Kkr & Co. Inc. v. Commonwealth of Kentucky

RENDERED: DECEMBER 1, 2023; 10:00 A.M.
NOT TO BE PUBLISHED

Commonwealth of Kentucky
Court of Appeals
NO. 2022-CA-0347-MR

KKR & CO. INC. APPELLANT

APPEAL FROM FRANKLIN CIRCUIT COURT
v. HONORABLE PHILLIP J. SHEPHERD, JUDGE
ACTION NO. 21-CI-00348

COMMONWEALTH OF KENTUCKY APPELLEE

AND

NO. 2022-CA-0350-MR

PAAMCO PRISMA, LLC;
PAAMCO/PRISMA HOLDINGS, LLC;
AND PRISMA CAPITAL PARTNERS
LP APPELLANTS

APPEAL FROM FRANKLIN CIRCUIT COURT
v. HONORABLE PHILLIP J. SHEPHERD, JUDGE
ACTION NO. 21-CI-00348

COMMONWEALTH OF KENTUCKY APPELLEE

AND
 NO. 2022-CA-0352-MR

DANIEL BOONE FUND, LLC APPELLANT

APPEAL FROM FRANKLIN CIRCUIT COURT
v. HONORABLE PHILLIP J. SHEPHERD, JUDGE
ACTION NO. 21-CI-00348

COMMONWEALTH OF KENTUCKY APPELLEE

AND

NO. 2022-CA-0353-MR

BLACKSTONE ALTERNATIVE
ASSET MANAGEMENT
ASSOCIATES LLC; BLACKSTONE
ALTERNATIVE ASSET
MANAGEMENT L.P.; AND
BLACKSTONE HENRY CLAY FUND,
LLC APPELLANTS

APPEAL FROM FRANKLIN CIRCUIT COURT
v. HONORABLE PHILLIP J. SHEPHERD, JUDGE
ACTION NO. 21-CI-00348

COMMONWEALTH OF KENTUCKY APPELLEES

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 OPINION
AFFIRMING IN PART,
REVERSING IN PART,
AND REMANDING

** ** ** ** **

BEFORE: CALDWELL, DIXON,1 AND ECKERLE, JUDGES.

CALDWELL, JUDGE: The main question presented in these appeals is whether

indemnity clauses in several investment-related contracts involving the Kentucky

Retirement Systems, now called the Kentucky Public Pensions Authority

(“Retirement”) are unconstitutional. The Kentucky Attorney General (“OAG”)

challenged the constitutionality of those indemnity clauses by filing a declaratory

judgment action in the Franklin Circuit Court. The trial court found the indemnity

clauses to be unconstitutional in a seventy-six-page order.2 We agree. However,

we must reverse and remand for an evidentiary hearing the trial court’s grant of

1
Judge Donna Dixon concurred in the Opinion prior to her retirement effective November 20,
2023. Release of this Opinion was delayed by administrative handling.
2
Among those named by the OAG as defendants were KKR & Co., Inc. (f/k/a KKR & Co.,
L.P.), Prisma Capital Partners LP, Prisma Capital Partners LLC, Blackstone Alternative Asset
Management L.P., Blackstone Alternative Asset Management Associates LLC, PAAMCO
Prisma, LLC (f/k/a Pacific Alternate Asset Management Company, LLC), PAAMCO Bluegrass,
Inc., Daniel Boone Fund, and Henry Clay Fund. Those defendants have a tangled history,
including name changes and some defendants being owned by others in whole or in part at
various points. To try to simplify matters, we shall simply refer to the Appellants as KKR,
Prisma, BAAM, PAAMCO, the Boone Fund, and the Clay Fund or, collectively, Appellants.
Because it is not necessary to do so in order to resolve the issues before us, we refrain from
relating in detail the Appellants’ corporate histories or the ownership interests thereof.

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summary judgment to the OAG stemming from a motion to dismiss for lack of

personal jurisdiction filed by KKR.

I. RELEVANT FACTUAL AND PROCEDURAL HISTORY

The facts underlying these appeals are complex and the circuit court

record is over 5,000 pages long, so we shall attempt to simplify, streamline, and

summarize to the maximum extent possible. Moreover, we have considered the

entirety of the parties’ voluminous briefs but will only discuss the arguments and

factual recitations therein which we deem crucial to resolve properly these appeals.

All issues raised by the parties which are not discussed herein lack merit, are

redundant or are otherwise unnecessary for us to address.

To understand why the OAG filed the underlying declaratory

judgment action we must discuss what is commonly referred to as the Mayberry

action, which was filed in 2017 by eight individual members of Retirement. As we

explained in an unpublished opinion resolving a case related to Mayberry:

The Mayberry Plaintiffs originally sued current and
former trustees and officers of [Retirement], as well as
certain outside advisors and investment managers,
including Appellants PAAMCO and Prisma, for leading
[Retirement] to enter into three “fund-of funds” hedge-
fund investments. The Plaintiffs alleged that these
investments were unsuitable, underperformed relative to
the stock market, and increased [Retirement’s] unfunded
pension liabilities. The Plaintiffs did not provide
[Retirement] with advance notice that they were filing
suit, nor did they obtain legal authorization to bring
claims on behalf of [Retirement]. Rather, they opted to

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 sue [Retirement] as a nominal defendant, contending that
[Retirement’s] Board of Trustees was conflicted and
incapable of evaluating whether [Retirement] should
assert the claim independently.

...

[Eventually], the Mayberry Plaintiffs and
“Nominal Defendant” [Retirement] filed a Joint Notice
with the circuit court indicating that . . . [Retirement]
“will not pursue the claims asserted by [the Mayberry]
Plaintiffs” but the claims “appear to have merit,” and
[Retirement] “believes that it is in the best interests of
[Retirement] for [the Mayberry] Plaintiffs to continue
their pursuit of these claims on a derivative basis on
[Retirement]’s behalf.”

Prisma Capital Partners, LP v. Kentucky Retirement Systems, No. 2019-CA-

000700-MR, 2020 WL 5083454, at *2 (Ky. App. Aug. 28, 2020). In another

related opinion, our Supreme Court described the Mayberry plaintiffs as having

alleged the “fund-of-fund” investments had “lost over $100 million by 2018 and

further accumulated fees expected to measure in the hundreds of millions of

dollars. These losses, according to [the Mayberry] Plaintiffs, contributed to what is

now a $25 billion funding shortfall in [Retirement’s] general pool of assets.”

Overstreet v. Mayberry, 603 S.W.3d 244, 250 (Ky. 2020) (internal quotation marks

omitted).

The merits of Mayberry were never fully resolved because our

Supreme Court unanimously held the Mayberry plaintiffs lacked standing and

remanded the matter to the Franklin Circuit Court “with direction to dismiss the

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complaint.” Id. at 266. However, in the gap between the issuance of that opinion

and it becoming final, the OAG asked the trial court to intervene as a plaintiff in

Mayberry. See KKR & Co., Inc. v. Mayberry, ___ S.W.3d ___, 2023 WL

2939473, at *2 (Ky. App. Apr. 14, 2023) (not yet final). The OAG also filed a

similar separate action, id., which – as of the writing of this Opinion – remains

pending. Franklin Circuit Court Action No. 20-CI-00590. Despite our Supreme

Court’s directive to “dismiss the complaint[,]” the Franklin Circuit Court granted

the OAG’s motion to intervene as a plaintiff in Mayberry. Id. But we recently

held the trial court erred by permitting that intervention since our Supreme Court

had specifically ordered the case to be dismissed. Id. at *3-4.

Meanwhile, having incurred substantial defense costs in Mayberry,

some Appellants sought indemnity from Retirement.3 Specifically, Prisma sued

3
Though the parties vigorously dispute whether the clauses at issue are true indemnification
provisions, there appears to be little practical difference between an indemnity clause and a
reimbursement or hold harmless clause. We have held that “[a] contract of indemnity is an
obligation or duty requiring a promisor . . . to make good any loss or damage which another has
incurred while acting at the request or for the benefit of the promisor.” Intercargo Ins. Co. v.
B.W. Farrell, Inc., 89 S.W.3d 422, 426 (Ky. App. 2002). Indemnify is defined in relevant part as
“[t]o reimburse (another) for a loss suffered because of a third party’s or one’s own act or
default; HOLD HARMLESS.” Indemnify, BLACK’S LAW DICTIONARY (11th ed. 2019). An
indemnity clause is similarly defined as “[a] contractual provision in which one party agrees to
answer for any specified or unspecified liability or harm that the other party might incur. – Also
termed hold-harmless clause; save-harmless clause.” Indemnity clause, BLACK’S LAW
DICTIONARY (11th ed. 2019).
Given those definitions, we reject Appellants’ argument that indemnity only involves an
obligation to repay another for costs incurred due to the conduct of a third party. Indemnity may
involve reimbursement for costs incurred due to the obligor’s own conduct under the plain
language of the definition of indemnity and indemnity clause. Thus, we agree with the OAG that
the contracts at issue contain indemnity clauses, and we shall refer to them as such.

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Retirement in a Delaware state court, BAAM sued Retirement in a Delaware state

court, and PAAMCO sued Retirement in a California state court. BAAM later

dismissed its Delaware action and sued Retirement in the Franklin Circuit Court.

The circuit court dismissed BAAM’s action on ripeness grounds, a decision we

recently affirmed. Blackstone Alternative Asset Management L.P. v. Kentucky

Public Pensions Authority, No. 2022-CA-0494-MR, 2023 WL 3556612, at *1 (Ky.

App. May 19, 2023) (unpublished).

