author: Justice ABRAMSON.

text:
    Kristy Rene LAWLESS, Appellant, v. COMMONWEALTH of Kentucky, Appellee.
    No. 2009-SC-000032-MR.
    Supreme Court of Kentucky.
    Aug. 26, 2010.

      Daniel T. Goyette, Louisville Metro Public Defender, Elizabeth B. McMahon, Assistant Public Defender, Office of the Louisville Metro Public Defender, Louisville, KY, Counsel for Appellant.
    Jack Conway, Attorney General, Jason Bradley Moore, Assistant Attorney General, Office of Criminal Appeals, Office of Attorney General, Frankfort, KY, Counsel for Appellee.
   Opinion of the Court by

Justice ABRAMSON.

Kristy Lawless appeals from a December 16, 2008 Judgment of the Jefferson Circuit Court convicting her, in accord with the jury’s verdict, of robbery in the first degree, in violation of KRS 515.020. Pursuant to Lawless’s plea acknowledging her status as a first-degree persistent felon, the court sentenced Lawless to twenty-years imprisonment. Lawless was accused and found guilty of robbing a National City Bank at 4th and Oak Streets in Louisville. She complains on appeal that the instructions given the jury were flawed in several ways: (1) that they included a first-degree robbery charge not supported by the evidence; (2) that they included an unsupported theory of first-degree robbery and thus violated her right to a unanimous verdict; (3) and (4) that they failed to include instructions on the lesser included offense of theft by unlawful taking and the affirmative defense of duress. Because we agree with Lawless that the evidence did not support the charge of first-degree robbery, we reverse her conviction and remand for additional proceedings. We shall address other issues only to the extent that they could recur at a retrial.

RELEVANT FACTS

The Commonwealth’s proof included testimony by the bank teller whom Lawless confronted and by a customer at an adjacent teller station who witnessed that confrontation. Both witnesses testified that Lawless approached the teller with the hood of her black jacket over her head and across part of her face. They both testified that she kept her right hand in the jacket pocket and with her left hand passed a note to the teller. The note demanded that the teller “hand over all the money, fast and quiet with no dye packs.” The teller testified that when she was not sure how to hand over the money, Lawless ordered her to “put it in a bag.” The teller then put the money into the plastic bag lining her wastebasket and gave it to Lawless. The adjacent customer testified that when he saw the teller putting money into the wastebasket-liner he realized that she was being robbed.

When Lawless left the bank, the customer followed in hopes of learning her license number. Lawless did not get into a car, however, but began walking away from the bank along 4th Street. The customer followed, reported to 911 what had happened, and continued to advise the 911 operator where Lawless was. Police arrived in just a few minutes and, following the customer’s directions, apprehended Lawless just a couple of blocks from the bank as she emerged from behind a house. Behind the house an officer found the money — the exact amount the bank reported missing— and the plastic bag. The police did not find a gun, however, or any other weapon, nor was Lawless armed when she was taken into custody.

Both the teller and the customer testified at trial that the fact that Lawless kept her right hand in her pocket made them think that she might have a gun. Indeed, the teller testified that that possibility terrified her and made her try to do nothing that would upset Lawless and the customer testified that not only did Lawless keep her hand in her pocket but that she made gestures as though she had a gun. Because he thought she might have a gun, he decided against trying to intervene and instead followed her as she left. Neither the teller not the customer, however, saw a gun, any part of gun, or any other implement for that matter. They saw only that Lawless kept her hand in her pocket.

Lawless admitted having robbed the bank, but testified that she did so because an acquaintance of hers threatened to shoot her if she did not. She testified that she and the acquaintance, a man she had seen from time to time for about eight years but knew only as “Slim,” had had a liaison the night before at Slim’s apartment in the Park Hill housing project. In the- morning, Lawless testified, Slim revealed a handgun, and asked her if she would do anything for him. Later, as Slim was driving her, Lawless believed, to her home, he again pulled out the gun, pointed it at her, and told her she was going to rob a bank for him. He dictated the note, she testified, and told her exactly what she was to do inside the bank. As he dropped her off at the bank, he said that he would meet her a couple of blocks away. Slim was not at the rendezvous point, however, nor were the police able to find anyone at the Park Hill apartments who knew “Slim” or who answered to Lawless’s description of him.

At the close of the Commonwealth’s proof and again after her proof, Lawless moved for a directed verdict on the first-degree robbery charge. She also objected to the first-degree robbery instruction as not supported by the evidence. We begin our analysis with her challenge to the first-degree robbery instruction.

ANALYSIS

I. The Proof Did Not Justify an Instruction on First-Degree Robbery.

Kentucky Revised Statute (KRS) 515.030 provides that “[a] person is guilty of robbery in the second degree when, in the course of committing theft, he uses or threatens the immediate use of physical force upon another person with intent to accomplish the theft.” Second-degree robbery is a Class C felony punishable by imprisonment for five to ten years. The offense becomes first-degree robbery, a Class B felony, if, in the course of the theft by force, the person “(a) Causes physical injury to any person who is not a participant in the crime; or (b) Is armed with a deadly weapon; or (c) Uses or threatens the immediate use of a deadly instrument upon any person who is not a participant in the crime.” KRS 515.020. No one was injured in Lawless’s robbery, but the trial court ruled that Lawless could be found guilty of first-degree robbery if the jury believed either that she was armed with a deadly weapon or that she threatened the immediate use of a dangerous instrument upon a non-participant. Over Lawless’s objection, both of those theories were presented to the jury in the instructions the court gave them. See Commonwealth v. Jones, 283 S.W.3d 665 (Ky.2009) (claim that evidence is insufficient with respect to some but not to all charges is preserved by objection to an instruction on the unsupported charge, and appellate relief is required if evidence does not permit a reasonable finding of guilt on that charge.). Lawless maintains that neither finding is justified by the mere fact that she kept her hand in her pocket and pretended to have a gun. We agree.

As Lawless correctly points out, in Swain v. Commonwealth, 887 S.W.2d 346 (Ky.1994), also a bank robbery case, we explained that “a ‘mere pocket bulge’ was insufficient to create a jury issue as to the existence of a deadly weapon or dangerous instrument.... [Wjithout the instrument being seen, an intimidating threat, albeit coupled with a menacing gesture, cannot suffice to meet the standard necessary for a first degree robbery conviction.” 887 S.W.2d at 347 (citing Williams v. Commonwealth, 721 S.W.2d 710 (Ky.1987)). Accordingly, we held that where the evidence established only menacing gestures, and a weapon was neither seen nor mentioned, the trial court erred when it refused to dismiss first-degree robbery charges.

Notably, Swain actually involved five different robberies which, in their variations, illustrate the scenarios typically encountered in cases charged under KRS 515.020(b) and(c), where no physical injury occurs. In one incident, Swain had a gun in his possession and brandished it in the course of the robbery. 887 S.W.2d at 348. Although this Court did not tie its analysis to a particular subsection of the statute, clearly Swain in that instance was both armed with a deadly weapon, KRS 515.020(b), and used or threatened the immediate use of a dangerous instrument, KRS 515.020(c). In a second incident, a gun was not seen by the victim but Swain referred to it and demanded money. That scenario fits squarely into KRS 515.020(c) as do the facts we address in Gamble v. Commonwealth, 319 S.W.3d 375 (Ky.2010). The last three offenses for which Swain was tried were similar to the case before us, ie., no gun was seen or referred to by the perpetrator but the victims perceived that he may have had a gun. Not surprisingly, this Court sustained Swain’s first-degree robbery convictions for the first two incidents, but, as noted, held that he was entitled to a directed verdict on first-degree robbery charges as to the last three incidents.

Recently, in Wilburn v. Commonwealth, 312 S.W.3d 321 (Ky.2010), we explained that “[n]o amount of intent or intimidation by a robber can turn a toy gun, or a stick, or a finger in the pocket” into a deadly weapon that would satisfy KRS 515.020(b). In so holding, we overruled Merritt v. Commonwealth, 386 S.W.2d 727 (Ky.1965), a case in which our predecessor Court determined that any object meant to convince a victim that it is a gun or other deadly weapon and does so convince him is one. Id. at 327. Wilburn clarified the requirement for a deadly weapon under KRS 515.020(b) as follows:

[W]e construe KRS 500.080(4)(b)’s definition of “deadly weapon” as a reference generally to the class of weapons which may discharge a shot that is readily capable of producing death or serious physical injury. A .38 caliber revolver, operable or not, falls into that class of weapons. A toy gun or a water pistol does not. Therefore, Wilburn was armed with a deadly weapon within the meaning of 515.020(7 )(b), and he was not entitled to a directed verdict upon the grounds that the Commonwealth failed to prove his firearm met the statutory definition of a deadly weapon.

