KNC Investments, LLC v. Lane's End Stallions, Inc.

Filing

OPINION filed : AFFIRMED, decision not for publication. Helene N. White, Circuit Judge; Bernice Bouie Donald, Authoring Circuit Judge and Kathleen McDonald O'Malley, Circuit Judge for the United States Court of Appeals for the Federal Circuit, sitting by designation. Judge White concurs and dissents.

Case: 13-5988

Document: 47-1

Filed: 09/02/2014

Page: 1

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 14a0681n.06

FILED

No. 13-5988
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

KNC INVESTMENTS, LLC, a California
Limited Liability Company,
Plaintiff-Appellant,
v.
LANE’S END STALLIONS, INC., a Texas
Corporation,
Defendant-Appellee.

)
)
)
)
)
)
)
)
)
)
)

Sep 02, 2014
DEBORAH S. HUNT, Clerk

ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR
THE EASTERN DISTRICT OF
KENTUCKY

OPINION

BEFORE: WHITE, DONALD, and O’MALLEY, Circuit Judges.*
BERNICE BOUIE DONALD, Circuit Judge.

The instant appeal involving KNC

Investments, LLC (“KNC”) and Lane’s End Stallions, Inc. (“Lane’s End”) arose following this
Court’s remand to the district court to determine whether subsequent events mooted the issues
KNC raised in its prior appeal. See KNC Invs., LLC v. Lane’s End Stallions, Inc., 504 F. App’x
467, 467-68 (6th Cir. 2012). On remand, the district court found that no live case or controversy
remained and accordingly granted Lane’s End’s motion to dismiss the case for lack of subjectmatter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). For the following
reasons, we AFFIRM the judgment of the district court.
*

The Honorable Kathleen M. O’Malley, United States Court of Appeals for the Federal Circuit,
sitting by designation.

Case: 13-5988

Document: 47-1

Filed: 09/02/2014

Page: 2

No. 13-5988
KNC Invs., LLC v. Lane’s End Stallions, Inc.
I.
Lane’s End serves as Syndicate Manager for the owners of interests in the Lemon Drop
Kid Syndicate (“the Syndicate”). Lemon Drop Kid is a Thoroughbred horse. The agreement
establishing the Syndicate transferred ownership of Lemon Drop Kid from the original, single
owner into syndicate form to provide for the horse’s management and supervision.

The

Syndicate consists of forty equal fractional ownership interests (“Fractional Interests”). A holder
of a Fractional Interest is an Owner. Each Owner has various rights under the agreement,
including breeding rights.
On February 28, 2011, KNC purchased Fractional Interest No. A05 in the Syndicate from
its previous Owner. At the time of this purchase, the Original Syndicate Agreement (“Original
Agreement”), effective November 30, 2000, governed the rights and responsibilities of the
Owners and the Syndicate Manager. The Original Agreement contained language providing that
it could be “altered, amended or modified with the affirmative vote of the Owners holding 34 of
the 40 Fractional Interests.”
In early March of 2011, KNC began making demands of Lane’s End regarding the other
Owners of Fractional Interests in the Syndicate. Specifically, KNC desired to obtain the names
and contact information of the other Owners. On March 8, 2011, Lane’s End responded to
KNC’s requests. Lane’s End indicated that it would seek permission from the other Owners in
the Syndicate to disclose their identities and contact information pursuant to section 6.1 of the
Original Agreement, which provided that a majority vote of the Owners of the Fractional
Interests would decide any question submitted. All the other Owners except KNC voted against

-2-

Case: 13-5988

Document: 47-1

Filed: 09/02/2014

Page: 3

No. 13-5988
KNC Invs., LLC v. Lane’s End Stallions, Inc.
disclosing their identities and contact information, and Lane’s End refused to provide such
information to KNC.
After the other Owners rebuffed KNC’s requests for information, on March 22, 2011,
KNC filed suit against Lane’s End, as Syndicate Manager, in the United States District Court for
the Eastern District of Kentucky, asserting four claims for relief and seeking declaratory relief,
damages, and complete accounting of the Syndicate’s financial records. In November of 2011,
the district court granted both Lane’s End’s motion to dismiss some of KNC’s claims and Lane’s
End’s motion for summary judgment as to KNC’s other claims. Following the district court’s
denial of KNC’s motion to reconsider its November 2011 decision, KNC appealed.
Before this Court adjudicated KNC’s prior appeal, the other thirty-nine Owners of
Fractional Interests in the Syndicate voted to amend the Original Agreement and expressly to
ratify Lane’s End’s past actions as Syndicate Manager. Lane’s End then filed a motion to
dismiss KNC’s appeal as moot based on the Amended Syndicate Agreement (“Amended
Agreement”). KNC Invs., 504 F. App’x at 467. This Court remanded to the district court to
determine in the first instance whether the Amended Agreement mooted KNC’s claims. Id. at
468.

