BFI WASTE SYSTEMS OF NORTH AMERICA, INC. v. HUNTINGTON WOODS NEIGHBORHOOD and FRANKLIN COUNTY FISCAL COURT v. BFI WASTE SYSTEMS OF NORTH AMERICA;
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RENDERED:
November 21, 2003; 2:00 p.m.
TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2002-CA-000661-MR
BFI WASTE SYSTEMS OF
NORTH AMERICA, INC.
v.
APPELLANT
APPEAL FROM FRANKLIN CIRCUIT COURT
HONORABLE WILLIAM L. GRAHAM, JUDGE
ACTION NO. 00-CI-00698
HUNTINGTON WOODS NEIGHBORHOOD
ASSOCIATION, INC.
AND
NO. 2002-CA-000805-MR
FRANKLIN COUNTY FISCAL COURT
v.
APPELLEE
APPELLANT
APPEAL FROM FRANKLIN CIRCUIT COURT
HONORABLE WILLIAM L. GRAHAM, JUDGE
ACTION NO. 00-CI-00698
BFI WASTE SYSTEMS OF NORTH AMERICA;
AND HUNTINGTON WOODS NEIGBORHOOD
ASSOCIATION, INC.
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
BAKER, BARBER AND JOHNSON, JUDGES.
JOHNSON, JUDGE:
BFI Waste Systems of North America, Inc. and
the Franklin County Fiscal Court have appealed from an order
entered by the Franklin Circuit Court on October 23, 2001, which
granted summary judgment1 in favor of the Huntington Woods
Neighborhood Association, Inc.
Having concluded that Huntington
is entitled to a judgment as matter of law, we affirm.
In 1991 the Kentucky General Assembly enacted Senate
Bill 22 in an effort to ameliorate many of the environmental
problems associated with solid waste disposal.
In particular,
Senate Bill 2 required county governments to engage in
comprehensive solid waste management planning.
Senate Bill 2
further required county governments to prepare solid waste
management plans for their respective solid waste management
areas.3
In an effort to comply with the provisions of Senate
Bill 2, the Franklin County Fiscal Court entered into a contract
with BFI on June 5, 1992, which, among other things, reserved a
1
Kentucky Rules of Civil Procedure (CR) 56.03.
2
1991 Ky.Acts (First Ex.Sess) ch. 12.
3
Id. ch. 12, § 6.
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certain amount of space in BFI’s privately owned landfill for
municipal solid waste generated in the unincorporated area of
Franklin County.4
The contract entered into between BFI and the
Fiscal Court was titled “Host Community Agreement,” and it was
set to expire in 2002.5
On November 4, 1992, the Fiscal Court
awarded BFI a ten-year franchise for the collection and disposal
of municipal solid waste generated in the unincorporated area of
Franklin County.6
The franchise agreement entered into between
BFI and the Fiscal Court was publicly advertised and bid in
accordance with Section 164 of the Kentucky Constitution.7
In recognition of the fact that the original Host
Community Agreement was set to expire in 2002, BFI and the
Fiscal Court entered into a second Host Community Agreement on
March 10, 2000, which, among other things, sought to expand
BFI’s landfill in order to provide for Franklin County’s future
4
BFI’s landfill is located off Highway 151 in Frankfort, Kentucky.
5
More specifically, the “Host Community Agreement” contained the following
provision:
This Agreement shall become effective on the
date the Solid Waste Management Plan (amended to be
consistent with this Agreement) is approved by the
Cabinet. [See Kentucky Revised Statutes (KRS) 224.43345.] This Agreement shall continue for ten (10)
years thereafter, unless terminated by agreement of
the parties or pursuant to the terms of this
Agreement.
6
It is the appellants’ contention that the franchise agreement entered into
on November 4, 1992, represented a separate contract, apart from the Host
Community Agreement entered into on June 5, 1992.
7
The Host Community Agreement was not publicly advertised, nor was it
competitively bid.
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disposal needs.
