Kkr & Co., Inc. v. Jeffrey C. Mayberry ( 2023 )

RENDERED: APRIL 14, 2023; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-1307-MR
KKR & CO., INC. (FORMERLY KKR
& CO., L.P.; GEORGE ROBERTS;
GIRISH REDDY; HENRY KRAVIS;
JANE BUCHAN; PAAMCO PRISMA,
LLC (FORMERLY PACIFIC
ALTERNATIVE ASSET
MANAGEMENT COMPANY, LLC);
AND PRISMA CAPITAL PARTNERS CROSS-APPELLANTS
LP
CROSS-APPEAL FROM FRANKLIN CIRCUIT COURT
v. HONORABLE PHILLIP J. SHEPHERD, JUDGE
ACTION NO. 17-CI-01348
JEFFREY C. MAYBERRY; ALISA
BENNETT; ASHLEY HALL-NAGY;
BLACKSTONE ALTERNATIVE
ASSET MANAGEMENT; BOBBIE D.
HENSON; BOBBY ESTES; BRENT
ALDRIDGE; CAVANAUGH
MACDONALD CONSULTING, LLC;
COMMONWEALTH OF KENTUCKY;
DAVID PEDEN; HON. BRANDY O.
BROWN; ICE MILLER, LLP; J.
TOMILSON HILL; JACOB WALSON;
JANE BUCHAN; JENNIFER ELLIOT;
JIM VOYTKO; MARTHA M.
MILLER; R.V. KUHNS &
ASSOCIATES, INC.; RANDY
OVERSTREET; REBECCA A.
GRATSINGER; STEVE ROBERTS;
STEVEN A. SCHWARZMAN; T.J.
CARLSON; TERESA M. STEWART;
THE BLACKSTONE GROUP L.P.;
THOMAS CAVANAUGH; THOMAS
ELLIOT; TIA TAYLOR; TIMOTHY
LONGMEYER; TODD GREEN;
VINCE LANG; WILLIAM A.
THIELEN; AND WILLIAM COOK CROSS-APPELLEES
AND
NO. 2021-CA-1312-MR
THE BLACKSTONE GROUP INC.
(FORMERLY THE BLACKSTONE
GROUP L.P.); BLACKSTONE
ALTERNATIVE ASSET
MANAGEMENT L.P.; J. TOMILSON CROSS-APPELLANTS
HILL; AND STEVEN A.
SCHWARZMAN
CROSS-APPEAL FROM FRANKLIN CIRCUIT COURT
v. HONORABLE PHILLIP J. SHEPHERD, JUDGE
ACTION NO. 17-CI-01348
JEFFREY C. MAYBERRY; ALISA
BENNETT; ASHLEY HALL-NAGY;
BOBBIE D. HENSON; BOBBY
ESTES; BRANDY O. BROWN;
BRENT ALDRIDGE; CAVANAUGH
MACDONALD CONSULTING, LLC;
COMMONWEALTH OF KENTUCKY;
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DAVID PEDEN; GEORGE ROBERTS;
GIRISH REDDY; HENRY KRAVIS;
ICE MILLER, LLP; JACOB WALSON;
JANE BUCHAN; JENNIFER ELLIOT;
JIM VOYTKO; KKR & CO., INC.;
KKR & CO., INC. (FORMERLY KKR
& CO., L.P.); MARTHA M. MILLER;
PAAMCO PRISMA, LLC
(FORMERLY PACIFIC
ALTERNATIVE ASSET
MANAGEMENT COMPANY, LLC);
PRISMA CAPITAL PARTNERS LP;
R.V. KUHNS & ASSOCIATES, INC.;
RANDY OVERSTREET; REBECCA
A. GRATSINGER; STEVE ROBERTS;
T.J. CARLSON; TERESA M.
STEWART; THOMAS CAVANAUGH;
THOMAS ELLIOT; TIA TAYLOR;
TIMOTHY LONGMEYER; TODD
GREEN; VINCE LANG; WILLIAM A.
THIELEN; AND WILLIAM COOK CROSS-APPELLEES
AND
NO. 2021-CA-1313-MR
R.V. KUHNS & ASSOCIATES, INC.;
JIM VOYTKO; AND REBECCA A.
GRATSINGER CROSS-APPELLANTS
CROSS-APPEAL FROM FRANKLIN CIRCUIT COURT
v. HONORABLE PHILLIP J. SHEPHERD, JUDGE
ACTION NO. 17-CI-01348
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JEFFREY C. MAYBERRY; ALISA
BENNETT; ASHLEY HALL-NAGY;
BLACKSTONE ALTERNATIVE
ASSET MANAGEMENT; BOBBIE D.
