                                                   RENDERED: AUGUST 24, 2017
                                                            TO BE PUBLISHED

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                                2016-SC-000303-DG


KENTUCKY STATE POLICE                                               APPELLANT


                     ON REVIEW FROM COURT OF APPEALS
V.                      CASE NO. 2014~CA-001081-MR
                   FRANKLIN CIRCUIT COURT NO. 09-CI-01342


TERRY SCOTT AND                                                     APPELLEES
DAMON FLEMING



               OPINION OF THE COURT BY JUSTICE VANMETER

                                       REVERSING



      As a general rule, persons aggrieved by administrative actions must

exhaust their administrative remedies before seeking redress in the courts.

The primary issue we must resolve in this case is whether the failure of Terry

Scott and Damon Fleming to appeal denial of their respective grievances

against the Kentucky State Police ("KSP") by the Personnel Cabinet, under

KRS 1 Chapters 13B and 18A, precludes their subsequent action filed in

Franklin Circuit Court. We hold that exhaustion of administrative remedies




      1   Kentucky Revised Statutes.
was required in this case and therefore reverse to the trial court with

instructions to dismiss this action.

                     I.     Factual and Procedural Background.

      Scott and Fleming were each hired in 2002 as an Arson Investigator II by

KSP. In late 2004, KSP hired Ma.;k Boaz as an Arson Investigator II for the

Henderson Post. Boaz's starting salary was $38,083 per annum, the midpoint

authorized salary for the position. At the time of Boaz's hire, Scott, assigned to

the Elizabethtown Post, earned $31,578 per annum, and Fleming, assigned to

the Madisonville Post, was earning $31,261 per annum.2 As noted by both the

circuit court and Court of Appeals, Boaz told Scott that he had negotiated a

higher salary; Scott then relayed this information to Fleming.

      In May 2006, Scott and Fleming filed internal grievances concerning

Boaz's higher rate of compensation in comparison to their rate of

compensation. The dates the grievances were filed are not exactly clear from

the record; however, on May 25, 2006, the KSP Commissioner denied Fleming's

grievance based on 101 KAR3 2:034 which permits salary adjustments only for

merit employees of the same class within the same county.4




      2
        Prior to transferring to the Madisonville Post on August 1, 2004, Fleming had
been assigned to Henderson Post.
      3   Kentucky Administrative Regulations.
      4   The regulation, 101 KAR 2:034 § 1, provides, in full:
               New Appointments. (1) An appointing authority shall appoint a
               new employee at a salary not to exceed the midpoint of the pay
               grade.

                                             2
      Both Scott and Fleming filed appeals with the Personnel Board. Scott's

appeal was filed on May 25, 2007; Fleming's appeal was filed on June 4, 2007.

They alleged that Boaz's hire and rate of pay had been motivated by his having

changed his political voting registratiQn to coincide with that of the incumbent

governor.                                                            ,,

      With respect to Scott, the hearing officer found that Scott knew or should

have known no later than February 28, 2006, that Boaz had been hired as an

Arson II investigator at a certain salary. As to Fleming, the hearing officer

fqund that he knew   or should have known no later than March 1, 2006, of
Boaz's hire, class and salary.

      The grievances were denied based on KRS 18A.095(29), which states

      Notwithstanding any other prescribed limitation of action, an
      employee that has been penalized, but has not received a written
      notice of his or her right to appeal as provided in this section, shall
      file his or her appeal with the Personnel Board within one (1) year
      from the date of the penalization or from the date that the
      employee reasonably should have known of the penalization.

      The Personnel Board's Hearing Officer issued Findings of Fact,

Conclusions of Law and Recommended Orders dismissing both Scott's and

Fleming's appeals on September 20, 2007. Those Recommended Orders set




            (2) The appointing authority shall adjust to that salary an
            employee who is earrung less than the new appointee's salary, if
            the appointing authority determines that the incumbent employee:
                   (a) ls in the same job classification;
                   (b) Is in the same work county; and
                   (c) Has a similar combination of education and experience
                   relating to the relevant job class specification.

                                           3
out Scott's and Fleming's Exception and Appeal rights under KRS 13B.140 and

KRS 18A.100. Apparently, no exceptions were filed and the Personnel Board

entered its Final Orders in conformity with the Hearing Officer's

recommendations on October 16, 2007. The Board's Final Order also noted

the appeal rights under KRS 13B.140 and KRS 18A.100.

