Taylor et al v. University of the Cumberlands
MEMORANDUM OPINION & ORDER: 1. The Defendants' Motion to Dismiss for failure to state a claim [R. 12] and the Supplemental Motion to Dismiss for failure to state a claim [R. 18] are GRANTED as to Count VII, "Termination of ERISA Prot ected Benefits, and Count VIII Unjust Enrichment." 2. The Defendants' Motion to Dismiss for failure to state a claim [R. 12 ] and the Supplemental Motion to Dismiss for failure to state a claim [R. 18 ] are DENIED as to all remaining cl aims. Motions terminated: 12 MOTION to Dismiss for failure to state a claim by University of the Cumberlands filed by University of the Cumberlands, and 18 SUPPLEMENTAL MOTION to Dismiss for failure to state a claim by University of the Cumberlands filed by University of the Cumberlands. Signed by Judge Gregory F. Van Tatenhove on 2/7/2017.(RBB)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
DR. JAMES TAYLOR and MRS. DINAH
UNIVERSITY OF THE
Civil No: 6:16-cv-109-GFVT
Dr. James Taylor was employed as President of the University of the Cumberlands for 35
years beginning in August of 1980. Following his retirement from that position, and after
serving as Chancellor of the University for a short time, Dr. Taylor insisted on enforcement of a
disputed agreement made between the University and Dr. and Mrs. Taylor. The University
refused to fulfill the terms of the disputed agreement which, among many benefits, provide Dr.
James Taylor and Mrs. Dinah Taylor with compensation for life following Dr. Taylor’s
retirement from the position of President. Subsequently, Dr. Taylor brought suit against the
University alleging breach of contract, promissory estoppel, slander, intentional infliction of
emotional distress, unjust enrichment, and seeking reformation. In the alternative to a breach of
contract claim, Dr. Taylor alleges that the University terminated benefits protected under the
Employee Retirement Income Security Act of 1974 (“ERISA”). Presently before the Court is the
Defendant’s Motion to Dismiss [R. 12] and Supplemental Motion to Dismiss [R. 18], which, for
the reasons set forth below, will be GRANTED in part and DENIED in part.
Given the present context, the factual summary that follows is taken from the amended
complaint [R. 16] and construed in favor of the plaintiff. See Crugher v. Prelesnik, 761 F.3d
610, 614 (6th Cir. 2014) (citation omitted). Dr. James Taylor was employed as President of the
University of the Cumberlands for 35 years beginning in August of 1980. [R. 6, ¶ 4.] Dr. Taylor
was President of the University during times of significant expansion and development,
including the transition from Cumberland College to the University of the Cumberlands. The
Plaintiff alleges that Dr. Taylor’s compensation was “significantly lower than the Presidents of
other similarly situated colleges.” [Id., ¶ 7.]
The Plaintiffs also allege that, through a series of University Board of Trustees meetings
beginning in October of 2005 and continuing to October, 2015, the University entered into and
reaffirmed commitment to an agreement to provide Dr. James Taylor and Mrs. Dinah Taylor
with compensation for life following Dr. Taylor’s retirement from the position of President. The
agreement that was made on April 19, 2012, [see R. 16-1] was first discussed generally at the
October 21, 2005, Board of Trustees meeting for the University. [R. 16, ¶ 8.] During a closed
executive session, the plaintiffs allege the board unanimously adopted a resolution made by
Trustee Bill Hacker and seconded by Trustee Dave Huff that would “continue Dr. Taylor and
Ms. Dinah Taylor’s salary and benefits following his retirement from the position of President,
and to appoint him as Chancellor of the University immediately thereafter.” [Id.]
The resolution adopted by the Board explicitly stated, “In the event Dr. Taylor
predeceases his wife, such compensation and benefits shall go to Dinah Taylor,” and that the
University Bylaws and President’s contract shall be amended “to include the establishment of the
position of Chancellor and the salary and benefits for Dr. and Mrs. Taylor.” [Id., ¶ 8(a)-(b).] Jim
Oaks, Chairman of the Board of Trustees, hired the law firm of Guenther, Jordan & Price, P.C. to
prepare the necessary amendments. [Id., ¶ 9.] The agreement itself, which the parties refer to as
the “disputed agreement” or the “Taylor Agreement,” was not further addressed by the Board
until seven years later at the April 19, 2012, meeting. Plaintiffs state that the “Taylor agreement
was unanimously approved by the Board of Trustees on that date,” and have attached the signed
agreement as Exhibit A to the Complaint. [Id., ¶ 11.] The agreement was prepared by attorney
Steven J. Moore and signed by Dr. Taylor, Mrs. Taylor, Jim Oaks, the “University of the
Cumberlands Authorized Representative,” and a notary public. [See R. 16-1.]
The Taylor Agreement states that the University agrees to provide a number of retirement
benefits to Dr. and Mrs. Taylor after his retirement from the Presidency including health
insurance benefits, continued pay of Dr. Taylor’s full salary, and the University agreed to
provide the Taylors with a residence or apartment in Williamsburg. [R. 16, ¶ 12.] These
benefits were to be provided for the lives of Dr. and Mrs. Taylor. At the time of his retirement
on October 15, 2014, the complaint states that the Board “unanimously reconfirmed the
University’s commitment to provide a benefit package for Dr. and Mrs. Taylor to include salary
in effect on January 1, 2015, all previously approved insurance for Dr. and Mrs. Taylor, plus all
other perks they were receiving at that time.” [Id., ¶ 13.] Dr. Taylor stepped down as President
and entered the role of Chancellor while Mrs. Taylor “continued to serve as ambassador for the
University.” [Id., ¶ 14.] The University contests the Plaintiffs’ description of Board action at
the Executive Sessions and challenges the validity and accuracy of the minutes that the Plaintiff
referenced in the complaint.
After Dr. Taylor’s retirement, the University attempted to reduce the amount of benefits
owed to Dr. and Mrs. Taylor by offering Dr. Taylor a one-year renewable contract that provided
for a reduced salary that was significantly less than had been provided for in the disputed
agreement. [R. 16, ¶ 15.] The University warned Dr. Taylor that failure to accept this one-year
renewable contract would result in the loss of all prior benefits including his “University owned
apartment in Williamsburg, KY, the University owned vehicle he drives, and the cellular
telephone he uses, all of which were benefits to him under the Taylor Contract.” [Id.] Despite
the threat of losing all benefits, Dr. Taylor refused these offers and insisted on enforcement of
the Taylor Agreement as originally negotiated by the parties. [Id.] Subsequently, the University
informed Dr. and Mrs. Taylor that “their Agreement . . . will not be honored and their retirement
benefits have been terminated.” [Id., ¶ 16.]
Plaintiffs allege that the Taylor Agreement was valid and that the University has
breached the contract by refusing to pay benefits to Dr. and Mrs. Taylor. [R. 16, ¶¶ 17-20.] In
the alternative, Plaintiffs allege that the Taylor Agreement constituted a “top hat ERISA pension
plan and a welfare plan as defined by 29 USCS § 1002,” and that “ERISA, 28 U.S.C. 1132
(a)(1)(B) authorizes the Taylors to recover benefits due under the terms of the plan.” [Id., ¶¶ 4247.] The Taylor Agreement contained a number of retirement benefits, in addition to monetary
compensation, such as health care and long term care for both Dr. Taylor and Mrs. Dinah Taylor.
[Id., ¶¶ 46.] The Plaintiffs also state that promissory estoppel should result in the agreement
being enforced because their detrimental reliance on the agreement “should reasonably have
been expected to induce action or forbearance,” by the Plaintiffs. [Id., ¶¶ 22-23.]
