Did Louisville have to pay defense costs for a city agent and appointed officer sued over their work?

Plain-English summary

Louisville had paid lawyers defending two people sued in litigation connected with its policemen's retirement fund. A legislator asked whether the city could cover those legal costs. The Attorney General concluded that it was required to do so under KRS 65.2005, on the facts presented: one defendant acted as a city agent in litigation the city asked him to bring, and the other served as an appointed retirement-fund officer. Both were sued over activities within those roles. The city had consented to outside counsel.

The opinion stressed that it was not making independent factual findings about either person's status or deciding the underlying lawsuits. The statutory duty depended on the person qualifying as a local-government employee, a definition that included agents and appointed officers but excluded independent contractors. The opinion also described statutory circumstances in which a city could refuse to pay a judgment or recover defense costs, including conduct outside the scope of employment or specified wrongdoing.

Currency note

This opinion was issued in 2001. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: Did Louisville have to defend an appointed retirement-fund officer sued for work on the fund? A: The Attorney General said yes on the presented facts, treating the officer as a covered city employee sued over acts within his appointed role.

Q: Could a person who was not on the city payroll still qualify for a defense? A: The opinion said the statutory employee definition included unpaid agents and appointed officers. It treated the person who brought a suit at Louisville's request as its agent, while expressly assuming the necessary facts.

Q: Could the city use outside lawyers for the defense?
A: Yes. The opinion said the local government chose how to provide the defense, including outside counsel, and Louisville had consented to that representation here.

Q: Did the opinion decide whether the retirement-fund defendants were liable in the underlying cases? A: No. It addressed defense costs and expressly declined to judge the merits of the underlying litigation.

Background and statutory framework

KRS 65.2005(1) required a local government to defend an employee against tort claims based on acts within the scope of employment. KRS 65.200 defined local government and included appointed officers and agents among employees. The opinion explained why the city's request for a lawsuit, its law director's role, an indemnity letter, and later approved counsel supported treating one defendant as an agent. It treated the other as an appointed officer and limited its conclusion to the facts it assumed.

Citations and references

Statutes: KRS 65.2005(1); KRS 65.200(2); KRS 65.200(3).

Case: Cullinan v. Abramson, 128 F.3d 301 (6th Cir. 1997).

Source

• Landing page: https://kdla.access.preservica.com/uncategorized/IO_16d9d14f-0254-4afa-a81a-78f4e0504867/
• Original PDF: https://kdla.access.preservica.com/download/file/IO_16d9d14f-0254-4afa-a81a-78f4e0504867

Original opinion text

OAG 01-1
February 6, 2001
Subject:

Provision of Legal Services by City of Louisville

Requested by:

Representative Thomas J. Burch

Written by:

Christina L. Bradford

Syllabus:

The City of Louisville is legally entitled to pay the legal defense costs for employees sued for actions arising out of the scope of their employment.

Statutes construed:

KRS 65.200, KRS 65.2005, KRS 95.290

Opinion of the Attorney General
State Representative Thomas Burch has requested our opinion
on whether the City of Louisville is permitted to pay the legal defense
costs of certain defendants involved in litigation. Based upon the facts
presented, it is our opinion that the City of Louisville is legally entitled
to pay the legal defense costs of these defendants.1 This opinion is
provided pursuant to KRS 15.
1

As a preliminary matter, we must note that we are only addressing the legal ques-

tion of whether a municipality must provide a defense to an agent or appointed ofcer of that municipality in litigation arising from the scope of the agent’s or appointed ofcer’s work. In applying this legal analysis to the facts of Mr. Nevin and Mr. Cherry, we note that we are not making any findings of fact and our analysis, in effect, assumes that Mr. Nevin meets the test for agency and Mr. Cherry meets the test for appointed ofcer, as discussed herein.