Here there was testimony that Lawless kept her hand in her pocket and may have made gestures suggesting that she had a gun. No one saw a gun, however, a part of a gun, or any other deadly weapon as delineated in Wilburn and required by KRS 515.020(b). Moreover, Lawless never mentioned a gun or other weapon and thus did not “threaten the immediate use of a dangerous instrument”, thereby rendering KRS 515.020(c) inapplicable.

In sum, as in the last three robberies addressed in Swain, these facts do not justify a first-degree robbery finding under either KRS 515.020(b) or (c) and the trial court erred, therefore, when it refused to direct a verdict on that charge. Because the evidence of first-degree robbery was insufficient, Lawless may not, under federal and state double-jeopardy principles, be retried for that offense. Commonwealth v. Davidson, 277 S.W.3d 232 (Ky.2009) (citing Burks v. United States, 437 U.S. 1, 98 S.Ct. 2141, 57 L.Ed.2d 1 (1978)). This ruling renders moot Lawless’s contention that the first-degree robbery conviction violated her right to a unanimous verdict.

II. The Trial Court Did Not Abuse Its Discretion by Refusing to Give Jury Instructions on Duress and Theft By Unlawful Taking.

Because Lawless’s other contentions raise issues that could recur at a retrial, we shall consider them to that extent. Lawless contends that the trial court erred when it denied her requests for jury instructions on the defense of duress and on the lesser included offense of theft by unlawful taking. The trial court denied these requests because in its view the evidence did not permit findings either that Lawless had no viable alternative to the robbery or that she accomplished the theft without threatening the immediate use of physical force. We review under the abuse of discretion standard a trial court’s decision not to give an instruction. Crain v. Commonwealth, 257 S.W.3d 924 (Ky.2008). There was no abuse of the trial court’s discretion here.

As Lawless correctly notes, a trial court is required to instruct the jury on affirmative defenses and lesser-included offenses if the evidence would permit a juror reasonably to conclude that the defense exists or that the defendant was not guilty of the charged offense but was guilty of the lesser one. Fredline v. Commonwealth, 241 S.W.3d 793 (Ky.2007); Fields v. Commonwealth, 219 S.W.3d 742 (Ky.2007). It is equally well established that such an instruction is to be rejected if the evidence does not warrant it. Payne v. Commonwealth, 656 S.W.2d 719 (Ky.1983).

A. Lawless Was Not Entitled to a Duress Instruction Because She Had a Reasonable Opportunity to Resist the Alleged Coercion.

Under KRS 501.090(1), it is a defense to any charge but intentional homicide, “that the defendant engaged in the proscribed conduct because he was coerced to do so by the use of, or a threat of the use of, unlawful physical force against him or another person which a person in his situation could not reasonably be expected to resist.” As noted above, Lawless testified that she robbed the bank because “Slim” threatened to shoot her if she did not. As the trial court correctly noted, however, under the statute this threat of force justifies Lawless’s crime only if she could not reasonably be expected to resist it. Once Slim had dropped her off at the bank and she was no longer exposed to his threat, it is reasonable to have expected her not to follow through with the robbery, but to seek help from bank personnel or the police. Indeed, absent evidence that Slim posed such a far reaching threat that Lawless could not escape it with help, no rational juror could fail to find that Lawless had a reasonable alternative to the robbery. Cf United States v. Moreno, 102 F.3d 994 (9th Cir.1996) (allegedly coerced drug courier had reasonable opportunity to resist notwithstanding threat by large gang). The trial court did not abuse its discretion, therefore, b.y refusing to give a duress instruction.

B. Lawless Was Not Entitled to a Theft Instruction Because the Evidence Did Not Permit a Finding That She Did Not Threaten the Use of Force.

Nor did the court abuse its discretion by refusing Lawless’s request for an instruction on theft by unlawful taking as a lesser included offense of robbery. Second-degree robbery, as noted infra, requires a theft furthered by the use or threatened use of physical force. Theft by unlawful taking requires only “control over movable property of another with the intent to deprive him thereof.” KRS 514.030(l)(a). Lawless contends that the jury could have concluded that she took control of the bank’s property without threatening the use of force, that her hand-in-the-pocket demeanor was not threatening and that the teller surrendered the money not because she felt threatened but simply because that is what she was trained to do. The trial court did not abuse its discretion by rejecting that argument and concluding that no rational juror could have believed that Lawless demanded the bank’s money but doubted that her demand was accompanied by a threat of physical force. Her hand-in-the-pocket demeanor was clearly intended to further the theft by creating the impression that she was armed, and the teller testified that it had its intended effect. The teller was terrified, she stated, and did all she could so as not to upset the possibly armed Lawless. Lawless was not entitled to a theft by unlawful taking instruction, and will not be on remand if the evidence is substantially the same.

CONCLUSION

In sum, although Lawless carried herself in a way and made gestures calculated to give the impression that she might be armed, a first-degree robbery finding requires something more. Because there was no evidence in this case satisfying either KRS 515.020(b) or (c), the charge of first-degree robbery should have been dismissed and her conviction of that offense must be reversed. Otherwise, Lawless’s allegations of error are not sustainable. She was not entitled to an instruction on the defense of duress since the duress she testified to did not foreclose reasonable resistance. Nor was she entitled to an instruction on the lesser included offense of theft by unlawful taking, because no rational juror could have found that her demand for the bank’s money was not accompanied by a threat of force. If the evidence is substantially the same at a retrial, these instructions, again, will not be required. Accordingly, we reverse the Judgment of the Jefferson Circuit Court and remand for additional proceedings consistent with this opinion.

CUNNINGHAM, NOBLE, SCHRODER, and VENTERS, JJ., concur. Minton, C.J.; and SCOTT, J., concur in result only.

      . In Swain, we relied upon Merritt to hold that a verbal reference to an unseen weapon coupled with a demand for money was sufficient to sustain a case of first-degree robbery. This reference to a dangerous instrument-plus-demand scenario remains sufficient under KRS 515.020(c) (as illustrated by Gamble v. Commonwealth, supra,) even though Merritt was overruled in Wilburn.


source: Caselaw Access Project

author: Justice VENTERS.

license: Public Domain

text:
    ERNST & YOUNG, LLP & David S. Meyer, Appellants, v. Sharon P. CLARK (In Her Official Capacity as Commissioner for the Kentucky Department of Insurance and Rehabilitator of AIK Comp); Stephen P. Lattanzio; Actuarial & Technical Solutions, Inc.; and John and Jane Does, all Unknown Actuaries and Accountants, Appellees. and Ernst & Young, LLP, Appellant, v. Appalachian Regional Healthcare, Inc.; Apollo Oil, LLP; Art’s Electric, Inc.; Crittenden Health Systems; European Design, Inc.; Fischer Special Manufacturing Company; Gallatin Health Care, LLC; Hopewell Farm, LLC; Louden & Company, LLC; M & M Cartage, Inc.; Modco Transport; and Pattie A. Clay Regional Medical Center, Appellees.
    Nos. 2007-SC-000770-TG, 2007-SC-000936-TG.
    Supreme Court of Kentucky.
    Aug. 26, 2010.

      William D. Kirkland, McBrayer, McGin-nis, Leslie & Kirkland, PLLC, Frankfort, KY, Brooks R. Burdette, Christopher H. Giampapa, Schulte, Roth & Zabel, LLP, New York, NY, John A. Chandler, King and Spalding, LLP, Atlanta, GA, David J. Tocco, Vorys, Safer, Seymour, and Pease, LLP, Cleveland, OH, Eric Wade Richardson, Victor Allen Walton, Jr., Vorys, Safer, Seymour, and Pease, LLP, Cincinnati, OH, Counsel for Appellants.
    Perry Mack Bentley, John Melvin Cam-enisch, Jr., Stoll, Keenon & Ogden, PLLC, Lexington, KY, Justin Drew Clark, Walter L. Sales, Stoll, Keenon & Ogden, PLLC, Louisville, KY, Paul C. Harnice, Stoll, Keenon & Ogden, PLLC, Frankfort, KY, Counsel for Appellee, Sharon P. Clark, in her Official Capacity as Commissioner for the Kentucky Department of Insurance and Rehabilitator of AIK Comp.
    Bernard F. Lovely, Jr., Bowles, Rice, McDavid, Graff & Love, LLP, Lexington, KY, Counsel for Stephen P. Lattanzio and Actuarial & Technical Solutions, Inc.
    Robert W. Bishop, Bishop & Associates, PSC, Louisville, KY, Ronald Richard Parry, Robert R. Sparks, Parry, Deering, Futscher & Sparks, PSC, Covington, KY, J. Guthrie True, Johnson, True & Guarnieri, LLP, Frankfort, KY, Gregory Eugene Mitchell, Frost, Brown & Todd, LLC, Jan De Beer, Lexington, KY, Counsel for Ap-pellees, Appalachian Regional Healthcare, Inc., et al.
   Opinion of the Court by

Justice VENTERS.