The 2000 Host Community Agreement contains the
following provisions, which are particularly relevant for
purposes of this appeal:
III. Term.
This agreement shall continue for twenty
(20) years after the Effective Date, unless
terminated by agreement of the parties or
pursuant to the terms of this Agreement.
. . .
VI.
Fees.
A. During the term of this Agreement, BFI
shall pay a fee to the Fiscal Court in the
amount of five and three-quarters percent
(5.75%) of the gross receipts for out-ofarea waste accepted for disposal at the
Facility. For purposes of this Agreement,
“out-of-area” waste shall mean waste which
is generated outside the Solid Waste
Management Area.
. . .
D. The parties intend that the payments to
be made and services to be provided by BFI
under this Agreement shall be in lieu of all
license fees, taxes and other impositions of
the type provided for in KRS 68.178.
Therefore, in determining the amount of fees
payable under this Agreement, BFI shall be
entitled to deduct from the amounts
otherwise payable to Fiscal Court, the
amount of those types of license fees, taxes
and impositions (other than taxes and fees
imposed generally without reference to the
status of the taxpayer or fee payer as the
owner or operator of a solid waste
management facility, waste site or facility)
payable by BFI to Fiscal Court, Franklin
County or multi-county political district or
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subdivision of which Franklin County is a
part.
. . .
XI.
Indemnification.
A. BFI shall indemnify and hold Fiscal Court
harmless from any and all claims, damages,
suits or causes of action, including
reasonable attorney’s fees resulting from
the design, construction or operation of the
Facility.
B. BFI shall indemnify and hold Fiscal Court
harmless from any and all claims, damages,
suits or causes of action, including
reasonable attorney’s fees (not to exceed
fifty thousand dollars ($50,000.00) in fees
and court costs) resulting from the rezoning
of the Facility or the Expansion, or the
issuance of a conditional use permit or a
variance for the Facility or the Expansion,
unless the claim, suit or action is brought
by BFI.
. . .
XIII.
Free Disposal of Certain Franklin
County Waste.
A. Each month during the term of this
Agreement, BFI shall provide without charge
up to forty (40) tons of disposal capacity
at the Facility for waste from Franklin
County open dump cleanups, roadway litter
removal, or other county operations which is
delivered to the Facility by Franklin
County[.]
B. BFI shall provide disposal of household
solid waste at a reduced rate to residents
of Franklin County, to be billed to the
Fiscal Court. . . . This household solid
waste shall be accepted for disposal at a
reduced rate of ten dollars ($10.00) per
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vehicle, which shall be billed to the Fiscal
Court on a monthly basis.
. . .
XV.
General Provisions.
. . .
B. The terms and conditions of this
Agreement are contingent upon BFI’s
receiving permits from the Cabinet that
enable BFI to construct and operate the
Expansion and as necessary to comply with
this Agreement; the issuance of a
determination by the Fiscal Court pursuant
to KRS 224.40-315 that the Expansion is
consistent with the Plan; and the approval
of zoning for the Expansion in a manner that
does not materially alter the proposed
Expansion, as described in Attachment A
(including, if applicable, the approval of
any necessary zone change or the issuance of
a conditional use permit). BFI shall have
the right to determine, in its good faith
sole discretion, whether the approval of any
zone change or conditional use permit issued
for the Facility materially alters the
proposed Expansion.
The 2000 Host Community Agreement was also not publicly
advertised, nor was it competitively bid.
On June 1, 2000, Huntington8 filed a petition for
declaratory and injunctive relief in the Franklin Circuit Court
challenging the validity of the 2000 Host Community Agreement
entered into between BFI and the Fiscal Court.
More
specifically, Huntington claimed the 2000 Host Community
8
The Huntington Woods Neighborhood Association, Inc. is comprised of a group
of citizens and homeowners currently residing in a Franklin County
subdivision located directly across from BFI’s Franklin County landfill.
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Agreement created a franchise granted in violation of the
competitive bidding requirements of Section 164 of the Kentucky
Constitution.
Huntington further alleged that the Agreement
violated the due process rights of its members.