      Neither Scott nor Fleming filed an appeal with the Franklin Circuit

Court, as directed by statute. Instead, in August 2009, the two filed a verified

complaint and petition for declaration of rights as an original action in the

Franklin Circuit Court. The factual allegations were that Boaz was hired at a

substantially higher salary than Scott or.Fleming despite having less law

enforcement experience than they had, and KSP had failed to pre-certify Boaz

under the Peace Officer Professional Standard in accordance with KRS 15.382,

.388. The allegations were that these hiring discrepancies were due to Boaz's

changing his political registration from Democrat to Republican (to coincide

with that of then incumbent Governor Fletcher). The first count of the

complaint alleged a violation of KRS 18A.140, and a denial of freedom of

association and equal protection as guaranteed by the Kentucky Constitution

·§§ 1-3, and the United States Constitution Amendments 1 and 14, thereby

entitling Scott and Fleming to compensatory and punitive damages. The

second count alleged a violation of KRS Chapter 15.

      KSP removed the case to federal court due to Scott's and Fleming's

assertion of violations of their federal civil rights. In a memorandum opinion,

the district court dismis~ed the federal claims with prejudice, and remanded

                                        4
the state claims back to the Franklin Circuit Court. Fleming v. Ky. State Police,

3:09-35-DCR, 2010 WL 881907 (E.D. Ky., Mar. 5, 2010). Following remand,

Scott and Fleming amended their complaint two times to add an allegation of

violation of the Kentucky Civil Rights Act, KRS Chapter 344 and to name

individual defendants.

      Ultimately, the trial court dismissed most of Scott's and Fleming's

claims. In a 2012 Order, the trial court held that KSP and four individuals

named in official capacities were all entitled to governmental immunity. Yanero

v. Davis, 65 S.W.3d 510, 519 (Ky. 2001). Subsequently, and as to the KRS

Chapter 18A claims, the trial court recognized that its jurisdiction with respect

to administrative proceedings was limited to matters appealed under KRS

i8A.100 and Chapter l3B. The court, similarly, dismissed the KRS Chapter

344 claims, holding that "[p)olitical affiliation is not a protected class.under the

Civil Rights Act." As to the claims for violation of the Kentucky Constitution,

the trial court recognized that no tort cause of action exists in Kentucky to

provide money damages for constitutional violations. See St. Luke's Hosp., Inc.

v. Straub, 354 S.W.3d 529, 537 (Ky. 2011) (declining to create judicially a new_

constitutional tort for a private right of action for state constitutional

violations). Despite the foregoing, the trial court, nevertheless, permitted the

case to go forward, stating

             The Court interprets [Straub) to mean that Plaintiff[s1 claims
      based directly on the Kentucky Constitution for monetary damages
      are foreclosed, but not that Plaintiff[s are) barred from bringing any
      and all claims directly under the Kentucky Constitution. If the
      plaintiffs demonstrate a constitutional violation in the form of

                                          5
      political discrimination that violates the right to freedom of
      association and the right of equal protection, they should have a
      remedy. The remedies available to the Plaintiffs may be limited to
      equitable relief, such as injunctive relief, but it would be premature
      to dismiss their claims. If Plaintiffs prove a violation of their right
      to equal protection under the state constitution, they may be
      entitled to injunctive relief in the form of reinstatement, backpay,
      restoration of retirement benefits, or some other actions necessary
      to make them whole[.] See e.g., 200 KAR 12:030. Courts are
      afforded "broad equitable discretion to fashion back pay awards."
      Dauid u. Caterpillar, Inc., 324 F.3d 851, 865 (7th Cir. 2003).

      The trial court held a bench trial in October 2013, following which it

entered an Opinion & Order adjudicating the sole issue of "whether Plaintiffs'

constitutional right to equal protection was violated when [KSP] hired Mark

Boaz as an Arson Investigator II, at a substantially higher rate of pay." In its

Findings of Fact, the court made extensive findings with respect to Boaz's,

Scott's and Fleming's employee class, pay and history, and what it

characterized as a number of irregularities in the hiring process for Boaz.

      The trial court concluded that KSP committed "flagrant violations of the

hiring procedures required in KRS Chapter 18A[,]" but noted the administrative

violations are not before the court by Scott's and Fleming's failure to exhaust

admirative remedies. The court, however, held that Scott and Fleming had met

their burden of showing a prima facie case of an equal protection violation,

specifically grossly unequal treatment between themselves and Boaz, for which

KSP had failed to prove any rational or reasonable justification, entitling them

to equitable relief. In its judgment, the court stated:




                                         6
            Plaintiffs right to equal protection under the Kentucky
      Constitution Section [2]151 was violated by Defendant. KSP failed
      to prove any rational or reasonable justification for the grossly
      unequal treatment of Mr. Boaz as compared to the Plaintiffs. By
      reason of this violation of their right to equal protection under the
      state constitution, Plaintiffs are entitled to injunctive relief in the
      form of reinstatement to a position with the same grade and pay as
      Mr. Boaz, back pay, restoration of retirement benefits, and any
      other actions necessary to make them whole. See e.g., 200 KAR
      12:030. Courts are afforded "broad equitable discretion to fashion
      back pay awards." David v. Caterpillar. Inc., 324 F.3d 851, 865
      (7th Cir. 2003). Accordingly, IT IS ORDERED AND ADJUDGED:

             1.   That the Plaintiffs shall be paid back pay and benefits
      at the same rate KSP paid Mark Boaz for all wages and benefits for
      the entire period of employment in which each plaintiff was
      employed by KSP starting with the date of the original employment
      of Mr. Boaz, with said wages and benefits to be calculated and
      credited to the Plaintiffs consistent with 200 KAR 12:030;

            2.   The Plaintiffs are entitled to the following injunctive and
      equitable relief against Defendant in order to be made whole:

             a.   Kentucky State Police shall reimburse Plaintiff Terry
      Scott an amount of back pay as if he were employed at the same
      rate as Mark Boaz from the date of the hire of Terry Scott, April 1,
      2002 until present, similar to Mark C. Boaz who was employed at
      the following monthly rates of pay for the time period: (1)
      $3,173.58 per month from November 16, 2004 until December 07,
      2004; (2) $3,205.32 per month from January 12, 2005 until
      December 1, 2005; (3) $3,365.60 per month until July 17, 2006;
      (4) $3,469.78 per month until December 11, 2006; (5) $3,569.78
      per month until July 11, 2007; (6) $3,882.28 per month until
      December 10, 2007; (7) $3,982.29 per month until December 12,
      2008; and, (8) $4,062.36 per month until April 23, 2010. Further,
      Kentucky State Police shall restore his retirement benefits in an
      amount commensurate with his rate of pay being equal to that of
      Mark C. Boaz as detailed above;

             b.   Kentucky State Police shall reimburse Plaintiff Damon
       Fleming an amount of back pay as if he were employed at the same
       rate as Mark Boaz from the date of the hire of Terry Scott,

       5In this final section of its Opinion & Order, the trial court referred to Section 3
of the Kentucky Constitution. Earlier portions of the Opinion, however, make clear
that the court intended to refer to Section 2.

                                             7
      November 1, 2002 until July 10, 2009, similar to Mark C. Boaz
      who was employed at the following monthly rates of pay for the
      time period: (1) $3,173.58 per month from November 16, 2004
      until December 07, 2004; (2) $3,205.32 per month from January
      12, 2005 until December 1, 2005; (3) $3,365.60 per month until
      July 17, 2006; (4) $3,469.78 per month until December 11, 2006;
      (5) $3,569.78 per month until July 11, 2007; (6) $3,882.28 per
      month until December 10 , 2007; (7) $3,982.29 per month until
      December 12, 2008; and, (8) $4,062.36 per month until April 23,
      2010. Further, Kentucky State Police shall restore his retirement
      benefits in an amount commensurate with his rate of pay being
      equal to that of Mark C. Boaz as detailed above;

The trial court's order was made final and appealable. CR6 54.02(1).

      KSP appealed to the Court of Appeals. In a split opinion, that court

affirmed the trial court judgment. KSP argued that Scott and Fleming had

failed to exhaust their administrative remedies. The Court of Appeals majority

opinion rejected this argument on the basis that such exhaustion is not

required when attacking the validity of a statute or regulation as void on its

face because an administrative agency cannot decide constitutional issues,

citing Commonwealth v. DLX, Inc., 42 S,W.3d 624, 626 (Ky. 2001). In contrast,

the Court _of Appeals dissent noted the exception to exhaustion set out in DLX

was inapplicable because Scott and Fleming did not attack the constitutional

validity of a statute or regulation either on its face or as applied. In other

words, Scott and Fleming's direct action was precluded by their failure to

exhaust their administrative remedies. The dissent further urged that Scott

and Fleming's direct action for b~ck pay was counter to this Court's decision in.

Straub, 354 S.W.3d at 537-38.


      6   Kentucky Rules of Civil Procedure.

                                               8
      KSP filed a motion for discretionary review, which we granted.

                            II.      Standard of Review.

      In this case, the trial court held a bench trial. Thus, to the extent that

any factual issues are germane to our review, we, of course, defer to the fact

finder, in this instance the trial court, and "[f]indings of fact, shall not be set

aside unless clearly erroneous, and due regard shall be given to the

opportunity of the trial court to judge the credibility of the witnesses." CR

52.01. That said, the issues in this case seems to involve pure questions oflaw,

and are therefore subject to de novo review by this Court. Louisville &

Jefferson Cnty. Metro. Sewer Dist. v. Bischoff, 248 S.W.3d 533, 535 (Ky. 2007)

(citing Bob Hook Chevrolet Isuzu, Inc. v. Commonwealth Transp. Cabinet, 983

S.W.2d 488,490 (Ky.1998)).