HENSON; BOBBY ESTES; BRANDY
O. BROWN; BRENT ALDRIDGE;
CAVANAUGH MACDONALD
CONSULTING, LLC;
COMMONWEALTH OF KENTUCKY;
DAVID PEDEN; GEORGE ROBERTS;
GIRISH REDDY; HENRY KRAVIS;
ICE MILLER, LLP; J. TOMILSON
HILL; JACOB WALSON; JANE
BUCHAN; JENNIFER ELLIOT; KKR
& CO., INC.; KKR & CO., INC.
(FORMERLY KKR & CO., L.P.);
MARTHA M. MILLER; PAAMCO
PRISMA, LLC (FORMERLY PACIFIC
ALTERNATIVE ASSET
MANAGEMENT COMPANY, LLC);
PRISMA CAPITAL PARTNERS LP;
RANDY OVERSTREET; STEVE
ROBERTS; STEVEN A.
SCHWARZMAN; T.J. CARLSON;
TERESA M. STEWART; THE
BLACKSTONE GROUP L.P.;
THOMAS CAVANAUGH; THOMAS
ELLIOT; TIA TAYLOR; TIMOTHY
LONGMEYER; TODD GREEN;
VINCE LANG; WILLIAM A.
THIELEN; AND WILLIAM COOK CROSS-APPELLEES
OPINION
AFFIRMING IN PART AND
VACATING IN PART
** ** ** ** **
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BEFORE: CETRULO, DIXON, AND TAYLOR, JUDGES.
DIXON, JUDGE: KKR & Co., Inc.; George Roberts; Girish Reddy; Henry
Kravis; Jane Buchan; PAAMCO Prisma, LLC (formerly Pacific Alternative Asset
Management Company, LLC); Prisma Capital Partners LP; the Blackstone Group
L.P.; Blackstone Alternative Asset Management; J. Tomilson Hill; Steven A.
Schwarzman; R.V. Kuhns & Associates, Inc.; Jim Voytko; and Rebecca A.
Gratsinger cross-appeal from the orders of the Franklin Circuit Court entered on
December 28, 2020, and June 14, 2021, deemed final and appealable by order
entered on September 21, 2021. Following a careful review of the record, briefs,
and law, we affirm in part and vacate in part.
FACTS AND PROCEDURAL BACKGROUND
This action began in late 2017 when eight members of the Kentucky
Public Pension Authority’s (“KPPA”)1 defined-benefit retirement plan brought
claims for alleged funding losses sustained by the plan against certain former
KPPA trustees and officers, as well as private investment advisors and hedge funds
and their principals. Plaintiffs provided the Attorney General of Kentucky2
(“OAG”) an advance copy of their complaint, but he declined to join the suit. In
1
Formerly known as the “Kentucky Retirement System.”
2
Governor Andy Beshear was Attorney General at that time.
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early 2018, the complaint was amended to include an additional defendant,
bringing the number to 32, including KPPA as a nominal defendant.
Shortly after the complaint was amended, half the defendants moved
the trial court to dismiss the action for lack of standing. Other defendants also
moved the trial court to dismiss the action, asserting a variety of defenses. The
trial court found Plaintiffs had standing and denied all motions to dismiss, except
that of the Government Finance Officers Association on other grounds.
The KPPA trustee and officer defendants filed interlocutory appeals
challenging the trial court’s rulings on standing and sovereign immunity, and the
Supreme Court of Kentucky accepted transfer of those appeals and consolidated
them in Overstreet v. Mayberry, 603 S.W.3d 244 (Ky. 2020).3 The Supreme Court
found “Plaintiffs lack an injury in fact sufficient to support constitutional standing”
and dismissed the case without reaching the immunity issue. Id. at 251. It
concluded its opinion, rendered July 9, 2020, stating:
Ultimately, this Court recognizes that Plaintiffs allege
significant misconduct, but, as a matter of law, these
eight Plaintiffs, as beneficiaries of a defined-benefit plan
who have received all of their vested benefits so far and
are legally entitled to receive their benefits for the rest of
their lives, do not have a concrete stake in this case. And
without a concrete stake in the case, the Plaintiffs lack
constitutional standing to bring their claims in our courts.
3
Other defendants sought writs of prohibition from the Kentucky Court of Appeals, which were
consolidated into what was referred to as the “Writ Case” and later found moot by the Supreme
Court in Overstreet. Id. at 251.
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We remand this case to the circuit court with direction to
dismiss the complaint.
Id. at 266. The opinion did not become final until July 30, 2020.
On July 20, 2020, pursuant to CR4 24, the OAG5 moved the trial court
to intervene on behalf of the Commonwealth of Kentucky. Defendants objected to
the OAG’s intervention, and the trial court did not immediately decide whether to
allow same.
