“Ross–Haydon Bridge Reconciliation Rule”
Kentucky Supreme Court Clarifies Sovereign-Immunity Limits on Monetary Relief and Refund Actions

Introduction

On 14 August 2025 the Supreme Court of Kentucky handed down a consolidated opinion in Commonwealth of Kentucky, Department of Revenue v. Kimberly Bennett and companion appeals (the “Medical Case” and “Education Case”). The litigation arose after state universities and the Department of Revenue (“DOR”) used tax-collection tools—garnishments, liens, refund intercepts—to recover unpaid medical and educational charges that had never been reduced to judgment. Plaintiffs sought both declaratory and monetary relief, raising statutory and constitutional challenges.

Although many preliminary issues swirled in the background—class certification, 2022 statutory amendments, and takings claims—the Supreme Court expressly limited its review to one pivotal question: the extent to which sovereign (or governmental) immunity shields the Commonwealth and its agencies from monetary claims seeking a return of money previously collected.

Summary of the Judgment

• Affirmed the Court of Appeals that sovereign immunity does not bar purely declaratory relief.
• Partially affirmed/partially reversed the Court of Appeals on monetary relief:
  • Sovereign immunity does bar claims demanding repayment of money that was actually due to the state, even if the collection method was unlawful.
  • Sovereign immunity does not bar claims for refund of money that was never due to the state—e.g., excess interest, penalties, or principal mistakenly assessed.
• Prospective declaratory relief in the Medical Case became moot after the 2022 amendment to KRS 131.130 banning collection of consumer health-care debt; retrospective relief remains live.
• The Court confirmed it was proper for the Court of Appeals to examine sovereign-immunity questions within an interlocutory class-certification appeal, even though the defendants had not separately appealed the earlier immunity ruling within thirty days.
• Takings claims under Ky. Const. §§ 13 and 242 survive because those provisions themselves waive immunity.

Detailed Analysis

1. Precedents Cited and Their Influence

1. Ross v. Gross, 188 S.W.2d 475 (Ky. 1945)
   Found that money mistakenly deposited into the Treasury that was never owed to the Commonwealth could be judicially ordered returned without violating §230. The new decision revitalises Ross and uses it as the cornerstone for permitting refund suits.
2. Beshear v. Haydon Bridge Co., 416 S.W.3d 280 (Ky. 2013) (“Haydon Bridge II”)
   Previously held that sovereign immunity barred an injunction requiring the state to move workers-comp funds that were due back into a specific fund. The 2025 Court harmonises Haydon Bridge with Ross: Ross applies where funds were never due; Haydon Bridge where funds were due.
3. Commonwealth v. Kentucky Retirement Systems, 396 S.W.3d 833 (Ky. 2013)
   Re-affirmed that no immunity defense applies to pure declaratory-judgment actions. Relied upon to sustain declaratory aspects of claims.
4. Breathitt County Board of Education v. Prater, 292 S.W.3d 883 (Ky. 2009)
   Recognised immediate appealability of immunity denials; cited to justify appellate jurisdiction discussion.
5. Withers v. University of Kentucky, 939 S.W.2d 340 (Ky. 1997) & Yanero v. Davis, 65 S.W.3d 510 (Ky. 2001)
   Provided doctrinal background on governmental immunity for state agencies and officials.

2. Legal Reasoning

The Court embarked on a two-step framework:

1. Threshold Jurisdiction in Interlocutory Appeal
   Even though the medical defendants missed the 30-day window to appeal the trial court’s first immunity ruling, the Court held appellate tribunals may tackle immunity issues embedded in any properly-filed interlocutory appeal (here, the class-certification appeal) because immunity is a “power-to-act” question that goes to the courts’ authority ab initio.
2. Merits of Sovereign-Immunity Defense
   a) The Court reaffirmed §230’s ban on withdrawing money from the Treasury absent legislative appropriation.
   b) Drawing a bright line, it construed Ross and Haydon Bridge together:

   • If the money in question was never owed to the state, it never constitutionally “vested” in the Treasury; refund suits are not barred.
   • If the money was legitimately owed, any judicial order compelling a refund would invade the legislative power of appropriation—hence barred.

   c) Statutory “waiver” arguments (KRS 45.111, 131.565, 131.570) failed because none contained the “express” or “overwhelming” language required to waive immunity for funds due the state.

3. Impact on Future Litigation and Governance

• The New Rule: Courts may award retrospective monetary relief against the Commonwealth where plaintiffs prove the state was never entitled to the money in the first place. This will embolden taxpayers, vendors, and consumers to challenge erroneous collections without legislative claims bills.
• Administrative Agencies: Agencies referring debts to DOR must ensure each debt is “liquidated” (reduced to judgment or otherwise final) or risk restitution litigation.
• Class Actions Against the State: By confirming immunity does not defeat class remedies for declaratory relief—and sometimes restitution—the Court opens the door to broader class-based accountability suits.
• Legislative Response: The General Assembly may craft clearer refund statutes or appropriations procedures, or conversely narrow administrative referral statutes to forestall unintended exposure.
• Takings Doctrine: The opinion re-states that constitutional takings claims automatically bypass sovereign immunity, preserving a direct compensatory path for property seizures by the state.

Complex Concepts Simplified

Sovereign vs. Governmental Immunity

“Sovereign” strictly belongs to the Commonwealth; “governmental” extends the same protection to state agencies and officials acting in governmental (not proprietary) functions. The distinction was academic here as universities and DOR clearly performed governmental functions.

Liquidated Debt (KRS 45.241)

More than a simple unpaid bill—debt must be definite in amount and final, meaning all appeals exhausted or reduced to a court judgment, before DOR may wield its powerful tax-collection arsenal.

Declaratory vs. Monetary Relief

A declaratory judgment merely states rights and duties; it does not order the state to pay. Monetary relief (refund, damages) directly impacts the Treasury.

Mootness

If a statute changes so the challenged conduct can no longer occur (e.g., 2022 ban on healthcare-debt collections), courts lose authority to pronounce future-looking declarations. Past conduct, however, remains justiciable.

Conclusion: Key Takeaways

1. The Court draws a decisive doctrinal line: Ross-type funds (never owed) vs. Haydon Bridge-type funds (truly owed). Only the former escape sovereign-immunity protection.
2. Immunity questions can be revisited in any interlocutory context that is properly before the appellate courts, enhancing judicial efficiency but, as the dissents note, raising timing-of-appeal controversies.
3. Statutory “refund” or “indemnity” language must be unmistakably explicit before it will waive immunity for monies legitimately owed.
4. Takings claims continue to bypass immunity altogether.
5. The decision signals that aggressive debt-collection via DOR faces robust judicial scrutiny—especially where no court judgment exists.

Prepared by: Legal Commentary Division – August 2025. All rights reserved.