                              III.    . Issue on Appeal.

      As in both lower courts, KSP argues that Scott's and Fleming's failure to

exhaust administrative remedies bars their direct action in the Franklin Circuit

Court. We agree.

      As noted, exhaustion of administrative remedies is required prior to

resort to the courts. DU(, 42 S.W.3d at 625 (citing Goodwin v. City of

Louisville, 309 Ky. 11,215 S.W.2d 557,559 (1948)). Three exceptions exist to

this rule oflaw: (1) a party demonstrates the futility of continuing the

administrative process, (2) a statute authorizes direct judicial relief, and (3) a

party challenges the constitutionality of a particular regulation or statute on its

face. Popplewell's Alligator Dock No. 1, Inc. v. Revenue Cabinet, 133 S.W.3d

                                           9
456, 471 (Ky. 2004). If none of these exceptions apply, then the court is

deprived of subject matter jurisdiction.

      In DLX, a mining company aggrieved by the Natural Resources and

Environmental Protection Cabinet ("Cabinet") alleged taking of its property

without compensation in violation of Section 242 of the Kentucky Constitution

filed a direct action in Franklin Circuit Court. In holding that exhaustion of

administrative remedies was required, we held

             Exhaustion of administrative remedies is not necessary
      when attacking the constitutionality of a statute or a regulation as
      void on its face. Goodwin[, 309 Ky. 11, 215 S.W.2d at 559]. This
      is because an administrative agency cannot decide constitutional
      issues. Id. Thus, to raise the facial constitutional validity of a
      statute or regulation at the administrative level would be an
      exercise in futility. This exception does not apply in the case at
      bar, however, because DLX has not challenged the facial validity of
      the surface mining statutes and regulations. Rather, as its
      complaint shows, DLX's argument is that the Cabinet's application
      of the statutes and regulations resulted in an unconstitutional
      taking of its property.

             When an administrative agency applies a statute
      unconstitutionally, it acts beyond the bounds of the constitution,
      rather than passing on a constitutional question. In other words,
      until a statute has been applied, there can be no unconstitutional
      application. This is the basis for the rule that one must first show
      injury as the result of a statutory application, before that
      application may be attacked as unconstitutional. See, e.g., Stein v.
      Kentucky State Tax Commission, 266 Ky. 469, 99 S.W.2d 443, 445
      (1936). Thus, exhaustion of administrative remedies is not futile to
      an as-applied challenge to a statute. Quite the contrary, it is the
      administrative action which determines the extent, if any, of the
      constitutional injury.

DLX, 42 S.W.3d at 626; see also Kentucky Exec. Branch Ethics Comm'n v.

Atkinson, 339 S.W.3d 472, 476 (Ky. App. 2010) (holding that property valuation

administrators were required, notwithstanding claim of agency's arbitrary

                                           10
exercise of power, to exhaust administrative remedies before seeking judicial

relief).

           Similar to DLX, Scott and Fleming have not challenged the facial validity

of any statutes or regulations. Instead, they have challenged KSP's application

of hiring statutes and regulations in its hiring of Boaz which, they claim, has

injured them. Under KRS 18A.095, administrative jurisdiction over

penalization is vested in the Personnel Board. Irrespective of whether the

Personnel Board's 2007 decision regarding Scott's and Fleming's claim was

correct, their obligation was to appeal timely that decision to the Franklin

Circuit Court. KRS 13B.140, 18A.100. That determination is long since final,

and operates as res judicata of any matters arising from the facts as alleged by

Scott and Fleming. See Godbey v. Univ. Hosp. of Albert B. Chandler Med. Ctr.,

Inc., 975 S.W.2d 104, 105 (Ky. App. 1998) ("Kentucky has for many years

followed the rule that the decisions of administrative agencies acting in a

judicial capacity are entitled to the same res judicata effect as judgments of a

court.").

           Becaus~ we decide this case on the basis of Scott's and Fleming's failure

to exhaust their administrative remedies, we do not reach the other primary

issue raised: whether the trial court effectively awarded Scott and Fleming

monetary damages contrary to our decisions in Yan~ro v. Davis, 65 S.W.3d

510; and St. Luke's lfosp., Inc. v. Straub, 354 S.W.3d 529.




                                            11
                                 IV.   Conclusion.

Based on the foregoing, we reverse the Opinion of the Court of Appeals.

      All sitting. All concur.



COUNSEL FOR APPELLANT:

Shawna Virgin Kincer
Kentucky State Police


COUNSEL FOR APPELLEE:

David F. Broderick
Brandon T. Murley
Broderick & Davenport, PLLC


COUNSEL FOR AMICUS CURIAE
KENTUCKY PERSONNEL CABINET:

Rosemary Holbrook
Office of Legal Services
Kentucky Personnel Cabinet.




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