The Plaintiffs allege, in addition to the contract and common law damages, that the
University representatives have engaged in slander as they made false statements that have been
published to third parties. [R. 16, ¶ 26.] The amended complaint alleges that these false
statements suggest that Dr. Taylor “hid the Taylor agreement from the University and from the
Board of Trustees, and that he had the contract drawn up in a deceitful or scheming manner.”
[Id.] Dr. Taylor and Mrs. Taylor believe that these statements were made by the University with
reckless disregard for the truth or knowledge of the falsity of the statements, and that Dr. Taylor
was harmed by their publication. Since these statements “includ[e] allegations of underhanded or
dishonest actions by Dr. Taylor, [they] are actionable as slander per se.” [Id., ¶ 28.]
The amended complaint also presents claims under intentional infliction of emotional
distress. Both Dr. and Mrs. Taylor were harmed when the University used “economic coercion
against an elderly couple, including threats of the loss of their residence and health insurance, as
well as their income, in an effort to accomplish a breach of a longstanding and enforceable
contract.” [Id., ¶ 33.] Plaintiffs allege that the discontinuance of retirement benefits has in fact
caused severe emotional distress as the elderly couple has been forced to decide where to live,
how to pay for healthcare and related costs, where to obtain insurance, and how to meet
remaining financial obligations. [Id., ¶ 35.] Dr. Taylor and Mrs. Taylor seek punitive damages
and allege that the University has acted “with malice and oppression, and the conduct of the
University was at all times of a willful and wanton character.” [Id., ¶ 38.]
Dr. and Mrs. Taylor also claim that, due to the Board of Trustee’s vote which continued
Mrs. Taylor’s salary as of Dr. Taylor’s retirement, the Taylor Agreement should “be reformed to
correct the mutual mistake and to comport with the true intent of the parties.” [R. 16, ¶ 41.]
Last, the Plaintiffs allege that the University has benefited from unjust enrichment. Dr. Taylor,
in reliance of the Taylor Agreement, continued to work as President for an additional two years
after that agreement was signed. [Id., ¶ 49.] During this time he raised significant amounts of
money for the University from donors and trained the next President that had been selected by
the Board of Trustees. [Id.] While training his replacement, Dr. Taylor facilitated introductions
so that the incoming President could meet University donors so as to “encourage donations to the
University in the future.” [Id., ¶ 50.] Dr. Taylor states that, if not for his reliance on the Taylor
agreement, he would not have performed these activities nor would he have been under an
obligation to do so. [Id.]
This case is before the Court pursuant to its diversity jurisdiction under 28 U.S.C.
§ 1332(a)(1). Plaintiffs Dr. James Taylor and Mrs. Dinah Taylor are a married couple that reside
in Bonita Springs, Florida, and are residents of the State of Florida. Defendant University of the
Cumberlands, Inc. is incorporated in Kentucky as a non-profit entity that has its principal place
of business in Williamsburg, Kentucky. [R. 16, ¶¶ 1-3.] Plaintiffs’ complaint alleges
uncontested damages exceeding $75,000, as the combined salary and benefits amount to at least
$395,000 per year. [Id., ¶ 3.] Plaintiffs’ also allege that jurisdiction is appropriate in civil
actions to recover employee benefits that are protected by the Employee Retirement Income
Security Act of 1974, 29 U.S.C. § 1001. (“ERISA”).
Defendants first moved to dismiss the complaint [R. 12.] and the motion was fully
briefed, but, an Amended Complaint was filed pursuant to Federal Rule of Civil Procedure
15(a)(1)(B). [R. 16.] Defendants now move to dismiss for failure to state a claim [R. 12] and
have filed a supplemental motion to dismiss [R. 18] that addresses the additional issues raised in
the amended complaint. Seeing that the parties have not agreed to dismissal of any claims, all of
the plaintiffs’ claims remain before the Court including breach of contract or in the alternative
termination of ERISA protected benefits, promissory estoppel, slander, intentional infliction of
emotional distress, unjust enrichment, and a request for punitive damages as well as reformation
of the contract.
Federal Rule of Civil Procedure 12(b)(6) allows a defendant to seek dismissal of a
complaint which fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6).
In making such a motion, “[t]he defendant has the burden of showing that the plaintiff has failed
to state a claim for relief.” DirecTV, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007) (citing
Carver v. Bunch, 946 F.2d 451, 454-55 (6th Cir. 1991)). Federal Rule 8 requires only “a short
and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a)(2). However, to survive a motion to dismiss, the complaint “must contain either direct or
inferential allegations” establishing each material element required for recovery under some
actionable legal theory. Bishop v. Lucent Technologies, Inc., 520 F.3d 516, 519 (6th Cir. 2008)
(internal citation and quotation marks omitted).
When reviewing a Rule 12(b)(6) motion, the Court “construe[s] the complaint in the light
most favorable to the plaintiff, accept[s] its allegations as true, and draw[s] all reasonable
inferences in favor of the plaintiff.” DirecTV, Inc., 487 F.3d at 476 (citation omitted). The
Court, however, “need not accept as true legal conclusions or unwarranted factual inferences.”
Id. (citation omitted). Moreover, as is now well known, “a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007)). In other words, the facts that are pled must rise to the level of plausibility, not just
possibility – “facts that are merely consistent with a defendant’s liability . . . stop[ ] short of the
line between possibility and plausibility.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at
557). According to the Sixth Circuit, “[a] claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” DirecTV, Inc., 487 F.3d at 476 (citing Twombly, 550 U.S. at 556).
Thus, the plaintiff must at least “provide the grounds of his entitlement to relief, [which] requires
more than labels and conclusions. . . .” Twombly, 550 U.S. at 555 (internal citations and
quotation marks omitted).
When ruling on a Rule 12(b)(6) motion, a district court generally may not consider
matters presented outside the pleadings unless it converts the motion into one for summary
judgment under Rule 56. Fed. R. Civ. P. 12(d); Heinrich v. Waiting Angels Adoption Servs.,
Inc., 668 F.3d 393, 405 (6th Cir. 2012). The district court, however, also has the discretion to
ignore such evidence and resolve the motion solely on the basis of the pleadings. Heinrich, 668
F.3d at 405; Max Arnold & Sons, LLC v. W.L. Hailey & Co., Inc., 452 F.3d 494, 502-03 (6th Cir.
2006) (collecting cases). Certain matters beyond the allegations in the complaint such as
“matters of public record, orders, items appearing in the record of the case, and exhibits attached
to the complaint, also may be taken into account.” Amini v. Oberlin College, 259 F.3d 493, 502
(6th Cir. 2001) (citations and internal quotation marks omitted). Additionally, the Sixth Circuit
has held that when a defendant attaches undisputed documents to a motion to dismiss, they “are
considered part of the pleadings if they are referred to in the plaintiff’s complaint and are central
to her claim.” Id. (citations and internal quotation marks omitted).
Here, Dr. and Mrs. Taylor attached the April 19, 2012, disputed agreement to their
amended complaint. [R. 16-1.] This the Court can consider without converting the motion into
one for summary judgment. See Amini v. Oberlin College, 259 F.3d 493, 502 (6th Cir. 2001).
The University of the Cumberlands contests most of the factual allegations in the Complaint.
[See R. 12-1.] The University did reference affidavits and external materials such as board
minutes, but generally all documents considered by the Court were either part of the Court’s
record, matters of public record, or had been referred to in the complaint and are essential to the
plaintiffs’ claim. [See R.12-1 n.2.]
