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Grimes v. GHSW Enterprises, LLC

Supreme Court of Kentucky

September 27, 2018



          COUNSEL FOR APPELLANT: Carroll Morris Redford, III Elizabeth C. Woodford Miller, Griffin & Marks, P.S.C

          COUNSEL FOR APPELLEE: John Choate Roach W. Keith Ransdell Ransdell, Roach & Royce PLLC William Brian Burnette Applegate Fifer Pulliam LLC



         Movant, Geoffrey T. Grimes, petitions pursuant to CR 65.09 for relief from an order of the Court of Appeals granting a CR 65.07 motion filed by Respondent, GHSW Enterprises, LLC (GHSW), to compel arbitration. GHSW filed its CR 65.07 motion seeking interlocutory relief to compel arbitration after the Fayette Circuit Court issued an order invalidating the arbitration clause embedded within the parties' employment contract. The circuit court found the arbitration provision was unenforceable due to lack of mutuality, in that under certain circumstances, it expressly allowed GHSW to seek provisional injunctive remedies in a court pending arbitration but did not specifically provide the same right to Grimes.

         The Court of Appeals concluded that this lack of reciprocal access to the courts for injunctive relief did not invalidate the arbitration agreement as written. In his CR 65.09 motion challenging the Court of Appeals' holding, Grimes contends that (1) the trial court was correct in its holding that the arbitration clause was unenforceable; (2) that without the quality of mutuality the arbitration provision must fail for lack of consideration; and (3) that even if consideration existed, the arbitration provision is unconscionable because it permits GHSW to seek pre-arbitration remedies but does not allow him to do so.

         For the reasons explained below, we affirm the Court of Appeals.


         GHSW operates a used automobile dealership in Lexington, Kentucky in which Grimes is a partner. In February 2015, GHSW and Grimes entered into an employment agreement in which Grimes would serve as GHSW's sales director. The agreement provided Grimes with a guaranteed member disbursement of $120, 000 per year plus other benefits as compensation.

         The employment agreement did not guarantee his employment for any particular length of time. Instead, it allowed GHSW or Grimes to terminate the employment at any time with or without cause; however, GHSW would suffer certain detriments if it discharged Grimes without cause. Those detriments included the voiding of the non-compete clause contained in the agreement.

         The non-compete provision of the agreement is Section 4. It restricts Grimes from competing with GHSW within a radius of 50 miles for 12 months after the termination of the agreement. Section 8(f) releases Grimes from the non-compete provision if GHSW terminated his employment without cause. Section 25 of the agreement contains an arbitration provision which provides as follows:

Arbitration; Injunctive relief. Any controversy or claim arising out of or relating to this Agreement or the breach thereof shall be settled by arbitration administered by the American Arbitration Association in accordance with its National rules for the Resolution of Employment Disputes, or in accordance with such other rules as the parties mutually agree, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitration proceeding shall be conducted in Fayette County, Kentucky (or such other location agreed upon by the parties). The arbitrator shall have the authority to award any remedy or relief that a court of competent jurisdiction could order or grant including, without limitation, the issuance of an injunction. The parties shall keep any arbitration (including the subject matter thereof) and any information disclosed in the arbitration proceedings secret and strictly confidential, except to the extent such information (i) is or becomes available to the public other than as a result of disclosure by the parties to such arbitration, their affiliates, employees or agents, or (ii) is required to be disclosed under applicable law (including any rule or regulation of a governmental body or self-regulatory organization) or in connection with any action, proceeding, or judicial process, but only to the extent it must be disclosed. Without limiting the rights of Company to pursue any other legal and/or equitable remedies available to it for any breach by Employee of the covenants contained in Sections 4 [the non-compete provision], and 9 through 12[1] above, Employee acknowledges that a breach of those covenants would cause a loss to Company for which it could not reasonably or adequately be compensated by damages in an action at law, that remedies other than injunctive relief could not fully compensate Company for a breach of those covenants and that, accordingly, Company shall be entitled to injunctive relief. Accordingly, without inconsistency with this arbitration provision, Company may apply to any court having jurisdiction hereof and seek interim provisional, injunction, or other equitable relief with respect to breaches of the covenants contained in Sections 4, and 9 thought 12 above until the arbitration award is rendered or the controversy is otherwise resolved in order to prevent any breach or continuing breaches of Employee's covenants as set forth in Sections 4, and 9 through 12 above. It is the intention of the parties that if, in any action before any arbitrator or court empowered to enforce such covenants, any covenant or portion thereof is found to be unenforceable, then such term, restriction, covenant, or promise shall be deemed modified to the extent necessary to make it enforceable by such court.

(emphasis added).

         Shortly after his employment with GHSW ended in June 2017, Grimes accepted employment in the used car department of the nearby Paul Miller Ford dealership. GHSW alleges that Grimes had voluntarily resigned from GHSW, thus triggering the non-compete clause which Grimes violated by going to work for a competing automobile dealership within 50 miles. Grimes claims he was terminated without cause and was, therefore, released from the non-compete clause.

         To resolve the matter, GHSW filed a petition for arbitration in accordance with the terms of the arbitration clause and correspondingly did not seek provisional injunctive remedies allowed by the agreement in the event of a violation of the non-compete clause. Grimes sought to avoid arbitration by filing a complaint in Fayette Circuit Court alleging breach of contract and various other causes of action. His pleadings included a motion seeking a declaration that the arbitration provision was invalid and unenforceable.[2]

         GHSW responded with a cross-motion to compel arbitration. Following a hearing, the trial court granted Grimes' motion and declared the arbitration provision invalid and unenforceable. The basis for the trial court's ruling was its conclusion that the arbitration clause lacked mutuality because it specifically allowed GHSW to seek provisional remedies in a court of law while not specifically providing Grimes with the same ...

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