This appeal arises out of the insolvency of AIK Comp, a workers’ compensation self-insurance group, and the efforts of the Rehabilitator appointed pursuant to Kentucky’s “Insurers Rehabilitation and Liquidation Law” (IRLL) to assert tort claims on behalf of AIK Comp against Appellants, Ernst & Young LLP, and others. Similar claims against Appellants were also asserted by the individual members of AIK Comp in a class action. The Franklin Circuit Court entered orders in each case denying Ernst & Young’s motion to enforce contractual provisions calling for such claims be submitted to “binding arbitration.” Appeals from those orders were consolidated and transferred to this Court. Two issues are presented: first, whether the arbitration agreements in Ernst & Young’s contracts with AIK Comp may be enforced against the Rehabilitator; and second, whether the same arbitration agreements force the plaintiffs in the class action to arbitrate their claims against Ernst & Young.

We hold that the arbitration agreements are not enforceable over the Rehabili-tator’s objection and affirm that order of the Franklin Circuit Court. However, for reasons set forth in section III of this opinion, we conclude that the circumstances that require the Rehabilitator’s claims to remain in the Franklin Circuit Court are not applicable to the class action claims, and thus those claims are subject to the arbitration requirements. Accordingly, we.reverse that order of the Franklin Circuit Court.

I. FACTUAL AND PROCEDURAL BACKGROUND

AIK Comp (formerly known as Associated Industries of Kentucky Selective Self-Insurance Fund) is a workers’ compensation self-insured group organized under KRS 342.350, to provide its member-employers with the workers’ compensation insurance required by KRS 342.340. At all times relevant to this action, KRS 342.347(1) mandated the Commissioner of the Kentucky Department of Insurance (now the Executive Director of the Kentucky Office of Insurance) to periodically examine the financial condition of workers’ compensation self-insured groups. KRS 342.347(2) required each self-insurance workers’ compensation group, including AIK Comp, to be annually audited by an independent certified public accountant and to file with the Commissioner a detailed statement of its financial condition as disclosed by the audits. The statute specified the particular information to be included in the annual statement of financial condition. KRS 342.347(5) required the insurance Commissioner to “make such recommendations to the Governor and legislative committees as may be appropriate to strengthen the oversight of self-insureds so that payment of liabilities to workers under this chapter is assured.”

In 1999 and each year thereafter through 2003, the Chief Executive Officer of AIK Comp, Maurice Turner, and a representative from Ernst & Young, David S. Meyer, executed a written agreement (the “engagement letters”) whereby Ernst & Young LLP, a certified public accounting and auditing firm, agreed to provide accounting services for AIK Comp to satisfy the statutory auditing and reporting requirements. Each engagement letter called for Ernst & Young to audit AIK Comp’s finances for the previous fiscal year. A mediation and arbitration clause was included in the first engagement letter, and was thereafter incorporated by reference in the subsequent engagement letters. For the audits completed for fiscal years 1998 to 2001, the arbitration clause stated as follows:

[a]ny controversy or claim arising out of or relating to the services covered by this letter or hereafter provided by us to the Company (including any such matter involving any parent, subsidiary, affiliate, successor in interest, or agent of the Company or of Ernst & Young LLP) shall be submitted first to voluntary mediation, and if mediation is not successful, then to binding arbitration, in accordance with the dispute resolution procedures set forth in the attachment to this letter. Judgment on any arbitration award may be entered in any court having proper jurisdiction.

The dispute resolution procedures set forth in the attachment included a choice of law provision requiring that any dispute regarding the validity of the arbitration clause would “be governed by the Federal Arbitration Act.”

In July 2002, Ernst & Young and AIK Comp executed another engagement letter, which applied to the audits for fiscal years 2002 and 2003 and contained the following, slightly different arbitration provision:

[a]ny controversy or claim arising out of or relating to services covered by this letter or hereafter provided by us for the Fund or at its request (including any such matter involving any parent, subsidiary, affiliate, successor in interest, or agent of the Fund or of Ernst & Young LLP, or involving any person or entity for whose benefit the services in question are or were provided), shall be submitted first to voluntary mediation, and if mediation is not successful, then to binding arbitration, in accordance with the dispute resolution procedures set forth in the attachment to this letter. Judgment on any arbitration award may be entered in any court having jurisdiction. (emphasis added.)

The latter arbitration clause retained the choice of law provision requiring that any dispute “shall be governed by the Federal Arbitration Act.” Later in 2003, Ernst & Young resigned as AIK Comp’s auditor prior to completion of the contract as outlined in the final engagement letter.

All of the audits completed by Ernst & Young for statutory submission by AIK Comp to Kentucky’s insurance regulators indicated that the group was financially sound. The audits showed that AIK Comp maintained a positive fund surplus with sufficient assets and reserves to cover the liabilities that may arise from future workers’ compensation claims. However, in 2004, a financial examination by a different accounting firm revealed that AIK Comp was in a deficit position and was unable to pay its claims. AIK Comp was subsequently placed in rehabilitation by order of the Franklin Circuit Court pursuant to KRS Chapter 304, and accordingly, a Re-habilitator was appointed. The discovery of AIK Comp’s insolvency brought into question the accuracy of the Ernst & Young audit reports and the competence of those who prepared them.

Eventually, a Reorganization Plan for AIK Comp was agreed upon by the Reha-bilitator and by the numerous parties that had intervened in the rehabilitation. The Reorganization Plan was approved by the Franklin Circuit Court in December 2005. To finance most of AIK Comp’s $90,000,000 deficit and to assure payment of the claims of injured workers, the Rehabilitation Plan required that the employers that comprised the membership of AIK Comp be assessed a proportional share of the deficit. The Reorganization Plan also provided for the Rehabilitator to “aggressively pursue” claims against those “[s]he holds responsible for the current problems faced by AIK Comp.” Thus, pursuant to the Reorganization Plan and her power under KRS 304.33-160, the Rehabilitator filed suit against Ernst & Young and other parties in the Franklin Circuit Court alleging that Ernst & Young’s audits had been negligently prepared, and had concealed AIK Comp’s declining financial condition. In addition, the members of AIK Comp that paid assessments to cover the financial deficit brought a separate suit against Ernst & Young and others in the Franklin Circuit Court, claiming that the assessments were necessitated by the alleged misrepresentations, omissions, and false statements made in the audits. The members’ suits were consolidated into a class action.

In response, Ernst & Young filed motions in both cases to stay the proceedings and to compel arbitration in accordance with the arbitration clauses contained in the engagement letters described above. The Franklin Circuit Court denied the motions. Ernst & Young appealed. The Re-habilitator moved to transfer the appeal of her case from the Court of Appeals to this Court. Ernst & Young subsequently moved to transfer the appeal involving the members of AIK Comp to this Court. We granted the motions to transfer and consolidated the appeals.

At the outset, we note that the arbitration agreements entered into between Ernst & Young and AIK Comp are facially valid. See General Steel Corp. v. Collins, 196 S.W.3d 18, 20 (Ky.App.2006) (holding that the validity of an arbitration agreement must be determined as a threshold matter) (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 988, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)). The engagement letters clearly contain agreements to arbitrate, and there is every indication that the elements of valid contract formation were satisfied.

Because the agreements explicitly require that disputes be governed by the Federal Arbitration Act, 9 U.S.C. § 1, et. seq., we need not consider Kentucky’s Uniform Arbitration Act, KRS 417.045 et. seq. Conseco Finance Servicing Corp. v. Wilder, 47 S.W.3d 335, 341 (Ky.App.2001) (citing Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University, 489 U.S. 468, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989)) (stating that choice of law provisions in arbitration agreements are to be generally upheld).