At the outset, the University asserts that the Plaintiffs’ claims fail, even if their factual
allegations are true, because the disputed agreement is unenforceable as a matter of law and the
agreement is “not a plan covered by ERISA.” [R. 18-1 at 10.] Fundamentally, the complaint
must provide the defendant with “fair notice” of the claims asserted against him and the grounds
for those claims. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 319 (2007). In
the instant action some, but not all, of the Plaintiffs’ claims must be dismissed.
Dr. and Mrs. Taylor allege that the University breached the terms of the Taylor
Agreement or in the alternative that the University Terminated ERISA protected benefits. Even
though the Complaint states that the “Taylor Agreement was a valid, enforceable contract,” this
Court “need not accept as true legal conclusions or unwarranted factual inferences” made in the
complaint. DirecTV, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007). Therefore, this Court
must determine independently whether the disputed agreement, which is attached to the amended
complaint [R. 16] as Exhibit A, establishes, in a plausible manner, a legal right that can survive
the Defendant’s Motion to Dismiss pursuant to Fed. R. Civ. P. 12(b)(6).
Under Kentucky law, to prove that there has been a breach of contract, “the complainant
must establish three things: 1) the existence of a contract; 2) breach of that contract; and 3)
damages flowing from the breach of contract.” Metro Louisville/Jefferson Cty. Gov't v. Abma,
326 S.W.3d 1, 8 (Ky. Ct. App. 2009) (citing Barnett v. Mercy Health Partners-Lourdes, Inc.,
233 S.W.3d 723, 727 (Ky. App. 2007)). Therefore, “[t]o establish a breach of contract claim
under Kentucky law, the plaintiff must show by clear and convincing evidence that an agreement
existed between the parties.” MidAmerican Distribution, Inc. v. Clarification Technology, Inc.,
807 F. Supp. 2d 646, 666-67 (E.D. Ky. 2011), aff'd, 485 F. App'x 779 (6th Cir. 2012). Here, the
University only challenges the existence of a contract and alleges that the disputed agreement is
“unenforceable because Dr. and Mrs. Taylor failed to provide any viable consideration for it.”
[R. 12 at 10.] The agreement itself recognizes the service of the Plaintiffs, notes that they have
exceeded expectations in “raising hundreds of millions of dollars for the University,” and states
that “Dr. and Mrs. Taylor have and will agree to continue to serve as the Chancellor (Dr. Taylor)
for the University of the Cumberlands and Ambassador (Mrs. Dinah Taylor) for the University
of the Cumberlands after their tenure as President and First Lady and including the rest of their
lives.” [R. 16-1 at 1.]
The Taylor Agreement provides multiple benefits to the Plaintiffs including: Dr. Taylor’s
yearly salary as President to the Plaintiffs for the rest of their individual lives, Dr. Taylor is
appointed as Chancellor of the University following his retirement, the plaintiffs receive all
benefits already conferred at the execution of the agreement including long term health care and
assisted living facility costs, Dr. Taylor’s brother Stan Edward Taylor and his wife are provided
an apartment for life from the University for $200 per month in rent, Dr. and Mrs. Dinah Taylor
are provided with an apartment or residence free of cost in Williamsburg, and Mrs. Taylor is the
beneficiary of a $1 million life insurance policy that the University has purchased or will
purchase. See id. In exchange for these benefits Dr. and Mrs. Taylor have agreed to a number of
terms. Dr. Taylor “agrees to continue to serve as President . . . until he may decide to retire” and
following retirement he “agrees to accept the position of Chancellor . . . for as long as he may
desire to perform the duties.” Mrs. Taylor agrees “to always be an Ambassador for the
University,” and both plaintiffs “agree to serve the University in any capacity requested and
agree to continue their fundraising efforts in identifying . . . donors and / or potential donors” for
the University. [Id.]
The University now argues that this agreement lacks valid consideration, and therefore
cannot be enforced, because the agreement was entered into solely based upon the plaintiffs’ past
performance which cannot serve as valid consideration. The contract itself states that, “The
University of the Cumberlands and the Board of Trustees agree that the compensation and
benefits contained in this agreement is/are for the past decades of duties and/or work performed
by Dr. and Mrs. Taylor all for the benefit of The University of the Cumberlands.” [Id. at 4.] The
University cites to Sawyer v. Mills, 295 S.W3d 79, 86 (Ky. 2009) which states that, “[i]t is a
general rule that past consideration is insufficient to support a promise.” Id. (quoting 17A Am.
Jur. 2d Contracts § 152 (2009)). Further, Sawyer v. Mills states that “the agreement and
consideration must be dependent on each other.” Id. at 88.
Sawyer v. Mills is distinguishable from the present action in multiple respects. In Sawyer
the Plaintiff “concedes she had completed her performance prior to the . . . oral agreement”
which means “[the contract] was supported only by past performance, which is no consideration
at all.” Sawyer v. Mills, 295 S.W.3d 79, 86 (Ky. 2009). To the contrary, Dr. and Mrs. Taylor
argue that in their written agreement, “the Agreement contains at least five promises of
performance by the Taylors, promises which were, in fact, fulfilled by the Taylors.” [R. 15 at 3.]
The Plaintiffs allege that the following promises constitute adequate consideration on behalf of
1. Dr. Taylor agreed to serve as president until he may decide to retire.
2. Dr. Taylor agreed to accept the position of Chancellor for as long as he desired to
perform the duties of Chancellor.
3. Mrs. Taylor agreed to always be an Ambassador for the University.
4. Dr. and Mrs. Taylor agreed to serve the University in any capacity requested; and
5. Dr. and Mrs. Taylor agreed to continue their fundraising efforts for the University.
[R. 15 at 14.]
The legal principle that past performance is inadequate as consideration under Kentucky
law is also supported by Greenup v. Wilhoite, 279 S.W. 655, 666 (Ky. 1926), which also holds
that “[t]here is a well-established rule that every writing evidencing an indebtedness imports a
consideration…” Id. While the University of the Cumberlands did not owe a monetary debt to
the Plaintiffs, the disputed agreement does recognize that “Dr. Taylor and Mrs. Taylor have
greatly exceeded all fundraising expectations, raising hundreds of millions of dollars for the
University,” and that “the Board of Trustees desires to compensate Dr. and Mrs. Taylor for their
decades of service to the University.” [R. 16-1 at 1.] This language which notes indebtedness
for service suggests that the contract is supported by valid consideration.
In contract issues such as these there is a presumption of universal application “that an
admitted and duly executed writing is supported by a legal consideration, and the burden is cast
on the one executing it to overcome that presumption.” Shrout’s Adm’r v. Vaughan, 204 S.W.2d
969, 970 (1947). Seeing that the disputed agreement has been signed by the Chairman of the
Board of Trustees, an authorized representative of the University, both Plaintiffs, and a notary
public, this presumption shall apply. The Plaintiffs further argue that the business judgment rule
should apply, and the court should not question “adequacy of consideration” as to the Taylor
Agreement, as the “Court is ill-equipped to second-guess the Board of Trustees regarding their
determination of the value to the University of its continued association of the Taylors.” [R. 15
at 15.] Without citing authority, the Defense merely states that “the multitude of cases regarding
the business judgment rule . . . have no application to this Motion, which presents a purely legal
question regarding the Disputed Agreement’s enforceability.” [R. 17 at 9.]
The Plaintiffs cite to an unpublished Kentucky Court of Appeals opinion, Davis v.
Innwood Condo. Prop. Owners Ass’n, which finds that “the business judgment rule is codified
for non-profit corporations” in the Kentucky Revised Statutes. Davis v. Innwood Condo. Prop.
Owners Ass'n, No. 2013-CA-001221-MR, 2014 Ky. App. Unpub. LEXIS 500, at *10-11 (Ct.