On June 21,
2000, the Fiscal Court filed an answer averring, among other
defenses, that the 2000 Host Community Agreement did not grant
BFI a franchise or privilege within the meaning of Section 164
of the Kentucky Constitution.
On December 21, 2000, the Fiscal
Court passed Resolution 17-2000, which included an amendment to
the Franklin County Solid Waste Management Plan authorizing the
expansion of BFI’s landfill.
On February 16, 2001, BFI filed an
answer generally denying the allegations raised by Huntington in
its petition for declaratory and injunctive relief.
In March
2001 the Fiscal Court issued a “local determination” pursuant to
KRS 224.40-315(1), stating that BFI’s proposed expansion of the
landfill was consistent with the Franklin County Solid Waste
Management Plan.
On April 6, 2001, Huntington filed a motion
for partial summary judgment.
In addition to the allegations
raised in its petition for injunctive and declaratory relief,
Huntington claimed the 2000 Host Community Agreement was in
violation of Sections 60, 171, 174 and 181 of the Kentucky
Constitution, which collectively prohibit special legislation
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and require uniformity and equality in taxation,9 and that it was
not enacted as an ordinance as required by law.
On October 23, 2001, the trial court entered an order
granting Huntington’s motion for summary judgment.10
The trial
court concluded that the 2000 Host Community Agreement created a
franchise affording special privileges or treatment to BFI in
violation of the competitive bidding requirements of Section 164
of the Kentucky Constitution.
The trial court relied upon
Eastern Kentucky Resources v. Arnett,11 in primary support of its
ruling.
The court did not address Huntington’s remaining
arguments.
On November 2, 2001, the appellants filed motions to
alter, amend, or vacate12 the trial court’s order, which were
summarily denied.13
This appeal followed.14
9
Huntington argued that the 2000 Host Community Agreement violated Sections
60, 171, 174 and 181 of the Kentucky Constitution by precluding the Fiscal
Court from imposing the statutory maximum tax (6.25%) on any out-of-area
waste accepted for disposal at BFI’s Franklin County landfill. See KRS
68.178(2)(b).
10
Although Huntington’s motion was originally brought as a motion for partial
summary judgment, the trial court entered an order tendered by Huntington on
May 29, 2001, stipulating that Huntington’s motion for partial summary
judgment was, in effect, a motion for a final judgment on the merits of the
action.
11
Ky., 934 S.W.2d 270 (1996).
12
CR 59.05.
13
In actuality, BFI filed a motion to alter or amend, whereas the Fiscal
Court filed a motion to alter, amend, or vacate the order entered by the
trial court on October 23, 2001. Huntington also filed a motion to alter or
amend judgment pursuant to CR 60.02, asking the court to declare the
resolution (Resolution 17-2000) passed by the Fiscal Court on December 21,
2000, and the “local determination” issued by the Fiscal Court in March of
2001, to be “null and void.” Huntington’s motion was also summarily denied
by the trial court.
-8-
BFI and the Franklin County Fiscal Court claim the
trial court erred by granting summary judgment in favor of
Huntington.
More specifically, the appellants claim that: (1)
the “Host Community Agreement” dated March 10, 2000, does not
create a franchise affording special privileges or treatment to
BFI in violation of the competitive bidding requirements of
Section 164 of the Kentucky Constitution; (2) the Agreement does
not violate the due process rights of Huntington’s members; (3)
the Fiscal Court was not required to enact the 2000 Host
Agreement as an ordinance; and (4) the Agreement does not
violate Sections 59, 60, 171, and 181 of the Kentucky
Constitution.
The standard of review governing an appeal from a
summary judgment in this Commonwealth is well-settled.
We must
determine whether the trial court erred in concluding that there
was no genuine issue as to any material fact and that the moving
party was entitled to a judgment as a matter of law.15
Summary
judgment is appropriate “if the pleadings, depositions, answers
to interrogatories, stipulations, and admissions on file,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party
14
The Fiscal Court and BFI both filed appellate briefs in the case sub
judice.
15
Scifres v. Kraft, Ky.App., 916 S.W.2d 779, 781 (1996).