II. THE ARBITRATION AGREEMENT BETWEEN ERNST & YOUNG AND AIK COMP IS NOT ENFORCEABLE AGAINST THE REHABILITATOR

Ernst & Young first argues that the Franklin Circuit Court erroneously denied its motion to compel arbitration of the Rehabilitator’s suit. The Franklin Circuit Court order held that arbitration could not be compelled against the Rehabilitator because: 1) the IRLL gives the Franklin Circuit Court broad discretion to retain full jurisdiction of the rehabilitation of AIK Comp, including any lawsuits filed by the Rehabilitator as part of the rehabilitation process; 2) the arbitration agreements do not cover all of the annual audits which the Rehabilitator alleges Ernst & Young performed negligently; 3) the Rehabilitator was not a signatory to any of the arbitration agreements; 4) the IRLL grants the Rehabilitator broad authority to exercise the state’s “police powers,” including the authority to revoke or rescind AIK Comp’s valid arbitration agreements; and 5) the Federal Arbitration Act’s preference for enforcing arbitration agreements is subordinated to the IRLL by the reverse-preemption doctrine of the McCarran-Fergu-son Act, 15 U.S.C. § 1011, et. seq.

Ernst & Young argues that the Franklin Circuit Court order failed to recognize the supremacy of the Federal Arbitration Act and its establishment of a national policy favoring the arbitration of disputes. We do not disagree. However, we conclude that the trial court correctly found that the IRLL’s broad grant of exclusive jurisdiction to the Franklin Circuit Court in matters relating to the delinquency of insurance companies preempts and supersedes the Federal Arbitration Act and its policy favoring arbitration.

A. Reverse Preemption of the Federal Arbitration Act Under The McCar-ran-Ferguson Actr-The Forsyth Test

KRS 304.33-010(6), one of the initial provisions of the IRLL, states:

[i]f there is a delinquency proceeding under this subtitle, the provisions of this subtitle shall govern those proceedings, and all conflicting contractual provisions contained in any contract between the insurer which is subject to the delinquency proceeding and any third party shall be deemed subordinated to the provisions of this subtitle. However, notwithstanding the foregoing, in any delinquency proceeding commenced against an insurer after July 15, 1996, nothing in this subtitle shall be construed to subordinate or restrict the rights of parties to submit their disputes to arbitration pursuant to a contractual arbitration clause contained in a reinsurance agreement.

“Delinquency proceeding,” as defined by KRS 304.33-030(5), includes “any proceeding commenced against an insurer for the purpose of ... rehabilitating ... such insurer.” Consequently, any provisions of the agreements between Ernst & Young and AIK Comp that conflict with KRS 304.33 “shall be subordinated to the provisions of [KRS subtitle 304.33, the IRLL]” unless as Appellants argue, the Federal Arbitration Act preempts KRS 304.33-010(6). “Under the conventional application of the supremacy clause and rules of statutory construction, the Federal Arbitration Act, a federal statute, would preempt Kentucky’s Liquidation Act, a state statute,[] insofar as the Liquidation Act contravenes the Federal Arbitration Act.” Stephens v. American Int’l Ins. Co., 66 F.3d 41, 43 (2d Cir.1995). However, the McCarran-Ferguson Act, 15 U.S.C. § 1011, et seq., establishes a doctrine of “reverse preemption” that expressly exempts from federal preemption state statutes enacted to regulate insurance, leaving the regulation of insurance to the individual state. Under McCarran-Ferguson, “[n]o Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance ... unless such [federal] Act specifically relates to the business of insurance.” 15 U.S.C. § 1012(b) (1994). The United States Supreme Court created a three-part test to determine when reverse preemption of federal law through McCarran-Ferguson occurs. The test is whether: 1) the state statute was enacted for the purpose of regulating the business of insurance; 2) the federal statute involved “does not specifically relat[e] to the business of insurance”; and 3) the application of the federal statute would “invalidate, impair, or supersede” the state statute regulating insurance. Humana Inc. v. Forsyth, 525 U.S. 299, 307, 119 S.Ct. 710, 142 L.Ed.2d 753 (1999).

In this matter, the first step of the Forsyth test is clearly satisfied. There can be no reasonable doubt that the IRLL, of which KRS 304.33-010(6) is a part, was enacted to regulate the “business of insurance.” Stephens, 66 F.3d at 41; National Home Ins. Co. v. King, 291 F.Supp.2d 518 (E.D.Ky.2003). We can hardly overstate the degree to which the regulation of insurance permeates this controversy. The very claims which Ernst & Young would take to arbitration arise directly out of Kentucky’s intense interest in the regulation of worker’s compensation insurance. The audits that form the core of the Reha-bilitator’s claims were performed by Ernst & Young for AIK Comp to comply with state insurance regulations which include a review of such audits by the state’s insurance commissioner to monitor the solvency of AIK Comp. The IRLL is itself the ultimate measure of the state’s regulation of the insurance business: the take-over of a failing insurance company.

The second step of the Forsyth test is satisfied because the Federal Arbitration Act does not “specifically relat[e] to the business of insurance.” See Munich Am. Reinsurance Co. v. Crawford, 141 F.3d 585, 590 (5th Cir.1998); Davister Corp. v. United Republic Life Ins. Co., 152 F.3d 1277, 1279 (10th Cir.1998).

The third step of the Forsyth test presents the question of whether the application of a federal law, in this case the Federal Arbitration Act, would “invalidate, impair, or supersede” provisions of a state statute regulating insurance, the IRLL. In essence, this returns us to KRS 304.33-010(6) because the question of whether the Federal Arbitration Act (with its strong preference for arbitration) “invalidates, impairs, or supersedes” a state law regulating insurance is, as a practical matter, virtually the same question we started with: whether the arbitration clauses of the engagement letters conflict with any provisions of the IRLL. If, as the Reha-bilitator argues, arbitration is inconsistent with parts of the IRLL, then KRS 304.33-010(6) commands that the arbitration clauses be overridden, and for that same reason, the final part of the Forsyth test would be satisfied.

B. The Arbitration Clauses and the FAA Conflict ivith the IRLL’s Grant of Broad Exclusive Jurisdiction to the Franklin Circuit Court

Enforcement of the arbitration clauses found in the engagement letters between Ernst & Young and AIK Comp conflicts with the IRLL. We are directed by KRS 304.33-010(3) to liberally construe the provisions of the IRLL to effect the purposes stated in KRS 304.33-010(4). KRS 304.33-010(4)(e) expressly states that one of the purposes of the IRLL is the “enhanced efficiency and economy of liquidation, through the consolidation of matters relating to the liquidation under the supervision of a single comí so as to avoid divergent rulings by a multiplicity of judicial tribunals .... ” (emphasis added). KRS 304.33-040(3)(a) provides that “the [Franklin Circuit] court[] shall have exclusive jurisdiction to entertain, hear, or determine all matters in any way relating to any delinquency proceeding under this subtitle, including, but not limited to, all disputes involving purported assets of the insurer.” KRS 304.33-040(3)(b) allows the Franklin Circuit Court to “authorize a re-habilitator[] to seek injunctive or other appropriate relief from other courts, either within this state or without this state, if in the opinion of the [Franklin Circuit] court, this action will be an aid to any delinquency proceeding.”

Similarly, KRS 304.33-140(2) provides:

(2) Upon the issuance of an order directing the executive director to rehabilitate a domestic insurer, the [Franklin Circuit] court shall have exclusive jurisdiction over all matters relating to the rehabilitation, including, but not limited to, the proper scope and application of the provisions of this subtitle to the rehabilitation as well as all interpretation and enforceability of all contracts of insurance to which the insurer is a party.

Exclusive jurisdiction over “all matters in any way relating to any delinquency proceeding ... including ... all disputes involving purported assets of the insurer” and over “all matters relating to the rehabilitation” is an extremely broad grant of authority by the General Assembly to the Franklin Circuit Court. Such broadly defined exclusive jurisdiction, coupled with directions for liberal construction, is a very rare, if not unique, provision in Kentucky law. We have on other occasions in another context noted the broad scope of this jurisdictional grant:

The subtitle provides Franklin Circuit Court broad discretion as to supervision of the proceedings. KRS 304.33-040 pertains to the exclusiveness of proceedings and states that the court shall have exclusive jurisdiction over all matters relating to the proceeding, including all disputes over assets. The court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of the subtitle. Section (3)(c) states that no provisions in the subtitle shall be construed to preclude the court from, on its own motion, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules or to prevent an abuse of process.

Kentucky Central Life Ins. Co. v. Stephens, 897 S.W.2d 583, 587 (Ky.1995); see also Minor v. Stephens, 898 S.W.2d 71, 80 (Ky.1995).