On remand, the district court found that no live case or controversy remained and

accordingly granted Lane’s End’s Rule 12(b)(1) motion to dismiss for lack of subject-matter
jurisdiction. KNC again appealed to this Court.

-3-

Case: 13-5988

Document: 47-1

Filed: 09/02/2014

Page: 4

No. 13-5988
KNC Invs., LLC v. Lane’s End Stallions, Inc.
II.
A.
In granting Lane’s End’s motion to dismiss for lack of subject-matter jurisdiction, the
district court decided only the question of whether KNC’s claims are now moot in light of the
Amended Agreement. Because the district court considered only the issue of mootness on
remand, we confine our review to that issue. Wright v. Holbrook, 794 F.2d 1152, 1157 (6th Cir.
1986) (“[T]he general rule is that this court will not consider issues not raised in the district
court.”); see also Norfolk & W. Ry. Co. v. City of Oregon, 210 F.3d 372, at *4 (6th Cir. 2000)
(Table) (“The district court limited its remand to that issue and, likewise, our review is similarly
limited.” (footnote omitted)).
We generally review de novo a district court’s decision to dismiss for lack of subjectmatter jurisdiction under Rule 12(b)(1). Howard v. Whitbeck, 382 F.3d 633, 636 (6th Cir. 2004).
If the lower court, however, “does not merely analyze the complaint on its face, but instead
inquires into the factual predicates for jurisdiction, the decision on the Rule 12(b)(1) motion
resolves a ‘factual’ challenge rather than a ‘facial’ challenge, and we review the district court’s
factual findings for clear error.” Id. (citing RMI Titanium Co. v. Westinghouse Elec. Corp.,
78 F.3d 1125, 1133-35 (6th Cir. 1996); United States v. Ritchie, 15 F.3d 592, 598 (6th Cir.
1994); Ohio Nat’l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir. 1990)).
Lane’s End’s challenge to the existence of subject-matter jurisdiction in this case is a
factual one because the district court analyzed the complaint in light of the Amended Agreement,
which Lane’s End contends deprives the court of a “factual predicate[]” for jurisdiction. Id.
Language from this Court’s prior order buttresses our conclusion: “Perhaps this case is moot, or
-4-

Case: 13-5988

Document: 47-1

Filed: 09/02/2014

Page: 5

No. 13-5988
KNC Invs., LLC v. Lane’s End Stallions, Inc.
perhaps the new facts relate to the merits of the dispute between KNC and Lane's End. Either
way, . . . the district court is best suited to find any relevant facts and to determine in the first
instance whether a live controversy remains.” KNC Invs., 504 F. App’x at 468. We therefore
review the district court’s factual findings for clear error and its legal conclusions de novo. See
Howard, 382 F.3d at 636.
B.
This Court has stated that “‘[t]he test for mootness is whether the relief sought would, if
granted, make a difference to the legal interest of the parties.’” Wedgewood Ltd. P’ship I v. Twp.
of Liberty, 610 F.3d 340, 348 (6th Cir. 2010) (quoting Ford v. Wilder, 469 F.3d 500, 504 (6th
Cir. 2006)). The “heavy burden of demonstrating mootness” lies with the party claiming that the
case is moot. Cleveland Branch, NAACP v. City of Parma, 263 F.3d 513, 530-31 (6th Cir. 2001)
(citing Cnty. of L.A. v. Davis, 440 U.S. 625, 631 (1979)). We agree with the district court that
Lane’s End met its burden to prove the mootness of this controversy in light of the Amended
Agreement, which now expressly ratifies Lane’s End’s past conduct.
KNC’s Amended Complaint asserts four claims against Lane’s End. Count I seeks a
declaratory judgment regarding KNC’s alleged rights to inspect the Syndicate’s books and
records, to an un-redacted purchase offer, and to information regarding the advancement of
Syndicate funds based on the Original Agreement. Count II seeks a declaratory judgment
regarding KNC’s alleged right to inspect the Syndicate’s books and records based on the
Kentucky Business Corporations Act, Ky. Rev. Stat. Ann. § 271b.16-020. Count III seeks
compensatory and punitive damages for Lane’s End’s alleged violations of its fiduciary duties to
the Owners of the Syndicate based on the Original Agreement. Count IV seeks a full and
-5-

