RENDERED: JULY 16, 2021; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2020-CA-0331-MR
DMITRIY ZILBERMAN AND JULIA
ZILBERMAN APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT
v. HONORABLE SUSAN SCHULTZ GIBSON, JUDGE
ACTION NO. 12-CI-002590
H.W. LOCHNER, INC.; DAVID ORR;
AND KEITH MCDONALD APPELLEES
OPINION
AFFIRMING
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BEFORE: JONES, LAMBERT, AND L. THOMPSON, JUDGES.
LAMBERT, JUDGE: Dmitriy Zilberman and Julia Zilberman (the Zilbermans)
have appealed from the summary judgment of the Jefferson Circuit Court finding
that defendant H.W. Lochner, Inc. (Lochner), was protected by qualified official
immunity and under the disclosed agency doctrine from their claims related to the
potential purchase of a right-of-way easement for the Kentucky Transportation
Cabinet. We affirm.
This case has previously been before the Court of Appeals, also an
appeal from the entry of a summary judgment, and we shall rely upon the factual
and procedural background as set forth in that opinion:
On May 9, 2012, the Zilbermans filed a complaint
in the Jefferson Circuit Court against Lochner and the
Commonwealth of Kentucky, Transportation Cabinet.
The complaint alleged improper and negligent acts
surrounding negotiations between the Cabinet, Lochner
(who acted as agent for the Cabinet in the negotiations),
and the Zilbermans for the purchase of an easement upon
the Zilbermans’ real property located in eastern Jefferson
County. The easement was being acquired in
conjunction with the construction of a bridge over the
Ohio River located east of Louisville (referred to as “East
End Bridge”). In September 2011, after appraising the
Zilbermans’ property and making an offer that was
rejected by the Zilbermans, the Commonwealth withdrew
its offer. Shortly thereafter, the Commonwealth
downsized the project for the East End Bridge. In
January 2012, the Zilbermans were notified that their
property was no longer needed for the bridge
construction project. This lawsuit followed in Jefferson
Circuit Court. Lochner and the Transportation Cabinet
each filed separate answers.
In January 2015, the Transportation Cabinet filed a
motion to dismiss based upon the doctrine of sovereign
immunity. By summary judgment entered June 3, 2015,
the circuit court dismissed all claims against the
Commonwealth. The circuit court specifically concluded
that the Zilbermans’ “claim that there is a ‘taking’ is not
supported by the record and fails as a matter of law; . . .
[the Zilbermans’] claim for bad faith and violations of
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statutes are barred by sovereign immunity” as to the
Commonwealth. June 3, 2015, order at 11. The circuit
court included complete Kentucky Rules of Civil
Procedure (CR) 54.02 language, but no appeal was taken.
On June 26, 2015, Lochner filed a motion for
summary judgment, and the circuit court granted the
motion by order entered December 22, 2015. Therein,
the circuit court determined that Lochner was entitled to
qualified official immunity, holding that all acts of
Lochner in the negotiation process on behalf of the
Cabinet were discretionary and performed in good faith.
The court further concluded that no “taking” had
occurred in this case.
Zilberman v. H.W. Lochner, Inc., No. 2016-CA-000108-MR, 2018 WL 1358025,
at *1 (Ky. App. Mar. 16, 2018).
This Court then analyzed the issue before it – whether summary
judgment was proper – as follows:
The Zilbermans contend that the circuit court erred
by granting summary judgment to Lochner upon the
basis of qualified official immunity. In particular, the
Zilbermans allege that qualified official immunity is an
affirmative defense that must be specifically pleaded in
the answer to the Complaint. The Zilbermans argue that
Lochner failed to affirmatively plead qualified official
immunity in its answer; consequently, the defense was
waived.
In Kentucky, the law is well-settled that qualified
official immunity constitutes an affirmative defense
under CR 8.03 that must be specifically pleaded. Yanero
v. Davis, 65 S.W.3d 510 (Ky. 2011); Jerauld ex rel.
Robinson v. Kroger, 353 S.W.3d 636 (Ky. App. 2011).
