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Superior Electrical (Superior) was in the business of installing electrical wiring and related components at new construction sites. Because some employees were assigned company vehicles equipped with company tools and materials and were expected to drive those vehicles to the work sites, Superior required all employment applicants to hold a valid driver’s license. Employees who were assigned a company vehicle were expected to drive for the company during the workday in order to transport job materials and company tools that were kept on the vehicle to job sites. These employees were expected to take the company issued vehicle home at the end of the work day.
Superior hired Cory Jones as an apprentice electrician. Jones had completed an employment application in which he stated that he had a valid driver’s license and had not been cited for any traffic violations. These statements were untrue. His license had been suspended because of numerous traffic violations, including careless driving and driving without a license. Superior did not check on his driving record at the time he was hired because, as an apprentice electrician, he was not being assigned a company vehicle and was not expected to drive for the company during the work day.
About a year after hiring Jones, Superior promoted him to electrician and assigned Jones a company vehicle equipped with a rack for transporting wiring and other materials to and from the work sites. Superior intended that Jones drive during the day for the company and to take the vehicle home after the end of the work day. On a later date, when Jones’s work hours had ended and he was driving home in the company vehicle, he collided with two cars. The collision resulted solely from Jones’s negligence. Carolyn Carson and her son were severely injured in the collision and they sued Superior. The Carson’s alleged two theories of recovery against Superior: respondent superior and negligent hiring.
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Raleigh v. Performance Plumbing and Heating, 130 P. 3d 1011 – Colo: Supreme Court 2006 – Google Scholar
Raleigh v. Performance Plumbing and Heating, 130 P. 3d 1011 – Colo: Supreme Court 2006
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130 P.3d 1011 (2006)
Carolyn A. RALEIGH, Kevin P. Raleigh, and Kevin C. Raleigh,
Petitioners,
v.
PERFORMANCE PLUMBING AND HEATING, INC., Respondents.
No. 04SC695.
Supreme Court of Colorado, En Banc.
February 21, 2006.
Rehearing Denied April 3, 2006.[*]
1012
*1012 Fish & Coles, Kenneth R. Fish, Denver, Jean E. Dubofsky, P.C., Jean E.
Dubofsky, Boulder, Burke & Neuwirth, P.C., Dean S. Neuwirth, Denver, for
Petitioners.
Harris, Karstaedt, Jamison & Powers, P.C., A. Peter Gregory, Englewood, Hale
Friesen, LLP, Richard A. Westfall, Denver, for Respondent.
Snell & Wilmer, LLP, Lee Mickus, Denver, Pacific Legal Foundation, for Amici
Curiae Pacific Legal Foundation and Colorado Civil Justice League.
Hall & Evans, L.L.C., Alan Epstein, Denver, for Amici Curiae National Association
of Mutual Insurance Companies and Property and Casualty Insurers Association of
America.
Montgomery Little & McGrew, P.C., Patrick T. O’Rourke, Kari MacKercher
Hershey, Greenwood Village, for Amicus Curiae Colorado Defense Lawyer’s
Association.
HOBBS, Justice.
We granted certiorari to review the court of appeals’ judgment in Raleigh v.
Performance Plumbing & Heating, Inc., 109 P.3d 978 (Colo.App.2004) (“Raleigh
II”).[1] Petitioners Carolyn A. Raleigh, her son, Kevin C. Raleigh (“the Raleighs”),
and Carolyn’s husband, Kevin P. Raleigh[2] sued Performance Plumbing and
Heating, Inc. (“Performance Plumbing”) for damages they suffered in an
automobile accident caused by Cory Weese (“Weese”). Weese, a Performance
Plumbing employee, was driving his own truck on the way home from work when
he caused the accident.
A jury found that Weese was not acting within the scope of his employment for
Performance Plumbing when he caused injury to the Raleighs. Nevertheless, the
jury awarded damages against Performance Plumbing for negligently hiring
Weese. In rejecting both the Raleighs’ respondeat superior and negligent hiring
causes of action against Performance Plumbing, the court of appeals relied on the
jury’s special finding that Weese was not acting within the scope of his
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Raleigh v. Performance Plumbing and Heating, 130 P. 3d 1011 – Colo: Supreme Court 2006 – Google Scholar
employment when he caused the injuries:
Having specifically found that employee was not acting within the
scope of his employment at the time of the accident, the jury had no
logical basis to find that defendant’s breach of its duty to use
reasonable *1013 care in hiring employee was the cause of plaintiffs’
injuries.