On July 29, 2020, the plaintiffs moved the trial court for leave to file a
second amended complaint. The proposed modifications to the complaint were
made by the plaintiffs in an attempt to acquire the constitutional standing the
Supreme Court found lacking. In addition to more claims and a new defendant, the
proposed second amended complaint sought to add three plaintiffs – the “Tier 3”
plaintiffs – who enrolled in KPPA after January 1, 2014, claiming they were not
enrolled in a defined-benefit plan and their benefits were not protected by an
inviolable-contract statutory provision. Again, the trial court did not immediately
decide whether to allow the complaint to be amended.
Meanwhile, the OAG filed a separate action – Franklin Circuit Court
Civil Action No. 20-CI-00590 – which the trial court sua sponte consolidated with
4
Kentucky Rules of Civil Procedure.
5
By this time, Daniel Cameron had been elected Attorney General.
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this case on August 5, 2020. On August 13, 2020, a group of defendants objected
to further proceedings and moved the trial court to enforce the Supreme Court’s
mandate in Overstreet – by dismissing the complaint – and to vacate its
consolidation order, which would effectively end litigation in this case. Following
oral argument on August 24, 2020, the trial court vacated its August 5, 2020, order
consolidating the two cases.
On December 28, 2020, the trial court addressed the pending
intervention motion and motion to file an amended complaint. It entered an order
which allowed the OAG to intervene, but dismissed the plaintiffs’ complaint and
motion to file a second amended complaint.
Three days later, in another effort to obtain constitutional standing, the
three Tier 3 plaintiffs moved the trial court for leave to file a third amended
complaint, which did not include the original plaintiffs but did contain additional
revisions.
About one month later, the Tier 3 plaintiffs moved to intervene and
tendered a proposed intervening complaint in a last-ditch effort to insert
themselves back into this case. Naturally, the defendants objected to the
intervention. On June 14, 2021, the trial court entered an order denying the Tier 3
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plaintiffs’ motions to intervene and to file a third amended complaint.6 Thus, the
only remaining plaintiff in this circuit court action is the OAG.
On September 21, 2021, the trial court entered an order deeming its
orders entered on December 28, 2020, and June 14, 2021, final and appealable.7
Plaintiffs appealed but later voluntarily dismissed their appeal. Defendants cross-
appealed, and their combined appeals are now before us.
LEGAL ANALYSIS
These cross-appeals consist of two over-arching arguments: (1) the
trial court exceeded the Supreme Court’s mandate, and (2) the trial court lacked
subject-matter jurisdiction to adjudicate any motions for relief.
Concerning the first issue, the mandate rule, a tenet of the law-of-the-
case doctrine, dictates that trial courts are bound by opinions of the Supreme Court
and are, therefore, required to follow its mandate. Thus, the mandate rule
“provides that on remand from a higher court a lower court must obey and give
effect to the higher court’s express or necessarily implied holdings and
instructions.” Brown v. Commonwealth, 313 S.W.3d 577, 610 (Ky. 2010)
(citations omitted). In addition to serving litigants’ interests in finality, the
6
On August 31, 2021, five original plaintiffs and a new Tier 3 plaintiff moved the trial court to
intervene.
7
This order also denied the intervention motion of the original and Tier 3 plaintiffs.
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mandate rule serves “the equally important interest courts have in judicial
economy[] by preventing the drain on judicial resources that would result if
previous decisions were routinely subject to reconsideration.” Id. “In a
subsequent appeal following remand, this Court’s role is limited to whether the
trial court properly construed and applied the mandate.” James v. James, 636
S.W.3d 549, 554 (Ky. App. 2021) (citations omitted).
There are two types of mandates: limited and general. See Monroe v.
FTS USA, LLC, 17 F.4th 664, 669 (6th Cir. 2021), cert. denied, 142 S. Ct. 1232,
212 L. Ed. 2d 236 (2022). Limited mandates direct the lower court to do a specific
action, such as require the dismissal of a complaint, as occurred herein. See
Hutson v. Commonwealth, 215 S.W.3d 708, 713-14 (Ky. App. 2006). “With such
a mandate, the trial court’s authority is only broad enough to carry out that
specific direction.” Id. at 714 (emphasis added).
General mandates, however, give the lower court broader discretion as
to how to proceed. They may, for example, include wording such as, “this case is
remanded with instructions to conduct further proceedings not inconsistent with
this opinion” or similar language. Id.Here, the Supreme Court mandated that since Plaintiffs did not have
standing, the complaint must be dismissed. Ultimately, the trial court complied
with this directive and dismissed the complaint; however, the trial court exceeded
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its authority when it entertained various motions to amend and to intervene, and
more specifically by permitting the OAG to intervene.8
It has often been held “where the court does not direct a certain
judgment, the circuit court has the same power to permit amended pleadings to be
filed that it had before the reversal of the judgment.” Culton v. Napier, 242 Ky.