Although each contract has its own specific language, the essential

gist of each indemnity clause is the same (except for, as we shall later discuss, the

Boone Fund’s agreement which requires the indemnity to be paid from the Boone

Fund’s assets, not Retirement’s): Retirement agreed to reimburse Appellants for

costs they incurred due to a breach by Retirement. Appellants assert Retirement

committed an actionable breach when it agreed with the Mayberry plaintiffs’

allegations of wrongdoing regarding the hedge fund investments after having

asserted in the investment agreements challenged in Mayberry that it (Retirement)

was an informed, sophisticated, experienced investor.

Against that jumbled backdrop, the OAG filed this declaratory

judgment action in April 2021. Though lengthy, the complaint sought limited

relief: first, a declaration that the indemnity clauses were unenforceable and,

second, a declaration that the Commonwealth of Kentucky – in the form of

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Retirement – is immune from the Delaware and California breach of contract suits.

KKR filed a motion to dismiss based upon a lack of personal jurisdiction.

Ultimately, the trial court issued a ruling wholly favorable to the OAG. Appellants

then filed the four appeals at issue, all of which we shall resolve in this Opinion.4

II. ANALYSIS

A. Amici Curiae Motion

Before we address the issues, we first resolve a motion to file a brief

as amici curiae submitted by three law professors. Though we ultimately do not

adopt their positions, we appreciate their scholarly input and have granted the

amici’s motion by separate order.

B. Standards of Review

But before we attempt to untangle that Gordian procedural knot

inherent in the trial court granting summary judgment to the OAG on a motion to

dismiss filed by KKR, we first briefly list the applicable standards of review.

Motions to dismiss are governed by CR5 12.02, which provides:

Every defense, in law or fact, to a claim for relief in any
pleading . . . shall be asserted in the responsive pleading
thereto if one is required, except that the following
defenses may at the option of the pleader be made by
4
KKR & Co., Inc. v. Commonwealth of Kentucky, No. 2022-CA-0347-MR; PAAMCO Prisma,
LLC, et al. v. Commonwealth of Kentucky, No. 2022-CA-0350-MR; Daniel Boone Fund, LLC v.
Commonwealth of Kentucky, No. 2022-CA-0352-MR; and Blackstone Alternative Asset
Management L.P., et al. v. Commonwealth of Kentucky, No. 2022-CA-0353-MR.
5
Kentucky Rules of Civil Procedure.

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 motion: . . . (b) lack of jurisdiction over the person . . . .
If, on a motion asserting the defense that the pleading
fails to state a claim upon which relief can be granted,
matters outside the pleading are presented to and not
excluded by the court, the motion shall be treated as one
for summary judgment . . . .

When deciding a motion to dismiss “the pleadings should be liberally construed in

a light most favorable to the plaintiff and all allegations taken in the complaint to

be true. Because the issue of personal jurisdiction is a legal question to be

answered in light of those allegations” our review is de novo. Bondurant v.

St. Thomas Hosp., 366 S.W.3d 481, 483 (Ky. App. 2011) (citations omitted).

The standards governing summary judgment and motions under CR

12.02 are similar but “not interchangeable . . . .” Schell v. Young, 640 S.W.3d 24,

33 (Ky. App. 2021). A court may properly grant summary judgment only if:

as a matter of law, it appears that it would be impossible
for the respondent to produce evidence at the trial
warranting a judgment in his favor and against the
movant. Summary judgment is not intended as a
substitute for trial and should be cautiously applied.
Instead of deciding an issue of fact, the trial court reviews
the evidence to determine whether a real issue of fact
exists. And in performing this review, the trial court
must view the evidence through a lens colored in favor of
the party opposing summary judgment.

Kirby v. Lexington Theological Seminary, 426 S.W.3d 597, 604 (Ky. 2014)

(internal quotation marks, footnotes, and citations omitted).

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 In sum, a court may not grant summary judgment “if there exists a

material fact which requires a trial.” James Graham Brown Foundation, Inc. v. St.

Paul Fire & Marine Ins. Co., 814 S.W.2d 273, 276 (Ky. 1991). Inherent in that

summary judgment standard is an inflexible rule: a court may only “determine”

the presence of “genuine issues to be tried[;]” the court may not “resolve” any

genuine issues because all “[q]uestions relating to the credibility of witnesses and

the weight of the evidence must await trial.” Id. We review a decision to grant

summary judgment de novo. Schmidt v. Leppert, 214 S.W.3d 309, 311 (Ky. 2007).

C. KKR’s Motion to Dismiss

The first major issue we must confront is the propriety of the trial

court granting summary judgment to the OAG on a motion to dismiss for lack of

personal jurisdiction filed by KKR. Precedent requires a court to conduct an

evidentiary hearing when there are conflicting facts materially impacting a motion

to dismiss based on lack of personal jurisdiction. Because the trial court did not

follow that procedure, we reverse the summary judgment and remand for an

evidentiary hearing, followed by issuance of a new decision.

“A court must have personal jurisdiction to hear a matter affecting a

specific person.” Soileau v. Bowman, 382 S.W.3d 888, 890 (Ky. App. 2012).

Thus, the trial court had to first ensure that it had personal jurisdiction over KKR

to address the merits of the OAG’s KKR-related claims. KKR asserts it is not

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subject to the trial court’s jurisdiction because, inter alia, Kentucky is neither its

state of incorporation nor the location of its principal place of business. Of course,

being a nonresident does not automatically exempt a person or corporate entity

from the jurisdiction of Kentucky courts. As our Supreme Court explained:

the proper analysis of long-arm jurisdiction over a
nonresident defendant consists of a two-step process.
First, review must proceed under KRS[6] 454.210 to
determine if the cause of action arises from conduct or
activity of the defendant that fits into one of the statute’s
enumerated categories. If not, then in personam
jurisdiction may not be exercised. When that initial step
results in a determination that the statute is applicable, a
second step of analysis must be taken to determine if
exercising personal jurisdiction over the non-resident
defendant offends his federal due process rights.

Caesars Riverboat Casino, LLC v. Beach, 336 S.W.3d 51, 57 (Ky. 2011).

In its motion to dismiss, KKR broadly asserted it “lacks any business

connections of its own with the Commonwealth of Kentucky . . . .” KKR

buttressed that assertion with an affidavit from one of its officials, Christopher Lee,

averring in relevant part:

Since KKR’s formation in 2007, KKR has never: (i)
leased or owned any real property in Kentucky; (ii)
maintained any office in Kentucky; (iii) had any
employees who resided or regularly worked in Kentucky;
(iv) registered to conduct business in Kentucky; (v)
maintained any bank account in Kentucky; or (vi)

6
Kentucky Revised Statutes.

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 conducted any business in Kentucky relating to
[Retirement] or [Prisma] . . . .

In its response, the OAG did not directly attack the contents of Lee’s

affidavit. Instead, the OAG asserted “the claims in this action arose from the

Defendants having transacted business and contracted to supply services in this

Commonwealth . . . .” The OAG emphasized that KKR had retained Kentucky

counsel to defend it in the Mayberry action. Finally, the OAG asserted KKR had

engaged in tortious conduct in Kentucky by making misrepresentations about the

funds invested by Retirement.

The trial court, obviously unsatisfied with the information provided by

the parties, based its decision in large part on its own copious independent

research. For example, the court cited numerous snippets from KKR’s website and

various filings KKR had submitted to the SEC. The court even cited to the

minutes of a meeting of the Alaska Retirement Management Board of Trustees.

All told, the court devoted roughly thirty pages of its summary judgment order to

relating its independent research. The trial court then noted a disparity between the

results of its independent research and Lee’s affidavit, noting that “Mr. Lee’s

Affidavit simply cannot be reconciled with other publicly-available facts.” Then

the court found the information it had independently ascertained was “more

inherently reliable” than Lee’s “troubling” affidavit.

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 KKR contends the trial court erred by conducting its own research and

by granting summary judgment on disputed facts. We disagree about the

independent research but agree about the grant of summary judgment.

As to the trial court’s research, Kentucky precedent does not constrict

courts to only considering information provided by the parties. Instead, our

Supreme Court has held that courts may “properly sua sponte consider documents

available to the general public.” Fox v. Grayson, 317 S.W.3d 1, 18 n.82 (Ky.

2010). Of course, a court must be careful to remain a neutral decisionmaker and

not become an advocate, and a party risks receiving an adverse ruling if it presents

insufficient information to a court since a court is not required to conduct its own

research. In short, a party should present sufficient information to a court to

support its position; however, a court has the discretion to conduct independent

research, so long as that research is limited to information available to the public.

Here, though unusually extensive, the trial court’s independent

research contained information available to the public. Consequently, we reject

KKR’s argument that the court committed reversible error simply by conducting its

own research.

The summary judgment itself is a different story. The trial court

casually stated that it did not really matter whether KKR’s motion was analyzed as

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a motion to dismiss or a motion for summary judgment. Indeed, sometimes that

does not matter. Fox, 317 S.W.3d at 7 n.21. But here, it did.

The overarching principle of summary judgment is that it is proper

only if there is not a “genuine issue as to any material fact . . . .” CR 56.03. The

judgment here states, correctly, that there is a factual gulf between the information

the court’s own research yielded and Lee’s affidavit. The presence of such a

dispute forecloses summary judgment. Patton v. Bickford, 529 S.W.3d 717, 723

(Ky. 2016) (“The trial court’s primary directive in this context is to determine

whether a genuine issue of material fact exists; if so, summary judgment is

improper[.]”). Nonetheless, the court resolved the dispute by crediting its own

research and discounting Lee’s affidavit. Kentucky precedent has long forbidden

granting summary judgment based on such credibility assessments or weighing of

conflicting evidence. James Graham Brown Foundation, Inc., 814 S.W.2d at 276.

Where there are material, disputed facts impacting whether a court has

personal jurisdiction over a party, Berthelsen v. Kane, 759 S.W.2d 831 (Ky. App.