App. June 27, 2014). Seeing that the Defense does not cite authority to contest application of the
business judgment rule in this context, and under belief that the University Board members
entered into this agreement with “an informed basis, in good faith and in the honest belief that
the action taken was in the best interests of the [University],” the business judgment rule may
apply in this context. Id. (citing Allied Ready Mix Co Inc. ex. Rel. Mattingly v. Allen, 994
S.W.2d 4, 8 (Ky. App. 1998)).
The University argues that, even if the disputed agreement is supported by consideration,
“it has no definite end date and, thus, is terminable at will.” [R. 12-1 at 14.] “The rule in this
state is that if a contract covers no definite period, it may be terminated by either party at will.”
Elec. & Water Plant Bd. Of City of Frankfort, Kentucky v. S Cent. Bell Tel. Co., 805 S.W.2d 141,
143 (Ky. Ct. App. 1990) (citing Brownsboro Rd. Rest., Inc. v. Jerrico, Inc., 674 S.W.2d 40, 41
(Ky. Ct. App. 1984)). In Brownsboro Rd. Rest., Inc. v. Jerrico, Inc., 674 S.W.2d 40 (Ky. Ct.
App. 1984) the court states that “[t]he law does not favor contracts running into perpetuity. Our
state is committed to the rule that where a contract covers no definite period, it may be
terminated by either party at will.” Id. at 41. But, Brownsboro Rd. Rest., Inc., also stands for the
proposition that a franchise agreement that does not have a set termination date “falls into the
category of contracts which specify no time for termination. Such contracts will not, in absence
of unequivocal language, be construed as running into perpetuity.” Id. Much like the franchise
agreements that do not have a set termination date, this contract has a termination clause but that
date is unascertainable until the death of Dr. and Mrs. Taylor.
Unlike Brownsboro or the other cases cited by the Defendant, the instant action concerns
a contract for what are, in effect, retirement or severance benefits from the University to the
Defendants for the lives of Dr. and Mrs. Taylor. While Brownsboro and Elec. & Water Plant
Bd. Of City of Frankfort, Kentucky, support the proposition that contracts are terminable at will
when the provisions of the contract extend into perpetuity, these cases are distinguishable from
the disputed agreement. In the disputed agreement, section “V. Termination” states that, “This
agreement shall remain in full force and effect and continue to be legally binding until and upon
the death of Dr. James H. Taylor and upon the death of Mrs. Dinah Taylor.” [R. 16-1 at 5.]
Black’s Law Dictionary defines the term “perpetuity” as. “[t]he state of continuing for all future
time; the condition of persisting forever.” Black's Law Dictionary (10th ed. 2014). While the
future date of Dr. and Mrs. Taylor’s passing is unknown, this day is certainly not one existing in
Accordingly, the contract is not terminable at will, as the contract is constrained to a
definite yet unascertainable period therefore, the plaintiffs may have a viable legal claim to
breach of contract. There are significant factual disputes surrounding the drafting, signing, and
execution of the disputed agreement as well as competing interpretations of University Board
minutes and closed Executive Session minutes. Fair disposition of this case requires this court to
allow discovery to proceed. In denying the motion to dismiss as to the breach of contract claim,
this Court notes that, “[d]istrict courts have the inherent power to manage and control their own
docket.” Ransaw v. United States, No. 1:10 CV 01672, 2011 WL 1752160, at *2 (N.D. Ohio
May 5, 2011). “[M]atters of docket control and conduct of discovery are committed to the sound
discretion of the district court.” In re Air Crash Disaster, 86 F.3d 498, 516 (6th Cir.1996).
Requiring discovery as to the breach of contract claim will not unfairly prejudice either party
neither will it result in procedures that produce “actual or substantial prejudice to the
complaining litigant.” Id.
The plaintiffs’ allegations in the amended complaint [R. 16] provide the basis for a
“reasonable inference that the defendant is liable for the misconduct alleged.” DirecTV, Inc. v.
Treesh, 487 F.3d 471, 476 (citing Twombly, 550 U.S. at 556). This reasonable basis is founded
upon the facts which suggest “grounds of [their] entitlement to relief.” Bell Atlantic Corp. v.
Twombly, 550 U.S. at 555 (internal citations and quotation marks omitted). Accordingly, the
motion to dismiss as to the breach of contract claim is denied. Further, seeing that neither party
briefed nor discussed the claim of reformation of the contract, besides in a cursory manner, that
claim shall also survive the motion to dismiss.
The University argues that the Disputed Agreement is not governed by ERISA, should
not be considered to provide ERISA-protected benefits, and that this is not a “pension plan
welfare benefit plan or top hat plan.” [R. 18-1 at 7.] Dr. and Mrs. Taylor allege that the
Disputed Agreement constitutes both an employee welfare benefit plan and employee pension
benefit plan because it provides welfare benefits (health care, death benefits) and retirement
compensation. [R. 19 at 3.] The definitions of Employee welfare benefit plans (“welfare plan”)
and employee pension benefit plans (“pension plan”) both state that these benefits originate in a
“plan, fund, or program.” See 29 U.S.C. § 1002(1), (2). Besides determining whether the
Disputed Agreement is governed by ERISA, it is helpful to consider whether the agreement itself
establishes a plan, fund, or program.
In Thompson v. American Home Assur. Co., 95 F.3d 429, 434 (6th Cir. 1996) the Sixth
Circuit adopted the Donovan v. Dillingham, 688 F.2d 1367 (11th Cir. 1982) (en banc) test which
states that “[t]he existence of an ERISA plan is a question of fact, to be answered in light of all
the surrounding circumstances and facts from the point of view of a reasonable person.”
Thompson v. American Home Assur. Co., 95 F.3d 429, 434 (6th Cir. 1996); see also Williams v.
WCI Steel Co., 170 F.3d 598 (6th Cir. 1999) (using the Dillingham test, as adopted by the Sixth
Circuit in Thompson to determine whether a plan met the minimum requirements of ERISA). To
determine whether a “plan is an ERISA plan” the Court must perform a three-step factual
First, the court must apply the so-called safe harbor regulations established by the
Department of Labor to determine whether the program was exempt from ERISA.
Second, the court must look to see if there was a plan by inquiring whether from the
surrounding circumstances a reasonable person [could] ascertain the (1) intended
benefits, (2) the class of beneficiaries, (3) the source of financing, and (4) procedures for
receiving benefits. Finally, the court must ask whether the employer established or
maintained the plan with the intent of providing benefits to its employees.
Thompson, 95 F.3d at 434-435 (internal quotation marks omitted) (emphasis added)
Neither parties suggest that the safe harbor regulations apply, therefore, this Court must turn to
the four elements discussed in the second prong of the three-step factual inquiry.
First, the Court must look to see whether “from the surrounding circumstances a
reasonable person could ascertain the intended benefits.” Thompson v. American Home Assur.
Co., 95 F.3d 429, 434-435 (6th Cir. 1996). The Plaintiffs argue that, despite the Disputed
Agreement’s unclear terms as to intended benefits, the agreement “provides a clear method for
calculating the compensation” by setting the yearly compensation to be determined “by the
Amount of Dr. Taylor’s salary, upon the date of the execution of this Agreement, or the salary of
Dr. Taylor upon the date of Dr. Taylor’s retirement as President, whichever yearly salary is
greater.” [R. 19 at 5.] By looking to surrounding circumstances, the terms of the Disputed
Agreement itself, and parol evidence, the Plaintiffs’ argue that the intended salary and welfare
benefits are ascertainable. [R. 19 at 6.]
The University cites persuasive authority, Jervis v. Elerding, 504 F. Supp. 606, 608 (C.D.
