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Commonwealth v. Wingate

Supreme Court of Kentucky

February 19, 2015

COMMONWEALTH OF KENTUCKY, FINANCE AND ADMINISTRATION CABINET; LORI FLANERY, IN HER OFFICIAL CAPACITY AS SECRETARY OF THE FINANCE AND ADMINISTRATION CABINET; COMMONWEALTH OF KENTUCKY, CABINET FOR HEALTH AND FAMILY SERVICES; AUDREY HAYNES, IN HER OFFICIAL CAPACITY AS SECRETARY OF THE CABINET FOR HEALTH AND FAMILY SERVICES; COMMONWEALTH OF KENTUCKY, DEPARTMENT OF MEDICAID SERVICES; AND LAWRENCE KISSNER, IN HIS OFFICIAL CAPACITY AS COMMISSIONER OF THE DEPARTMENT FOR MEDICAID SERVICES, APPELLANTS
v.
HONORABLE THOMAS D. WINGATE, JUDGE, FRANKLIN CIRCUIT COURT; AND KENTUCKY SPIRIT HEALTH PLAN, INC., APPELLEES

Released for Publication June 4, 2015.

ON APPEAL FROM COURT OF APPEALS. NO. 2014-CA-000429-MR. FRANKLIN CIRCUIT COURT NO. 12-CI-01373.

COUNSEL FOR APPELLANTS: Kenneth Allen Bohnert, Richard M. Sullivan, Scott Alan Johnson, Conliffe, Sandmann & Sullivan.

COUNSEL FOR APPELLEE HON. THOMAS D. WINGATE, JUDGE, FRANKLIN CIRCUIT COURT: Hon. Thomas Dawson Wingate.

COUNSEL FOR APPELLEE KENTUCKY SPIRIT HEALTH PLAN, INC.: Philip Wallace Collier, Bethany A. Breetz, Stites & Harbison, PLLC, Christopher Flynn, Crowell 85 Moring, LLP.

OPINION OF THE COURT BY JUSTICE VENTERS. Minton, C.J., Abramson, Cunningham, Keller, Noble and Venters, JJ., sitting. All concur.

Page 844

OPINION

VENTERS, JUSTICE.

Appellants, Commonwealth of Kentucky, Finance and Administration Cabinet, et al. (collectively, Cabinet), appeal from an order of the Court of Appeals granting the petition of Kentucky Spirit Health Care Plan, Inc., for a writ of prohibition against Franklin Circuit Court Judge Thomas Wingate. The writ prohibited Judge Wingate from enforcing an order imposing a stay of discovery in the underlying declaratory judgment litigation.

Page 845

Kentucky Spirit brought a declaratory judgment action seeking a ruling that it had a right to terminate its Medicaid managed care contract with the Cabinet, without penalty, prior to the expiration of the contract. Following a partial summary judgment in favor of the Cabinet, Kentucky Spirit appealed and the Cabinet cross-appealed. While those appeals are pending, Kentucky Spirit intended to pursue pre-trial discovery measures relating to its rights under the Medicaid contract. The circuit court, however, stayed those discovery efforts until the resolution of the partial summary judgment appeals.[1] In concluding that Kentucky Spirit should have the right to proceed with discovery, pending the appeal, the Court of Appeals determined that the trial court's suspension of discovery amounted to an indefinite stay on discovery without a pressing need to do so in violation of Estate of Cline v. Weddle, 250 S.W.3d 330 (Ky. 2008) and Rehm v. Clayton, 132 S.W.3d 864 (Ky. 2004).

As grounds for relief from the writ, the Cabinet argues that: (1) the trial court's stay of discovery was proper because upon Kentucky Spirit's appeal of the partial summary judgment order, the Franklin Circuit Court lost " subject matter jurisdiction" over the proceeding and, therefore, there was no ongoing circuit court jurisdiction under which discovery could proceed; and (2) even if the circuit court was not divested of subject matter jurisdiction by the appeal from the partial summary judgment, a stay of discovery was appropriate pending resolution of the threshold issues currently on appeal.

Because the circuit court did not abuse its discretion by temporarily staying discovery, we vacate the writ issued by the Court of Appeals and remand for entry of an order denying Kentucky Spirit's petition for a writ of prohibition.

I. FACTUAL AND PROCEDURAL BACKGROUND

In July 2011, Kentucky Spirit entered into a three-year contract with the Cabinet to provide Medicaid services in Kentucky. In October 2012, Kentucky Spirit filed a petition for declaratory judgment (Case No. 12-CI-1373) in Franklin Circuit Court seeking a determination that it had the right to an early termination of the contract, without liability for damages, effective July 5, 2013, one year prior to the scheduled conclusion of the initial term under the provisions of the contract. The complaint further alleged that in the event that Kentucky Spirit was subject to damages, then those damages should be calculated pursuant to the liquidated damages provision of the contract. In April 2013, Kentucky Spirit brought a second lawsuit in Franklin Circuit Court (Case No. 13-CI-458) in which it alleged various damage claims against the Cabinet based upon the Cabinet's alleged breach of contract; the Cabinet responded with its own counterclaim for damages. The two lawsuits were subsequently consolidated.

On May 31, 2013, the circuit court entered an order rejecting Kentucky Spirit's claim that it was entitled to an early termination of the contract, holding instead that the company did not have that right. The order further stated that ...


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