OAG 01-1
Page 2

The facts giving rise to this opinion request apparently span over
a decade of litigation in both state and federal forums.2 This opinion
does not address the legal merit of these underlying court actions, but
merely cites to them for purposes of clarifying the facts giving rise to
this opinion request. The litigation involves issues relating to the management of the Policemen’s Retirement Fund of the City of Louisville (hereinafter “Retirement Fund”). 3 The City of Louisville has indemnified John Nevin and Andrew Cherry for the claims brought against them in that litigation. More particularly, the City of Louisville has paid the legal defense costs of Mr. Nevin and Mr. Cherry with the consent of the City of Louisville. Statutory Authority KRS 65.2005(1) provides that a local government must provide a defense to any employee for any actions in tort arising against him as a result of an act or omission committed by him which occurred within the scope of his employment. Pursuant to this statutory provision, the local government may choose how to provide the legal defense services (i.e., either by the city’s attorneys or by outside counsel). Further, a local government must pay any final judgment or settlement cost as a result of such an action against the employee. However, a local government may refuse to pay a judgment and may recover legal defense costs in certain cases, such as if the employee acted outside the scope of his employment, or acted or failed to act due to malice, fraud, or corruption.4 2

Although 40 KAR 1:020 Section 4 prohibits the Attorney General from issuing an

opinion on an issue which is currently being litigated, which may arise during current litigation, or which is the subject of contemplated litigation, it is the determination of this ofce that the particular issue which comprises the subject of this opinion request will not arise during the current litigation. 3

The Retirement Fund was created and is governed pursuant to KRS 95.290 and

Louisville Local Ordinance Sections 36.099 through 36.130.
4

In the opinion request, it is maintained that KRS 65.2005 did not go into effect until

July 15, 1994. However, the legislative history of this statute indicates that the

OAG 01-1
Page 3

For purposes of KRS 65.2005, a local government includes any
city incorporated pursuant to state law. See KRS 65.200(3). Further,
an “employee” is defined as follows:
“Employee” means any elected or appointed
ofcer of a local government, or any paid or
unpaid employee or agent of a local government, provided that no independent contractor nor employee nor agent of an independent contractor shall be deemed to be an employee of a local government. See KRS 65.200(2). Legal Analysis

1. John Nevin is Entitled to be Indemnified for his Legal Representation
   The City of Louisville is an incorporated city pursuant to state
   law. As such, it must provide a provide a legal defense for any employee in any action arising in tort arising out of acts or omissions which occurred within the scope his employment, pursuant to KRS 65.2005(1). KRS 65.200(2) specifically provides that, for purposes of KRS 65.2005(1), an “employee” includes an agent of a local government. There is no specific test to determine whether an agency relationship exists with a municipality. See McQuillan Mun Corp Section 53.66 (3rd Ed). It is not required that an agency relationship be manifested in writing or by formal ordinance, bylaw, or resolution. Id. at statute was first enacted in 1988. In 1994 the Kentucky legislature amended the statute as follows: 1) to allow local government to determine who shall represent the employee by adding to subsection (1) the language “by an attorney chosen by the local government”; and 2) by adding subsection (3)(e), which provides that a local government may refuse to pay a judgment and may recover the costs of defense if the employee obtains private counsel without the consent of local government.

