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Board of Commissioners of City of Danville v. Advocate Communications, Inc.

Supreme Court of Kentucky

September 28, 2017

BOARD OF COMMISSIONERS OF THE CITY OF DANVILLE, KENTUCKY APPELLANT
v.
ADVOCATE COMMUNICATIONS, INC. D/B/A THE ADVOCATE-MESSENGER APPELLEE

         ON REVIEW FROM COURT OF APPEALS CASE NOS. 2014-CA-001300 AND 2014-CA-1301 BOYLE CIRCUIT COURT NO. 12-CI-00482

          COUNSEL FOR APPELLANT: Stephen Dexter Sheehan, Barnett, Dean, Pennington, Little & Dexter, P.S.C.

          COUNSEL FOR APPELLEE: Jon L. Fleischaker Jeremy Stuart Rogers DINSMORE 8b SHOHL, LLP Michael P. Abate KAPLAN 8b PARTNERS LLP

          COUNSEL FOR AMICUS CURIAE THE MUNICIPAL ATTORNEYS ASSOCIATION OF KENTUCKY, INC.: Morgan Todd Osterloh Sturgill, Turner, Barker 8b Moloney, PLLC

          COUNSEL FOR AMICUS CURIAE KENTUCKY LEAGUE OF CITIES: Laura Milam Ross Kentucky League of Cities, Legal Services Counsel

          OPINION.

          VANMETER JUSTICE.

         AFFIRMING IN PART AND VACATING IN PART

         Under Kentucky's Open Meetings Act, city council meetings are presumptively open to the public unless an exception permits a meeting to be closed. The issue we address in this case is whether the Board of Commissioners of the City of Danville ("Board") permissibly went into closed session to discuss its intention to bid on real property offered for sale pursuant to an absolute auction. Under the facts of this case, we hold that no exception permitted the Board's action and affirm that portion of the Court of Appeals' opinion. But because the Board's action was not willful, we vacate that portion of the Court of Appeals' opinion remanding to the Boyle Circuit Court for an assessment of fees and costs.

         I. Factual and Procedural Background.

         For some time prior to 2012, the City of Danville needed space to house its public works departments. To accommodate its needs, it leased a portion of the Boyle Industrial Storage Company's property, and attempted to purchase or enter a long-term lease for the property in 2011. In 2012, the Board budgeted $2, 000, 000 for the purchase of real estate for its public works department. In July 2012, that property came up for sale at an absolute public auction. The auction was advertised and scheduled for August 10.

         At its next regularly scheduled meeting, July 23, the Board went into closed session to discuss the auction advertisement. During the closed session, the Board authorized bidding at the auction up to $1, 500, 000, the amount for which the property appraised in 2007. In addition, the Board discussed using a bidding agent to conceal the City's interest and participation in the auction. The parties disagree on whether the Board decided to use a bidding agent at the July 23 meeting, or whether that decision was made by the City Manager following the meeting.

         The next week, Danville's mayor signed a confidential Agreement and Bidding Instruction with a local realtor to act as the City's agent/bidder. The auction terms included a 10% buyer's premium on the successful bid. As a result, the Board's authorization limited the City's highest bid to $1, 363, 636, which together with the buyer's premium of $136, 364, totaled $1, 500, 000. In conjunction with that Agreement, the mayor and the agent signed a registration form with the auctioneer, and the agent signed an acknowledgement of Auction Terms and Conditions. The significant terms were that "[t]he successful bidder shall be required to enter into a non-contingent auction purchase agreement and deposit 10% of the contract price[, ]" with closing to be held within 30 days. The property was offered AS IS, WHERE IS, and potential bidders were advised to conduct inspection prior to the auction.

         At the auction, the City, through its agent, was the successful bidder at a total price, including buyer's premium, of $1, 237, 500. After the fall of the hammer, the mayor, the seller, and all participating realtors, signed the auction purchase contract whereby the City agreed to buy the property at a closing to be held within 30 days, subject only to a standard contingency that the City receive merchantable title via a general warranty deed, free and clear of all liens and encumbrances, except easements, covenants and restrictions of record. The mayor tendered the requisite 10% deposit check of $123, 750. Significantly, the contract contained no contingency of Board approval.

         A few days after the auction, at its August 13 meeting, the Board went into closed session to discuss the property's purchase. At the adjournment of the closed session, the Board openly and unanimously approved the purchase of the property. At its August 27 meeting, ...


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