683, 687, 47 S.W.2d 519, 521 (1932). But, “[a] different rule prevails if [an
appellate] court orders the entry of a certain judgment. In such event no further
pleading to avoid a mandate can be filed except such as would justify a review of
the judgment.” Id.It is also well-established, “[t]he circuit court has not power after an
interlocutory decree made or directed by the mandate of this court to admit new
parties to make the same defen[s]e, or to allow the same parties to introduce
another defen[s]e existing before the first decree.” Kennedy’s Heirs v.
Meredith, 20 Ky. (T.B. Mon.) 409, 411 (1827) (emphasis added). That is precisely
what the plaintiffs attempted to do in the case herein, and it is simply
impermissible.
Accordingly, while the trial court did not err in dismissing the
complaint, it did err in entertaining and ruling upon the motions to amend and
8
In fact, had the circuit court not permitted the OAG to intervene all issues raised would be
moot.
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intervene as same exceeded its authority on remand in view of the Supreme
Court’s limited mandate. Therefore, while we must affirm the dismissal of the
complaint, we are equally obligated to vacate the orders resulting from the trial
court’s actions taken outside its authority on remand.9
Further, the cross-appellants’ second contention of error that the trial
court lacked subject-matter jurisdiction to adjudicate any motions for relief is
essentially moot. Because “[t]he scope of a lower court’s authority on remand of a
case is not measured in terms of its jurisdiction, but by the direction or discretion
contained in the appellate court’s mandate,” we need not discuss this second
argument as the result remains the same. Hutson, 215 S.W.3d at 713-14.
CONCLUSION
Therefore, and for the foregoing reasons, the orders entered by the
Franklin Circuit Court are AFFIRMED in part, as they relate to the dismissal of the
Overstreet plaintiffs’ claims, and VACATED in part, as they purport to grant or
deny motions – including but not limited to those to amend and intervene – made
after the Court’s opinion in Overstreet.
ALL CONCUR.
9
We note that this Opinion has no effect on the OAG’s separate case, Franklin Circuit Court,
Civil Action No. 20-CI-00590, as it was unconsolidated from the case herein by order entered
August 26, 2020, and remains active and pending.
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BRIEFS FOR CROSS-APPELLANTS BRIEF FOR CROSS-APPELLEE
PRISMA CAPITAL PARTNERS, THE COMMONWEALTH OF
L.P.; GIRISH REDDY; PACIFIC KENTUCKY:
ALTERNATIVE ASSET
MANAGEMENT COMPANY, LLC; Daniel Cameron
AND JANE BUCHAN: Attorney General of Kentucky
Barbara Edelman Victor B. Maddox
Grahmn Morgan Deputy Attorney General
John M. Spires
Seth T. Church Brett R. Nolan
Lexington, Kentucky Principal Deputy Solicitor General
Michael J. Garvey Daniel J. Grabowski
Peter E. Kazanoff Alexander Y. Magera
David Elbaum Assistant Solicitors General
Sarah A. Ricciardi
New York, New York Aaron J. Silletto
Assistant Attorney General
BRIEFS FOR CROSS-APPELLANTS Frankfort, Kentucky
R.V. KUHNS & ASSOCIATES, INC.;
JIM VOYTOKO; AND REBECCA A.
GRATSINGER:
Philip Collier
Thad M. Barnes
Jeffrey S. Moad
Louisville, Kentucky
Robin E. McGuffin
Lexington, Kentucky
BRIEFS FOR CROSS-APPELLANTS
BLACKSTONE ALTERNATIVE
ASSET MANAGEMENT L.P.; THE
BLACKSTONE GROUP L.P.;
STEVEN A. SCHWARZMAN; AND
J. TOMILSON HILL:
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Donald J. Kelly
Jordan M. White
Louisville, Kentucky
Brad S. Karp
Lorin L. Reisner
Andrew J. Ehrlich
Brette Tannenbaum
David P. Friedman10
New York, New York
BRIEFS FOR CROSS-
APPELLANTS, KKR & CO., INC.;
HENRY KRAVIS; AND GEORGE
ROBERTS:
Barbara Edelman
Grahmn Morgan
John M. Spires
Seth T. Church
Lexington, Kentucky
Barry Barnett
Abigail Noebels
Ryan Weiss
Houston, Texas
Steven Shepherd
New York, New York
10
Mr. Friedman’s name does not appear on the briefs for the cross-appeals. He was admitted
pro hac vice via separate order entered on March 13, 2023.
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