An affirmative defense must ordinarily be set forth in a
pleading (as opposed to a motion) and must be stated so
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as to give fair notice of the defense asserted. Vogler v.
Salem Primitive Baptist, 415 S.W.2d 72 (Ky. 1967).
And, the failure to do so constitutes waiver of the
affirmative defense. Id.
In its December 22, 2015, order, the circuit court
concluded that qualified official immunity was not an
affirmative defense:
[The Zilbermans] argue that, since Lochner
did not specifically plead the affirmative
defense of “qualified official immunity,”
said affirmative defense is waived. CR 8.03
provides, pertinently:
In pleading to a preceding
pleading, a party shall set forth
affirmatively accord and
satisfaction, arbitration and
award, assumption of risk,
contributory negligence,
discharge in bankruptcy,
duress, estoppel, failure of
consideration, fraud, illegality,
injury by fellow servant, laches,
license, payment, release, res
judicata, statute of frauds,
statute of limitations, waiver,
and any other matter
constituting an avoidance or
affirmative defense. . . .
As is evident from the above discussion of
sovereign immunity, governmental
immunity and qualified official immunity, it
was not necessary for Lochner to
affirmatively plead such “immunity” as an
“affirmative defense.” Likewise, “qualified
official immunity immunity” [sic] is not one
of the enumerated “affirmative defenses”
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CR 8.03 requires to be pleaded. Thus, [the
Zilbermans’] argument is without merit.
December 22, 2015, order at 14.
Based upon our review of the record and
applicable law, we believe the circuit court committed an
error of law by concluding that qualified official
immunity was not an affirmative defense that must be
affirmatively pleaded pursuant to CR 8.03. To the
contrary, qualified official immunity is an affirmative
defense that must be [pled]. Robinson, 353 S.W.3d at
639. However, Lochner maintains that official qualified
immunity was affirmatively set forth in its answer, which
reads as follows:
25. Lochner affirmatively states and alleges
that the claims of [the Zilbermans’] herein
are barred by applicable statutes, limitations
and immunity.
Lochner Answer at 4.
From the above, Lochner clearly did not
specifically allege the defense of qualified official
immunity in its answer. Rather, Lochner generally
alleged certain defenses and stated entitlement to
“immunity” presumably as an affirmative defense under
CR 8.03. In such instances we believe the circuit court
must examine the general language contained in the
answer and determine whether Lochner gave sufficiently
fair notice to preserve the affirmative defense. Cf.
Sheffer v. Chromalloy Mining, 578 S.W.2d 594 (Ky.
App. 1979). In this case, the circuit court failed to
address this issue below. As the circuit court failed to
address and determine whether Lochner gave fair notice
of the affirmative defense of qualified official immunity,
we vacate and remand for the circuit court to make such
determination. If the circuit court determines the defense
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was not sufficiently pleaded, the defense shall be waived
and the case shall proceed accordingly.
We deem any other contentions of error as moot at
this time.
Zilberman, 2018 WL 1358025, at *1-3 (footnotes omitted).
Once the matter returned to the circuit court, the Zilbermans refiled
their motion for leave to file a first amended complaint on June 5, 2019, against
Lochner and two Transportation Cabinet employees, David Orr and Keith
McDonald.1 Lochner objected to the motion, noting that the Zilbermans had not
raised any different factual allegations and that the court had already found that
their claims lacked merit. The court granted the motion by order entered August 7,
2019, noting that Lochner did not have standing to make any arguments on behalf
of Orr and McDonald, as they were employees of the Transportation Cabinet, and
that governmental immunity and statute of limitations defenses must be
affirmatively raised in an answer.2 Lochner filed an answer to the first amended
complaint, and it specifically pled that the Zilbermans’ claims against it were
1
The record reflects that the Zilbermans moved to file the first amended complaint on July 1,
2015, and tendered the identical amended complaint with the motion.