Case: 13-5988

Document: 47-1

Filed: 09/02/2014

Page: 6

No. 13-5988
KNC Invs., LLC v. Lane’s End Stallions, Inc.
complete accounting of all Syndicate funds based on Kentucky’s law of agency and the Original
Agreement. In the prior appeal, this Court affirmed the district court’s dismissal of Count II.
KNC Invs., 504 F. App’x at 468 (“We thus need no additional facts to conclude that the district
court correctly rejected KNC’s claims under the Business Corporations Act.”). The only claims
remaining on remand, then, were those KNC asserted based on the Original Agreement.
Events that transpired after KNC filed its Amended Complaint, however, prevent it from
asserting any claims under the Original Agreement. The other thirty-nine Owners of Fractional
Interests in the Syndicate—all save for KNC—voted in May and June of 2012 to amend the
Original Agreement. The Amended Agreement addresses the actions taken by Lane’s End that
KNC complains of in this litigation. Specifically, the language of the Amended Agreement
confirms that the identities of individual Owners are confidential and Lane’s End cannot disclose
them absent a majority vote. The language of the Amended Agreement also expressly ratifies
the actions taken by Lane’s End that KNC alleges violated its rights under the Original
Agreement. Kentucky law permits such ratification, even with the consent of a simple majority
of the owners. See Weisbord/Etkin/Goldberg v. Gainesway Mgmt. Corp., No. 2007-CA-000280MR, 2008 WL 820950, at *5-6 (Ky. Ct. App. Mar. 28, 2008) (“The appellants provide no
convincing authority in law or in the express language of the Agreement to support the view that
such a post facto approval of the transfer of one share must be approved by all the members of
the syndicate.”).1

1

We recognize that the Weisbord court reached this conclusion in a case where the syndicate
agreement was not amended, which is different from the situation here. We cite this case only to
demonstrate that the other Owners of Fractional Interests in the Syndicate were permitted under
Kentucky law to ratify Lane’s End’s past conduct without KNC’s consent.
-6-

Case: 13-5988

Document: 47-1

Filed: 09/02/2014

Page: 7

No. 13-5988
KNC Invs., LLC v. Lane’s End Stallions, Inc.
Accordingly, the district court’s factual conclusion—based on the affidavit submitted by
Thomas Hyams, Secretary and Treasurer of Lane’s End—that the other thirty-nine Owners in the
Syndicate followed the proper procedures for ratifying Lane’s End’s prior actions is not clearly
erroneous. KNC failed to present probative evidence to the district court rebutting Hyams’
affidavit, and the Amended Agreement specifically ratifies all of Lane’s End’s past actions. This
Court thus cannot grant any relief that “would . . . make a difference to the legal interest of the
parties.” Wedgewood, 610 F.3d at 348 (quoting Ford, 469 F.3d at 504).
C.
KNC nonetheless contends that the district court committed two legal errors in granting
Lane’s End’s Rule 12(b)(1) motion to dismiss. First, KNC argues that the district court erred by
denying its request for discovery on remand because KNC “should have been given an
opportunity to investigate how the amendments occurred and whether Lane’s End went beyond
its role as Syndicate Manager in seeking and obtaining the amendments.” Appellant Br. at 38.
Second, KNC argues: “Lane’s End could not effectuate an amendment to the Original Syndicate
Agreement without the consent of one of its parties (KNC), especially when its attempt to do so
was intended to void certain provisions of that contract that existed when KNC agreed to become
a party to it.” Id. at 42.
The district court properly rejected KNC’s request for discovery. In Chrysler Corp. v.
Fedders Corp., 643 F.2d 1229 (6th Cir. 1981), this Court held that whether or not to allow
discovery prior to deciding a motion to dismiss for lack of jurisdiction is within the discretion of
the district court. Id. at 1240 (“A ruling by the trial court limiting or denying discovery will not
be cause for reversal unless an abuse of discretion is shown.”). The instant case is analogous to
-7-

