Cumberland Sur.
Ins. Co., Inc., 983 S.W.2d 501, 503 (Ky. 1998) (finding other writing
incorporated where contract stated other writing was made a part “the same as
though it was set forth herein.”).
Other authorities are consistent. For example, while the majority
decision notes that Williston on Contracts states incorporation may be
accomplished by clear reference and description of the writing to be
incorporated, it omits the immediately preceding sentence from the treatise
noting that this statement applies in “the situation in which the parties have
expressed their intention to have one document’s provision read into a separate
37
document.” 11 Williston on Contracts § 30:25 (4th ed.) (emphasis added). Or
as noted in American Jurisprudence,
In order for an instrument to be incorporated into and become part
of a contract, the instrument must actually be incorporated; it is
not enough for the contract to merely mention the
instrument, and the referring language in the contract must
demonstrate the parties intended to incorporate all or part of
the referenced instrument.
17A AM. JUR. 2D Contracts § 381 (emphasis added).14
Nor is the majority opinion correct in asserting that our decision in Britt
is consistent with a holding that incorporation may be accomplished without
language actually incorporating the other writing. In Britt, the University of
Louisville hired Dr. Britt as a professor and provided her with an initial letter
setting forth a salary and work duties. Britt, 628 S.W.3d at 3. Subsequent
annual letters provided for “continuation” of that employment. Id. at 7. Dr.
Britt sued for breach of contract. Id. at 4. This Court held that although the
subsequent letters did not include salary and work duty terms, damages could
be calculated on the basis of prior performance because the parties intended
Dr. Britt to perform substantially similar tasks for the same salary as her prior
appointment. Id. at 7.
14 The majority opinion refers to a comment to RESTATEMENT (SECOND) OF
CONTRACTS § 132 as support for its conclusion because the comment states a signed
writing may incorporate an unsigned writing by implication, physical attachment, or
circumstances indicating it clearly relates to the same transaction and the parties
have acquiesced. See cmt. c. However, this provision of the Restatement relates to a
use of several writings to comprise a memorandum memorializing an oral agreement
to satisfy the Statute of Frauds. It does not address the issue presented here, i.e. the
method by which one writing may be incorporated into another written agreement. In
any event, our analysis in Dixon is directly relevant Kentucky authority regarding
incorporation of other writings into a written contract and thus should control over
any allegedly contrary comment in the Restatement.
38
From this the majority opinion concludes the Court must have found
that the initial letter was incorporated into the subsequent letters, even though
the subsequent letters did not reference the initial letter. However, the
question addressed by the Court when it considered prior performance was not
whether the subsequent letters incorporated the original letter by reference,
but rather whether the terms of the letters were sufficiently definite to allow for
a calculation of damages. Id. Indeed, nowhere in the Britt opinion did the
Court even consider, much less suggest or hold, that the subsequent letters
incorporated the initial letter.15
Rather, the Court considered whether those letters incorporated the
University’s Redbook governance document and related policy statements. In
addressing that issue, the Court once again noted that incorporation by
reference may be accomplished only by “clear language expressing the
incorporation of [the] other terms and conditions.” Id. at 8 (cleaned up)
(emphasis added). The Court further noted that the letters stated the parties’
agreement would be “governed” by and “subject to” the Redbook and
15 The majority ponders how the Court in Britt “could . . . have found that the
three latter letters of employment, which did not state the material terms of salary,
were nonetheless a written contract for purposes of KRS 45A.245(1), when they did
not have any language to the effect that the original employment letter’s salary term
would ‘control, decide, or affect’ the on-going employment relation between Britt and
the University of Louisville?” The answer is simple: each subsequent letter stated it
was a “continuation” of Dr. Britt’s employment. Id. Though the Court was not faced
with the issue and thus did not decide whether this was sufficient to accomplish
incorporation, stating that a prior contractual relationship will “continue” is
sufficiently clear language to refer to and actually incorporate that contract into a
subsequent agreement. See id. (“Importantly, the letter provides that the University
intends to continue Dr. Britt’s employment. On its face, this indicates that—absent an
agreement to the contrary—the parties intended for Dr. Britt to perform substantially
similar tasks for the same compensation due under her prior appointment.”).
39
accordingly found the Redbook incorporated because that language indicated
the Redbook would “control, decide, or affect” the parties’ contractual
relationship. Id. Britt thus offers no support for the majority opinion’s
conclusion that incorporation may be accomplished by mere reference to
another writing. To the contrary, Britt’s holding that incorporation by reference
was accomplished by language showing the other writing would “control,
decide, or affect” the contract is entirely consistent with Dixon’s holding that
incorporation must be accomplished by clear language indicating the other
writing is “actually being incorporated” into the parties’ contract. Dixon, 483
S.W.3d at 346.