Cal. 1980), to support the proposition that “a contract between an employer and individual
employee providing for post-retirement or post-termination in-kind compensation is not a plan,
fund, or program within the definitional framework of ERISA.” Id. In Jervis v. Elerding a
retiring employee was offered a post-retirement salary as well as an apartment, free of cost. Id.
at 606. The Court ultimately dismissed the action, as the benefits constituting in-kind
compensation were not within the ERISA framework and proper redress would more
appropriately be sought under a breach of contract action. See id. at 609. Importantly, the court
was able to reach this conclusion because, “[t]he clause was part of the present compensation
arrangement, inserted as consideration for plaintiff’s continued services to defendant, rather than
as part of a plan providing for retirement income or deferral of income.” Id. While this case is
merely persuasive, numerous Courts of Appeals, excluding the Sixth Circuit Court of Appeals,
have affirmatively adopted the conclusion reached in Jervis. See Nagy v. Riblet Prod. Corp., 79
F.3d 572, 574 (7th Cir.), certified question answered, 683 A.2d 37 (Del. 1996); Williams v.
Wright, 927 F.2d 1540, 1546 (11th Cir. 1991); Fraver v. N. Carolina Farm Bureau Mut. Ins. Co.,
801 F.2d 675, 678 (4th Cir. 1986).
ERISA protected benefits include “medical, surgical, or hospital care or benefits in the
event of sickness, accident, disability, death, or unemployment” as well as “vocational benefits,
apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal
services” but excludes other forms of in-kind compensation. 29 U.S.C. § 1002(1), (2).
Therefore, the Plaintiffs’ claims as to non-ERISA benefits such as Stan Edward Taylor’s
residence in Williamsburg, Dr. and Mrs. Taylor’s apartment or residence in Williamsburg, and
benefits such as a University car and cell phone, cannot be brought under an ERISA claim. See
id.; Jervis v. Elerding, 504 F. Supp. 606, 608 (C.D. Cal. 1980). To determine whether the claim
for Dr. Taylor’s salary to Dr. and Mrs. Taylor for life and the associated healthcare benefits can
be brought under an ERISA action, the remaining elements of the Dillingham test must be
considered. Thompson, 95 F.3d at 434. The University repeatedly asserted that the disputed
agreement did “not otherwise set forth the amount of Dr. Taylor’s salary” in a manner that is
readily ascertainably but this Court is confident that discovery would allow a reasonable person
using the surrounding circumstances to determine the salary and medical benefits owed Dr.
Taylor and Mrs. Taylor at the time established in the disputed agreement. [See R. 18 at 16.]
Next, part two of the Dillingham test asks “whether from the surrounding circumstances a
reasonable person [could] ascertain . . . the class of beneficiaries” covered by the Disputed
Agreement. Thompson, 95 F.3d at 434-435. There is no serious dispute as to the identity of the
beneficiaries, in this case Dr. and Mrs. Taylor. Rather, there is a dispute, albeit nuanced,
regarding whether Dr. Taylor, and potentially his wife, can be considered members of a “class.”
[R. 18-1.] The University cites to Dakota, Minn. & Eastern R.R. Corp. v. Schieffer, 648 F.3d
935, 938 (8th Cir. 2011) which states that “the words ‘plan’ and ‘program’ in § 1002(1) strongly
imply benefits that an employer provides to a class of employees.” But, “[e]ven more
significantly, the plain language of the statute — the reference to ‘participants or their
beneficiaries’ — reflects the congressional intent that a covered ‘plan’ is one that provides
welfare benefits to more than one person.” Id. (holding that Congress’ “use of the plural” in the
ERISA statute stating that ERISA benefits are for “participants or their beneficiaries” evidences
In the instant action, the Disputed Agreement would provide benefits to both Dr. and
Mrs. Taylor. The University argues that these benefits originate solely from Dr. Taylor’s
position as President and that these benefits do not derive from Mrs. Taylor’s prior position at
the University, therefore they are not a class of employees. [R. 18 at 14.] The University does
admit that the Sixth Circuit has not issued a ruling addressing whether a single employee can
constitute a “one-person” ERISA plan. [Id. at n.9.] Plaintiffs cite to DuBrul v. Citrosuco N.
Am., Inc., 892 F. Supp. 2d 892, 906 (S.D. Ohio 2012) to support the proposition that “even if the
alleged plan does apply to only one individual, Defendants still are not entitled to dismissal of
Plaintiff’s ERISA claims at this stage of the litigation.” Id. at 906. Dubrul is easily
distinguishable from the instant action because in Dubrul “four other highly compensated and
select management employees received similar agreements” which suggested that the agreement
in that case was “not a purely individual contract since a triggering event . . . could occur more
than once and at a different time for each employee.” Id.; see also, Fort Halifax Packing Co. v.
Coyne, 482 U.S. 1, n. 9 (1987)( recognizing that an “ongoing, predictable” obligation triggered at
different times by different employees suggests an ERISA plan may exist).
The Disputed Agreement [R. 16-1] seems to be an individual contract, rather than a
document establishing a fund, plan, or program that would provide ERISA covered benefits.
The complaint does not allege that other employees were offered a similar plan or retirement
package. While it is true that “[t]he weight of authority indicates that one-person plans may
qualify as ERISA plans” the plan must also “satisfy the other factors necessary for the plausible
existence of an ERISA plan” otherwise the action must be dismissed. DuBrul v. Citrosuco N.
Am., Inc., 892 F. Supp. 2d 892, 905 (S.D. Ohio 2012); see also Combs v. Ky. Wesleyan Coll., No.
4:05-CV-139-JHM, 2008 U.S. Dist. LEXIS 2339 (W.D. Ky. Jan. 10, 2008) (holding that “the
class of beneficiaries is the individual retiree and where applicable, his family”).
Third, “the court must look to see if there was a plan by inquiring whether from the
surrounding circumstances a reasonable person could ascertain the . . . source of financing.”
Thompson v. American Home Assur. Co., 95 F.3d 429, 434 (6th Cir. 1996). Fort Halifax
Packing Co. v. Coyne, 482 U.S. 1, 18 (1987) provides that “if an employer has an administrative
scheme for paying benefits, it should not be able to evade the requirements of the statute merely
by paying those benefits out of general assets.” Id. at 15-16. Further, “[s]ome severance benefit
obligations by their nature necessitate an ongoing administrative scheme, but others do not.” Id.
In Dr. and Mrs. Taylor’s case, management of their benefit agreement does not require an
extensive or additional administrative scheme. While it is true that “[a]s a matter of federal law,
an employer who promises to pay benefits for the lifetime of a retired employee must keep that
promise” the proper remedy may be through a breach of contract claim rather than through an
ERISA mechanism. Williams v. WCI Steel Co., Inc., 170 F.3d 598, 604 (6th Cir. 1999).
Plaintiffs argue that the “source of funding is not an issue in the court’s opinion,” [R. 19
at 9, referencing Williams 170 F.3d at 603] but, in Williams, the only reason the “source of
funding” was not an issue is because a $21 million trust was established by the agreement.
Williams 170 F.3d at 603. There, the “Memorandum Agreement clearly states that the $21
million set aside is to be allocated among the Recipient Employees.” Id. In contrast, the
individual contract between the University and Dr. Taylor notes that the “University shall pay”
or “will continue to provide and/or pay all benefits” but no funding source is identified, assets
are not set aside into a trust, nor is the University’s general fund referenced. [See R. 16-1.]