It is evident that an essential goal of the IRLL is to promote consistent rulings in all matters that impact the rehabilitation of an insurance company. We believe that the strong language of KRS 304.33-040(3)(a) and KRS 304.33-140(2) is an unambiguous expression of the General Assembly’s intention to achieve that goal by concentrating in the Franklin Circuit Court “all matters in any way related” to the proceeding to rehabilitate or liquidate an insurance company. The vesting of such jurisdiction in the Franklin Circuit Court, including the broad authority to supervise all issues relating to a rehabilitation, provides a logical and reasonable means of attaining the IRLL’s stated purpose of achieving “enhanced efficiency and economy of liquidation, through the consolidation of matters relating to the liquidation under the supervision of a single court so as to avoid divergent rulings by a multiplicity of judicial tribunals.” KRS 304.33-010(4)(c)).

Compelling the enforcement of the arbitration agreements in this case would remove virtually all of the supervisory authority of the Franklin Circuit Court over the adjudication of the Rehabilitator’s claims against Ernst & Young and place it in the hands of the arbitrators. Thus, all discovery issues, evidentiary disputes, and determinations of applicable law would be made by the arbitrators, not by the court as the General Assembly intended.

Inconsistent and incompatible results are possible if the Rehabilitator’s claims against Ernst & Young are resolved by arbitration, while other issues pertaining to the AIK Comp rehabilitation are adjudicated in the Franklin Circuit Court. Piecemeal adjudication and the potential for inconsistent verdicts are what the General Assembly sought to avoid by the IRLL’s strong grant of exclusive jurisdiction to the Franklin Circuit Court.

Ernst & Young argues that the potential for such inefficiencies is not relevant to the enforceability of valid arbitration agreements, and cites cases that discount such concerns in favor of arbitration. We recognize the validity of the cited authority, but we note that they do not involve arbitration in the context of a proceeding to liquidate or rehabilitate an insurance company, with the extraordinary state interest vested therein; nor, do they involve the strong statutory preference for the resolution of such matters in a specific forum that we find in the IRLL.

Ernst & Young also argues KRS 304.33-010(6) does not apply in this case because the Rehabilitator’s lawsuit is not a “delinquency proceeding.” See Nichols v. Vesta Fire Ins. Corp., 56 F.Supp.2d 778 (E.D.Ky.1999) (holding that an insurance Rehabili-tator’s breach of contract suit filed against a third-party insurer was merely a “garden variety” lawsuit, not a delinquency proceeding in which KRS 304.33-010(6) would apply). On this point, we first note that KRS 304.33-010(6)’s subordination of contractual provisions that conflict with the IRLL is not limited to the “delinquency proceeding.” By the plain language of KRS 304.33-010(6), any contractual provision in conflict with the IRLL is subordinated “[i]f there is a delinquency proceeding under this subtitle .... ” (emphasis added). That there is, in fact, a delinquency proceeding in the Franklin Circuit Court regarding AIK Comp cannot be disputed, and as part of that proceeding under KRS 304.33-160(4), the Rehabilitator has been charged to “pursue all appropriate legal remedies on behalf of the insurer.”

Secondly, the federal court in Nichols found that the exclusive jurisdiction granted by KRS 304.33-040 to the Franklin Circuit Court was inapplicable because the claim involved was simply a “common law breach of contract action which merely happens to involve an insolvent insurer.” Nichols, 56 F.Supp.2d. at 780. “[T]he instant action is no more than a garden variety contract suit which happens to involve two insurers. The fact that one is insolvent is irrelevant[.]” Id. at 781. Far from being just a coincidental aspect of a “garden variety” claim, AIK Comp’s insolvency was allegedly caused by Ernst & Young’s audits which masked AIK Comp’s true financial condition. Under the Reorganization Plan approved by the Franklin Circuit Court, the Rehabilitator’s claims against Ernst & Young are an essential component of AIK Comp’s rehabilitation. Unlike the claims in Nichols, the claims asserted by the Rehabilitator fall squarely within the scope of KRS 304.33-040(3)(a), as “matters ... relating to [a] delinquency proceeding under this subtitle, including ... all disputes involving purported assets of the insurer,” and therefore, under KRS 304.33-010(6) remain within the exclusive jurisdiction of the Franklin Circuit Court.

We therefore conclude that the contractual provisions for arbitration under the Federal Arbitration Act are in conflict with the jurisdictional requirements of the IRLL. In reaching this conclusion, we reject Ernst & Young’s comparison of that result to the anti-arbitration concept of “ouster of jurisdiction,” a doctrine discredited in Fite & Warmath Construction Co. v. MYS Corp., 559 S.W.2d 729, 735 (Ky.1977), and Kodak Min. Co. v. Carrs Fork Corp., 669 S.W.2d 917, 921 (Ky.1984). We recognize that when a lawsuit is submitted to arbitration, the trial court technically retains jurisdiction over the proceeding while the issues are arbitrated. But, we also recognize that in such situations, the trial court no longer retains the authority to “determine all matters in any way related to the delinquency.” KRS 304.33-040(3)(a). "When a dispute goes to arbitration, the trial court’s broad discretion to decide all issues pertaining to pre-hearing procedures, including discovery, all issues of substantive law, and all evidentiary matters passes to the arbitrator. 4 Am. Jur.2d. Alternative Dispute Resolution, § 157-169 (2007). The trial court’s function is constricted to the simple entry of a final judgment enforcing the arbitrator’s decision. See DiMercurio v. Sphere Drake, Ins., PLC, 202 F.3d 71, 77 (1st Cir.2000) (holding that “arbitration agreements do not divest courts of jurisdiction, though they prevent courts from resolving the merits of arbitrable disputes.”) Only if the arbitrator’s decision is alleged to have been tainted by fraud or favoritism does the trial court have the ability to intercede. See Wall Street Associates, L.P. v. Becker Paribas Inc., 27 F.3d 845, 849 (2d Cir.1994)(eiting the Federal Arbitration Act, 9 U.S.C. § 10); 3D Enterprises Contracting Corp. v. Lexington-Fayette Urban County Government, 134 S.W.3d 558, 561 (Ky.2004) (citing KRS 417.160 of Kentucky’s Uniform Arbitration Act). Such a substantial reduction of the court’s role in a process central to the rehabilitation of an insurance company is inconsistent with our legislature’s extensive grant of exclusive jurisdiction to the Franklin Circuit Court. The General Assembly did not intend for that grant of jurisdiction to be overruled by an insurance company’s agreement to arbitrate issues critical to the state’s interest in the rehabilitation or liquidation of the insurance company.

Therefore, we conclude that the third part of the Forsyth test is satisfied because the Federal Arbitration Act’s preference for arbitration conflicts with, and impairs, the IRLL’s grant of broad and exclusive jurisdiction to the Franklin Circuit Court. In this case, application of the McCarran-Ferguson Act reverse-preempts the Federal Arbitration Act. Pursuant to KRS 304.33-010(6), the federal policy favoring arbitration is subordinated to the state’s superior interest in having matters relating to the rehabilitation of an insurance company adjudicated in the Franklin Circuit Court.

The Rehabilitator properly chose to initiate her claims against Ernst & Young in the Franklin Circuit Court, and properly declined to submit the matter to arbitration. We affirm the court’s order denying Ernst & Young’s motion to compel arbitration of the Rehabilitator’s claims.

III. THE CLASS ACTION PLAINTIFFS ARE BOUND BY THE ARBITRATION CLAUSES IN THE ENGAGEMENT LETTERS

Ernst & Young next argues that the Franklin Circuit Court erred by denying its motion to compel arbitration of the members’ class action lawsuit. The Franklin Circuit Court denied the motion for the following reasons: 1) the court believed the plaintiffs’ claims against Ernst & Young were not covered by the arbitration clauses because they do not “arise out of or relate to” the services Ernst & Young performed pursuant to the engagement letters; 2) the class action plaintiffs had not signed the engagement letters containing the arbitration agreements, are not identified in the agreements as parties subject to the arbitration clauses, and are not otherwise bound under agency principles to the arbitration clauses; 3) the plaintiffs are not third-party beneficiaries to the engagement letters containing arbitration agreements; 4) the plaintiffs are not equitably estopped from disavowing the arbitration clauses; and 5) compelling arbitration of class action claims while the Rehabilitator’s claims are litigated promotes the inefficiencies and confusion inherent in piecemeal adjudication.

We begin the analysis with the trial court’s first reason and fifth reason as listed above because if either of those reasons validly supports its decision, our consideration of the remaining issues becomes unnecessary.