1988) requires a court to hold an evidentiary hearing. In Berthelsen, a Nebraska

citizen (Berthelsen) filed a breach of contract suit in Kentucky against a citizen of

Michigan (Kane) and a business which was incorporated in Michigan but had its

principal place of business in Kentucky (Three D. Coal). Id. at 831. Both

defendants sought dismissal, alleging “the ‘minimum contacts’ requirement

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between them and Kentucky, necessary for Kentucky courts to exercise personal

jurisdiction over them as non-resident defendants under KRS 454.210, had not

been met.” Id.

We held the trial court erred by granting the motion to dismiss based

upon conflicting facts. Because of its relevance, we quote Berthelsen at length:

These jurisdictional defenses are among the seven
permitted to be raised by motion as well as by answer
pursuant to CR 12.02. In opting for “by motion” Kane
and Three D. Coal also chose the standards to be applied
by the trial court in ruling on the motion. These include
reading the challenged pleading as a whole and
construing any reasonable favorable inference in favor of
the plaintiff and to accept as true all material allegations
in the complaint.

In ruling on a motion to dismiss on jurisdictional
grounds, the trial court, in addition to considering the
material allegations in the complaint and construing them
as true, is free to hear evidence regarding jurisdiction and
to rule on that issue before trial, resolving factual
disputes when necessary.

Here the material allegations in the complaint
when construed as being true are sufficient to establish
the “minimum contact” requirement between Kane and
Three D. Coal in the transaction at hand with Kentucky
for Kentucky courts to exercise personal jurisdiction over
them under KRS 454.210.

No doubt the trial court in arriving at its decision
considered and relied on Kane’s, Three D. Coal’s, and
Berthelsen’s affidavits in support of their conflicting
factual contentions. The affidavits, however, rather than
resolving the conflict of facts they contained, merely
emphasized the ultimate conflict of fact that existed

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 regarding “minimum contacts.” An evidentiary hearing
at which proof could be presented to resolve the affidavit
conflicts should be had to enable the trial court to have an
evidentiary basis for its resolution of the conflicts.

In dismissing this action the trial court either
ignored the above standards or misapplied them. As a
result, at worst it was in error for doing so and at best
premature in the absence of an evidentiary hearing. This
later defect can be cured by the trial court providing a
hearing regarding the facts of “minimum contacts” and
considering them . . . in resolving any factual dispute
arising from such proof.

Id. at 831-32 (citations omitted).

There are two main takeaways from Berthelsen relevant here. First,

the trial court’s conversion of KKR’s motion to dismiss based on lack of personal

jurisdiction into a motion for summary judgment was improper. In Berthelsen, the

trial court considered affidavits but did not convert the motion to dismiss for lack

of personal jurisdiction to a motion for summary judgment – and we did not

instruct it to do so on remand.

Declining to convert a motion to dismiss based on a lack of personal

jurisdiction to a motion for summary judgment is supported by CR 12.02, which

facially only requires that conversion to occur if “matters outside the pleading are

presented to and not excluded by the court” and the motion “assert[s] the defense

that the pleading fails to state a claim upon which relief can be granted . . . .”

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KKR’s motion was based on a lack of jurisdiction, not a failure to state a viable

claim upon which relief may be granted. Thus, no conversion was necessary.7

Nonetheless, Kentucky appellate courts have sometimes approved

converting motions to dismiss based on a lack of personal jurisdiction to motions

for summary judgment. See, e.g., Hinners v. Robey, 336 S.W.3d 891, 893, n.1

(Ky. 2011). In Hinners, the Court cited CR 12.02’s conversion language but failed

to analyze whether that language applied to motions to dismiss based upon an

alleged lack of personal jurisdiction. In any event, the precise procedural

methodology in Hinners did not seem to impact the jurisdictional question. The

court unanimously concluded one contract formed on the internet between a

Kentuckian and a nonresident to purchase a vehicle was insufficient for a

Kentucky court to exercise jurisdiction over a nonresident. Id. at 902. In other

words, there is no indication that there were any meaningful factual disputes

bearing on the jurisdictional questions. Here, by contrast, the trial court admitted

7
Federal courts generally recognize that it is improper to convert motions to dismiss based on an
alleged lack of personal jurisdiction into summary judgment motions. 10A Fed. Prac. & Proc.
Civ. § 2713 (4th ed. 2023) (“In general, courts have ruled that summary judgment is an
inappropriate vehicle for raising a question concerning . . . personal jurisdiction . . . . Therefore,
although some courts have entered summary judgment on jurisdictional grounds, the general rule
is that it is improper for a district court to enter a judgment under Rule 56 for defendant because
of a lack of jurisdiction.”) (footnotes and citations omitted); Kerns v. Caterpillar, Inc., 583 F.
Supp. 2d 885, 891 n.1 (M.D. Tenn. 2008); Lavrov v. NCR Corp., 600 F. Supp. 923, 929 (S.D.
Ohio 1984). That approach makes sense because “a court that lacks personal or subject-matter
jurisdiction does not have power to enter any kind of a judgment – summary or otherwise.”
Pope v. Elabo GmbH, 588 F. Supp. 2d 1008, 1012 (D. Minn. 2008).

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that there are disputed evidentiary issues which directly bear on whether KKR is

subject to the jurisdiction of Kentucky courts.

Respectfully, we are confident that our Supreme Court would not

have converted the motion to dismiss in Hinners if the Court had analyzed the

precise “conversion” language of CR 12.02. After all, Hinners cites Berthelsen

with approval for the proposition that a court should conduct an evidentiary

hearing to resolve disputed jurisdictional facts when resolving a motion to dismiss

based on an alleged lack of personal jurisdiction. See Hinners, 336 S.W.3d at 895

n.6. And no such conversion occurred in Berthelsen. An automatic conversion of

a motion to dismiss based upon a lack of alleged personal jurisdiction into a

motion for summary judgment – which appears to be what our Supreme Court did

sua sponte in Hinners – would require rewriting CR 12.02 as follows: “If, on a

motion asserting the defense that the pleading fails to state a claim upon which

relief can be granted, matters outside the pleading are presented to and not

excluded by the court, the motion shall be treated as one for summary judgment

and disposed of as provided in Rule 56 . . . .” We decline to construe Hinners as

having silently rewritten CR 12.02.

Our state’s highest Court has repeatedly, forcefully held it to always

be improper to grant summary judgment based upon a court’s assessment of the

evidence or the credibility of various witnesses or proof. See, e.g., James Graham

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Brown Foundation, Inc., 814 S.W.2d at 276; Ogden v. Employers Fire Ins. Co.,

503 S.W.2d 727, 729 (Ky. 1973). We also have emphasized the same fundamental

rule. See, e.g., Amos v. Clubb, 268 S.W.3d 378, 382 (Ky. App. 2008). Hinners

does not discuss that precedent, which therefore remains viable. In short, we do

not construe Hinners as having required conversion of KKR’s motion to dismiss

on jurisdictional grounds to a motion for summary judgment.

The second main takeaway from Berthelsen relevant here is that the

trial court, not this Court, must first resolve disputed, material jurisdictional facts.

In Berthelsen, we acknowledged that “the material allegations in the complaint

when construed as being true are sufficient to establish the ‘minimum contact’

requirement . . . for Kentucky courts to exercise personal jurisdiction . . . under

KRS 454.210.” Berthelsen, 759 S.W.2d at 832. We similarly acknowledge here

that the allegations in the amended complaint, especially when combined with the

information obtained by the trial court, would likely suffice to support the exercise

of jurisdiction over KKR. But we also acknowledge, as we did in Berthelsen, the

existence of “conflicting factual contentions[,]” particularly Lee’s affidavit. Id.

So, while there is evidence to support the trial court’s conclusion, Berthelsen

makes clear that we cannot simply affirm.

We would prefer to address the merits of the jurisdictional issue(s)

and regret the delay, uncertainty, and additional costs inherent in this remand.

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However, “[a]s an appellate court, we review judgments; we do not make them.”

Klein v. Flanery, 439 S.W.3d 107, 122 (Ky. 2014). We express no opinion on the

merits of KKR’s motion to dismiss. Instead, we reverse the grant of summary

judgment to the OAG and remand the matter to the trial court to conduct an

evidentiary hearing regarding the contested jurisdictional facts. After holding the

hearing, the trial court shall issue a new decision on KKR’s motion to dismiss.

That new decision shall not convert the motion to dismiss to a motion for summary

judgment. A party aggrieved by a forthcoming final and appealable decision on

KKR’s motion may seek appropriate appellate relief.8

8
The judge who issued the summary judgment decision at issue has subsequently recused. Since
a new judge will issue a new decision on KKR’s motion to dismiss, KKR’s argument that the
current decision is fatally flawed because it was issued by a judge who should have recused is
moot. Similarly, KKR’s argument that reversal is required because the appellate record does not
contain all the documents cited by the court is moot. On remand, either party may seek to
introduce the evidence it believes is appropriate; a party aggrieved by any future evidentiary
rulings generally retains the usual panoply of appellate rights.
Finally, we reject the OAG’s argument that KKR’s appeal must be dismissed for failure
to name indispensable parties in the notice of appeal – the Boone Fund and Prisma. The OAG
makes similar indispensable party arguments in the other appeals, which we also reject. As
previously stated, the Boone Fund and Prisma each filed their own appeals, which we have
joined together with KKR’s. Both therefore received notice of this appeal and neither has been
obviously prejudiced by not being named as a party in KKR’s notice of appeal. Cates v. Kroger,
627 S.W.3d 864, 874-75 (Ky. 2021) (declining to dismiss an appeal for failure to name
indispensable parties when those entities were made aware of the appeal and suffered no
prejudice from being omitted from the notice of appeal). In short, the parties the OAG contends
are indispensable have participated in at least one of these combined appeals.