Case: 13-5988

Document: 47-1

Filed: 09/02/2014

Page: 8

No. 13-5988
KNC Invs., LLC v. Lane’s End Stallions, Inc.
Chrysler Corp. because KNC did not present any probative evidence to the district court to
support its allegations that Lane’s End acted improperly during the amendment process in May
and June of 2012. See id. (“Inasmuch as Chrysler failed to offer any factual basis for its
allegations of conspiracy, it was well within the trial court's discretion to deny Chrysler's request
for discovery.”). The district court therefore did not abuse its discretion in denying KNC’s
discovery request.
KNC’s second argument, that the other Owners of the Syndicate could not amend the
Original Agreement without KNC’s consent, lacks merit.

In Kentucky Home Mutual Life

Insurance Co. v. Leitner, 196 S.W.2d 421 (Ky. 1946), Kentucky’s highest court held the
opposite. Where a contract contains a provision for amendment, even if that provision allows for
unilateral modification by only one party, there is no blanket requirement under Kentucky law
that all parties must consent to an amendment before it binds them. See id. at 423 (“It is
stipulated that the insured was bound by the original reinsurance agreement. Since it provided
for amendments thereto, he was likewise bound by the amendments, unless the Company was
estopped or unless a consideration separate and distinct from the original consideration is
required to support the amendment.”). KNC’s assent to the amendment provision in the Original
Agreement thus precludes it from challenging the validity of subsequent amendments enacted
pursuant to that provision, absent certain exceptions not present in this case. See id. (requiring
the objecting party to “accept the contract as it was made”).2 Because Kentucky law does not
prohibit the other thirty-nine Owners of Fractional Interests in the Syndicate from ratifying

2

Because we conclude that the other thirty-nine Owners of Fractional Interests in the Syndicate
properly ratified Lane’s End’s conduct, we do not address whether the Owners properly could
amend the agreement retroactively.
-8-

Case: 13-5988

Document: 47-1

Filed: 09/02/2014

Page: 9

No. 13-5988
KNC Invs., LLC v. Lane’s End Stallions, Inc.
Lane’s End’s conduct without KNC’s consent, the district court did not err when it granted
Lane’s End’s motion to dismiss for lack of subject-matter jurisdiction.
III.
Accordingly, we AFFIRM the judgment of the district court.

-9-

Case: 13-5988

Document: 47-1

Filed: 09/02/2014

Page: 10

No. 13-5988
KNC Invs., LLC v. Lane’s End Stallions, Inc.
HELENE N. WHITE, Circuit Judge, concurring and dissenting.
The majority opinion concludes that KNC’s claims against Lane’s End are moot because
the Amended Agreement “now expressly prohibits the relief sought by KNC.” Maj. Op. at 5. I
respectfully dissent from that determination. I would, however, affirm because I agree with the
district court’s dismissal on the merits.
I.
KNC brought four claims in its amended complaint: (I) for a declaratory judgment
regarding KNC’s alleged rights (a) to inspect the Syndicate’s books and records, (b) to an unredacted purchase offer, and (c) to information regarding the advancement of Syndicate funds to
one Owner, all based on the Original Agreement; (II) for a declaratory judgment regarding
KNC’s alleged right to inspect the Syndicate’s books and records under the Kentucky Business
Corporations Act, Ky. Rev. Stat. Ann. § 271b.16-020; (III) for compensatory and punitive
damages for Lane’s End’s alleged violations of its fiduciary duties to KNC, based on Lane’s
End’s (a) refusal to provide KNC full access to the books and records, (b) advancing Syndicate
funds to one Owner, and (c) polling and attempting to influence the Owners to “ratify” its
conduct; and (IV) for an accounting of all Syndicate funds based on Kentucky’s law of agency
and the Original Agreement. The district court dismissed the claims, and KNC appealed.
While KNC’s appeal was pending, thirty-nine of the forty members of the Syndicate
voted to amend the Syndicate Agreement and to ratify Lane’s End’s challenged conduct. The
Amended Agreement makes its changes effective retroactive to the date of the adoption of the
Original Agreement and purports to supersede that Agreement entirely. This court affirmed the
dismissal of Count II and remanded the case to the district court to determine whether the
Amended Agreement rendered moot KNC’s remaining claims. On remand, the district court