1013
Id. at 982.
We uphold the judgment of the court of appeals requiring dismissal of the
respondeat superior and negligent hiring claims by the Raleighs against
Performance Plumbing for the accident Weese caused, but on different grounds as
to the negligent hiring claim. The court of appeals ruling invalidated the Raleighs’
negligent hiring award based on their failure to prove the causation element of the
tort. Our holding focuses on the first element of the tort, the scope of the
employer’s legal duty based upon the job duties for which the employer hired the
employee.
We hold that the tort of negligent hiring, when applicable under the circumstances
of a particular case, can operate to hold an employer liable for intentional or
negligent acts of an employee that are within or outside of the scope of
employment. Under the facts of this case, however, the trial court should not have
submitted the negligent hiring claim to the jury; having done so, it should have
granted judgment in favor of Performance Plumbing notwithstanding the verdict.
The accident occurred after Weese had finished his work day. The scope of
Performance Plumbing’s duty to the Raleighs under the tort of negligent hiring did
not extend to the Raleighs because the job for which it hired Weese did not include
driving to and from work.
I.
Performance Plumbing is in the business of installing underground and in-house
water and sewer plumbing at new residential construction sites in the Denver
metropolitan area. The company utilizes metal construction trailers it rents for the
purpose of storing tools, materials such as pipe, and equipment needed for jobs.
The company expects its plumber employees to commute to a construction trailer,
load up the items needed for the particular job they are assigned, and proceed to
the job site. At the end of the day, employees are required to return company tools
to a construction trailer and may store their own tools there. Unless assigned a
company vehicle, employees use their own vehicles to commute to and from work.
The work day is from seven in the morning to three-thirty in the afternoon. The
work day typically starts when the employee reports to a construction trailer to pick
up pipe and other materials needed for that day’s job. The employee then
proceeds to the job site. Work at the job site does not require frequent contact with
members of the public. The employee typically ends the work day by returning
company materials and tools to a construction trailer. When there is no need for an
employee to go from home to a construction trailer or from the job site back to a
construction trailer, the work day may start or end at the job site.
Whether employees drive a company vehicle or their own vehicle, Performance
Plumbing does not consider commuting from home to a construction trailer or
directly from home to a job site, and back home from a construction trailer or
directly from a job site, to be part of the work day. Employees are not
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Raleigh v. Performance Plumbing and Heating, 130 P. 3d 1011 – Colo: Supreme Court 2006 – Google Scholar
compensated for such commute time or reimbursed for mileage spent in
commuting.
As part of their employment, employees are expected to drive for the company
during the work day for the purpose of getting job materials and company tools
from the construction trailers to job sites and back to construction trailers. The
employer therefore requires a valid driver’s license as part of the application
process, but it relies on the applicant’s truthfulness in stating whether or not he or
she holds a valid driver’s license. Performance Plumbing checks driving licenses
and records only as required by its insurance company when it assigns an
employee one of the company vehicles to drive.
1014
In April of 1996, Performance Plumbing hired Weese as an apprentice plumber on
the recommendation of one of its employees who had known Weese since high
school. At the time Performance Plumbing hired him, Weese completed a standard
employment application that contained inquiries into the status of his driver’s
license and driving history. Weese stated that he had a valid license and no
moving violations, although his license was then under suspension. Nevertheless,
at *1014 the time he applied for the job, he was eligible for reinstatement of his
license upon providing proof of insurance.[3] Weese signed a standard release
form, enabling Performance Plumbing to investigate the status of his driver’s
license, but, in accordance with the company’s practice, it conducted no further
investigation when it hired him because it was not assigning him a company car to
drive.
The company employee who recommended Weese for employment knew that he
had a driving record that included moving violations and two accidents. He did not
inform the company’s president, who hired Weese, about Weese’s driving record.
Sometime after Weese was hired and proved himself to be a reliable worker,
Performance Plumbing in early 1997 equipped Weese’s personal truck with a rack
for transporting pipe from construction trailers to work sites. As part of his work
day, the company paid Weese for travel time between the construction trailers and
job sites, but it did not pay or reimburse Weese for the use of his vehicle.