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 D. Propriety of the OAG Seeking Declaratory Relief in Kentucky
While Related Actions Are Pending in Other Jurisdictions

As previously stated, Prisma sued Retirement in Delaware and

PAAMCO sued Retirement in California. The gist of those actions was seeking

reimbursement for costs and expenses incurred in Mayberry. It is uncontested the

Delaware and California actions were filed before the OAG filed the complaint

which led to these appeals. The question we must answer is whether the prior

existence of those actions precluded the OAG from filing this declaratory judgment

action. Under these unique facts, the answer is no.

The OAG argues the extraterritorial suits against Retirement are

barred by sovereign immunity. PAAMCO and Prisma, on the other hand, argue

that the OAG could not seek declaratory relief in Kentucky once the extraterritorial

actions were filed.9 The trial court agreed with the OAG for two main reasons.

First, the court held that the Delaware and California actions were not really “prior

actions” because they were filed after Mayberry, to which they related, had

commenced. Second, the court held Retirement was immune from being sued in

extraterritorial courts. We agree with the trial court’s second rationale.

Before we analyze the arguments, we set forth some undisputed facts

and applicable legal principles. Kentucky enjoys sovereign immunity, which

9
We do not construe any other Appellants as having set forth these arguments in their briefs.
But, to the extent they intended to do so, our analysis would be equally applicable to them.

-21-
generally means “the resources of the state, its income and property, cannot be

compelled as recompense for state action that harms a plaintiff through the

ordinary suit-at-law process. It is often stated that the state is immune from suit

unless there has been an express waiver allowing suit.” Commonwealth v.

Kentucky Retirement Systems, 396 S.W.3d 833, 836 (Ky. 2013). And a court may

determine that sovereign immunity has been waived only by an express waiver or

“such overwhelming implications from the text as will leave no room for any other

reasonable construction.” Id. (internal quotation marks and citations omitted).

Retirement is an agent of the Commonwealth of Kentucky. Indeed, it

is “an integral part of state government.” Kentucky Retirement Systems, 396

S.W.3d at 837. As such, it “is entitled to immunity under sovereign immunity law

unless waived.” Id. Though an arm of the State, Retirement cannot unilaterally

waive its immunity; only the General Assembly may do so. Ruplinger v.

Louisville/Jefferson Cnty. Metro Government, 607 S.W.3d 583, 585 (Ky. 2020).

And as part of its exclusive ability to waive sovereign immunity, the General

Assembly may “direct in what manner and in what courts suits may be brought

against the Commonwealth.” KY. CONST. § 231.

Appellants stress that Retirement’s counsel helped draft the

agreements at issue. We do not impugn that attorney’s good faith efforts to ensure

that the agreements comply with Kentucky law. But, respectfully, Retirement’s

-22-
counsel is not the final immunity arbiter. “The immunity is such that it may not be

waived, except by legislative action. Ky. Constitution, § 231. Certainly the

constitutional mandate would be of small stature if its precepts could be ‘waived’

by any state officer or agent other than the general assembly.” Commonwealth,

Dept. of Highways v. Davidson, 383 S.W.2d 346, 348 (Ky. 1964). See also

University of Louisville v. Rothstein, 532 S.W.3d 644, 647 (Ky. 2017). Thus, the

fact that an agent of Retirement believed these contracts complied with Kentucky

law is not dispositive, especially since the contracts state that Retirement’s

obligations are subject to Kentucky law.

And the United States Supreme Court has explicitly held that a state

cannot be “sued by a private party without its consent in the courts of a different

State.” Franchise Tax Board of California v. Hyatt, 587 U.S. ___, 139 S. Ct. 1485,

1490, 203 L. Ed. 2d 768 (2019). As the Court explained, “[e]ach State’s equal

dignity and sovereignty under the Constitution implies certain constitutional

limitation[s] on the sovereignty of all of its sister States[,]” including “the inability

of one State to hale another into its courts without the latter’s consent. The

Constitution does not merely allow States to afford each other immunity as a

matter of comity; it embeds interstate sovereign immunity within the constitutional

design.” Id. at 1497.

-23-
 On the other hand, as Prisma and PAAMCO stress, the longstanding

general rule in Kentucky is that our Declaratory Judgment Act “was not designed,

and is not suitable, for . . . the declaration of the substantive rights involved in a

pending suit. Such decisions and declarations must be made in the first instance by

the court whose power is invoked and which is competent to decide them.”

Jefferson Cnty. ex rel. Coleman v. Chilton, 236 Ky. 614, 33 S.W.2d 601, 603

(1930). Our Supreme Court reiterated that ancient general rule this century.

Mammoth Medical, Inc. v. Bunnell, 265 S.W.3d 205, 210 (Ky. 2008).

We question the trial court’s conclusion that this action predated the

California and Delaware actions simply because all of them relate to Mayberry,

which was filed first and remained ongoing when those extraterritorial actions

were filed. The substantive legal issues in the various offshoots from Mayberry

are not the same. In Mayberry, the main issue was allegedly improper conduct by

the investment firms. That issue is absent from the extraterritorial actions against

Retirement. The main substantive issue in those actions is indemnification; that

issue is mostly, if not entirely, absent from Mayberry.

A declaratory judgment action generally may not be filed if it asks for

a “declaration of the substantive rights involved in a pending suit.” Chilton, 33

S.W.2d at 603. Since Mayberry did not involve the same “substantive rights” at

issue in the extraterritorial actions, the fact that it preceded them is not dispositive.

-24-
 Nonetheless, we agree with the trial court that this action was

permissible since Retirement is entitled to immunity in the extraterritorial actions.

Our analysis differs from the trial court’s, but we may affirm “on other grounds as

long as the lower court reached the correct result.” Emberton v. GMRI, Inc., 299

S.W.3d 565, 576 (Ky. 2009). We review whether a party is entitled to immunity

de novo. Ohio v. Great Lakes Minerals, LLC, 597 S.W.3d 169, 171 (Ky. 2019).

So, the core question becomes whether or not the General Assembly

waived sovereign immunity for Retirement on breach of contract claims. We

conclude it did but only for actions filed in the Franklin Circuit Court.

To explain that conclusion, we must examine KRS 61.645 and KRS

45A.245. KRS 61.645(2)(a) permits Retirement “[t]o sue and be sued in its

corporate name . . . .” The United States Supreme Court has held that a statute

permitting a state to “sue and be sued” did not, standing alone, waive the state’s

immunity from suit in federal court. College Sav. Bank v. Florida Prepaid

Postsecondary Educ. Expense Bd., 527 U.S. 666, 676, 119 S. Ct. 2219, 2226, 144

L. Ed. 2d 605 (1999). Our Supreme Court similarly held that “sue and be sued”

language in a statute “is inadequate, on its own, to exhibit a legislative intent to

waive immunity on behalf of a governmental agency.” Bryant v. Louisville Metro

Housing Authority, 568 S.W.3d 839, 850 (Ky. 2019).

-25-
 We reached a similar result decades ago in University of Louisville v.

Martin, 574 S.W.2d 676, 678-79 (Ky. App. 1978). Particularly relevant here, we

rejected an argument that a state University could unilaterally waive its immunity

in its charter. Id. Martin reinforces our conclusion that Retirement could not

validly waive its inherent immunity, regardless of any contractual language

purporting to do so.

In sum, the “sue and be sued” language in KRS 61.645 cannot bear

the heavy weight placed upon it by Appellants. A layperson would likely think

that a statute allowing a state entity to “sue and be sued” would allow it to do just

that: be subject to suit like any other person or corporate entity. But precedent

compels a different conclusion. Therefore, though we strive to afford statutes their

plain meaning, the “sue and be sued” language in KRS 61.645(2)(a) did not, by

itself, waive Retirement’s immunity.

However, that cannot be the end of the immunity analysis. When

Retirement entered into its contracts with Appellants, KRS 61.645(2)(d) gave

Retirement the authority to “contract for investment counseling, actuarial, auditing,

medical, and other professional services as required to carry out the obligations of

the board without limitation, notwithstanding the provisions of KRS Chapters 45,

45A, 56, and 57 . . . .” Similarly, at that time, KRS 61.645(2)(f) gave Retirement

the express authority to “hold, sell, dispose of, pledge, lease, or mortgage, the

-26-
goods or property necessary to exercise the board’s powers and perform the

board’s duties without limitation, notwithstanding the limitations of KRS Chapters

45, 45A, and 56 . . . .” In 2017, the General Assembly amended KRS 61.645 and

expressly made the Board’s authority to contract and use its property “subject” to

the provisions of KRS Chapter 45A.10

10
Specifically, KRS 61.645 now provides in relevant part:

(2) The board is hereby granted the powers and privileges of a corporation,
including but not limited to the following powers:

(a) To sue and be sued in its corporate name;

...

(d) Except as provided in KRS 61.650(6), to contract for investment
counseling, auditing, medical, and other professional or technical services
as required to carry out the obligations of the board subject to KRS
Chapters 45, 45A, 56, and 57. . . .

...

(f) Except as provided in KRS 61.650(6), to acquire, hold, sell, dispose of,
pledge, lease, or mortgage, the goods or property necessary to exercise the
board’s powers and perform the board’s duties subject to KRS Chapters
45, 45A, and 56[.]

KRS 61.645 was amended in 2017, 2019, 2020, 2021, 2022, and 2023. Those amendments do
not materially impact the above-quoted sections.