- 10 -

Case: 13-5988

Document: 47-1

Filed: 09/02/2014

Page: 11

No. 13-5988
KNC Invs., LLC v. Lane’s End Stallions, Inc.
found that a live controversy no longer exists between the parties because the Amended
Agreement “now expressly bars the exact relief requested by KNC in its original suit for
declaratory relief seeking a right to inspect the books and records of the Syndicate,” and because
the Owners “expressly ratified Lane’s End’s actions in not providing KNC with their identities
and contact information.” The district court did not separately address KNC’s claim for damages
except that it rejected a new argument that KNC made, post-remand, that Lane’s End had
continued to engage in conduct contrary to its fiduciary duties when it wrote the Owners and
asked them to approve the Amended Agreement. The district court found that argument barred
by specific language in the Amended Agreement providing that the Syndicate Manager can
express its views to Owners regarding matters in issue.
In this appeal, KNC appeals only the district court’s determination that Count III, its
claim for damages, is moot.3 It argues that the district court should have granted its request for
discovery into the validity of the process used to amend the Original Agreement, and that the
other Owners of the Syndicate could not amend the Original Agreement without KNC’s consent,
and could not “effectively and after-the-fact ratify” Lane’s End’s breach of the Original
Agreement on KNC’s behalf. I agree with the majority that the district court had the discretion
to deny further discovery, but I do not agree that the Amended Agreement renders KNC’s
damages claim moot.

3

Lane’s End contends that KNC waived appeal of Count III by failing to brief it in its opening brief in the first
appeal in this case, and that therefore KNC has waived appeal of all its claims. I disagree. Count III is a claim for
punitive and compensatory damages based on the allegedly wrongful conduct described in Count I. In its opening
brief in the first appeal, KNC stated “[t]his Appeal relates primarily to the District Court’s dismissal of Count I” and
asked this court, if it found reversal warranted on Count I, to remand for the district court for determination of the
remaining counts “based upon the outcome of Count I.” Because KNC made arguments relevant to the reversal of
Count III in its opening brief in the first appeal, and asked for reversal of the district court’s decision on that count, I
would not find that it waived appeal of the claim.

- 11 -

Case: 13-5988

Document: 47-1

Filed: 09/02/2014

Page: 12

No. 13-5988
KNC Invs., LLC v. Lane’s End Stallions, Inc.
II.
As KNC apparently concedes, its claims for declaratory and injunctive relief under the
Original Agreement are now moot because the Original Agreement no longer exists to enforce.
See KNC Br. 6 n.2 (stating it does not appeal the dismissal of those claims). But the Owners’
adoption of the Amended Agreement does not necessarily moot KNC’s claims for damages
because this court can still redress a past violation of the Original Agreement by awarding
damages. See Wedgewood Ltd. P’ship I v. Twp. of Liberty, 610 F.3d 340, 348 (6th Cir. 2010)
(“‘The test for mootness is whether the relief sought would, if granted, make a difference to the
legal interest of the parties.’”) (citation omitted); see also 13C Fed. Prac. & Proc. Juris. §
3533.3 (3d ed.) (“Untold numbers of cases illustrate the rule that a claim for money damages is
not moot, no matter how clear it is that the claim arises from events that have completely
concluded without any prospect of recurrence.”).
Lane’s End asserts, essentially, two reasons that the Amendment Agreement nonetheless
renders KNC’s damages claims moot: (1) in the Amended Agreement, the Owners ratified, i.e.
retroactively sanctioned, all the conduct of Lane’s End that KNC claims was in violation of the
Agreement and Lane’s End’s fiduciary duties; and (2) the Amended Agreement purports to
supersede the Original Agreement entirely, as though it never existed.
A. Ratification
The Original Agreement provides that “the relationship of the Owners to the Syndicate
Manager [is] that of principal and agent.” Under Kentucky law, a principal may ratify or affirm
its agent’s otherwise unauthorized conduct. See Stewart v. Mitchell’s Adm’x, 301 Ky. 123, 126
(1945) (“As applied to the law of agency, ratification is the affirmance of an act by one for or in
behalf of another at a time when he had no authority to do the act for the one in whose name it