On September 15, 1997, after his work day had ended and he was driving home,
Weese collided with two cars. He entered the right lane of a three lane road to get
around a large truck and be in position to make a right turn at the next major
intersection, which was approximately one-half mile away. The right lane was
bounded by a curb and gutter. Two cars were stopped within the right lane, and
their drivers were outside the vehicles. The Raleighs owned both vehicles, one of
which was in tow behind the other. Standing between the cars, Carolyn Raleigh
and her son were adjusting a tow strap when Weese’s truck hit the back of the
towed vehicle, forcing it into the lead vehicle.
Both of the Raleighs sustained severe injuries as a result of the accident. Seeking
damages against Performance Plumbing, the Raleighs asserted negligent hiring
and respondeat superior claims against the company as employer of Weese.
The court of appeals has had this case before it twice. On summary judgment, the
trial court initially dismissed both claims against Performance Plumbing. In the first
appeal, a division of the court of appeals held that genuine issues of material fact
as to both claims required a trial. Raleigh v. Performance Plumbing & Heating,
Inc., No. 99CA1887, slip op. (Colo.App. Dec. 14, 2000) (not selected for official
publication) (“Raleigh I”).
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Raleigh v. Performance Plumbing and Heating, 130 P. 3d 1011 – Colo: Supreme Court 2006 – Google Scholar
On remand, the trial court submitted both causes of action to the jury. Utilizing a
special verdict form, the jury found against the Raleighs on the respondeat
superior claim and for them on the negligent hiring claim; the jury did not find the
Raleighs to be negligent in any regard. The trial court entered judgment
accordingly. Both parties moved for judgment notwithstanding the verdict; the trial
court denied both motions.[4]
1015
*1015 On appeal, the court of appeals held that Performance Plumbing had a duty
when hiring Weese to inquire into his driving record and there was sufficient
evidence in that record to support a duty of reasonable care in hiring a safe driver
who would not create an undue risk of harm to the public in performing his
employment duties. Raleigh II, 109 P.3d at 981. The court of appeals also
determined that there was sufficient evidence for the jury to determine that the
company breached its duty to the driving public in hiring Weese. However, as to
the tort element of causation, the court of appeals invalidated the jury’s negligent
hiring award in light of its special verdict finding that Weese was not acting within
the scope of his employment when the accident occurred.
Accordingly, the court of appeals entered judgment against the Raleighs on both
the negligent hiring and respondeat superior claims. The Raleighs seek
reinstatement of the jury’s verdict on the negligent hiring claim; they also reassert
their respondeat superior claim despite the jury’s verdict against them. We
conclude as a matter of law that the Raleighs are not among the members of the
public to whom Performance Plumbing owed a legal duty. Under the reasonably
foreseeable aspect of its negligent hiring duty of care, the company’s duty would
extend only to those members of the public exposed to Weese’s unsafe driving in
the performance of his job duties.[5]
II.
We hold that the tort of negligent hiring, when applicable under the circumstances
of a particular case, can operate to hold an employer liable for intentional or
negligent acts of an employee that are either within or outside of the scope of
employment. Under the facts of this case, however, the trial court should not have
submitted the negligent hiring claim to the jury; having done so, it should have
granted judgment in favor of Performance Plumbing notwithstanding the verdict.
The accident occurred after Weese had finished his work day. The scope of
Performance Plumbing’s duty under the tort of negligent hiring did not extend to
the Raleighs because the job for which it hired Weese did not include driving to
and from work.
We also uphold the court of appeals’ judgment affirming the trial court’s judgment
against the Raleighs on the respondeat superior claim of negligence in light of the
evidence and jury’s special verdict finding that Weese was not operating within the
scope of his employment when the accident occurred.
A.
Standard of Review
To obtain submittal of a negligence claim to a jury, the plaintiff must establish a
prima facie case demonstrating the following elements: (1) the existence of a legal
duty to the plaintiff; (2) the defendant breached that duty; (3) the plaintiff was
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Raleigh v. Performance Plumbing and Heating, 130 P. 3d 1011 – Colo: Supreme Court 2006 – Google Scholar
injured; and (4) the defendant’s breach of duty caused the injury. Keller v. Koca,
111 P.3d 445, 447 (Colo.2005); Ryder v. Mitchell, 54 P.3d 885, 889 (Colo.2002);
see generally, Restatement (Second) of Torts § 281 (1965).