KRS 61.650(6), referenced in KRS 61.645(2), provides:

All contracts for the investment or management of assets of the systems shall not
be subject to KRS Chapters 45, 45A, 56, and 57. Instead, the board shall conduct
the following process to develop and adopt an investment procurement policy
with which all prospective contracts for the investment or management of assets
of the systems shall comply:

(a) On or before July 1, 2017, the board shall consult with the secretary of
the Finance and Administration Cabinet or his or her designee to develop

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 And KRS 45A.245(1) provides:

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.

an investment procurement policy, which shall be written to meet best
practices in investment management procurement;

(b) Thirty (30) days prior to adoption, the board shall tender the
preliminary investment procurement policy to the secretary of the Finance
and Administration Cabinet or his or her designee for review and
comment;

(c) Upon receipt of comments from the secretary of the Finance and
Administration Cabinet or his or her designee, the board shall choose to
adopt or not adopt any recommended changes;

(d) Upon adoption, the board shall tender the final investment
procurement policy to the secretary of the Finance and Administration
Cabinet or his or her designee;

(e) No later than thirty (30) days after receipt of the investment
procurement policy, the secretary or his or her designee shall certify
whether the board’s investment procurement policy meets or does not
meet best practices for investment management procurement; and

(f) Any amendments to the investment procurement policy shall adhere to
the requirements set forth by paragraphs (b) to (e) of this subsection.

-28-
(Emphasis added.) Shall “is mandatory . . . .” KRS 446.010(39).

Frankly, KRS 61.650 is not a paradigm of clarity when compared to

KRS 61.645 vis-à-vis the application of KRS Chapter 45A. We agree with the

Appellants that Retirement is sometimes exempted from the requirements of the

Kentucky Model Procurement Code found in KRS Chapter 45A. But that

exemption applies to Retirement making some investment decisions, as shown by

KRS 61.650 repeatedly referring to “procurement” of investments. We agree with

the OAG’s brief that argues KRS 61.650 does not state “what to do if an agency

breaches and the vendor wants to bring a claim for that breach. So, whether

[Retirement] had to follow the Model Procurement Code in entering its contract

with [Appellants] is irrelevant to whether [Appellants’] claim against [Retirement]

is subject to KRS 45A.270.”

In short, Retirement did not have to comply with all provisions in

KRS Chapter 45A when contracting with the Appellants but that does not mean

that all of KRS Chapter 45A is inapplicable to Retirement. After all, the only

reason Retirement is not immune from breach of contract actions is because the

General Assembly waived sovereign immunity in KRS 45A.245. And KRS

45A.245 “is an unqualified waiver of immunity in all cases based on a written

contract with the Commonwealth, including but not limited to employment

contracts. We hold that this immunity is not limited to contracts entered into

-29-
pursuant to the KMPC . . . .” Rothstein, 532 S.W.3d at 647 (emphasis added).

KRS 45A.270(1), which generally requires judgments against the State to be paid

from the general fund, applies to “[e]ach agency which has had an award or

judgment against it upon a claim filed pursuant to KRS 45A.240 to 45A.270 . . . .”

Since all breach of contract claims against the State are based upon KRS 45A.245,

the claims by the Appellants here are made “pursuant to KRS 45A.240 to

45A.270[.]” Thus, we reject Appellants’ arguments that KRS 45A.270 is

inapplicable. And requiring judgments against Retirement to be paid from the

general fund has constitutional implications, as we shall later see.

Therefore, KRS 45A.245 is a waiver of “governmental immunity on

all claims brought by all persons on all lawfully authorized written contracts with

the Commonwealth.” Rothstein, 532 S.W.3d at 651. Or, as our Supreme Court

very recently explained, KRS 45A.245 is “a general, unqualified waiver of

immunity for all written contracts” involving a state entity. University of Kentucky

v. Regard, 670 S.W.3d 903, 911 (Ky. 2023) (plurality opinion of three justices with

a fourth concurring in result only).

However, the waiver in KRS 45A.245(1) is plainly conditioned upon

the breach of contract suit being brought in the Franklin Circuit Court. Such a

venue restriction is permissible since § 231 of the Kentucky Constitution gives the

General Assembly the discretion to “direct in what manner and in what courts

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suits may be brought against the Commonwealth.” (Emphasis added.) See also

River City Fraternal Order of Police Lodge 614, Inc. v. Kentucky Retirement

Systems, 375 F. Supp. 3d 748, 769 (E.D. Ky. 2019) (“a State can waive immunity

by statute as to one forum and not another . . . . KRS § 45A.245 only waives the

State’s immunity in state court, specifically Franklin Circuit Court.”), aff’d in part

and vacated and remanded in part on grounds not germane here by River City

Fraternal Order of Police Lodge 614, Inc. v. Kentucky Retirement Systems by and

through Board of Trustees, 999 F.3d 1003 (6th Cir. 2021).

So, if it is clear that the breach of contract suits filed by PAAMCO

and Prisma must – at least as of 2017 – be filed in the Franklin Circuit Court, what

is there left for us to decide on this issue since it is unquestionable that

PAAMCO’s and Prisma’s extraterritorial suits were filed after that date?

PAAMCO and Prisma argue they were not required to sue Retirement in the

Franklin Circuit Court until KRS 61.645 was amended in 2017; in other words, the

core of their argument is that they are free to sue Retirement in accordance with

their contracts since the Franklin Circuit Court restriction did not exist when those

deals were executed. As did the trial court, we disagree.

First, we agree with the Commonwealth that the forum limitation

clause in KRS 45A.245 applied to Retirement even prior to 2017. KRS 45A.245

was enacted in 1978, well before the contracts at issue were executed, and it has

-31-
not been subsequently amended. Under longstanding general Kentucky precedent,

“contracts of public bodies, like those of individuals, are made with reference to

existing statutes and [those] statutory provisions enter into the contracts by

operation of law.” Moore v. Babb, 343 S.W.2d 373, 376 (Ky. 1960). KRS

45A.245 contains all-encompassing language which makes plain that its provisions

apply to all contracts involving the Commonwealth. Rothstein, 532 S.W.3d at 647.

Thus, because KRS 45A.245 significantly predated the contracts at issue, it

“enter[ed] into the contracts [at issue] by operation of law.” Moore, 343 S.W.2d at

376.

Moreover, both we and our Supreme Court held prior to 2017 that

KRS 45A.245 was a waiver of the State’s immunity on breach of contract claims.

In fact, one of those pre-2017 cases involved Retirement. Kentucky Retirement

Systems, 396 S.W.3d at 838; Commonwealth v. Samaritan All., LLC, 439 S.W.3d

757, 762 (Ky. App. 2014). Our Supreme Court held in 2017 that a dispute about

an employment contract with a public university entered into in 2000 was subject

to the provisions of KRS 45A.245, regardless of whether the contract was subject

to the remainder of KRS Chapter 45A. Rothstein, 532 S.W.3d at 647.

The 2017 amendments to KRS 61.645 thus codified what was already

required under Kentucky precedent: KRS 45A.245 applies to breach of contract

claims against the Commonwealth and its applicable components for every

-32-
contract executed after June 21, 1974. These contracts are no exceptions. And

KRS 45A.245 allows breach of written contract claims against the state to be

brought only in the Franklin Circuit Court.

Second, PAAMCO and Prisma sued Retirement for breach of contract

in Delaware and California after the 2017 amendments to KRS 61.645 at issue.

The forum restriction in KRS 45A.245 is especially applicable to Prisma, as it

admits there is not a forum selection clause in its contractual arrangements with

Retirement.11 And the relevant contracts contain explicit language unsurprisingly

stating, essentially, that Retirement’s obligations are subject to Kentucky law.12

In short, Retirement agreed to the jurisdiction of California courts for

its disputes with PAAMCO. But it did not have the power to allow itself, as an

integral component of the Commonwealth of Kentucky, to be haled into court in a

foreign state by a private party. The General Assembly – and only the General

Assembly – may waive Kentucky’s immunity. Since there is nothing to indicate

the General Assembly has allowed Retirement to be sued in foreign courts by

11
The agreement provides that it is governed by Delaware law but does not facially require
actions to be brought in Delaware.
12
For example, Retirement’s subscription agreement with PAAMCO regarding the Newport
Colonels, LLC provides in relevant part that “[t]o the extent permissible under applicable law,
[Retirement] hereby irrevocably agrees that any suit, action or proceeding with respect to this
Subscription Agreement and its investment . . . may be brought in U.S. federal and state courts in
the State of California.” R. at 159 (Emphasis added.)

-33-
private parties, any contrary language in these contracts must yield. Kentucky law

is clear: the state and its applicable components may be sued for breach of contract

only in the Franklin Circuit Court, so the breach of contract actions filed against

Retirement in Delaware and California were improper.

We decline to unduly lengthen this lengthy Opinion by further

analyzing the parties’ sundry arguments on this issue. We have considered, but

reject, all arguments contrary to our conclusion that any breach of contract claims

must be brought against Retirement in the Franklin Circuit Court. Accordingly,

the extraterritorial actions were improper, and their existence did not prevent the

OAG from filing the underlying declaratory judgment action.13

E. § 50 of the Kentucky Constitution

Having cleared the immense procedural underbrush, we now address

the substantive core of these appeals: do the indemnification clauses violate § 50

of the Kentucky Constitution? We agree with the trial court that they do.

Our analysis begins with the text of the Constitution. “The basic

rule . . . is to interpret a constitutional provision according to what was said and not

what might have been said; according to what was included and not what might

13
Obviously, we respectfully disagree with the Orange County, California Superior Court’s
conclusion that sovereign immunity did not bar PAAMCO from suing Retirement in California.
The superior court’s decision was affirmed on appeal, but on different grounds not germane to
the issues before us. Paamco Prisma, LLC v. Board of Trustees of Kentucky Retirement Systems,
2022 WL 3593349, at *5 (Cal. Ct. App. Aug. 23, 2022) (unpublished).

-34-
have been included.” Pardue v. Miller, 306 Ky. 110, 115, 206 S.W.2d 75, 78

(1947). So, “[w]hen interpreting constitutional provisions, we look first and

foremost to the express language of the provision, and words must be given their

plain and usual meaning.” Westerfield v. Ward, 599 S.W.3d 738, 747 (Ky. 2019)

(internal quotation marks and citations omitted).