A. The Plaintiffs’ Claims Arise From the Services Ernst & Young Performed Pursuant to the Engagement Letters

The trial court justified its refusal to enforce the arbitration clauses in the engagement letters by holding that the clauses simply do not apply to the class action claims in question. We disagree. The arbitration clauses plainly state that they apply to “[a]ny controversy or claim arising out of or relating to services covered by this letter ...,” the services being Ernst & Young’s accounting and auditing for AIK Comp. Regardless of whether the class action claims are viewed as contract disputes or tort claims, or as something else, Ernst & Young’s auditing and accounting services for AIK Comp are the basis for all of the claims. Thus, the plaintiffs’ claims “arise out of’ and “relate to” the services Ernst & Young were obligated by the engagement letters to render.

B. Inefficient Piecemeal Adjudication of Complex Litigation Does Not Authorize Avoidance of Agreements to Arbitrate

The trial court concluded that despite any basis upon which the class action plaintiffs might otherwise be bound by the arbitration clauses, arbitration of their claims should not be compelled because resolving the class action claims in a forum separate and apart from the adjudication of the Rehabilitator’s claims unduly complicates an already complex matter, infusing it with the inefficiency of duplicative effort and the potential for inconsistent or incompatible results. Having previously noted that the claims of the Rehabilitator and the claims of the class action plaintiffs are based upon the same allegations of deficient auditing by Ernst & Young, we do not doubt that separate adjudicative processes will substantially increase the burden in time and expense to witnesses and litigants.

However, as we also stated previously in this opinion, the Rehabilitator’s claims involve the rehabilitation of an insurance company which is a matter of such compelling state interest that, under federal law, it transcends the applicability of the Federal Arbitration Act. Although the class action plaintiffs’ claims and the Rehabili-tator’s claims arise from the same course of conduct, the class action claims are essentially private disputes with no substantial impact on the state’s regulation of insurance. Joining the claims of the class action plaintiffs with the Rehabilitator’s claims may promote judicial economy, but we do not see that it would promote the legislative policy embodied in KRS 304.33-010(4) for consolidating the various claims of the Rehabilitator. Without an overarching state interest to the contrary, the class action plaintiffs cannot avoid the forceful preference for arbitration found in the Federal Arbitration Act. The United States Supreme Court has decided the question in favor of the Federal Arbitration Act’s national policy promoting arbitration. See Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 217, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985) (holding the Federal Arbitration Act requires arbitration of pendent arbitrable claims even where the result would be the inefficient maintenance of separate proceedings in different forums); Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 20, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) (holding that under the Federal Arbitration Act, an arbitration agreement must be enforced even though it results in piecemeal litigation by other persons who are parties to the underlying dispute but not to the arbitration agreement.) We perceive that the federal policy allows no accommodation for the situation present here. Thus we conclude that the trial court erred by finding that arbitration could be denied on the grounds of judicial economy.

C. The Class Action Plaintiffs Gave Assent to the Arbitration Clause via their Application for AIK Comp Membership

None of the class action plaintiffs actually signed the engagement letters. However, Ernst & Young argues that each of the class action plaintiffs is nevertheless bound to the arbitration agreements because upon joining AIK Comp, each executed a membership application giving assent to be bound by AIK Comp’s contracts. The argument, although presented by Ernst & Young to the trial court, is not mentioned in the order denying the motion to arbitrate. However, we agree that the assent given in the membership application binds the class action plaintiffs to the arbitration clauses.

In the membership application, each class action plaintiff upon joining AIK Comp agreed to “appoint AIK Comp and its trustees to act as [its] agent[s] in all matters relating to Kentucky Workers’ Compensation Statutes” and “to abide by the rules, regulations and by-laws of [AIK Comp] and to conform to the terms of the agreements they may enter into with any authorized service company” for as long as membership in AIK Comp was maintained. (emphasis added.) Ernst & Young reasons that since AIK Comp’s annual audits are matters “relating to Kentucky Workers’ Compensation Statutes,” Maurice Turner acted as an agent of each member when he executed the engagement letters.

First, we do not agree with Ernst & Young’s argument that AIK Comp acted as the agent of its members when it executed the engagement letters. Under basic agency principles, an agent acts on the principal’s behalf and is subject to the principal’s control. See Restatement (Third) Of Agency § 1.01 (2006). The audit requirement of KRS 342.347(2) pertains only to AIK Comp. AIK procured the audits for itself, not as an agent on behalf of the individual members. As employers, the members are bound by Kentucky’s workers’ compensation laws, but they have no duty to obtain an audit and therefore have no need of an agent in obtaining one. In signing the engagement letters, Turner was not acting as an agent of the class action plaintiffs. We construe that language of the membership application as simply enabling AIK Comp to act as agent for the individual members in the processing and settlement of worker compensation claims, just as traditional workers’ compensation insurers act as agents of the parties they insure to resolve workers’ compensation issues.

Ernst & Young’s second argument, that the member application compels each member of AIK Comp “to conform to the terms of the agreements [AIK Comp] may enter into with any authorized service company,” is well taken. We are presented with no sound rationale by which we may conclude otherwise. The plaintiffs do not contend that Ernst & Young is not an “authorized service company.” By accepting membership in AIK Comp, the class action plaintiffs agreed to “conform” to AIK Comp’s agreements. We find no basis upon which to distinguish the arbitration clauses of the engagement letters from any other agreement with a service company, and thus conclude each class action plaintiff, under the terms of the membership application, agreed to “conform” to AIK Comp’s agreements with Ernst & Young, including the agreement that claims or controversies arising from Ernst <& Young’s services be submitted to arbitration.

Accordingly, we reverse the trial court’s order denying Ernst & Young’s motion to compel arbitration of the class action claims. Because of that resolution, we need not address Ernst & Young’s argument that the class action plaintiffs are third-party beneficiaries under the agreements and are otherwise equitably es-topped from disavowing the agreements.

D. The Other Entities Listed in the Arbitration Clauses are not Bound Thereby

The class action plaintiffs argue that the 2002 modification to the engagement letter, which purports to add “any person or entity for whose benefit the services in question are or were provided” to the list of parties required to arbitrate, is a clear indication that they were excluded from the arbitration clauses in the 1998-2001 engagement letters. We are not persuaded however, because we do not read the agreements as establishing a list of collateral parties to be bound thereby. The list of other entities in the arbitration clauses does not purport to identify the parties that must submit to arbitration. Literally read, it simply includes as among the kinds of disputes that AIK Comp must arbitrate, controversies that “involve” the listed entities. The listing of such entities is of no significance in the resolution of the issues presented herein, and the 2002 modification provides no relief to the class action plaintiffs.

TV. CONCLUSION

For the reasons set forth above, we affirm the Franklin Circuit Court’s order in Civil Action No. 05-CI-00344 denying the Appellants’ demand for arbitration of the claims brought against it by the AIK Comp Rehabilitator, and we reverse the Franklin Circuit Court’s order in Civil Action No. 05-CI-00455 denying the Appellants’ motion to compel arbitration of the claims of Appalachian Regional Healthcare, Inc. and the other class action plaintiffs. Accordingly, we remand this matter to the Franklin Circuit Court for entry of an order compelling arbitration of the class action lawsuit and for further proceedings in the adjudication of the Rehabilitator’s claims.

All sitting. All concur.

      . KRS 304.33-010 to 304.33-600.

      . There are numerous plaintiffs in the class action. These plaintiffs include: Appalachian Regional Healthcare, Inc.; Apollo Oil, LLP; Art's Electric, Inc.; Crittenden Health Systems; European Design, Inc.; Fischer Special Manufacturing Company; Gallatin Health Care, LLC; Hopewell Farm, LLC; Louden & Company, LLC; M & M Cartage, Inc.; Modco Transport; and Pattie A. Clay Regional Medical Center.

      .In 2005, after the failure of AIK Comp and after the audits that are the subject of this litigation, the General Assembly enacted KRS 304.50-010 to 304.50-160 which recodified, and in some instances modified, the regulation of workers' compensation self-insured groups previously covered by KRS 342.350.

      . Note that KRS 304.50-075, effective March I, 2005, specifically calls for review of each workers' compensation self-insured groups' financial condition every four years by the Executive Director of the Office of Insurance.

      . KRS 304.50-110 now provides substantially similar reporting requirements.

      . Martin Koetters was the first Rehabilitator. He was succeeded by R. Glenn Jennings, who was succeeded by Julie Mix McPeak. Clark then replaced McPeak. To avoid confusion, we will use feminine pronouns to refer to the Rehabilitator throughout the opinion since Sharon P. Clark currently holds the position.

      . The Rehabilitator filed suit against Ernst & Young employee David S. Meyer, Actuarial & Technical Solutions, Inc. which performed actuarial services for AIK Comp between 1998 and 2003, and its agent Stephen Lattan-zio.