Appropriately formulated and applied, tort principles adopted pursuant to the
common law or legislative enactment are meant to deter and sanction conduct that
results in victim injury and to remedy victim injury, in circumstances where the
defendant owes a duty of care, defendant breaches the duty, that breach is the
proximate cause of the plaintiff’s injuries, and damages result. See, e.g., Bayer v.
Crested Butte Mountain Resort, 960 P.2d 70, 80 (Colo.1998).
1016
Thus, the first question in any negligence case is whether the defendant owed a
legal duty to protect the plaintiff from injury. Taco Bell, Inc. v. Lannon, 744 P.2d 43,
46 (Colo.1987). Whether a specific defendant owes a duty to a specific plaintiff
under the circumstances involved with a tort claim is a question of law we review
de novo. Vigil v. Franklin, 103 P.3d 322, 325 (Colo.2004); Ryder, *1016 54 P.3d at
889; Martinez v. Lewis, 969 P.2d 213, 218 (Colo.1998).
Negligent hiring cases are complex because they involve the employer’s
responsibility for the dangerous propensities of the employee, which were known
or should have been known by the employer at the time of hiring, gauged in
relation to the duties of the job for which the employer hires the employee. The
employee’s later intentional or non-intentional tort is the predicate for the plaintiff’s
action against the employer, so proof in the case involves both the employer’s and
the employee’s tortious conduct.
The lesson to be learned from a successful negligent hiring suit is that the
employer should not have hired the employee in light of that person’s dangerous
propensities or, having hired him or her, must exercise that degree of control over
the employee necessary to avert that employee from injuring persons to whom the
employer owed the duty of care when making the hiring decision. But, “[a]
negligence claim against an employer will fail if it is based on circumstances in
which the employer owed no duty of care.” John R. Paddock, Jr., Colorado
Employment Law and Practice, § 14.21, at 913 (2005).
We conclude in the case before us that the court of appeals erred in its ruling that
the causation element of the tort of negligent hiring came into play to bar the jury’s
award on the Raleighs’ cause of action. The court of appeals utilized the jury’s
special verdict finding that Weese was not acting within the scope of his
employment when he caused the accident. However, conduct of the employee
outside of his or her employment can nonetheless be actionable as a breach of the
employer’s duty of care in a negligent hiring case, if the employer owed a duty of
care to plaintiff when making the hiring decision.
Accordingly, we focus in this case on whether Performance Plumbing owed a duty
of care to the Raleighs in the first instance. Analyzing the scope of the company’s
duty, we conclude that the Raleighs are not among those persons to whom it owed
a duty of care in hiring Weese.
B.
Tort of Negligent Hiring
In 1992, we joined the majority of states in formally recognizing the tort of
negligent hiring. Connes v. Molalla Transp. Sys., Inc., 831 P.2d 1316, 1321
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(Colo.1992). Connes focused on the duty element of the tort. We posited the
scope of the employer’s legal duty upon the employer’s actual knowledge at the
time of hiring or reason to believe that the person being hired, by reason of some
attribute of character or prior conduct, would create an undue risk of harm in
carrying out his or her employment responsibilities.[6] We observed that
foreseeability of harm to the plaintiff is a prime factor in the duty analysis. A court
should also weigh other factors, including the social utility of the defendant’s
conduct, the magnitude of the burden of guarding against the harm caused to the
plaintiff, the practical consequences of placing such a burden on the defendant,
and any additional elements disclosed by the particular circumstances of the case.
Id. at 1320. No one factor is controlling; the question whether a duty should be
imposed in a particular case is essentially one of fairness under contemporary
standards — whether reasonable persons would recognize a duty and agree that it
exists. Id.
1017
When the duties of the job will bring the employee into frequent contact with
members *1017 of the public, or will involve close contact with particular individuals
as a result of a special relationship between such persons and the employer, some
courts have expanded the employer’s duty and have required the employer to go
beyond the job application and make an independent inquiry into the applicant’s
background; but, when the employment calls for incidental contact between the
employee and other persons, there may be no reason for an employer to conduct
any investigation of the applicant’s background beyond obtaining past employment
information and personal data during the application process. Id. at 1321.