It is difficult to give a plain language, literal interpretation to the

stilted, grammatically idiosyncratic language of Section 50. That section

exemplifies the language and stylistic approach of a bygone era as it consists of

one sentence which contains over one hundred words, seven commas, a semicolon,

and a colon:

No act of the General Assembly shall authorize any debt
to be contracted on behalf of the Commonwealth except
for the purposes mentioned in Section 49, unless
provision be made therein to levy and collect an annual
tax sufficient to pay the interest stipulated, and to
discharge the debt within thirty years; nor shall such act
take effect until it shall have been submitted to the people
at a general election, and shall have received a majority
of all the votes cast for and against it: Provided, The
General Assembly may contract debts by borrowing
money to pay any part of the debt of the State, without
submission to the people, and without making provision
in the act authorizing the same for a tax to discharge the
debt so contracted, or the interest thereon.

And § 49 of our Constitution, referenced in § 50, uses a similar stylistic approach:

-35-
 The General Assembly may contract debts to meet casual
deficits[14] or failures in the revenue; but such debts,
direct or contingent, singly or in the aggregate, shall not
at any time exceed five hundred thousand dollars, and the
moneys arising from loans creating such debts shall be
applied only to the purpose or purposes for which they
were obtained, or to repay such debts: Provided, The
General Assembly may contract debts to repel invasion,
suppress insurrection, or, if hostilities are threatened,
provide for the public defense.

As we perceive it, the crux of the dispute here is whether the indemnity clauses at

issue are debts in the constitutional sense. Like the trial court, we answer that

question “yes.” Because the answer may be ascertained by applying Kentucky

law, we decline to address the extraterritorial authority cited by the parties.

In common parlance, a debt is merely “something owed . . . .” Debt,

MERRIAM-WEBSTER DICTIONARY, https://www.merriam-

webster.com/dictionary/debt (last visited Sep. 21, 2023). A leading legal

dictionary similarly defines debt in relevant part as “a specific sum of money due

by agreement or otherwise . . . .” Debt, BLACK’S LAW DICTIONARY (11th ed.

2019). But not every single dollar ever “owed” by the state is considered a debt for

14
A casual deficit is “[a]n unforeseen shortfall of funds.” BLACK’S LAW DICTIONARY (11th ed.
2019). Kentucky’s then-highest Court expounded on that archaic term as follows: ‘“Casual
deficits,’ . . . means ‘a deficit’ or ‘deficits,’ happening by chance or accident, and without any
design to avoid the constitutional inhibitions of the state against incurring an unauthorized
expenditure of the state’s funds above a certain amount.” State Budget Comm’n v. Lebus, 244
Ky. 700, 51 S.W.2d 965, 969 (1932). In sum, a casual deficit occurs when a taxing body takes
an unduly “optimistic view of [future] tax collections” when enacting a budget. Letcher Cnty.
Bd. of Educ. v. Bank of Whitesburg, 271 Ky. 166, 111 S.W.2d 656, 657 (1937).

-36-
constitutional purposes. Indeed, as one law professor persuasively notes, “state

governments seek ways around their constitutional limitations on taxation and

finance” such that, sometimes, “[a] debt is not really a debt . . . .” Susan P. Fino, A

Cure Worse Than the Disease? Taxation and Finance Provisions in State

Constitutions, 34 Rutgers L.J. 959, 1010-11 (2003).15

Under settled precedent, an obligation is a debt under §§ 49 and 50

only if the obligation “bind[s] the commonwealth to pay it by the levy and

collection of general taxes . . . . A contingent liability is not within the meaning of

the Constitution fixing debt limit.” Lebus, 51 S.W.2d at 969. Or, stated somewhat

differently, “[a] debt in the constitutional sense arises out of a contract wherein the

creditor is unconditionally entitled to receive and the debtor is obligated to pay.”

Preston v. Clements, 313 Ky. 479, 487, 232 S.W.2d 85, 90 (1950). That

15
By way of an illustrative example, Kentucky’s then-highest Court stated that the word debt as
used in §§ 49 and 50 our Constitution should be afforded its everyday meaning, which it used a
dictionary to define as “something owed . . . .” Crick v. Rash, 190 Ky. 820, 229 S.W. 63, 68
(1921). But the Court then performed an about-face and said that some obligations “although
amounting to a technical debt” are “not forbidden” by the Kentucky Constitution. Id. at 69.
Thus, Professor Fino was correct. As illustrated by precedent, it is not always obvious whether
an obligation of the state is a debt for purposes of analyzing a state’s constitutional debt limit.
Also, we are keenly aware of the harsh criticism of constitutional debt limits made by
many scholars. Particularly relevant here, one professor opined that the underfunding of state
pensions is among the “pernicious consequences” directly stemming from such debt limits.
Richard C. Schragger, Democracy and Debt, 121 Yale L.J. 860, 869 (2012). See also, e.g., Amy
B. Monahan, State Fiscal Constitutions and the Law and Politics of Public Pensions, 2015 U. Ill.
L. Rev. 117 (2015). Whether the ancient $500,000 debt limit in Kentucky should be raised, or
abolished, is beyond the scope of this Opinion. “The court has nothing to do with the wisdom or
expediency of any constitutional or statutory enactment.” Pardue, 206 S.W.2d at 78.

-37-
unconditional obligation by the state as a debtor is precisely what occurred here

because the State is irrevocably required to make up any shortfalls by Retirement.

Though nearly fifty years old, the leading case on what constitutes a

debt under §§ 49 and 50 is McGuffey v. Hall, 557 S.W.2d 401 (Ky. 1977). Due to

its importance to these cases, we shall discuss McGuffey in depth.

McGuffey involved the constitutionality of legislation which created a

state fund for medical malpractice claims. Id. at 408. Physicians and hospitals

were required to contribute to the fund, whose funds would be used to pay

malpractice claims – but the general fund would be responsible for making

payments if the fund could not. Id.

Among the issues decided by our Supreme Court was whether that

contingent financial guarantee by the Commonwealth violated § 50. The Court

unanimously answered “yes.” But what is germane here is the rationale, not the

answer, as McGuffey provides the most straightforward judicial explanation to date

of what is prohibited by § 50 (and, as we shall later see, § 177):

It does seem to us that by this time, with all of the
cases that have been decided under Const. s[ection] 50,
its simple message should be clear to all. No
commitment against future general revenues can be made
without a vote of the people. This is nothing less than the
keystone guaranty of the state’s fiscal responsibility. No
agency of the state, including its legislature, can place an
obligation against the general funds otherwise available
for appropriation and expenditure by a future legislature.
. . . [T]he restriction of Const. s[ection] 50 against

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 obligating future general revenues is not satisfied by
substituting other assets equal in value to the forbidden
encroachment. As we see it, the purpose of Const.
s[ection] 50 is to see that each generation is left free to
make its own trades with its own money.

Id. at 409-10 (paragraph break omitted). We agree with the trial court that the

indemnity clauses at issue do not leave future generations free to make their own

trades with the state’s money.

Expounding on the “commitment against future revenues” concept

discussed in McGuffey, our Supreme Court explained later that “[i]t is the

assurance that the legislature would provide for funding in future appropriations

which has been most offensive to this Court.” Hayes v. State Property and Bldgs.

Comm’n, 731 S.W.2d 797, 800 (Ky. 1987). On the other hand, if funding is

“clearly at the mercy of the Kentucky legislature[,]” Kentucky courts have

generally upheld plans which call for the expenditure of future state funds. Id. at

801.

Here, the indemnity clauses are not dependent on the mercy of future

sessions of the General Assembly. Retirement is an arm of the State. The General

Assembly cannot break its inviolable contract with many members of Retirement.

So, if Retirement lacks funds to pay its retirees, the general fund will have to be

tapped to cover any shortfall. Consequently, we agree with the trial court that if

Retirement depletes its funds by indemnifying Appellants (bearing in mind the lack

-39-
of any express ceiling on the potential amount of such indemnification in these

contracts), the General Assembly would be required to tap the general fund to pay

retirees pursuant to the inviolable contract. That is the harsh financial reality, not a

mere attenuated daisy chain, as Appellants argue.16

Contrary to the Appellants’ arguments, the secondary nature of the

State’s obligation here does not immunize it from running afoul of § 50. In

16
As our Supreme Court explained in Mayberry, the unique funding arrangement combined with
the “inviolable contract” between certain Retirement members and the Commonwealth creates a
situation where state funding is at risk if Retirement is insolvent. Specifically,

relying on any increased risk of not receiving pension benefits in the future poses
a problem in this case: as KRS beneficiaries, Plaintiffs’ retirement benefits are
part of a statutorily declared “inviolable contract” between KRS members and the
Commonwealth. Should KRS become so severely underfunded that it runs out of
assets and terminates, the Plaintiffs are still entitled to their pension benefits under
their inviolable contract with the Commonwealth. And even before the risk of
plan termination is realized, the Commonwealth has the authority to increase its
own contribution to the KRS plan to make up any actuarial shortfall in its assets.
In essence, then, the full faith and credit of the Commonwealth serves as a
backstop for Plaintiffs’ pension benefits even in the event that severe plan
mismanagement renders KRS insolvent.

Mayberry, 603 S.W.3d at 253-54 (footnotes omitted). Given that unique funding and
unbreakable promise by the Commonwealth, we generally agree with the OAG that:

if [the Boone Fund] exhausts its current accounts indemnifying others and cannot
return all of the Commonwealth’s assets, the Commonwealth must still pay those
[retirement] benefits. And that means that if [Retirement] cannot pay out the
required benefits in 2023 because of an indemnity obligation to [Appellants] that
[Retirement] created in 2011, the funds must be appropriated by the General
Assembly . . . .

Appellee Brief, p. 18 in No. 2022-CA-0350-MR.