The two nineteenth-century cases relied upon in the majority opinion do
not support departing from our current Kentucky law regarding incorporation.
M’Dowell v. Hall simply held that where two contracts have conflicting terms,
both “should be taken into consideration” to ascertain the parties’ true intent.
5 Ky. at 611. M’Dowell did not address incorporation by reference. And
though Dillingham v. Estill held that parol proof could be used to show that two
instruments were part of a single agreement even where the instruments did
not refer to one another, 33 Ky. at 23, its holding is contrary to our more recent
jurisprudence requiring “clear language expressing the incorporation of” another
writing, i.e. “language indicating . . . that [the other writing is] actually being
incorporated.” Dixon, 483 S.W.3d at 344, 346 (cleaned up) (emphasis added).
Dillingham is also contrary to the general trend of the law requiring express
language of incorporation and therefore should be overruled, not followed. See
40
17A AM. JUR. 2D Contracts § 381 (“[I]t is not enough for the contract to merely
mention the instrument, and the referring language in the contract must
demonstrate the parties intended to incorporate all or part of the referenced
instrument.”); Jones v. Bituminous Cas. Corp., 821 S.W.2d 798, 801 (Ky. 1991)
(recognizing “our obligation to modify or overrule precedent which is no longer
viable in terms of present development of the law.”).
In sum, Dixon plainly holds that another writing may be incorporated
into a contract only by clear language indicating that the other writing is
“actually being incorporated” into the parties’ agreement. 483 S.W.3d at 346.
A mere reference to another writing does not suffice, even if that writing
regards the same subject matter as the contract. See id. The SFO relied on by
Appellees contains no reference to the tuition and fees information contained in
the Bulletin, much less “clear language” indicating that information was
actually incorporated into the SFO. As such, I disagree with the majority’s
conclusion that the parties incorporated the Bulletin’s tuition and fees
information into the SFO and thus find no written contract sufficient to
support a finding of waiver of the University’s governmental immunity under
KRS 45A.245(1).
II. The Majority Decision Is A Judicial Expansion Of KRS
45A.245’s Limited Waiver Of Governmental Immunity Only
For Claims On “Written Contracts.”
After setting forth its understanding that incorporation by reference
requires only “a clear reference to the document being incorporated,” the
majority opinion then acknowledges the SFO does not even contain such a
41
reference to the Bulletin, the writing allegedly supplying the terms relied upon
by Appellees: “the SFO does not expressly mention, point to, or adopt the
Bulletin insofar as the Bulletin contains the requisite tuition and fee rates.” No
matter, the majority says: we can simply look to the “overwhelming implication
and surrounding circumstances” to conclude the Bulletin’s tuition and fees
information is incorporated into the SFO. Again, I disagree.
First, Dixon wholly forecloses any conclusion that incorporation may be
accomplished by looking to “implication” and “surrounding circumstances.” In
Dixon, the circumstances strongly suggested a connection between the student
enrollment agreement and the arbitration provision. Indeed, the arbitration
provision was found on the reverse side of the agreement, and the agreement
itself pointed to it. Dixon, 483 S.W.3d at 337, 345. In addition, the arbitration
provision plainly related to the same subject matter as the agreement—it
provided a mechanism for resolution of disputes arising under the agreement.
Id. at 337. Despite these circumstances and their implications, this Court
found the agreement did not incorporate the arbitration provision given the
lack of any clear “language indicating [the arbitration provision was] actually
being incorporated.” Id. at 346. The majority opinion’s holding to the contrary
today simply cannot be squared with Dixon.
Second, even if incorporation could be accomplished via implication and
consideration of surrounding circumstances, it would result at most in an
implied contract for which the General Assembly has not waived governmental
immunity. An implied contract is one in which “some one or more of the terms
42
and conditions are to be implied from the circumstances or conduct of the
parties.” Furtula, 438 S.W.3d at 308 n.6 (quoting Dorton v. Ashland Oil & Ref.