- 12 -

Case: 13-5988

Document: 47-1

Filed: 09/02/2014

Page: 13

No. 13-5988
KNC Invs., LLC v. Lane’s End Stallions, Inc.
was done.”). “An otherwise-effective ratification eliminates claims that the principal has against
the agent, including claims for breach of fiduciary duty.” Restatement (Third) of Agency §
4.02(b). Accordingly, if KNC ratified Lane’s End’s conduct, all KNC’s claims against Lane’s
End would be extinguished, and therefore moot, even claims for damages.
The Original Agreement provides that a vote of 34 out of 40 Owners may alter, amend, or
modify the Agreement, and a simple majority of Owners may resolve “all questions properly
submitted.” The Owners’ express statement in the Amended Agreement that they ratified Lane’s
End’s conduct is undoubtedly effective to ratify the conduct on behalf of the Owners who
participated in the vote to amend, but the question is whether it is effective with respect to KNC.
The majority opinion concludes that Kentucky law permits a simple majority of syndicate
owners to ratify an agent’s conduct on behalf of the remaining owners.

Maj. Op. at 6

(“Kentucky law permits such ratification, even with the consent of a simple majority of the
owners.”) (citing Weisbord/Etkin/Goldberg v. Gainesway Mgmt. Corp., No. 2007-CA-000280MR, 2008 WL 820950, at *5–6 (Ky. Ct. App. Mar. 28, 2008), for its observation that “[t]he
appellants provide no convincing authority in law or in the express language of the Agreement to
support the view that such a post facto approval of the transfer of one share must be approved by
all the members of the syndicate.”). But the quoted sentence in Weisbord was not a holding; it
was dicta. In Weisbord, the plaintiffs challenged the sale of one member’s Fractional Interest,
arguing that in coordinating the sale, the Syndicate Manager had deviated from the terms of the
Syndicate Agreement governing such sales. Id. at *2. The court affirmed the dismissal of the
plaintiffs’ claims for declaratory and injunctive relief. It found, first, that the plaintiffs were
estopped from challenging the sale because they themselves had sought a waiver from the terms
of the Agreement. Id. at *4. Second, it addressed the plaintiffs’ argument “that the ratification

- 13 -

Case: 13-5988

Document: 47-1

Filed: 09/02/2014

Page: 14

No. 13-5988
KNC Invs., LLC v. Lane’s End Stallions, Inc.
was invalid because it was not approved by all the members of the syndicate, but was approved
only by a majority.” Id. at *6. The court made the observation quoted above that the plaintiffs
had provided “no convincing authority in law or in the express language of the Agreement to
support the view that such a post facto approval of the transfer of one share must be approved by
all the members of the syndicate.” Id. And then in a footnote immediately following that
observation, the court stated: “Regardless of whether the appellants have a valid argument in
this regard, they are without remedy due to estoppel as we have explained above.” Id. at *6 n.3
(emphasis added). Thus, the observation the majority relies on would not bind subsequent
Kentucky courts because it is dicta, see Bd. of Claims of Kentucky v. Banks, 31 S.W.3d 436, 439
n.3 (Ky. Ct. App. 2000), and because it appears in an unpublished decision, see Ky. St. RCP
76.28(4)(c). For a federal court sitting in diversity, like this one, the observation is a relevant
data point, but is not controlling on its own. See Garden City Osteopathic Hosp. v. HBE Corp.,
55 F.3d 1126, 1130 (6th Cir. 1995) (“When deciding a diversity case under state law,” where the
state’s highest court has not decided the question, “a federal court must . . . ascertain the state
law from ‘all relevant data’” including “the state’s appellate court decisions, . . . the state’s
supreme court dicta, restatements of law, law review commentaries, and the majority rule among
other states”) (citations omitted).
The Kentucky Supreme Court has applied the Restatement (Third) of Agency (2006) to
questions of agency law, see Pannell v. Shannon, 425 S.W.3d 58, 84 (Ky. 2014) (citing §§ 4.01,
4.02 in a discussion of ratification), as well as American Jurisprudence, Second Edition, on
Agency, see Kindred Nursing Centers Ltd. P’ship v. Leffew, 398 S.W.3d 463, 467 (Ky. Ct. App.
2013) (stating that “Kentucky has adopted th[e] understanding of ratification” expressed in 2
Am. Jur. 2d Agency § 209 (2013)) (citing Capurso v. Johnson, 248 S.W.2d 908, 910 (Ky. 1952)).