-40-
Preston, Kentucky’s then-highest Court quoted with approval a Florida case as

follows:

In Brash v. State Tuberculosis Board, 124 Fla. 652, 169
So. 218, 219, may be found this pertinent language:
‘Only where it can be clearly demonstrated beyond a
reasonable doubt that a contemplated scheme of
embarkation upon new capital ventures will not
immediately or mediately, presently or in futuro, directly
or contingently, operate to impose an added burden on
the taxing power, or have the effect of impairing the
public credit in futuro, will the consummation of such a
debt incurring scheme be held authorized, absent the
approving voice of the freeholders . . . . And, in the case
of enterprises authorized by the Legislature to be
embarked upon through state agencies, a particular
scheme of financing will be held to be valid only where it
is clearly demonstrable from the specific terms of the
financing proposal itself that no tax burden or pecuniary
liability of the state to appropriate or pay for the
indebtedness about to be incurred will ever arise, or be
looked to as security, in whole or in part, for repayment
of the borrowed moneys.’

Preston, 232 S.W.2d at 90 (emphasis added). It is not certain beyond a reasonable

doubt that the State would never have to tap the general fund in the future due to

the potentially limitless indemnity costs inherent in these contracts. Similarly, in

McGuffey, our Supreme Court held that “[l]ike Const. [section] 50 . . . the ‘credit’

provision of Const. [section] 177 seeks to prevent transactions that might result in

future liabilities against the general resources of the state and thereby encroach

upon the freedom of another generation to utilize those resources as it then deems

necessary or appropriate.” McGuffey, 557 S.W.2d at 411 (emphasis added). In

-41-
sum, the “backstop” nature of the general fund’s obligations does not exempt these

agreements from being constitutionally infirm.

Also, as the trial court cogently held, there is no obvious limit

“imposed on the temporal reach of the ‘reimbursement’ provisions [Appellants]

seek to invoke . . . [and] the parties are well-beyond the fiscal biennium that was

current at the time the contracts were executed in 2011.” In other words, the

agreements, as written, could bind the financial hands of distant future sessions of

the General Assembly. And we held long ago that a state agency would violate §

50 if it agreed to a contract which would impose future liabilities against the

general fund. City of Shelbyville ex rel. Shelbyville Mun. Water and Sewer

Comm’n v. Commonwealth, Nat. Resources and Environmental Protection

Cabinet, 706 S.W.2d 426, 430 (Ky. App. 1986).

We must briefly address the Boone Fund, as its indemnification clause

is different to the extent that it requires indemnity to be paid by the assets of the

Boone Fund, not the separate assets of Retirement. Indeed, the Boone Fund is

holding well over $130,000,000 in reserve for indemnification purposes.

Appellants tout the Boone Fund’s status as an LLC but ignore the practical reality:

the Boone Fund’s assets are almost entirely derived from Retirement and remain

needed assets of the Commonwealth.

-42-
 Of course, an LLC, such as the Boone Fund, is considered to be a

legally distinct entity from its members. See, e.g., Turner v. Andrew, 413 S.W.3d

272, 275 (Ky. 2013). Nonetheless, we agree with the OAG’s argument in its brief

“money from the general fund moved from [Retirement’s] control to [the Boone

Fund’s] – but it remained the assets that the Commonwealth needed to pay its

pension obligations.” If the Boone Fund “use[d] the investment returns it earned

on the Commonwealth’s assets . . . to pay its indemnity obligations” it would

deprive Retirement of funds it would otherwise receive and could “use to pay the

guaranteed pension benefits to its retirees.”

We agree that “whether [the Boone Fund] is holding the initial capital

investments or simply the earnings on [them] is irrelevant. [The Boone Fund] is

holding a substitute for general fund dollars that it plans on using to indemnify

Prisma.” In short, for purposes of § 50, we reject Appellants’ arguments that the

funds at issue are not state funds simply because they are currently controlled by

the Boone Fund.

We agree with the trial court that McGuffey forecloses the Boone

Fund’s argument. Under McGuffey, “the restriction of Const. [section] 50 against

obligating future general revenues is not satisfied by substituting other assets equal

in value to the forbidden encroachment.” McGuffey, 557 S.W.2d at 410. The

assets held by the Boone Fund are substitutes for Retirement’s assets. As the trial

-43-
court concluded, § 50 prohibits “both direct and indirect encroachment on future

revenues. . . . [I]f [Retirement] itself would be prohibited from encroaching on

future revenues, then it seems logical that an entity in which it owns substantially

all of the ownership interest would be subject to similar limitations.”

It is beyond reasonable dispute that a diminution in the money

Retirement possesses increases the likelihood the General Assembly will be

required to allocate general fund revenues to retirees pursuant to the inviolable

contract. The tens of millions held by the Boone Fund for indemnification are not

available to Retirement. Thus, the fact that the Boone Fund’s agreement states that

the indemnification must be paid solely out of the Boone Fund’s assets is not

determinative. Retirement contributed the vast majority of the money which

eventually led to the assets currently held by the Boone Fund. Retirement needs to

maximize its financial assets to pay its members. After all, increasing

Retirement’s assets was the entire point Retirement invested with the Appellants.

If Retirement cannot pay its members with its own funds, then the State must do

so. And the large amount of money held by the Boone Fund is vastly above a de

minimis amount which would likely have no impact on Retirement’s bottom line.

We also reject the Appellants’ argument(s) that the indemnity clauses

are routine breach of contract clauses. We generally agree with BAAM’s assertion

that “Sections 50 and 177 are not meant to limit a state agency’s ability to promise

-44-
to its contractual counterparties . . . that it will pay damages resulting from its own

breach of contract.” But we disagree that the indemnity clauses at issue only serve

that narrow purpose.

The indemnity clauses go beyond the scope of a typical breach of

contract provision. Two examples will highlight our conclusion. First, the

subscription Agreement for the Clay Fund obligates Retirement to pay “any and

all claims, demands, losses, damages, costs and expenses whatsoever” incurred by

BAAM and the Clay Fund “arising directly as a result of any material breach” by

Retirement. That sweeping language is no run-of-the-mill breach of contract

provision. Second, the Boone Fund’s LLC agreement entitles Prisma to be

indemnified from the Boone Fund’s assets (which, again, were chiefly provided by

Retirement) for “any and all loss, liability and expense (including, without

limitation, reasonable legal and expert witness fees and expenses” which Prisma

“incurred in connection with investigating, preparing for and/or defending against

any claim, action, suit or proceeding, threatened or commenced . . . to the extent

arising from the good faith performance by [Prisma] . . . .” (emphasis added).

That breathtakingly broad language does not even require the expenses to have

been directly caused by Retirement’s breach – it permits recovery of costs merely

-45-
connected to such a breach. As such, the clause goes well beyond an ordinary

breach of contract provision.17

And we must stress that the costs and expenses for which Appellants

seek reimbursement were incurred due to the unilateral act of third parties – the

plaintiffs who filed the Mayberry action. It is nigh impossible to discern how any

misstatement(s) by Retirement about its investment prowess led to the filing of the

Mayberry action – i.e., how would a misstatement by Retirement have caused the

Mayberry plaintiffs to allege that Appellants engaged in misconduct? Phrased

differently, how would any misstatement by Retirement be a “material” breach

which led to Appellants incurring the costs for which they seek reimbursement?

The entire thrust of Mayberry is that Appellants engaged in misconduct. Thus, by

seeking reimbursement for their Mayberry-induced costs, Appellants want

Retirement to reimburse them for costs incurred because third parties asserted that

Appellants failed to treat Retirement fairly and properly. As the OAG cogently

posits, even assuming that Retirement erroneously inflated its investment acumen

17
Without belaboring the point, the vast language of the indemnity clauses appears facially to
allow Appellants to seek “any and all” types of damages. “It is well established in this
jurisdiction that the measure of damages for breach of contract is that sum which will put the
injured party into the same position he would have been in had the contract been performed.”
Perkins Motors, Inc. v. Autotruck Federal Credit Union, 607 S.W.2d 429, 430 (Ky. App. 1980)
Thus, some limited types of damages are generally not recoverable in breach of contract actions.
See Ronald W. Eades, Measure of damages generally, Ky. L. of Damages § 18:1 (2023). But the
limitless “any and all” language, taken at face value, would permit Appellants to seek damages
not typically permitted in breach of contract actions.

-46-
in the agreements, “that does not mean the Mayberry action arose directly from

[Retirement’s misstatement]. How could it when the Mayberry plaintiffs alleged

that the hedge-fund managers mismanaged the funds and breached fiduciary

duties?”

Of course, “every word, phrase or term of a contract must be given

effect. An interpretation which gives effect to all provisions of the contract is

preferred to one which renders part of the writing superfluous, useless or

inexplicable.” 11 Williston on Contracts § 32:5 (4th ed. 2023). A provision doing

nothing but regurgitating the law generally allowing Retirement to be sued for

breach of contract (again, only in the Franklin Circuit Court) would be superfluous

or useless. As the OAG asks: “if the reimbursement provision does nothing more

than codify ordinary breach-of-contract damages, why is it necessary at all?”

Because the contracts at issue do not contain mere typical breach of

contract clauses, we also reject Appellants’ overwrought arguments that affirming

the trial court would destroy the ability of any state agency to enter into future

contracts. Our narrow holding is that these virtually limitless indemnity provisions

are unconstitutional and thus unenforceable. We are confident that the State and

the applicable subdivisions thereof will be able to enter into future contracts.

First, entities who contract with the State are not left defenseless

against a breach by the State. In such an instance, the entity contracting with the

-47-
State may sue the State for breach of a written contract in the Franklin Circuit

Court. See, e.g., Appalachian Stream Restoration, LLC v. Kentucky, No. 3:17-cv-

00103-GFVT, 2019 WL 1005196, at *4 (E.D. Ky. Mar. 1, 2019) (unpublished) (“It

is undoubtedly frustrating to discover that the contract provision that seemed so

clear and unambiguous, is in fact, unenforceable in federal court. But ASR is not

without a remedy. The doors of the Franklin Circuit Court are open to ASR, at

least as to its contractual claims, by way of valid waiver of sovereign immunity,

executed by the General Assembly.”) (cited only as an illustrative example).