      . Under the Kentucky's "Uniform Arbitration Act”, KRS 417.045-417.240, the arbitration clauses at issue would be unenforceable since they do not specifically provide for the arbitration to occur in this state. Ally Cat, LLC v. Chauvin, 274 S.W.3d 451, 455 (Ky.2009) (holding that the plain language of KRS 417.200 only allows enforcement of arbitration agreements which specifically state that the arbitration is to be held in Kentucky). Ally Cat has no applicability to an arbitration agreement governed exclusively by the Federal Arbitration Act.

      . The Court in Stephens adopted the term "the Kentucky Liquidation Act” as a shorthand reference for the Kentucky Insurers Rehabilitation and Liquidation Law, KRS 304.33-010 et seq. Stephens, 66 F.3d at 42.

      . The actual word used in KRS 304.33-040 is "court.” However, KRS 304.33-030 defines court as the "Franklin Circuit Court.”

      . The statute uses the word "receiver” which at KRS 304.33-030(3) is defined to include a “receiver, liquidator, rehabilitator, or conservator, as the context requires.”

      . KRS 304.33-040(3)(a)

      . KRS 304.33-140(2)

      . Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985); Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).

      . Chief Executive Officer of AIK Comp.

      . Now KRS 304.50-110.


text:
    ZURICH AMERICAN INSURANCE COMPANY, Appellant, v. JOURNEY OPERATING, LLC; Angela Jeffers, Individually and as Administratrix of the Estate of Patrick Jeffers, Deceased; Susie Bell, Individually and as Administratrix of the Estate of William Bell, Deceased; Myers Completion, Inc.; Honorable Donna H. Terry, Chief Administrative Law Judge; and Workers’ Compensation Board, Appellees.
    No. 2009-SC-000796-WC.
    Supreme Court of Kentucky.
    Oct. 21, 2010.

      A. Stuart Bennett, Jackson Kelly, PLLC, Lexington, KY, Counsel for Appellant, Zurich American Insurance Company.
    Barry Lewis, Lewis and Lewis Law Offices, Hazard, KY, Counsel for Appellee, Journey Operating, LLC.
    Marcus L. Vanover, Law Offices of Howard 0. Mann, PSC, Somerset, KY, Counsel for Appellee, Angela Jeffers, Individually and as Administratrix of the Estate of Patrick Jeffers, Deceased.
    Paul F. Henderson, Somerset, KY, Counsel for Appellee, Susie Bell, Individually and as Administratrix of the Estate of William Bell, Deceased.
    Kimberly K. Van Der Heiden, Allen, Kopet & Associates, PLLC, Lexington, KY, Counsel for Appellee, Myers Completion, Inc.
   OPINION OF THE COURT

This appeal concerns whether KRS 342.125(1) permits an Administrative Law Judge (ALJ) to reopen a final award in order to prevent an insurer from benefiting from its constructive fraud on the tribunal. If so, the question becomes whether substantial evidence supports the finding of constructive fraud and decision to estop the insurer from denying liability at reopening. The Court of Appeals reversed a decision of the Workers’ Compensation Board, reinstating the ALJ’s decision by holding that an ALJ has such authority; that the evidence supports the finding of constructive fraud on the part of Zurich-American Insurance Company (Zurich); and that Zurich must comply with the ALJ’s order to continue paying benefits based on its admitted liability under Tennessee law.

Appealing, Zurich asserts that the ALJ lacked jurisdiction to consider the matter at issue as well as the authority to reopen. Zurich also asserts that no evidence supported the finding of constructive fraud. We disagree with both assertions and affirm.

The workers’ compensation claims that underlie the present action were considered together. The claimants, Angela Jef-fers and Susie Bell, are the widows of Patrick Jeffers and William Bell, both of whom were Tennessee residents employed by Myers Completion, Inc. (Myers). Myers was a Tennessee corporation that maintained oil and gas wells and had no office in Kentucky. The men were killed in Kentucky, in an explosion that occurred while they were servicing a well owned by Journey Operating LLC (Journey). The Uninsured Employers’ Fund (UEF) was joined as a party to the claims after the Office of Workers’ Claims determined that Myers did not have workers’ compensation coverage in Kentucky. Journey was joined as a party with potential up-the-ladder liability at the UEF’s request. Kentucky Employers’ Mutual Insurance (KEMI) covered Journey’s Kentucky workers’ compensation liability.

Zurich provided Myers’ Tennessee workers’ compensation coverage. Having determined that the widows were entitled to benefits under Tennessee law, Zurich paid the decedents’ medical expenses, paid some funeral expenses, and began to issue the widows cheeks for weekly survivors’ benefits under its Tennessee policy. Zurich maintained that the policy did not provide coverage for the widows’ Kentucky claims but continued to pay benefits under the Tennessee policy throughout litigation of the claims.

The Benefit Review Conference Memorandum in Mrs. Jeffers’ claim lists only “which carrier is responsible for the payment of benefits” as being at issue. Mrs. Jeffers testified that Zurich paid the funeral home $7,500 towards her husband’s final expenses and that she received other workers’ compensation checks but did not cash them. The Benefit Review Conference Memorandum in Mrs. Bell’s claim indicates that Zurich paid $7,500 for her husband’s funeral expense and continued to pay Tennessee income benefits of $322.05 per week. The contested issues included: 1.) responsible insurer — whether Zurich had coverage for a Kentucky injury; 2.) coverage under the Act for Zurich and KEMI; and 3.) credit to KEMI for benefits paid by Zurich.

The ALJ determined on February 9, 2007 that the Kentucky Workers’ Compensation Act covered the claims. Noting that Zurich admitted liability for benefits afforded by Tennessee law but denied liability for benefits afforded by Kentucky law, the ALJ found that Zurich’s policy covered benefits awarded under Tennessee’s workers’ compensation system but failed to cover those awarded under the Kentucky Act. Noting that the Act requires every employer in Kentucky to compensate employees who are injured; requires employers to insure that liability; and imposes liability on a contractor to compensate the injured employee of an uninsured subcontractor, the ALJ found Journey to be a contractor that was liable for the decedents’ injuries because Myers’ liability was uninsured in Kentucky. As a consequence, the ALJ ordered Journey to pay the survivors’ benefits provided in KRS 342.750(1). Noting, however, that KRS 342.670(2) provides credit for compensation paid under another jurisdiction’s workers’ compensation law, the ALJ granted Journey credit for the death and income benefits “paid and owing” under the Tennessee policy that Zurich issued to Myers.

Journey filed a petition for reconsideration in each claim, but Zurich did not. Journey’s petitions requested the ALJ to specify the amount of weekly credit Journey would receive due to Zurich’s payments under Tennessee law. Zurich responded that the petitions were attempts to reargue the merits; that the ALJ interpreted Zurich’s policy correctly; and that Zurich could not be compelled to pay Kentucky workers’ compensation benefits “in addition to the benefits it had already paid (or had offered to pay) under Tennessee law.”

The ALJ denied Journey’s petitions. Finding that the credit awarded for benefits “paid and owing” provided “sufficient protection and explanation of Journey’s rights and responsibilities,” the ALJ noted that “the amount of payments under the Tennessee policy will change and vary with time as the children became emancipated or in the event of remarriage.” Neither Myers nor Zurich objected to the latter finding based on a contrary interpretation of their continuing obligations under the Tennessee Workers’ Compensation Act. Nor did they appeal the ALJ’s decision.

Journey appealed both decisions, asserting that the ALJ erred by failing to find that Zurich’s policy provided coverage; that Zurich should be estopped from denying coverage because its agent failed to inform Myers that he needed separate coverage for employees who worked in Kentucky; and that the ALJ erred by failing to specify the amount of weekly credit to which it was entitled due to Zurich’s payments under Tennessee law. The Board affirmed the awards on November 8, 2007, finding that the credit protected Journey’s rights adequately.

Zurich ceased paying Tennessee benefits when the Board’s decision became final. This appeal concerns subsequently-filed motions to reopen in which Journey sought an order requiring Zurich to resume paying weekly income benefits. Relying on Wheatley v. Bryant Auto Service as providing the ALJ with authority to reopen on the ground of mistake, Journey asserted that Zurich’s conduct affected the credit the ALJ awarded and violated multiple sections of the regulations adopted under the Unfair Settlement Practices Act as well as KRS 342.310. Journey reasoned that it was liable for benefits only because Myers had no Kentucky insurance for its employees; that Zurich not only admitted liability for benefits owed under Tennessee law throughout litigation of the widows’ Kentucky claims but also continued to pay the benefits throughout the litigation; and that the widows’ awards granted Journey credit for benefits due and owing under Tennessee law.