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is entitled to a judgment as a matter of law.”16
In Paintsville
Hospital Co. v. Rose,17 the Supreme Court of Kentucky held that
for summary judgment to be proper the movant must show that the
adverse party cannot prevail under any circumstances.
The Court
has also stated that “the proper function of summary judgment is
to terminate litigation when, as a matter of law, it appears
that it would be impossible for the respondent to produce
evidence at the trial warranting a judgment in his favor.”18
There is no requirement that the appellate court defer to the
trial court since factual findings are not at issue.19
Whether
the 2000 Host Community Agreement entered into between BFI and
the Fiscal Court created a franchise in violation of Section 164
of the Kentucky Constitution is purely a question of law,
subject to this Court’s independent review.
The appellants insist that the 2000 Host Community
Agreement “in no way grants BFI any rights or privileges not
available to the public at large.”
The appellants further claim
that the trial court misconstrued both the terms of the 2000
Host Community Agreement and Kentucky law as it pertains to
16
CR 56.03.
17
Ky., 683 S.W.2d 255, 256 (1985).
18
Steelvest, Inc. v. Scansteel Service Center, Inc., Ky., 807 S.W.2d 476, 480
(1991).
19
Goldsmith v. Allied Building Components, Inc., Ky., 833 S.W.2d 378, 381
(1992).
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franchises.
We respectfully disagree.
Section 164 of the
Kentucky Constitution reads in relevant part as follows:
No county, city, town, taxing district or
other municipality shall be authorized or
permitted to grant any franchise or
privilege, or make any contract in reference
thereto, for a term exceeding twenty years.
Before granting such franchise or privilege
for a term of years, such municipality shall
first, after due advertisement, receive bids
therefor[e] publicly, and award the same to
the highest and best bidder; but it shall
have the right to reject any or all bids.
In E.M. Bailey Distributing Co., Inc. v. ConAgra, Inc.,20 the
Supreme Court stated:
The purpose for Section 164 of the Kentucky
Constitution is to prevent governmental
agencies of any kind from giving away, or
disposing of at inadequate prices, the
rights and privileges which belong to its
citizens and to compel the disposition of
public property to be accomplished publicly
and for the highest and best value.21
It is undisputed that the 2000 Host Community Agreement was not
publicly advertised or competitively bid.
Thus, the question
presented on appeal is whether the 2000 Host Community Agreement
created a franchise agreement between BFI and the Fiscal Court.
The Supreme Court of Kentucky was faced with a similar
issue in Arnett, supra.
The franchise agreement at issue in
Arnett granted Eastern Kentucky Resources (EK Resources) the
20
Ky., 676 S.W.2d 770, 773 (1984).
21
See also Stites v. Norton, 125 Ky. 672, 677, 101 S.W. 1189, 1190 (1907).
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right to operate a landfill in Magoffin County, Kentucky, and
the right to collect the garbage of the county free of charge.
The agreement further provided that EK Resources was to pay
Magoffin County a royalty fee for each ton of garbage accepted
from outside the county and that any other landfill choosing to
locate in Magoffin County would have to pay the same royalty
fees as EK Resources.22
On appeal, the Supreme Court concluded that the
agreement entered into between EK Resources and the Magoffin
County Fiscal Court “constituted a special privilege which
Magoffin County Fiscal Court gave to EK Resources without
advertising or bidding as required by Section 164.”23
The
Supreme Court noted as follows:
[A] franchise is [generally defined as] a
right or privilege granted by a sovereign
power to a party to do some act which such
party could not do without a grant from the
government.24
. . .
22
Arnett, 934 S.W.2d at 275.
23
Id.
24
Id. (citing E.M. Bailey, 676 S.W.2d at 771; Mt. Vernon Tel. Co. v. City of
Mt. Vernon, 313 Ky. 93, 230 S.W.2d 451 (1950); and Inland Waterways Co. v.
City of Louisville, 227 Ky. 376, 13 S.W.2d 283 (1929)). See also Young v.