2
In August 2019, Orr and McDonald moved to be dismissed from the Zilbermans’ action on
statute of limitations and immunity grounds. The Zilbermans objected, and the circuit court
denied the motion by order entered November 13, 2019, holding that the claims (other than the
federal constitutional claims) against Orr and McDonald related back and were timely filed, and
that genuine issues of material fact remained as to whether they were entitled to immunity. This
ruling is not presently before the Court.
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barred by the doctrines of qualified official immunity and disclosed agency, among
other defenses.
On December 31, 2019, Lochner filed a renewed motion for summary
judgment, again seeking dismissal of all claims against it for several reasons. It
argued that: 1) its first answer gave the Zilbermans sufficiently fair notice to
preserve their intent to rely upon the defense of qualified official immunity; 2) any
defect in the original answer was rendered moot by its answer to the superseding
first amended complaint, which specifically pled qualified official immunity as a
defense; 3) it could not be liable based upon the disclosed agency doctrine as its
alleged actions were taken within the scope of authority of the Transportation
Cabinet; 4) because there was no taking, there was no legal basis for a civil right of
recovery under Section 2 of the Kentucky Constitution; 5) the real estate statutes
relied upon by the Zilbermans applied to individuals, not corporate entities; 6) the
Zilbermans’ alleged injuries were not the direct and proximate result of licensure
or non-licensure as Kentucky Revised Statutes (KRS) 446.070 required; and 7)
KRS 446.070 was not applicable to alleged violations of federal statutes or rules.
Lochner first addressed the fair notice issue pursuant to this Court’s direction on
remand, arguing that the Zilbermans knew from the beginning that the Cabinet and
Lochner were both pleading immunity defenses and responded to this issue in their
pleadings.
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In their response, the Zilbermans addressed Ms. Taylor’s dislike of
Mr. Zilberman and that she had been acting in a ministerial role. They also
addressed that Lochner, in its first answer, argued that it was entitled to the full
scope of sovereign immunity, not qualified official immunity, meaning that
Lochner had waived this defense. They also argued that properly pleading this
affirmative defense in the answer to the first amended complaint did not render its
prior waiver moot. The Zilbermans went on to address their real estate licensing,
bad faith, and constitutional claims. They asserted that, because disputed issues of
fact remained for a trier of fact to decide and Lochner was not entitled to
immunity, the motion should be denied.
In reply, Lochner argued that the Zilbermans had not presented any
affirmative evidence of any actionable wrong, breach of legal duty, any incurred
legal damages, or a factual or causal nexus between any damages and the alleged
act of bad faith by Lochner. Furthermore, the Zilbermans did not attempt to
address whether they had sufficiently fair notice of Lochner’s qualified immunity
defense but rather argued that it was waived as not specifically pled. Nor did they
address the disclosed agency doctrine defense.
By order entered February 4, 2020, the circuit court granted Lochner’s
motion for summary judgment. It concluded that Lochner adequately pled the
defense of qualified official immunity in its answer to the original complaint and
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that, therefore, this affirmative defense was preserved and not waived. It also
concluded that, “[the Zilbermans] had fair notice of the defense [and] suffered no
prejudice from the wording of Lochner’s initial pleading. Additionally, [the
Zilbermans] were afforded and made full use of the opportunity to rebut the
defense prior to this [c]ourt’s determination of summary judgment.” The court
then held that the proper pleading of the qualified official immunity issue was
rendered moot due to the filing of the first amended complaint and Lochner’s
answer, which specifically pled this defense. The first amended complaint
superseded the original complaint as the Zilbermans did not adopt the original
complaint by reference in the first amended complaint. The court went on to hold
that Lochner was entitled to qualified official immunity, found in a footnote that
Ms. Taylor’s actions did not arise to the level of bad faith, and found no merit in
the Zilbermans’ statutory or constitutional claims.
Finally, the circuit court addressed Lochner’s disclosed agency
doctrine defense, stating that “it appears that Lochner is immune from all liability
to [the Zilbermans] under the disclosed agency doctrine[,]” citing to Pannell v.