Zurich asserted that Journey was not entitled to reopen and relied on Tennessee’s election of remedies doctrine as a basis to deny any liability for additional benefits. Zurich argued that its admission of an obligation to pay benefits under Tennessee law during litigation did not oblige it to continue paying benefits “after the widows elected to pursue claims under Kentucky’s Workers’ Compensation Act and were awarded benefits.”

The ALJ rejected Zurich’s jurisdictional argument, finding that KRS 342.125 permitted reopening because Journey alleged that Zurich should be estopped from denying liability insofar as it committed constructive fraud in the initial proceeding. The ALJ found that the reopening involved the type of mistake contemplated in Messer v. Drees and also involved constructive fraud because Zurich’s conduct, though not actually fraudulent, produced the consequences and legal effects of a fraudulent action. Moreover the doctrine of collateral estoppel precluded re-litigation of Zurich’s liability for continuing payments under the Tennessee policy because it had a full opportunity to litigate the matter in the initial proceeding.

Finding that Zurich committed constructive fraud and was estopped from denying liability, the ALJ noted that Zurich planned during the initial litigation to terminate benefits based on its interpretation of Tennessee’s election of remedies doctrine. Yet, Zurich failed to disclose its plan to the ALJ and represented through its conduct during the initial litigation and appeal that it would continue to pay benefits under its Tennessee policy. As a consequence, the other parties received no opportunity to address Zurich’s plan and the ALJ received no opportunity to consider it when deciding the initial claim.

Having found that Zurich committed constructive fraud in the initial proceeding, the ALJ ordered it to continue making payments under the Tennessee policy and to tender within ten days a statement of the bi-weekly amounts due each plaintiff. The ALJ denied Zurich’s motion under KRS 342.310 for costs against Journey and KEMI, finding that no evidence supported the motion. Finally, the ALJ gave Zurich ten days to show cause why it should not be held liable for defending Journey’s motion to reopen without reasonable grounds.

Zurich appealed, arguing that the ALJ lacked jurisdiction to decide the matters at issue as well as the authority to reopen. The Board agreed with Zurich and reversed. Journey then sought review in the Court of Appeals.

Noting that KRS 342.325 and KRS 342.125(1) give an ALJ the jurisdiction and authority to reopen upon an allegation of mistake or fraud, Journey argued that Zurich pursued a fraudulent litigation strategy that worked to its own advantage and Journey’s detriment. Journey reasoned that the ALJ based the award on Zurich’s representations that it owed and was paying survivors’ benefits under the Tennessee policy but that Zurich then denied liability after the award became final. Convinced that Chapter 342 permitted reopening under the circumstances and that Zurich committed constructive fraud on the tribunal, the Court of Appeals reversed and reinstated the decision rendered at reopening.

Appealing, Zurich continues to assert that the ALJ lacked jurisdiction to decide the matter at issue and that no evidence supported the finding of constructive fraud on the tribunal. We disagree.

I. JURISDICTION.

Although KRS 342.805 gives a circuit court jurisdiction over matters concerning the enforcement of a final award, KRS 342.325 gives an ALJ jurisdiction over all questions arising under Chapter 342. KRS 342.125(1) permits an ALJ to reopen a final workers’ compensation award based upon an allegation of mistake or fraud. KRS 342.125(l)(a) includes an allegation of fraud or constructive fraud on the tribunal.

The ALJ recognized properly that the present reopening differed from a simple attempt to enforce a final award and differed from a dispute between insurance carriers over reimbursement for previously-paid benefits, such as occurred in Custard Ins. Adjusters, Inc. v. Aldridge. At issue was whether Zurich’s conduct during the initial workers’ compensation proceeding amounted to a constructive fraud that affected the accuracy and integrity of the ALJ’s decision and, thus, estopped Zurich from later denying that it was liable for continued payments under the Tennessee policy.

II. SUFFICIENCY OF THE EVIDENCE OF CONSTRUCTIVE FRAUD.

Zurich asserts that the ALJ erred by applying the doctrine of equitable es-toppel to preclude it from terminating benefits paid under Tennessee law because no evidentiary foundation existed for finding that Zurich engaged in constructive fraud. Zurich maintains that it “properly represented that it owed benefits by operation of Tennessee law” during the initial litigation and acted fully within its rights under Tennessee’s election of remedies doctrine by terminating payments after the award became final because it owed no additional benefits under the Tennessee policy at that point. Zurich states that the doctrine “completely terminates any obligation to continue paying benefits pursuant to Tennessee law when benefits are awarded in any other jurisdiction” and also states that its “obligation to pay those benefits did not end until the award of benefits in Kentucky became final.”

Zurich’s argument overlooks the fact that these appeals concern the integrity of judgments in claims that were brought under the Kentucky Act. A trial court has the inherent power to determine that its judgments reflect the truth, a power that extends not only to fraud but also to bad faith, abuse of judicial process, deception of the court, and lack of candor to the court. Estoppel is an equitable remedy that courts often invoke to prevent a party from benefiting from its misconduct. The facts and circumstances of a case determine the propriety of resorting to an equitable remedy. Conduct that works a fraud or constructive fraud on the tribunal and has a detrimental effect on the accuracy and integrity of a judgment warrants such a remedy. The facts and circumstances of the present case support the decision to estop Zurich from denying liability at reopening and order it to continue paying the benefits for which it admitted both liability and coverage throughout the initial proceeding.

The widows filed claims against Myers in Kentucky. Zurich knew that the policy it issued to Myers did not cover Kentucky claims but did cover Tennessee claims. It also knew that Tennessee’s election of remedies doctrine would bar such a claim if the widows acted affirmatively to obtain benefits in another state or knowingly and voluntarily accepted benefits under the law of another state.

Acting with that knowledge, Zurich admitted that it was liable for benefits provided by Tennessee law and paid Tennessee benefits voluntarily throughout the litigation. Moreover, it failed to object to either the initial order granting Journey credit for Tennessee benefits paid by Zurich or the order on reconsideration, which indicated clearly that the ALJ construed Zurich’s admission of liability for such benefits to mean that it would continue to pay them in the future. Zurich’s litigation strategy worked to Journey’s detriment (and perhaps the widows’) by discouraging the widows from filing Tennessee claims and obtaining a Tennessee judgment against Zurich until such time as the election of remedies doctrine would bar them from doing so. Moreover, it deceived the ALJ.

If allowed to succeed, Zurich’s strategy would enable it to avoid paying the bulk of its admitted liability under Tennessee law by rendering worthless most of the credit that Journey received against the widows’ awards of income benefits. By misrepresenting its true position throughout the initial litigation, Zurich denied the parties and the ALJ an opportunity to address its plan of action and undermined the integrity of the resulting judgment. Such circumstances warranted an estoppel and an order requiring Zurich to pay the Tennessee benefits that its policy covered and for which it admitted having liability initially.

The decision of the Court of Appeals is affirmed.

All sitting. All concur.

      . KRS 342.610(2) deems a contractor who subcontracts work that is a regular or recurrent part of its business to an uninsured subcontractor to be the employer of the subcontractor’s employees and to be liable for their workers' compensation benefits.

      . KRS 342.610(1).

      . KRS 342.340(1).

      . KRS 342.610(2).

      . 860 S.W.2d 767 (Ky.1993) (an ALJ may reopen a final award sua sponte in order to correct a mistake in applying the law to the facts as found).

      . 803 KAR 25:240.

      . 382 S.W.2d 209 (Ky.1964).

      . See Kendrick v. Bailey Vault Co., Inc., 944 S.W.2d 147 (Ky.App.1997).

      . See 17 Couch On Insurance 239:34 (3rd ed.2006).

      . KRS 342.125(l)(c).

      . KRS 342.125(l)(a).

      . See, for example, Crummies Creek Coal Co. v. Hensley, 284 Ky. 243, 144 S.W.2d 206 (1940); Ray v. Black Mountain Corporation, 254 Ky. 800, 72 S.W.2d 477 (1934).

      . 57 S.W.3d 284 (Ky.2001) (ALJ lacked jurisdiction to decide dispute between two carriers over reimbursement of erroneously-paid benefits where dispute did not involve a provision of Chapter 342).

      . Potter v. Eli Lilly and Co., 926 S.W.2d 449, 455 (Ky.1996).

      . Akers v. Pike County Board of Education, 171 S.W.3d 740, 743 (Ky.2005).

      . Patrick v. Christopher East Health Care, 142 S.W.3d 149 (Ky.2004).

      . Eadie v. Complete Co., Inc., 142 S.W.3d 288, 291 (Tenn.2004).