- 14 -

Case: 13-5988

Document: 47-1

Filed: 09/02/2014

Page: 15

No. 13-5988
KNC Invs., LLC v. Lane’s End Stallions, Inc.
Under the Restatement, the Owners are “coprincipals,” and lack the power to ratify their agent’s
conduct on each other’s behalf. See Restatement (Third) of Agency § 3.14 (“[A]n agent for
coprincipals acts for more than one principal in the same transaction or other matter.
Coprincipals are not hierarchically stratified.”); see also id. § 4.01 (“When there are two or more
coprincipals, each must ratify to be bound.”) (emphasis added). American Jurisprudence is in
accord. See 3 Am. Jur. 2d Agency § 176 (2013) (“If a ratification would bind multiple principals,
each must affirm with knowledge of the acts to be ratified.”) (citing Restatement (Third) Agency
§ 4.06 cmt. b.); see also Kindred Nursing Centers Ltd. P’ship, 398 S.W.3d at 467 (citing § 176
of Am. Jur. as authoritative on a question of agency law).
KNC did not vote to ratify Lane’s End’s conduct. To resolve the question whether the
Owners’ ratification is effective as to KNC, I would look to the authorities the Kentucky
Supreme Court and Court of Appeals have relied on in published decisions rather than an
unsupported, non-binding observation in an unpublished decision.

According to those

authorities, the Owners lacked authority to ratify Lane’s End’s conduct on KNC’s behalf, and
therefore, the Owners’ ratification could not and did not extinguish KNC’s claims for damages.
B. Contract
I would also reject Lane’s End’s contention that the Owners’ purported retroactive
amendment of the contract moots KNC’s claims for damages. Lane’s End cites Kentucky
decisions holding generally that a contract provision allowing for amendment of the contract is
enforceable and binding, see, e.g., Kentucky Home Mut. Life Ins. Co. v. Leitner, 196 S.W.2d 421,
423 (Ky. 1946)); Supreme Lodge K.P. v. Hunziker, 87 S.W. 1134, 1135 (Ky. 1905), but neither
party cites cases addressing whether a contract provision granting one-sided authority to amend
can be reasonably construed to include authority to amend the contract retroactively.

- 15 -

Case: 13-5988

Document: 47-1

Filed: 09/02/2014

Page: 16

No. 13-5988
KNC Invs., LLC v. Lane’s End Stallions, Inc.
Kentucky follows the general rule of enforcing contracts as written.

See Wehr

Constructors, Inc. v. Assurance Co. of Am., 384 S.W.3d 680, 685 (Ky. 2012) (“‘[A] written
instrument will be enforced strictly according to its terms,’ and a court will interpret the
contract’s terms by assigning language its ordinary meaning and without resort to extrinsic
evidence.”) (quoting Frear v. P.T.A. Industries, Inc., 103 S.W.3d 99, 106 (Ky. 2003). No term
in the Original Agreement confers on the Owners the power to retroactively change its terms.
The Original Agreement provides that it may be “altered, amended, or modified” by thirty-four
out of forty Owners, but says nothing about retroactivity, and the contract does not purport to
govern the parties’ past conduct. Under those circumstances, I see no basis to conclude that the
Owners’ authority to amend the Original Agreement includes the additional extraordinary power
to retroactively amend it to eliminate an Owner’s accrued claim for damages. Cf., e.g., Sec.
Watch, Inc. v. Sentinel Sys., Inc., 176 F.3d 369, 373 (6th Cir. 1999) (declining to give a merger
clause retroactive effect “as no other provision of the later agreement even ‘remotely intimate[d]
that the parties ever contemplated so radical a retroactive renegotiation of their earlier
agreements’”) (quoting Choice Security Sys., Inc. v. AT&T Corp., No. 97–1774, 1998 WL
153254, at *1 (1st Cir. 1998) (unpublished)). To the extent that Lane’s End argues that the
Amended Agreement is probative of the Owners’ understanding of the terms of the Original
Agreement, that is not a contention that renders KNC’s claims moot; it is an argument on one
side of a live controversy.
I would VACATE the district court’s mootness determination and reach the merits of
KNC’s appeal regarding Count III. In this regard, however, I agree with the district court’s
dismissal. KNC has shown no breach and no damages as relevant to the claims in this case.

- 16 -