Rather, what may be established in the Disputed Agreement is more akin to an “ad hoc pension
arrangement with individual retirees [that] d[oes] not constitute an ERISA plan.” Williams 170
F.3d at 603 (citing Diak v. Dwyer, Costello & Knox, P.C., 33 F.3d 809 (7th Cir. 1994)). Despite
the fact that the agreement does not specify a source of funds, it may be possible that a
reasonable individual looking to surrounding circumstances would believe the University’s
general fund to be the source of financing for the agreed benefits. See Thompson v. American
Home Assur. Co., 95 F.3d 429, 434-435 (6th Cir. 1996).
Finally, this court must look to the procedures for receiving benefits. Id. In the disputed
agreement, under Section 1. “Duties and/or Obligations of The University of the Cumberlands,”
paragraph two states: “The manner of payment: monthly, quarterly or otherwise shall be
established by Dr. or Mrs. Taylor in written form and delivered to the Chairman of the Board of
Trustees.” [R. 16-1 at 2.] Further, the remaining healthcare benefits are defined in paragraph
five and six as determined by the date of execution of the Disputed Agreement. Id. Besides
these sparse instructions, the disputed agreement lacks additional procedures for receiving
benefits or filing claims. Much like Williams v. WCI Steel Co., Inc., 170 F.3d 598, 604 (6th Cir.
1999) the Disputed Agreement fails the Dillingham test since, “it does not create the requisite
scheme to administer the benefits.” Id. The instant action is also similar to Elmore v. Cone Mills
Corp., 23 F.3d 855 (4th Cir. 1994) (en banc), a case where “the intended benefits, beneficiaries,
and source of funding were arguably clear” but “the procedure for recovering benefits was not
ascertainable until later when a formal Employee Stock Option Plan was created.” Williams, 170
F.3d at 604 (stating that the Fourth Circuit held the plan in Elmore to be deficient and fail the
Dillingham test due to a lack of sufficient procedures for recovering benefits).
The Sixth Circuit also agreed that “Dillingham requires more than just the existence of an
administrative scheme. If a reasonable person cannot ascertain the claims procedures in a
purported plan, then the plan is not an employee benefit plan under ERISA.” Williams v. WCI
Steel Co., Inc., 170 F.3d 598, 604 (6th Cir. 1999). Here, no actual claims procedures are
detailed. Rather, the Disputed Agreement seems to be an extension of previous benefits that Dr.
Taylor was already receiving at the end of his Presidency and start of his tenure as Chancellor.
See Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th Cir. 1982) (stating that “[a] decision to
extend benefits is not the establishment of a plan or program”). The Disputed agreement in the
instant action is nearly identical to the contract addressed in Melton v. Physicians in Emergency
Med., No. 3:04-CV-183-S, 2006 U.S. Dist. LEXIS 9123, (W.D. Ky. Mar. 3, 2006), which states:
Lastly, and perhaps most importantly, the contract completely fails to identify procedures
for receiving the benefits. Dr. Melton's individual employment contract simply lacks the
administrative program or procedures characteristic of ERISA plans. For instance, the
employment contract did not detail when the elimination period would begin, how and
when the benefits would be paid, how and when an employee must make a disability
claim, the procedures to follow for appeal, or any other procedures typical of ERISA
Id. at *11-13.
When looking to the surrounding circumstances and text of the disputed agreement, it is
clear that the procedures for receiving benefits provided by the agreement are not sufficiently
ascertainable. Therefore, the plaintiffs’ Amended Complaint [R. 16] has failed to state a viable
claim under ERISA, as the disputed agreement fails the Dillingham test. Accordingly, the
Defendant University’s Motion to Dismiss shall be GRANTED as to Count VII, Termination of
ERISA Protected Benefits.
“Under Kentucky law, the elements of promissory estoppel are: (1) a promise; (2) which
the promisor should reasonably expect to induce action or forbearance on the part of the
promisee; (3) which does induce such action or forbearance; and (4) injustice can be avoided
only by enforcement of the promise.” Harris v. Burger King, 993 F. Supp. 2d 677, 691 (W.D.
Ky. 2014) (internal citation and quotation marks omitted); see also Sawyer v. Mills, 295 S.W3d
79, 89 (Ky. 2009). Additionally, there is a presumption of at-will employment in Kentucky law,
meaning that generally an employee can be discharged “for good cause, for no cause, or for a
cause that some might view as morally indefensible.” Wymer v. JH Props., Inc., 50 S.W.3d 195,
198 (Ky. 2001); see also Lewis-Smith, 85 F. Supp. 3d at 915 (“Generally, in the absence of a
specific contractual provision to the contrary, employment in Kentucky is terminable at-will”)
(quoting Miracle v. Bell Cnty. Emergency Med. Servs., 237 S.W.3d 555, 558 (Ky. Ct. App.
2007)). In Kentucky, “[a]n at-will employee can claim promissory estoppel only if [he] can
show a specific promise of job security.” Harris, 993 F. Supp. 2d at 691 (citing DePrisco v.
Delta Air Lines, Inc., 90 F. App’x 790, 796 (6th Cir. 2004)). Moreover, “[r]eliance on the
promise must be justified.” Id. (citations omitted).
Here, Dr. Taylor and Mrs. Taylor consider the disputed agreement to represent a
“promise” from the University for job security, continued compensation, and a number of
benefits. The Plaintiffs’ complaint merely alleges reliance upon the terms of the Taylor
Agreement which include serving as Chancellor (Dr. Taylor) and Ambassador (Mrs. Taylor) for
life as well as receiving a salary equal to Dr. Taylor’s yearly salary as president for “the rest of
both of their individual lives.” [R. 16 at 4; R. 16-1 at 2.] Dr. Taylor further alleges that because
of his reliance on the Disputed Agreement he continued to work for the University from the
execution of the agreement in 2012 to October of 2015 when he resigned. [R. 6 at 5.]
In Rivermont Inn, Inc. v. Bass Hotels & Resorts, Inc., 113 S.W.3d 636 (Ky. Ct. App.
2003), promissory estoppel was not properly invoked “because the element of reasonable
reliance is missing.” Id. at 642. The Kentucky Court of Appeals explains that “[a] key element
of promissory estoppel, conveniently ignored by [Plaintiff], is that the defendant must reasonably
expect an oral promise or understanding to induce reliance on the part of the plaintiff.’ Id.
Unlike Rivermont Inn, Dr. and Mrs. Taylor’s reliance was produced by a written agreement with
the University that was produced with significant formality, not merely an oral promise. Further,
neither Plaintiff had received notice of any kind, other than affirmative support and commitment
from the University Board of Trustees, which would suggest the agreement could not be relied
Besides a brief reference to the promissory estoppel claim by footnote [R. 12-1 at 10,
n. 4] and citing to a case that states the standard for promissory estoppel in Kentucky [R. 17 at
11], the Defendant University did not cite to legal authority that suggests the claim under
promissory estoppel should be dismissed, therefore the motion to dismiss as to this claim shall be
denied. See United States v. Layne, 192 F.3d 556, 566 (6th Cir. 1999) (stating that “issues
adverted to in a perfunctory manner, unaccompanied by some effort at developed argumentation
are deemed waived.”). The facts alleged in the amended complaint are sufficient to support a
plausible claim for promissory estoppel. But, if the Disputed Agreement is found to be a duly
executed contract supported by adequate consideration, additional damages under a promissory
estoppel claim would be inappropriate. See Sparton Technologies, Inc. v. Ulti-Link, LLC, 248
Fed. Appx. 684, 690 (6th Cir. 2007) (holding that since the jury found a contract existed this
finding “precludes, as a matter of law, a damage award based on promissory estoppel concerning
the same subject matter”).
The University of the Cumberlands’ sole defense against a charge of slander per se in
four comprehensive filings rests on a single footnote which states that, “each of these claims
relies and is built upon the enforceability of the Disputed Agreement. Because the Disputed
Agreement is unenforceable, none of these claims against the University can be established.” [R.