City of Morehead, 314 Ky. 4, 7, 233 S.W.2d 978, 980 (1950), “[t]he term
“franchise” is difficult to define due to the broad sense in which it is used
both in legal and popular parlance. But it seems to us that the word as used
in § 164 is a grant of a right to use public property, or at least the
property over which the granting authority has control” [citations omitted].
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Only a local government can contract to
allow all its residential garbage to be
collected free. Only a local government can
agree that no other landfill company will
operate within its geographic area without
paying the same royalties as the current
landfill. Clearly, these are privileges
granted to EK Resources by the contract.25
The appellants, however, insist that the contract at
issue in Arnett is “distinctly different from the 2000 Host
Community Agreement.”
The appellants claim that the contract at
issue in Arnett expressly granted EK Resources all of the county
approvals necessary to construct and operate a landfill in
Magoffin County, whereas the 2000 Host Community Agreement
grants no such right.
This distinction is without merit.
While
we agree with the appellants that the 2000 Host Community
Agreement does not expressly grant BFI the exclusive right to
collect or dispose of solid waste generated in the
unincorporated areas of Franklin County, it does provide
significant financial rewards to the Fiscal Court that are
contingent upon local approval of BFI’s proposed expansion.26
As
for the appellants’ argument that the 2000 Host Community
Agreement does not grant BFI the “exclusive” right to collect or
dispose of solid waste generated in the unincorporated areas of
25
Arnett, 934 S.W.2d at 275.
26
For example, under Section XIII of the agreement, BFI is required to
provide free disposal for certain types of waste generated in Franklin
County. Moreover, under Section VI of the Agreement, BFI is required to pay
a fee in the amount of 5.75% of the gross receipts for out-of-area waste
accepted for disposal at BFI’s Franklin County landfill.
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Franklin County, the following annotation contained in 36
Am.Jur.2d, Franchises, § 29 (1968), adequately summarizes our
position on the issue:
Monopoly is not an essential feature of
a franchise, and the strictly legal
signification of the term “franchise” is not
always confined to exclusive rights. The
mere granting of a franchise does not amount
to an implied contract on the part of the
grantor that it will not grant a rival
franchise to a competing corporation or
enter into competition itself in reference
to the subject of the franchise. A local
franchise to operate a public utility, while
having elements of property, confers no
contractual or property right to be free of
competition either from individuals, other
public utility corporations, or the state or
municipality granting the franchise, in the
absence of a contract precluding the grantor
from initiating or permitting such
competition [footnotes omitted].
Simply put, the 2000 Host Community Agreement, in effect,
granted BFI the right or privilege to expand its Franklin County
landfill.27
This right or privilege is not one that is enjoyed
by the citizens in general.28
Appellants further argue that a franchise cannot be
granted “for the sale of a commercial product that is not a
product of a government, but is a business which is open to
27
See Beavers v. County of Walker, 645 So.2d 1365, 1375-76 (Ala. 1994), for a
similar result under Alabama law.
28
See E.M. Bailey, 676 S.W.2d at 771, “[o]ne test for determining a franchise
within the meaning of Section 164 of the Kentucky Constitution can be found
in Willis v. Boyd, 224 Ky. 732, 7 S.W.2d 216 (1928), when the court said that
a lease can grant a franchise because the lessee obtained a right or
privilege not enjoyed by citizens in general.”
-14-
all.”
This argument is entirely without merit.
“The management
of solid waste, including its disposal, is vested exclusively in
county fiscal courts.”29
KRS 67.083(3), which provides the
statutory framework under which the county fiscal courts operate
in this regard, states in relevant part as follows:
The fiscal court shall have the power
to carry out governmental functions
necessary for the operation of the county.
Except as otherwise provided by statute or
the Kentucky Constitution, the fiscal court
of any county may enact ordinances, issue
regulations, levy taxes, issue bonds,
appropriate funds, and employ personnel in
performance of the following public
functions:
. . .
(o) Exclusive management of solid wastes by
ordinance or contract or by both . . . .