The employer’s duty to members of the public in both negligent hiring and
negligent supervision cases stems from the principle that the employer receives
benefits from having customers and business invitees and incurs responsibilities to
them. Louis Buddy Yosha & Lance D. Cline, Negligent Hiring and Retention of an
Employee, 29 Am.Jur. Trials 267, § 2 (2005). The Restatement (Second) of
Agency addresses the tort of negligent hiring as follows:
A person conducting an activity through servants or other agents is
subject to liability for harm resulting from his conduct if he is negligent
or reckless:
….
(b) in the employment of improper persons or instrumentalities in work
involving risks of harm to others.
Restatement (Second) of Agency § 213 at 458.
The comment to this portion of the Restatement reveals that liability is predicated
on the employer’s reason to believe at the time of hiring that undue risk of harm
would exist from employing that person.
Liability results under the rule stated in this Section, not because of the
relation of the parties, but because the employer antecedently had
reason to believe that an undue risk of harm would exist because of
the employment.
Id., cmt. d at 460 (emphasis added).
The key word in this formulation, “antecedently,” refers to the time of hiring. In
explaining the nature of the employer’s duty at the time of hiring, we have
reiterated that the scope of the employer’s duty in exercising reasonable care in a
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Raleigh v. Performance Plumbing and Heating, 130 P. 3d 1011 – Colo: Supreme Court 2006 – Google Scholar
hiring decision depends on the employee’s anticipated degree of contact with other
persons in carrying out the job for which the employee was hired. Moses v.
Diocese of Colo., 863 P.2d 310, 328 (Colo.1993); Van Osdol v. Vogt, 908 P.2d
1122, 1132-33 n. 17 (Colo.1996); Bear Valley Church of Christ v. De Bose, 928
P.2d 1315, 1323-24 (Colo.1996). See also Keller v. Koca, 111 P.3d 445, 448-49
(Colo.2005) (holding that, to establish a duty of care towards the plaintiff in a
negligent supervision case, evidence must show that the employee’s acts are
connected with the employment in time and place such that the employer would
have reasonably foreseen the harm).
The job for which the defendant was hired in Connes consisted primarily of
commercial vehicle driving. We recognized that employers of commercial drivers
have a duty to investigate an applicant’s driving record, in addition to what he or
she provides in response to application questions or an employment interview.
But, we cautioned in Connes that the tort of negligent hiring does not function as
an insurance policy for all persons injured by persons an employer hires. Connes,
831 P.2d at 1321.
When driving is involved in performance of the job responsibilities, the duty is “to
use reasonable care in hiring a safe driver who would not create a danger to the
public in carrying out the duties of the job.” Id. at 1323 (emphasis added).
C.
Application to This Case
1018
The Raleighs claim that Performance Plumbing owed a duty of care to them
because Weese possessed a dangerous propensity in that he was a dangerous
driver; had Performance Plumbing conducted a further investigation into his driving
record, it would have discovered that Weese’s license was under suspension and
he had a record of moving violations and automobile accidents, despite his false
statements in answer to the employment application questions. They contend that
Weese was expected to drive as *1018 part of his employment, and they put much
emphasis on the benefit the employer obtained by outfitting his private vehicle with
a pipe rack.
We agree with the Raleighs that Weese was expected to drive as part of his
employment, but only as part of his work day from construction trailers to job sites
and back from the job site to construction trailers.[7] The job required employees to
commute to and from work on their own time. In this regard, this company is no
different from any of a large number of Colorado employers who expect their
employees to get to work on their own time and in their own way, and do not
assume liability as part of their hiring decision to act as a surety for automobile
accidents their employees may cause when commuting to and from work.
Whether Performance Plumbing owed a duty of care to the Raleighs boils down to
whether reasonable persons would recognize and agree that a duty exists.
Connes, 831 P.2d at 1320. The scope of the employer’s duty of care in making the
hiring decision extends to persons the employer should have reasonably foreseen
the employee — who possesses the dangerous propensity the employer knew of,
or reasonably should have known of — would come into contact with through the
employment. See Paddock, supra § 14.22, at 915 (stating that “[a]n employer is
found liable for negligent hiring if, at the time of hiring, the employer knew or had
reason to believe that hiring the person would create an undue risk of harm to the
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people with whom the employee would likely have contact in performing customary
job duties.”); see also DiCosala v. Kay, 91 N.J. 159, 177, 450 A.2d 508, 518
(1982) (in regard to a duty owed by the employer to the plaintiff to exercise
reasonable care in the selection and retention of the employee, stating that “the
question presented is whether the employer, knowing of its employee’s unfitness,
incompetence or dangerous attributes when it hired or retained its employee,
should have reasonably foreseen the likelihood that the employee through his
employment would come into contact with members of the public, such as the
plaintiff, under circumstances that would create a risk of danger to such persons
because of the employee’s qualities.”).