OAG 01-1
Page 4

Section 12.129. A municipality may ratify an agency relationship after
the services have been performed. Id.; See also Blanks v. Toombs, 14
S.W.2d 153 (1929) (wherein the city council’s vote to pay for services
rendered after performance was deemed a ratification of the person’s
services on behalf of the city). An agency relationship may be implied,
directly or indirectly, from the circumstances, acts, and conduct between the municipality and the alleged “agent.” See Wedding v. Duncan, 220 S.W.2d 564, 568 (1949). The ability of the municipality to control the actions of the person which resulted in a wrong being complained about is also a factor in determining whether the person was an agent on behalf of the municipality. See McQuillan, supra, at Section 53.66. According to the facts presented, Mr. Nevin was sued as a result of his bringing a lawsuit in the early 1990’s relating to the management of the Retirement Fund. The City of Louisville initially attempted to bring that lawsuit, but was found by the trial court to lack standing. Accordingly, the City of Louisville asked Mr. Nevin, a retired member of the Retirement Fund, to bring the lawsuit on the City’s behalf. See Cullinan v. Abramson, 128 F.3d 301, 306 (6th Cir. 1997), cert. denied 523 U.S. 1094 (1998). Mr. Nevin’s attorney in that proceeding was the City of Louisville’s law director. Id. In addition, in a letter to Mr. Nevin in 1991, the City of Louisville agreed to indemnify Mr. Nevin for any lawsuits against him arising out of his bringing of the lawsuit on the city’s behalf. Further, after Mr. Nevin was ultimately sued as a result of his actions on behalf of the public’s purpose, the City of Louisville retained outside counsel to defend Mr. Nevin. The circumstances, acts, and conduct between Mr. Nevin and the City of Louisville indicate that Mr. Nevin was acting as an agent of the City of Louisville. Further, the facts indicate that the City of Louisville had control over Mr. Nevin’s actions (i.e., the bringing of the lawsuit on behalf of the City of Louisville). For example, Mr. Nevin brought the lawsuit expressly at the request of the City of Louisville. See Cullinan, supra, at p. 306. In addition, the City’s law director was the attorney who represented Mr. Nevin in the initial state action. Id. Moreover, the City of Louisville has ratified Mr. Nevin as its agent in the initial lawsuit

OAG 01-1
Page 5

by the fact that it has retained counsel to defend Mr.Nevin and has
agreed to indemnify him in the action brought against him as a result
of the initial lawsuit.
By acting as an agent for the City of Louisville, Mr. Nevin was an
“employee” for the purposes of KRS 65.2005(1). Accordingly, the City
of Louisville is not only legally entitled to provide a legal defense for
Mr. Nevin, it was required to do so pursuant to KRS 65.2005(1). Moreover, the City of Louisville was entitled to determine how those legal services were to be provided. In this particular instance, the City of Louisville approved the retention of outside counsel to represent Mr. Nevin, which was specifically permitted by the provisions of KRS 65.2005. 2.

Andrew Cherry is Entitled to be Indemnified for his Legal Defense

Under the facts presented, Mr. Cherry was sued by the Plaintiffs
as a direct result of his service as an appointed member on the Retirement Fund. Thus, Mr. Cherry was sued in his capacity as an appointed ofcer of the City of Louisville. As stated above, the City of Louisville is a “local government” pursuant to KRS 65.200(3), and is required to provide a defense to employees for claims arising out activities which occurred within the scope of their employment. Therefore, Mr. Cherry is entitled to be indemnified for his legal expenses incurred in defending the suit against him.5 Further, the City of Louisville is specifically authorized to pay such legal expenses to outside counsel pursuant to KRS 65.2005. Conclusion

5

The City of Louisville’s provision of a legal defense for Mr. Nevin and Mr. Cherry also

appears to be supported by Louisville City Ordinance Sections 36.160 through
36.163. However, analyzing the facts of this opinion request pursuant to those ordinances is unnecessary as the state statutes, KRS 65.200 et. seq., preempt the local ordinance (See Franklin County v. Webster, Ky, 400 S.W.2d 693 (1966)) and require that the City of Louisville provide a defense for both under the facts presented.

OAG 01-1
Page 6

Pursuant to KRS 65.2005, the City of Louisville is a “local government” which is required to provide a legal defense and pay claims regarding claims filed against employees as a result of activities which occurred during the scope of their employment. Both Mr. Nevin and Mr. Cherry are “employees” of the city for the purposes of this statute, and are being sued by the Plaintiffs as a result of activities which occurred as a direct result of their employment for the City of Louisville. Moreover, both are being represented by counsel obtained with the consent of the City of Louisville, which is permitted by statute. See KRS 61.2005. Accordingly, the City of Louisville is legally required to indemnify Mr. Nevin and Mr. Cherry for their legal defense costs in the litigation referenced in Representative Burch’s opinion request. Albert B. Chandler III Attorney General

Christina L. Bradford
Assistant Attorney General