Co., 303 Ky. 279, 197 S.W.2d 274, 275-76 (1946)). Such a contract is, by
definition, not written. Id. (“By definition, ‘[a]n implied contract is one neither
oral nor written . . . .’” (quoting Hammond v. Heritage Commc’ns, Inc., 756
S.W.2d 152, 154 (Ky. App. 1988))). As we have repeatedly recognized, however,
KRS 45A.245 waives governmental immunity only for claims on a “lawfully
authorized written contract.” KRS 45A.245(1) (emphasis added); Britt, 628
S.W.3d at 5 (“KRS 45A.245 waived immunity for all written contracts with the
state . . . .”) (emphasis added). The plain language of the statute—which as a
waiver of immunity must be strictly construed—references no waiver of claims
based on implied contracts. See Jones v. Cross, 260 S.W.3d 343, 345 (Ky.
2008) (“Statutes in derogation of the state’s sovereign immunity will be strictly
construed in favor of the state unless the intention of the legislature to do
otherwise is clearly expressed in the statute.”).
Yet here the majority decision concludes the University does not have
governmental immunity from the Appellees’ claims even though those claims
are premised on terms not contained or explicitly incorporated in the written
contract, but rather divined from “overwhelming implication and surrounding
circumstances.” Where, as here, one must resort to implication and
surrounding circumstances to determine the terms of a contract, the contract
is by definition implied rather than written. The majority’s decision thus
judicially expands the scope of the governmental immunity waiver provided in
43
KRS 45A.245 to include not only written contracts, but also implied contracts.
I therefore also disagree with the majority’s conclusion that a contract claim
against the state premised on incorporation purportedly accomplished by
implication and circumstance may proceed without violating KRS 45A.245’s
express limitation of waiver to claims on written contracts.
It is beyond cavil that Appellees’ claims are not premised on the terms of
any “written contract.” The majority states:
[I]t is clear the Appellees and the University entered into a written
contract offered by the University, to receive a collegiate-level
education in exchange for the payment of an applicable tuition,
based on the registered classes, at a rate determined by the
University; and to the use of ancillary services offered by the
University such as (but not limited to) health services and
recreational facilities in exchange for the mandatory fees.
Yet the majority opinion points to no written contractual language setting forth
any such terms. This is unsurprising, given that no such writing appears in the
record. Perhaps those are the terms the majority imagines should constitute
the basis of the relationship between the University and its students. But
“[t]here is no better established rule of law in this state than that a court
cannot make a contract for the parties, but can only construe the contract it
finds they have entered into. Nor has the court the authority to read words
into a contract.” Big Sandy Co., 545 S.W.3d at 847 (quoting Alexander v.
Theatre Realty Corp., 253 Ky. 674, 70 S.W.2d 380, 387-88 (1934)). The
majority errs in doing so here.16
16 The dangers inherent in a judicial imposition of unwritten contractual terms
are evident in the majority’s conclusion that the parties here must have agreed tuition
would be assessed “at a rate determined by the University.” The Council on
44
III. Even If The Majority Opinion’s View Of Incorporation Was
Correct, The Bulletin Would Be Incorporated Only For
Purposes of the Drug-Free Policy.
Finally, it again bears noting that the only reference to the Bulletin in the
SFO is as follows:
Note: Copies of the Drug-Free Policy can be found in the UK
Bulletin and Schedule of Classes which can be obtained from the
Registrar’s Office.
(Web addresses removed). Even assuming a contract could incorporate
another writing by mere reference, the language of the SFO makes clear such
incorporation would be for purposes of the Drug-Free Policy only.
Where parties reference only a portion of another writing in their
contract, only the referenced portion is incorporated and only for the specific
purposes indicated. See Twin City Fire Ins. Co. v. Terry, 472 S.W.2d 248, 249
(Ky. 1971) (“Where a writing refers to another document, that other document,
or so much of it as is referred to, is to be interpreted as part of the writing.”
(quoting 4 Williston on Contracts § 628 (1961))) (emphasis added). Or as stated
in Williston on Contracts,
When a writing refers to another document, that other document,
or the portion to which reference is made, becomes constructively a
part of the writing . . . . [I]t is important to note that when
incorporated matter is referred to for a specific purpose only, it
Postsecondary Education—not the University—determines tuition rates at Kentucky
public universities, including at the time the Appellees registered. KRS 164.020(8)(a)
(“The Council on Postsecondary Education shall . . . [d]etermine tuition . . . .”); 13 KAR
2:045 (“KRS 164.020(8) requires the Council on Postsecondary Education to determine
tuition . . . .”); 13 KAR 2:050 § 1 (“The Council on Postsecondary Education sets the
tuition for all students enrolled in each public institution of higher education
[including the] University of Kentucky . . . .”) (expired Mar. 1, 2020 pursuant to KRS
13A.3102).