Second, the inviolable contract is generally not applicable to contracts entered into

by other state entities. In that sense, Retirement is unique. But here, the General

Assembly has an unbreakable bond with many of its retirees, so it has an

unflagging, unavoidable, nondiscretionary obligation to step in when Retirement

lacks funds.

Finally, we reject Appellants’ hyperbolic arguments that affirming the

trial court will destroy the existence of the LLCs or void the entirety of the

agreements at issue. Under Delaware law, the basis for forming an LLC is an

agreement. 6 Del. Code Ann. § 18-101(9) (‘“Limited liability company

agreement’ means any agreement (whether referred to as a limited liability

company agreement, operating agreement or otherwise) . . . of the member or

members as to the affairs of a limited liability company and the conduct of its

-48-
business.”). Of course, an LLC agreement cannot violate applicable law. XRI

Investment Holdings LLC v. Holifield, 283 A.3d 581, 656 (Del. Ch. 2022), affirmed

in part, reversed in part, and remanded by Holifield v. XRI Investment Holdings

LLC, ___ A.3d ___, 2023 WL 5761367 (Del. Sep. 7, 2023) (opinion not yet final)

(“if an LLC lacks the statutory power to engage in a particular act, then the act is

void ab initio.”). Retirement cannot validly agree to violate Kentucky law. The

indemnity clauses are unenforceable, but the remainder of the contracts is

unaffected due to their severability clauses, as aptly argued in Appellee’s brief:

“But an LLC like [the Boone Fund] can only be formed under Delaware or

Kentucky law after an ‘agreement’ between different parties . . . . But the point

here is that [Retirement] had no authority to agree to any of the indemnity contract

terms . . . under Sections 50 and 177 . . . . So the indemnity clauses are not

enforceable.”

We decline to belabor this issue further. We reject the Appellants’

arguments to the contrary and affirm the trial court’s conclusion that the indemnity

clauses violate § 50 of the Kentucky Constitution.

F. § 177 of the Kentucky Constitution

We also agree with the trial court that the indemnity clauses violate §

177. But “[r]ealizing that the patience of the reader whose sturdy horse

Perseverance has carried him to this point must be wearing thin, we shall deal with

-49-
[this issue] briefly[.]” McGuffey, 557 S.W.2d at 414. The gist of the

disagreement(s) here is whether the indemnity clauses involve pledging the credit

of the Commonwealth.18

Once again, the clearest explanation of § 177 comes from Justice

Palmore’s opinion for a unanimous court in McGuffey:

whether the objects of an expenditure are “public” or
otherwise is irrelevant to Const. s[ection] 177 . . . . Here
. . . the [medical malpractice] Fund is underwritten by a
guaranty in which the general funds of the state derivable
from future tax revenues are made the surety. If
becoming a surety does not amount to a lending of credit,
then there cannot be such a thing . . . . Const. s[ection]
177 does not permit the state’s credit to be given or lent
for any purpose, public or otherwise. . . . [T]he listing of
entities to which the state’s credit may not be given was
intended to be all-inclusive. . . .

In 1891 the kind of governmental administrative
agency that is so prevalent today was virtually unknown,
and it would not have occurred to the members of the
Convention that there might be a need to prohibit using
the credit of the state for the benefit of one of its own
administrative agencies. But the purpose is clear. Like
Const. s[ection] 50, which we have already discussed at
some length, the “credit” provision of Const. s[ection]
177 seeks to prevent transactions that might result in
future liabilities against the general resources of the state

18
Section § 177 prevents the Commonwealth from becoming “an owner or stockholder” in a
“company, association or corporation . . . .” Retirement, an arm of the Commonwealth, is a
member of (i.e., has an ownership stake in) the Boone Fund and the Clay Fund, each of which is
an LLC. Although at first blush those ownership interests could be deemed to violate § 177,
seventy years ago Kentucky’s then-highest Court held that portion of § 177 “is directed to the
Commonwealth as such and not to an agency” thereof. City of Louisville Municipal Housing
Commission v. Public Housing Administration, 261 S.W.2d 286, 287 (Ky. 1953).

-50-
 and thereby encroach upon the freedom of another
generation to utilize those resources as it then deems
necessary or appropriate. It is a “clincher,” making
certain that if perchance some court might hold a
contingent or secondary liability not to be a “debt” under
Const. s[ection] 50, it would nevertheless fall under the
interdict of Const. s[ection] 177. These two
constitutional provisions, originating in the fiscal follies
of the 19th century, bespeak the same motivating
thought. In contrast with the federal constitution, state
constitutions ordinarily forbid one generation from
stealing the earnings of another, at least without a vote of
the people as a whole.

McGuffey, 557 S.W.2d at 410-11 (footnotes and some paragraph breaks omitted).

In sum, § 177 “prevent[s] transactions which might result in future liabilities

against the general tax revenues of this state and thereby encroach[es] on the

freedom of future generations to utilize those resources as they deem appropriate.”

Hayes, 731 S.W.2d at 800.

We need not belabor the point in this already protracted Opinion. The

indemnity clauses at issue violate § 177 for the same fundamental reasons they also

violate § 50 – they may obligate revenue from future sessions of the General

Assembly and thus they impermissibly lend the credit of the Commonwealth.

Such a conclusion should not be surprising given that § 50 and § 177 share the

“same motivating thought” and work hand-in-glove to “prevent transactions that

might result in future liabilities against the general resources of the state . . . .”

McGuffey, 557 S.W.2d at 411.

-51-
 As the trial court aptly noted, the agreements do not contain a

“warning that any future payments are contingent on the willingness of future

legislatures to make appropriations for any claims.” In other words, the General

Assembly will have to step in if Retirement lacks sufficient funds, given the

inviolable contract. Moreover, we agree with the trial court that Retirement’s

ability to make the potentially staggering indemnity payments is not assured since

the agreements contain “no restrictions whatsoever on the amount of the claims or

the time for bringing such claims. In doing so, they . . . make [Retirement] a surety

in an unlimited amount for the defense costs [Appellants] have incurred and will

incur.”19

III. CONCLUSION

For the foregoing reasons, in Appeal No. 2022-CA-0347-MR, the

Franklin Circuit Court’s grant of summary judgment to the Attorney General of

Kentucky on KKR’s motion to dismiss is reversed and remanded with

19
Briefly, we reject Appellants’ arguments that equitable estoppel should lead to a different
result. “While it is true that equitable estoppel can be invoked against a governmental entity in
unique circumstances, a court must find that exceptional and extraordinary equities are involved
to invoke that doctrine.” Sebastian-Voor Properties, LLC v. Lexington-Fayette Urban Cnty.
Government, 265 S.W.3d 190, 194 (Ky. 2008). We conclude these appeals do not present
sufficiently unique, exceptional, and extraordinary circumstances for invoking equitable estoppel
against a governmental entity. Appellants had the statutory right to file breach of contract
actions in the Franklin Circuit Court. Even though Retirement’s counsel helped negotiate the
indemnity clauses, the agreements explicitly remind the parties that Retirement’s obligations are
limited by Kentucky law. Thus, even though Retirement’s counsel was mistaken about
Retirement’s indemnification abilities, we perceive nothing so egregious or extraordinary as to
warrant applying equitable estoppel here.

-52-
instructions to conduct an evidentiary hearing forthwith pursuant to the rubric

discussed in Berthelsen and Hinners, supra. After the hearing, the court shall

expeditiously issue a new decision. The Franklin Circuit Court is otherwise

affirmed.

ALL CONCUR.

-53-
BRIEFS FOR APPELLANT KKR BRIEFS FOR APPELLEE
& CO., INC: COMMONWEALTH OF
KENTUCKY:
Barry Barnett
Abigail Noebels Daniel Cameron
Ryan Weiss Attorney General of Kentucky
Max Straus
Houston, Texas Daniel John Grabowski
John Christian Lewis
Steven Shepard Victor Bruce Maddox
New York, New York Alexander Y. Magera
Aaron John Silletto
Seth Thomas Church Brett R. Nolan
Barbara B. Edelman Assistant Attorneys General
Grahmn New Morgan Frankfort, Kentucky
John Moose Spires
Lexington, Kentucky

BRIEFS FOR APPELLANTS
PAAMCO PRISMA, LLC,
PAAMCO/PRISMA HOLDINGS,
LLC AND PRISMA CAPITAL
PARTNERS LP:

David Elbaum
Michael J. Garvey
Peter E. Kazanoff
Sara A. Ricciardi
New York, New York

Seth Thomas Church
Barbara B. Edelman
Grahmn New Morgan
John Moose Spires
Lexington, Kentucky

-54-
BRIEFS FOR APPELLANT DANIEL
BOONE FUND, LLC:

Brian Michael Johnson
Carol Anne Stewart
Lexington, Kentucky

BRIEFS FOR APPELLANTS
BLACKSTONE ALTERNATIVE
ASSET MANAGEMENT
ASSOCIATES LLC, BLACKSTONE
ALTERNATIVE ASSET
MANAGEMENT L.P., AND
BLACKSTONE HENRY CLAY
FUND, LLC:

Andrew J. Ehrlich
Brad S. Karp
Lorin L. Reisner
Brette Tannenbaum
New York, New York

Donald Joseph Kelly
Jordan Michael White
Louisville, Kentucky

AMICI CURIAE BRIEF FOR LAW
PROFESSORS:

Christopher D. Belelieu
New York, New York

Michael W. Oyler
Louisville, Kentucky

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