Thus, the case before us could have presented a jury question on the negligent
hiring claim had the accident occurred when Weese was driving to a job site from
a construction trailer or from a job site to a construction trailer as part of his
work.[8] But, our research has not disclosed any case that extends employer
negligent hiring liability to off-duty driving of the type citizens undertake normally to
get to and from their jobs. There is precedent that cautions courts against
extending the tort of negligent hiring to off-duty commute accidents.
Otherwise, any employer who fails to check the license status of
employees, and who knows that it is necessary that employees drive
to and from work, could be considered to have brought the employee
into contact with the third person via the vehicular collision, and could
face potential liability for negligent hiring and retention as to injuries
occurring from such a collision.
1019
Hare v. Cole, 25 S.W.3d 617, 621-22 (Mo. App.2000). The Missouri court’s
analysis observes that the “employer must have played a role in bringing the
offending employee into contact with the party who is thereby injured.” Id. at 621.
We agree, and we make the further observation that this is properly part of the
scope-of-the-employer’s-duty analysis — however it might also play into a
causation analysis — because the duty *1019 of reasonable care in hiring the
employee appropriately focuses on the job duties for which the employee is being
hired in relation to persons the employer would reasonably foresee the employee
coming into contact with through the employment.
In Keller, we refused to extend liability to the employer for the employee’s sexual
assault of a young girl at the employer’s place of business while it was closed. The
employer’s duty and liability for undue risk of harm posed by hiring the employee
must be related to “those with whom the employee came in contact in executing
his employment responsibilities.” 111 P.3d at 448.
In considering whether the employer in hiring the employee owed a legal duty to
persons in plaintiff’s circumstances, Connes states we should consider the social
utility of defendant’s business, the burden of imposing liability on the employer,
and whether the employment would bring the employee into frequent or only
infrequent contact with members of the public. 831 P.2d at 1320-21. Performance
Plumbing’s business has the social utility of providing residents of new houses with
adequate plumbing. Plumbers hired to work at the company’s job sites were not
expected to have frequent contact with members of the public at those sites, but
the employer could have reasonably foreseen they would have contact with
members of the driving public on the job driving in route from construction trailers
to job sites and back to construction trailers.
Weese caused the accident when he was commuting from his job on his way
home from work. We recognize that the Raleighs suffered serious injuries for
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Raleigh v. Performance Plumbing and Heating, 130 P. 3d 1011 – Colo: Supreme Court 2006 – Google Scholar
which Weese bears responsibility. But, we conclude as a matter of law that the
Raleighs are not among the members of the public to whom Performance
Plumbing owed a legal duty. They did not come into contact with Weese through
his employment.
The trial court should not have submitted the Raleighs’ negligent hiring claim to the
jury and, having done so, it should have granted judgment for Performance
Plumbing notwithstanding the verdict.
D.
The Raleighs’ Respondeat Superior Negligence
Claim
Well-established in Colorado law, the doctrine of respondeat superior is based on
the theory that the employee acts on behalf of the employer when the employee is
within the scope of his or her employment. In such circumstances, the employer is
vicariously liable for the employee’s negligent acts. Grease Monkey Int’l, Inc. v.
Montoya, 904 P.2d 468, 473 (Colo.1995).
Under the theory of respondeat superior, the question of whether an employee is
acting within the scope of the employment is a question of fact, and we must
accept the fact-finder’s determinations of fact. N.J. Fid. & Plate Glass Ins. Co. v.
Patterson, 86 Colo. 580, 586, 284 P. 334, 336 (1930). The trier of fact resolves
conflicting evidence; we cannot exercise that function. Aspen Times Pub. Co. v.
Russell, 18 Colo. 75, 77, 31 P. 503, 504 (1892). In the present case, we decline to
disturb the jury’s special verdict factual finding that Weese was not acting within
the scope of his employment when he caused the accident. Because that finding is
based on sufficient evidence in the record, we uphold the court of appeals’
judgment for dismissal of the Raleighs’ respondeat superior claim against
Performance Plumbing.