45
becomes a part of the contract for that purpose only, and should
be treated as irrelevant for all other purposes.
11 Williston on Contracts § 30:25 (4th ed.) (emphasis added); see also 17A AM.
JUR. 2D Contracts § 381 (“[A] reference in a contract to another instrument will
incorporate the other instrument only to the extent indicated and for the
specific purpose indicated.”). Here, even if one could conclude the parties
manifested sufficient assent to incorporate some portion of the Bulletin into the
SFO, such assent could only be to inclusion of the Bulletin’s Drug-Free Policy
as referenced in the SFO. This reference is plainly insufficient to also
incorporate the Bulletin’s tuition and fees information. I disagree with the
majority’s conclusion to the contrary.
In sum, the majority decision’s holding that mere reference to another
writing suffices to incorporate that writing into a contract is directly contrary to
our holding in Dixon that mere reference is not enough absent additional clear
“language indicating . . . [the other writing is] actually being incorporated.”
Dixon, 483 S.W.3d at 346. In addition, the majority opinion’s finding that the
Commonwealth does not have governmental immunity against claims premised
on terms found solely by implication and circumstance judicially expands KRS
45A.245 beyond its plain language to waive governmental immunity not only as
to claims on written contracts, but also as to claims on implied contracts.
Finally, the majority decision also ignores the express language of the SFO
indicating that if the Bulletin were incorporated at all, it would be solely for
purposes of the Drug-Free Policy.
46
Because Appellees’ claims are not based on any terms set forth in a
written contract or incorporated into a written contract with the University, I
would find that the University has governmental immunity against the
Appellees’ claims and reverse the Court of Appeals and the Franklin Circuit
Court. For the foregoing reasons, I respectfully dissent.
Nickell, J., joins. Keller, J., concurs in result only.
NICKELL, J., DISSENTING: I respectfully dissent. Morally, a
governmental entity should not be shielded from an alleged breach of its
obligations any more than the average citizen. See Cullinan v. Jefferson Cnty.,
418 S.W.2d 407, 411 (Ky. 1967) (Palmore, J., dissenting), overruled by Yanero
v. Davis, 65 S.W.3d 510 (Ky. 2001)). Nevertheless, the application of
governmental immunity is mandated under Section 231 of the Kentucky
Constitution. Id. Although I share the frustration of my fellow Justices with
the apparent unfairness17 of the present situation, the Students cannot
overcome the University’s immunity because the enrollment procedure and
associated materials do not amount to an express written contract.
17 I would further note the wisdom or efficacy of the University’s response to the
COVID-19 pandemic is not a question properly before us. Generally, courts do not
interfere with the operations of a university in the absence of a clear legal violation.
Lexington Theological Seminary, Inc. v. Vance, 596 S.W.2d 11, 14 (Ky. App. 1979).
Prior to the COVID-19 pandemic, courts afforded colleges and universities the
necessary flexibility and discretion to respond to emergencies that required the closing
of campus. See, e.g., Roe v. Loyola Univ. New Orleans, No. 07-1828, 2007 WL
4219174, at *1-2 (E.D. La. Nov. 26, 2007) (dismissing breach of contract claim where
law school transferred students to a nearby law school for one semester while campus
was closed following Hurricane Katrina); Paynter v. New York Univ., 66 Misc.2d 92,
319 N.Y.S.2d 893, 893 (App. Div. 1971) (dismissing breach of contract claim where
defendant suspended classes following anti-war student protests and shooting at Kent
State University).
47
Under Kentucky law, the relationship between an enrolled student and a
college or university is undoubtably contractual in nature.18 Lexington
Theological Seminary, Inc. v. Vance, 596 S.W.2d 11, 14 (Ky. App. 1979) (citing
15A Am. Jur. 2d Colleges and Universities § 31). However, the fact that a
university is contractually obligated to its students “merely begs the question of
what has been promised.” See Center Coll. v. Trzop, 127 S.W.3d 562, 568 (Ky.
2003) (quoting Fellheimer v. Middlebury Coll., 869 F.Supp. 238, 243 (D. Vt.