The General Assembly has made it abundantly clear that the
primary responsibility for adequate solid waste collection,
management, treatment, disposal and resource recovery rests with
the counties.30
KRS 109.041 provides in part as follows:
(1) In addition to all other powers
enumerated in Chapter 67 and other sections
of the Kentucky Revised Statutes, counties,
acting by and through their fiscal courts,
may own and hold the permit for, plan,
initiate, acquire, construct, and maintain
solid waste management facilities, enter
into contracts or leases with private
parties for the design, construction, or
operation of a publicly-owned solid waste
29
Arnett, 934 S.W.2d at 273.
30
See KRS 67.083.
See also KRS 109.011.
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management facility, and adopt
administrative regulations with respect
thereto in accordance with this chapter. It
is hereby determined and declared that in
the implementation, acquisition, financing,
and maintenance of solid waste management
facilities, and in the enforcement of their
use, counties will be performing state
functions duly delegated to them for the
public welfare. . . .
KRS 224.40-315(1), which sets forth the requirements for
obtaining a permit to construct a municipal solid waste disposal
facility, provides in relevant part as follows:
No permit to construct or expand a
municipal solid waste disposal facility
shall be accepted for processing by the
cabinet unless the application contains a
determination from the governing body for
the solid waste management area in which the
facility is or will be located concerning
the consistency of the application with the
area solid waste management plan submitted
under KRS 224.43-345(1)(a) to (d) and (l)
until January 1, 1993, and the entire plan
after January 1, 1993. . . .
As the Supreme Court stated in Arnett, supra, “KRS Chapters 67,
109 and 224 establish that the General Assembly has placed in
the counties primary responsibility and authority for the
exclusive management of solid waste.”31
Accordingly, the Fiscal
Court was exercising its governmental, rather than proprietary,
function in contracting with BFI for the expansion of its
Franklin County landfill.32
31
Arnett, 934 S.W.2d at 273.
32
Id. at 275.
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The fact that BFI proposes to expand its Franklin
County landfill on privately-owned property rather than on
public property does not alter our conclusion.
As was stated by
the former Court of Appeals in Inland Waterways, supra,33 “[i]t
is the nature of the business, not the title to the land, that
fixes its status [under Section 164].
It is the service that is
rendered pursuant to an obligation, not the facilities employed,
that determines the proper solution of the problem” [citations
omitted].
BFI contracted to perform a public function (solid
waste disposal) that is statutorily within the jurisdiction of
Franklin County.
BFI cannot escape the constitutional mandate
of Section 164 by choosing to perform that public function on
private property.34
In summary, we hold that the 2000 Host Community
Agreement entered into between BFI and the Fiscal Court granted
BFI special privileges not generally available to the public at
large to engage in activities which it could not do without a
grant from the state.
Under Section 164 of the Kentucky
Constitution, franchises and special privileges are subject to
bidding and advertising requirements, which were not met in this
case.
33
13 S.W.2d at 286.
34
Arnett, 934 S.W.2d at 273.
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Accordingly, the order of the Franklin Circuit Court
granting summary judgment in favor of Huntington is affirmed.35
ALL CONCUR.
BRIEFS FOR APPELLANT, BFI
WASTE SYSTEMS:
Dennis J. Conniff
Amy D. Cubbage
Louisville, Kentucky
BRIEFS FOR APPELLANT,
FRANKLIN COUNTY FISCAL
COURT:
BRIEF FOR APPELLEE:
Phillip J. Shepherd
David M. Vance
Frankfort, Kentucky
ORAL ARGUMENT FOR APPELLEE:
Phillip J. Shepherd
Frankfort, Kentucky
Richard M. Sullivan
Edward F. Busch
Louisville, Kentucky
ORAL ARGUMENT FOR APPELLANT,
BFI WASTE SYSTEMS:
David J. Conniff
Louisville, Kentucky
ORAL ARGUMENT FOR APPELLANT,
FRANKLIN COUNTY FISCAL COURT:
Edward F. Busch
Louisville, Kentucky
35
Our disposition of this appeal precludes us from reaching the remaining
arguments raised by the appellants as they are now moot.
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