12-1 at 10, n. 4.] In Kentucky four elements are required for a defamation action: (1) defamatory
language, (2) about the plaintiff, (3) which is published and, (4) which causes injury to
reputation. Columbia Sussex Corp. v. Hay, 627 S.W.2d 270, 273 (Ky. Ct. App. 1981); see also
Fortney v. Guzman, 482 S.W.3d 784, 789 (Ky. Ct. App. 2015), review denied (Mar. 9, 2016).
Kentucky law separates libel and slander actions into two categories: defamatory words that are
actionable per se and those that are actionable per quod. Digest Publishing Co. v. Perry
Publishing Co., 284 S.W.2d 832, 834 (Ky. 1955). For words to be actionable under defamation
per se, the words
must tend to expose the plaintiff to public hatred, ridicule, contempt or disgrace, or to
induce an evil opinion of him in the minds of right-thinking people and to deprive him of
their friendship, intercourse and society. But it is not necessary that the words imply a
crime or impute a violation of laws, or involve moral turpitude or immoral conduct.
CMI, Inc. v. Intoximeters, Inc., 918 F. Supp. 1068, 1083 (W.D. Ky. 1995) (quoting Sweeney &
Co. v. Brown, 60 S.W.2d 381, 383 (1933)).
In determining whether the Defendant has engaged in slander per se, “[t]he Court must
consider if the words directly tend to the prejudice or injury of a person in his profession, trade
or business.” CMI, Inc. v. Intoximeters, Inc., 918 F. Supp. 1068, 1083 (W.D. Ky. 1995) (quoting
White v. Hanks, 255 S.W.2d 602 (Ky. 1953)). Slanderous words are actionable per se when they
“either directly or indirectly import fraud, dishonesty, or sharp or unethical practices.” White v.
Hanks 255 S.W.2d 602, 603 (Ky. 1953). Dr. Taylor alleges in the Amended Complaint [R. 16]
that the “agents of the University” published statements to third parties that suggest “Dr. Taylor
hid the Taylor agreement from the University . . . and that he had the contract drawn up in a
deceitful or scheming manner.” [R. 16, ¶ 26.] If true, the agents of the University would be
making comments that directly implicate Dr. Taylor as a dishonest, unethical, or fraudulent
person. Regardless of the Contract’s enforceability, it is plausible that further discovery would
uncover evidence that these words are actionable under Kentucky law. See White v. Hanks 255
S.W.2d 602, 603 (Ky. 1953).
The Plaintiffs have pled allegations of slander per se that have “facial plausibility” in a
manner “that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” DirecTV, Inc., 487 F.3d at 476 (citing Twombly, 550 U.S. at 556). Further,
Defendants did not adequately address or develop arguments challenging the Plaintiffs’
complaint as to the charge of slander. Despite the Defendant filing a motion to dismiss [R. 12]
and reply [R.17] followed by a supplemental motion to dismiss [R. 18] and a reply to the
supplemental motion [R. 20], the accusation of slander was solely addressed by one footnote
totaling three sentences. [R. 12-1 at 10, n.4.] Further, since the accusation of slander is not
dependent upon the contract’s validity, the University’s argument in footnote 4 is largely
The Sixth Circuit has held that “[w]e consider issues not fully developed and argued to be
waived.” Brindley v. McCullen, 61 F.3d 507, 509 (6th Cir. 1995); see e.g., United States v.
Layne, 192 F.3d 556, 566 (6th Cir. 1999) (stating that “issues adverted to in a perfunctory
manner, unaccompanied by some effort at developed argumentation are deemed waived.”);
Brindley v. McCullen, 61 F.3d 507, 509 (6th Cir. 1995) (holding that “[w]e consider issues not
fully developed and argued to be waived.”)). In light of this instruction, the defendants’
inadequate and unresponsive briefing as to this charge, and the sufficiently detailed complaint,
the Defendants’ motions to dismiss as to slander, Count III, shall be denied.
The Kentucky Supreme Court recognized the tort of intentional infliction of emotional
distress in Humana of Kentucky, Inc. v. Seitz, 796 S.W.2d 1 (Ky. 1990). The necessary elements
to succeed in a cause of action for intentional infliction of emotional distress are:
1) the wrongdoer’s conduct must be intentional or reckless;
2) the conduct must be outrageous and intolerable in that it offends against the generally
accepted standards of decency and morality;
3) there must be a causal connection between the wrongdoer’s conduct and the plaintiff’s
emotional distress; and
4) the emotional distress must be severe.
Id. at 2-3.
The bar for success in an intentional infliction of emotional distress claim is extraordinarily high,
as illustrated by the Kentucky Supreme Court’s recitation of Comment d, § 46 of the
Restatement (Second) of Torts which states:
It has not been enough that the defendant has acted with an intent which is tortious ..., or
that he has intended to inflict emotional distress, or even that his conduct has been
characterized by ‘malice,’.... Liability has been found only where the conduct has been so
outrageous in character, and so extreme in degree, as to go beyond all possible bounds of
decency, and to be regarded as atrocious, and utterly intolerable in a civilized
Id. at 3 (quoting Restatement (Second) of Torts, § 46 Comment d); see also Kroger Co. v.
Willgruber, 920 S.W.2d 61, 65 (Ky. 1996) (holding that “only outrageous and intolerable
conduct” is covered by the tort of intentional infliction of emotional distress)
Dr. Taylor and Mrs. Taylor argue that intentionally breaching the Taylor agreement was
tantamount to “economic coercion against an elderly couple” that included “threats of the loss of
their residence and health insurance, as well as their income.” [R. 16, ¶ 33.] These threats were
allegedly brought after Dr. Taylor had retired. At this time the University attempted to “coerce
Dr. and Mrs. Taylor into accepting a [sic] substantially less than is owed with threats to cease
paying any benefits owed under the Taylor Agreement.” [R. 16, ¶ 15.] Dr. Taylor “was told if
he did not accept this new contract that his relationship with the University would terminate,”
including all benefits. Id.
Just as with the charge for slander, the University of the Cumberlands’ sole defense
against a charge of intentional infliction of emotional distress in four comprehensive filings rests
on a single footnote which states that, “each of these claims relies and is built upon the
enforceability of the Disputed Agreement. Because the Disputed Agreement is unenforceable,
none of these claims against the University can be established.” [R. 12-1 at 10, n.4.]
Resultantly, no state or federal case law addressing this portion of the complaint has been
referenced by the defense. Elements one and three of the plaintiffs’ claim are almost certainly
established by the complaint as the University has allegedly behaved in an intentional or reckless
manner and the plaintiff’s distress is a direct result of the University’s refusal to adhere to the
terms of the disputed agreement. But, fact specific comparison to case law is required to
determine whether the Defendant’s conduct is outrageous or intolerable and whether Dr. and
Mrs. Taylor’s distress is severe.
The instant action is not too dissimilar from Kroger Co. v. Willgruber, 920 S.W.2d 61
(Ky. 1996). In Willgruber, Andrew Willgruber was employed by Kroger Company for 32 years
and was ultimately promoted to National Sales Manager of Country Oven Bakery. Id. at 62. Mr.
Willgruber was positively reviewed by his employer and “the bakery prospered under his sales
direction.” Id. at 63. There were no work related issues until a newly hired plant manager wrote
“fictitious monthly evaluation reports” that described Mr. Willgruber’s job performance as poor.