1994)). Many courts have recognized that express contracts between students
and universities “are rarely prepared.” Wickstrom v. North Idaho Coll., 111
Idaho 450, 725 P.2d 155, 157 (1986). Indeed, enrollment at a university
typically gives rise to an implied contract, “and if the student complies with the
terms prescribed by the university and completes the required courses, the
university must award the student a degree.” 15A Am. Jur. 2d Colleges and
Universities § 25; 14A C.J.S. Colleges and Universities § 42. The rights and
obligations of the parties as contained in the bulletins, handbooks, and
regulations made available to the student become a part of the implied
contract. See Vought v. Teachers College, Columbia Univ., 127 A.D.2d 654, 511
N.Y.S.2d 880, 881 (2nd Dep’t. 1987); Ali v. Univ. of Louisville, No. 3:17-cv-
00638-RGJ, 2019 WL 539098, at *9 (W.D. Ky. Feb. 11, 2019); and Green v.
18 While published Kentucky decisions often concern the relationship between a
student and a private educational institution, the same rule can be applied to public
universities. See, e.g., Healy v. Larsson, 67 Misc.2d 374, 323 N.Y.S.2d 625, 626 (N.Y.
1971).
48
Sandy, No. 5:10-CV-367-JMH, 2011 WL 4688639, at *4 (E.D. Ky. Oct. 3,
2011).
In the present appeal, the Student Financial Obligation (“SFO”)
unquestionably references the contractual relationship between the Students
and the University. However, simply because a written document references a
contractual obligation does not necessarily mean the written document is,
itself, an express written contract. “A written contract is one which is all in
writing, so that all its terms and provisions can be ascertained from the
instrument itself.” Mills v. McGaffee, 254 S.W.2d 716, 717 (Ky. 1953). The
traditional rule is that “a written instrument which sets forth the undertaking
of the persons executing it or discloses terms from which such an undertaking
can be imported, and which shows the consideration for the undertaking, and
which identifies the parties thereto, will be considered a contract in writing.”
Id.Moreover, when an action is based upon a written contract, “the action
must be upon the writing and it is not enough that the evidence by which the
cause of action is supported is in writing.” Held v. Held, 137 F.3d 998, 1001
(7th Cir. 1998) (quoting Ames v. Crown Life Ins. Co. of Toronto, Canada, 85
Ill.App.3d 203, 40 Ill.Dec. 521, 525, 406 N.E.2d 222, 226 (1980)). Here,
neither the SFO nor the Bulletin recites the material terms or promises
concerning in-person instruction and other services which the Students are
seeking to enforce in this litigation. Instead, the Students have sought to
amalgamate a disparate series of written documents into a single written
49
contract. Crucially, the lack of definite, material terms in the purported
written contract, coupled with the nature of the student-university
relationship, distinguishes the present appeal from our decision in Britt. 628
S.W.3d at 6.
In Britt, we held a series of letters constituted a written employment
agreement when the letters specified the employee’s salary, the duration of
employment, and details concerning the receipt of work assignments. Id.
Additionally, the letters explicitly incorporated “all rules and regulations
promulgated on the authority of the University of Louisville Board of Trustees
and the governance document known as The Redbook.” Id. at 8. The
purported written contract in the present appeal does not approach the
specificity of terms underlying our decision in Britt. Further, without
sufficiently definite terms, I am “left to wonder” which specific terms the parties
intended to constitute the original terms of the agreement and which terms
were incorporated by reference. See Dixon, 483 S.W.3d at 345. Such
puzzlement epitomizes implied terms as opposed to those expressly written.
In the absence of clear language signifying the mutual intent of the
parties to so bind themselves, I cannot conclude a written contract exists.
Again, I do not lightly discount the harsh result mandated by governmental
immunity. Otherwise, the Students could have proceeded under an implied
contract theory. Nonetheless, Kentucky courts cannot draft contracts for the
benefit of one party or the other. See Frear v. P.T.A. Indus., Inc., 103 S.W.3d
99, 106 (Ky. 2003). Therefore, I dissent.
50
Bisig, J., joins. Keller, J., concurs in result only.
COUNSEL FOR APPELLANT:
Joshua M. Salsburey
Donald C. Morgan
Sturgill, Turner, Barker, Moloney, PLLC
William E. Thro
Shannan B. Stamper
University of Kentucky Office of Legal Counsel
COUNSEL FOR APPELLEE:
Andre F. Regard
Ivey L. Workman
Regard Law Group, PLLC
COUNSEL FOR AMICI CURIAE, EASTERN KENTUCKY
UNIVERSITY, MURRAY STATE UNIVERSITY, NORTHERN KENTUCKY
UNIVERSITY, UNIVERSITY OF LOUISVILLE, AND WESTERN KENTUCKY
UNIVERSITY:
Donna K. Perry
Jeremy S. Rogers
Alina Klimkina
August Johannsen
Dinsmore & Shohl LLP
51