Shannon, 425 S.W.3d 58 (Ky. 2014). The court agreed with Lochner that its
actions were taken as the agent of the Transportation Cabinet and were authorized
and/or ratified by that Cabinet. Because the record reflected that Lochner’s actions
were authorized by the Transportation Cabinet and were taken within the scope of
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its disclosed agency, the court concluded that Lochner could not be held liable for
actions it took on behalf of the Transportation Cabinet as there was no evidence
that the actions were improper or in bad faith. Therefore, it ruled that Lochner was
entitled to summary judgment because it was protected by the doctrines of both
qualified official immunity and disclosed agency. This appeal now follows.
On appeal, the Zilbermans raise three issues, specifically listing these
issues on the first page of their brief as follows:
1) In ruling on the Motion for Summary Judgment filed
by [Lochner], did the trial court err in determining
that Lochner had pled the affirmative defense of
qualified official immunity with the requisite
specificity to be entitled to immunity from suit or was
said defense waived by its failure to do so?
2) If said affirmative defense was waived, can a
previously-waived defense be revived simply by filing
a responsive pleading to an Amended Complaint?
3) Does KRS 324.010, et seq. allow a private entity to
receive a fee for acting as an agent for another entity
to acquire interests in real estate without a license or
did Lochner violate said statute and 23 [Code of
Federal Regulations] § 710.201?
These are the same issues the Zilbermans listed in their prehearing statement.
In its brief, Lochner argues that the issues the Zilbermans address in
their brief are moot as they did not contest or preserve the other independent
grounds for summary judgment ruled upon by the circuit court. Specifically, the
circuit court concluded that Lochner was entitled to a judgment as a matter of law
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based upon both qualified official immunity as well as the doctrine of disclosed
agency. It addressed the application of the disclosed agency doctrine on pages 18
and 19 of its order before concluding that this doctrine also barred the Zilbermans’
claims against Lochner. The Supreme Court of Kentucky described this doctrine
as follows:
And it is the universal law of agency that when an
agent acts with authority in a transaction with a third
party, and the third party is aware of the agency, the
transaction is between the principal and the third party.
See Restatement (Third) Of Agency § 6.01 (2006). In
such circumstances, the agent is not liable. Id. The agent
of a business entity (or any agent, for that matter) can be
personally liable only when he or she purports to be an
agent but actually acts without authority. When that
happens, responsibility for the transaction falls back to
the agent and does not bind the principal.
Pannell, 425 S.W.3d at 81.
The Zilbermans did not address the doctrine of disclosed agency in
their initial brief and allotted one sentence to it in the reply brief: “Moreover,
because the trial court’s ruling with respect to disclosed agency rests on the same
shaky ground as its ruling on qualified immunity – both flow of necessity from its
finding that no bad faith was evident – it is indistinguishable from said ruling and
is therefore also in error.” That one sentence in a reply brief, let alone the failures
to address the issue in the initial brief or list it as an issue in the prehearing
statement, is not enough to preserve the circuit court’s ruling on this issue for our
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review. While the Zilbermans have certainly addressed the issue of bad faith based
upon Ms. Taylor’s actions, that does not excuse them from failing to raise this
particular issue and preserve it for our review. Furthermore, the Zilbermans never
addressed the fair notice issue as directed by this Court in the previous opinion or
contested the circuit court’s ruling that they had fair notice of Lochner’s qualified
official immunity defense.
Therefore, we agree with Lochner that the issues the Zilbermans
raised are moot as the circuit court’s judgment must be affirmed on alternate
grounds that are not before this Court for review. Accordingly, we shall not
address any of the arguments the Zilbermans raised in their brief, nor shall we
consider the propriety of the circuit court’s ruling as a whole.
For the foregoing reasons, the summary judgment of the Jefferson
Circuit Court is affirmed.
ALL CONCUR.
BRIEFS FOR APPELLANTS: BRIEF FOR APPELLEE H.W.
LOCHNER, INC.:
C. Dodd Harris IV
Lee Harris Donahue Michael T. Davis
Louisville, Kentucky Lexington, Kentucky
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