Finally, at a Christmas luncheon Mr. Willgruber was “presented with a resignation letter and
possible severance package,” but “to qualify for the severance package, he was required to sign a
release forever discharging Kroger for any and all liability arising from his separation from the
company.” Id. Further, he was guaranteed a new job at bakery in South Carolina, but this
opportunity was never formally offered again. Id. At the luncheon, Mr. Willgruber was given
twenty-one days to resign or be fired, but, not three days later, he was “forced to clean out his
desk while friends and co-workers looked on.” Id. Mr. Willgruber then suffered through two
years that he described as a “living hell” where he encountered “physical sickness, emotional
pain, inability to eat or sleep,” and emotional distress that led him to attempt suicide. Id.
On appeal, Kroger Co. challenged the second element of proof necessary for the tort
which states that, “The conduct must be outrageous and intolerable in that it offends against the
generally accepted standards of decency and morality.” Kroger Co. v. Willgruber, 920 S.W.2d
61, 65 (Ky. 1996). To determine whether the defendant’s conduct was “outrageous and
intolerable” the Kentucky Supreme Court discussed previous decisions relating to this tort. In
Humana of Kentucky, Inc. v. Seitz, 796 S.W.2d 1 (Ky. 1990), a pregnant woman alleged that her
hospital room intercom had been disconnected, that there was a 12-15 minute delay resulting in
late arrival of nurses, that one nurse told her to “shut up” and that another nurse told her “that the
hospital would dispose of her dead baby.” Kroger Co v. Willgruber, 920 S.W.2d at 66. The
Kentucky Supreme Court found that this behavior may have been negligent or reckless but that
the employees “did not intentionally or recklessly cause severe emotional distress.”
The standard for outrageous and intolerable conduct was further detailed in Craft v. Rice,
671 S.W.2d 247 (Ky. 1984). Here the outrageous and intolerable conduct “against Mrs. Craft
consisted of (a) keeping her under surveillance; (b) telling her on the CB radio that her husband
would be put in jail; and (c) driving so as to force her into an opposing lane of traffic.” Kroger
Co v. Willgruber, 920 S.W.2d at 66. With this body of case law in mind, the Kentucky Supreme
Court in Willgruber looked to Kroger Company’s repeated misrepresentations, Mr. Willgruber’s
“complete mental breakdown,” the Company representative’s knowledge of this breakdown, and
the fact that that same representative then pressured Mrs. Willgruber to “have her husband sign
the papers.” Id. at 66. The Court referenced Comment f to § 46 of the Restatement (Second) of
Torts which “provides that extreme and outrageous behavior may arise from the actor’s
knowledge that the other is peculiarly susceptible to emotional distress.” Id. Finally, in holding
that the conduct by Kroger was, in fact, outrageous, the Court found that “Kroger’s actions did
not constitute some petty insult, minor indignity or impolite triviality” and “[n]or was its conduct
typical of what occurs when an employment relationship ends.” Id.
Similarly, in the instant action, Dr. Taylor had been employed by the University for 35
years and the University was generally aware, during its attempts to coerce Dr. Taylor into
accepting an annually renewable contract, that Dr. Taylor and his wife are both elderly and were
relying on the disputed agreement to provide compensation, housing, and retirement benefits.
Additional discovery is necessary to understand whether Dr. and Mrs. Taylor’s emotional
distress is “severe”. See Humana of Kentucky, Inc. v. Seitz, 796 S.W.2d 1 (Ky. 1990). In the
complaint, Dr. and Mrs. Taylor allege that “the University has caused severe emotional distress”
and that this distress includes “worry, mental stress and concern…” about a number healthcare
costs, insurance, economic obligations, and the necessities of life. [R. 16, ¶¶ 34-35.] This is
similar to the complaint in Miller v. Currie, 50 F.3d 373, 378 (6th Cir. 1995), which states
“Miller specifically alleged that the emotional distress she suffered was severe and that she
suffered physically as a result.” Id. The Sixth Circuit Court of Appeals found that it cannot be
said that “this is merely a case where some one’s feelings are hurt,” and accordingly that “the
allegation is sufficient to survive a Fed.R.Civ.P. 12(b)(6) motion to dismiss.” Id. The complaint
in the instant action also shows serious harm more than mere hurt feelings. While this guidance
is persuasive, not mandatory, due to the Sixth Circuit’s application of Ohio law, the reasoning
and analysis is nevertheless helpful.
Beyond the plausibility of the Plaintiffs’ claim and rather clear persuasive instruction
from the Court of Appeals, it should again be noted that the Defendant University failed to
address the allegation beyond a single footnote in the motions and replies that were filed in the
record. Accordingly, the Defendants’ motion to dismiss the claim for intentional infliction of
emotional distress is denied. See United States v. Layne, 192 F.3d 556, 566 (6th Cir. 1999)
(stating that “issues adverted to in a perfunctory manner, unaccompanied by some effort at
developed argumentation are deemed waived.”); Brindley v. McCullen, 61 F.3d 507, 509 (6th
Cir. 1995) (holding that “[w]e consider issues not fully developed and argued to be waived.”)).
Unjust enrichment was created “as a basis of restitution to prevent one person from
keeping money or benefits belonging to another.” Rose v. Ackerson, 374 S.W.3d 339, 343 (Ky.
App. 2012) (quoting Haeberle v. St. Paul Fire and Marine Ins. Co., 769 S.W.2d 64, 67 (Ky.
App. 1989)). The Plaintiffs, Dr. and Mrs. Taylor plead Count VIII, unjust enrichment, as an
alternative claim. [R. 19 at 17.] Demands for relief may include claims in the alternative. See
Fed. R. Civ. P. 8. Kentucky Courts have created a three element test to sustain a claim for unjust
enrichment which requires: “(1) benefit conferred upon defendant at plaintiff’s expense, (2) a
resulting appreciation of benefit by defendant; and (3) inequitable retention of benefit without
payment for its value.” Collins v. Kentucky Lottery Corp., 399 S.W.3d 449, 455 (Ky. Ct. App.
2012). The University argues that the Plaintiffs have failed to state facts sufficient to satisfy the
third requirement of the test as “Dr. Taylor has acknowledged that he continued to be
compensated by the University through April 6, 2016, and he has not alleged that he provided
any benefits to the University after that date. [R. 18 at 20.] Seeing that the Kentucky courts
merely require “payment for its value” and not necessarily “adequate payment,” it seems that Dr.
and Mrs. Taylor’s alternative claim for unjust enrichment should fail as Dr. Taylor was
compensated for his work through April 2016. [R. 18 at 20.] Therefore, as to this count the
complaint has failed to state a claim for which relief can be granted. Accordingly, the motion to
dismiss as to Count 8, Unjust Enrichment, is granted.
To survive a motion to dismiss, the complaint “must contain either direct or inferential
allegations” establishing each material element required for recovery under some actionable
legal theory. Bishop v. Lucent Technologies, Inc., 520 F.3d 516, 519 (6th Cir. 2008) (quoting
Mezibov v. Allen, 411 F.3d 712, 716 (6th Cir. 2005) (internal quotation marks omitted)). Here,
Dr. and Mrs. Taylor have presented law and facts, in compliance with federal pleading standards
and precedent, establishing that the plaintiffs may be entitled to relief on a number of claims.
Accordingly, and the Court being otherwise advised, it is hereby ORDERED as follows:
The Defendants’ Motion to Dismiss for failure to state a claim [R. 12] and the
Supplemental Motion to Dismiss for failure to state a claim [R. 18] are GRANTED as to Count
VII, “Termination of ERISA Protected Benefits,” and Count VIII “Unjust Enrichment.”
The Defendants’ Motion to Dismiss for failure to state a claim [R. 12] and the
Supplemental Motion to Dismiss for failure to state a claim [R. 18] are DENIED as to all
This the 7th day of February, 2017.
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?