III.
Accordingly, we affirm the judgment of the court of appeals dismissing the
respondeat superior claim, and, on different grounds, the negligent hiring claim
against Performance Plumbing.
MULLARKEY, C.J., concurs in part and dissents in part.
Chief Justice MULLARKEY, concurring in part and dissenting in part.
I concur in the majority opinion upholding the jury verdict on respondeat superior,
and I respectfully dissent from the majority opinion overturning the jury verdict on
negligent hiring.
1020
I agree with the majority that, in general, an employer is not liable under the tort of
*1020 negligent hiring for an accident caused by its employee while commuting to
or from work in the employee’s vehicle. I also agree that liability in a particular case
depends on the application of the principles set forth in Connes v. Molalla
Transport Sys., Inc., 831 P.2d 1316 (Colo.1992), and related cases. I dissent
because the majority applies the wrong analysis and reaches the wrong result in
this case. Causation, not duty, is the applicable principle in this case. Properly
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Raleigh v. Performance Plumbing and Heating, 130 P. 3d 1011 – Colo: Supreme Court 2006 – Google Scholar
analyzed, the commuting accident before us is an exception to the general rule,
and the jury’s verdict on negligent hiring should be sustained.
In most cases, the means by which an employer commutes, how he or she arrives
at or leaves the workplace, are immaterial to the employer. The employer does not
control the employee’s means of travel and does not benefit if the employee uses
a particular means of travel.
However, there are exceptions to the general notion that an employer is not liable
for accidents occurring during an employee’s daily commute. If there is evidence
that the employer has negligently hired an employee who is an unsafe driver and
the employer controls or benefits from the employee’s commuting by driving, then
the case should be submitted to the finder of fact to determine whether the
employer’s negligence in hiring the employee caused injuries to a third party.
There is evidence in the record now before us that Performance benefited
financially from Weese’s daily use of his truck for commuting. Performance
outfitted Weese’s truck to its specifications, and required him to drive that truck to
work so that he could use it to transport pipe on the job. Given the evidence that
Performance (1) knew Weese was an unsafe driver, and (2) intended Weese to
commute in his truck and also benefited from his commuting by truck, the
causation issue was properly submitted to the jury. I would uphold the jury verdict
finding the employee, Cory Weese, 70 percent liable and the employer,
Performance Plumbing, 30 percent liable for the damages suffered by the
Raleighs.
When an employer hires an employee, and places the employee in a position that
poses a risk of harm to others, it is incumbent upon the employer to conduct an
inquiry into the employee’s background to determine the employee’s fitness for the
duties involved. See Restatement (Second) of Agency § 213 cmt. d (1958) (“The
principal may be negligent because he has reason to know that the servant or
other agent, because of his qualities, is likely to harm others in view of the work or
instrumentalities entrusted to him.”) (emphasis added).
As the majority acknowledges, Performance hired Weese to be an apprentice
plumber, and his duties required a substantial amount of driving every day
between construction trailers and various work sites. Maj. op. at 1013. Although
Performance owed a duty to the motoring public to ensure that Weese was a safe
driver, it did not do so. The majority discusses Weese’s poor driving record and
notes that, when he was hired, Weese did not have a valid driver’s license and did
not have the statutorily required liability insurance for his truck. Maj. op. at 1014 n.
3. Performance’s foreman testified that he knew about Weese’s driving history and
his lack of a valid license and insurance when Weese was hired. Under the jury
instructions, the foreman’s knowledge was attributable to the company. Thus,
Performance acted not merely negligently, but with actual knowledge when it hired
an unsafe driver for a position requiring substantial driving.
The fact that Weese commuted to work in his truck directly benefited Performance
because it equipped the truck for use on Performance’s job sites. Moreover,
Performance knew at the time it hired Weese that he was likely to drive a
company-equipped truck. The owner of Performance testified that his company
routinely installed pipe racks on vehicles belonging to workers who proved to be
reliable. According to his testimony, a reliable employee was one who came to
work every day with the specially outfitted truck. It appears the company’s main
concern with employee reliability was that the employee not abscond with its
equipment.
