The Supreme Court reaffirms the American Rule against shifting fees, recognizing CR 37.03 and KRS 403.220 as exceptions to the rule. In this case, $50,000 of attorney fees were awarded to the Wife under CR 37.03 and KRS 403.220. The Supreme Court held that the Trial Court misapplied CR 37.03 by imposing discovery sanctions on Husband for denial of a request for admission. The Trial Court should have considered Husband’s grounds for denial. As in this case, when a party reasonably believes he might prevail on a matter, or has a legitimate reason for denial of a request for admission, the denial is justified and sanctions are improper. CR 37.03 is to be narrowly construed. Husband should not have been sanctioned under CR 37.03.
Unlike 37.03 which provides for narrow sanctions, KRS 403.220 provides for attorney fees when there is financial disparity between parties to a divorce. The Trial Court has broad discretion in awarding attorney fees under KRS 403.220. The rule is not punitive, but Kentucky case law holds Trial Courts can appropriately consider the litigation conduct of the parties. Allowing Trial Courts this discretion prevents an “unreasonable or an unfair burden on the party with fewer financial resources.” In this case, the Supreme Court notes facts which may support an award of attorney fees under KRS 403.200. The Supreme Court remands the matter to the Trial Court to determine the amount of Wife’s attorney fees Husband should pay under KRS 403.200.
Finally, The Supreme Court looks to Husband’s argument that wife improperly applied CR 59.05. The Wife challenged the business-valuation amount after trial and entry of the initial judgment. CR 59.05 is not available to Wife because she could have raised the business-valuation issues during the trial. Wife’s use of CR 59.05 and the Trial Court’s subsequent modification of the property settlement award are improper. The Supreme Court agrees with the Husband that Wife should have raised any business-valuation issues pre-judgment, as she has the information available to her at that time.