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Raleigh v. Performance Plumbing and Heating, 130 P. 3d 1011 – Colo: Supreme Court 2006 – Google Scholar
1021
On cross examination, the owner admitted that Weese’s truck was equipped
identically to the company vehicles issued to foremen *1021 and supervisors. The
evidence showed that, at the time of the accident, there were two company owned
trucks at Weese’s job site, and neither was available to him. One was assigned to
the foreman and one was assigned to a higher level supervisor.
The majority asserts that Performance’s contention, that travel to and from work
was “[not] part of the work day,” was sufficient in and of itself to exclude the
possibility that affixing the pipe rack onto Weese’s truck converted this travel to a
benefit for the employer. Maj. op. at 1013. The majority’s reasoning is not
consistent with the record and I do not find it persuasive.
Weese was hired by Performance as an apprentice plumber, having had no prior
experience as a plumber. The pipe rack installed on his truck by Performance is a
specialized piece of equipment designed for safely transporting pipe from one
place to another. Other than using the rack while working for Performance, the
equipment had no apparent value for Weese.
By contrast, Weese’s truck, as modified, had considerable value for Performance.
Use of Weese’s truck enabled the company to avoid the expense of buying or
leasing and insuring a suitably equipped company vehicle for use by its employee.
Certainly, a jury could conclude from the evidence that there was a financial
benefit to Performance if Weese commuted in his truck. In the workers’
compensation context, similar facts would bring the worker within the coverage of
the act for injuries incurred during the worker’s commute. See Electric Mut. Liab.
Ins. Co. v. Indus. Comm’n, 154 Colo. 491, 495, 391 P.2d 677, 679 (1964) (holding
in workers’ compensation case that when employee uses his own car to perform
services for his employer, employee remains in the course of his employment until
he returns home).
The majority views this issue as a question of duty for the court to decide rather
than a question of causation for the jury to decide. In my opinion, the majority’s
analysis is focused on the wrong element of the tort of negligent hiring.
Application of the majority’s duty analysis results in a curious anomaly.
Performance owes a duty of care to the motoring public (which presumably would
include the Raleighs) to hire employees who are safe drivers because the
employees are expected to drive during the work day. If this accident had
happened during Weese’s shift, the majority would hold Performance liable to the
Raleighs. But the majority concludes that Performance owed no duty to the
Raleighs in this case because the accident occurred after work hours.
The majority’s analysis creates a kind of “blinking light” of duty that is arbitrary in
practice and not helpful to the future development of the law. It seems to me that
the answer to this analytical confusion is to address the commuting issue as a
question of causation.
The causation element in a tort action functions as a natural limitation of liability.
As the Draft Restatement of the Law of Torts explains:
There are two primary legal doctrines for limiting liability: duty and
scope of liability [otherwise referred to as proximate cause]. . . . Duty is
a question of law for the court . . . while scope of liability . . . is treated
as a question of fact for the factfinder. Hence, duty is a preferable
means for addressing limits on liability when those limitations are
clear, are based on relatively bright lines, are of general application,
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do not usually require resort to disputed facts in a case, implicate
policy concerns that apply to a class of cases that may not be fully
appreciated by a jury deciding a specific case, and are employed in
cases in which early resolution of liability is particularly desirable. . . .
On the other hand, when the limits imposed require careful attention to
the specific facts of a case, and difficult, often amorphous evaluative
judgments for which modest differences in the factual circumstances
may change the outcome, scope of liability [or proximate cause] is a
more flexible and preferable device for placing limits on liability.
Restatement (Third) of Torts § 29 cmt. f (Proposed Final Draft No. 1, 2005).
1022
*1022 Causation is the element that limits liability generally because “[t]ort law does
not impose liability on an actor for all harm factually caused by the actor’s tortious
conduct.” Id. § 29 cmt. d. As explained in the draft Restatement of Torts, “[a]n
actor’s liability is limited to those physical harms that result from the risks that
made the actor’s conduct tortious.” Id. In order to limit the liability of an actor, or in
this case, an employer, the Restatement observes that
an actor should be held liable only for harm that was among the
potential harms — the risks — that made the actor’s conduct tortious.
The term `scope of liability’ is employed to distinguish those harms that
fall within this standard and, thus, for which the defendant is subject to
liability, and on the other hand, those harms for which the defendant is
not liable.
Id. Applying this rule requires consideration of both “the risks that made the actor’s
conduct tortious,” and “whether the harm for which recovery is sought was a result
of any of those risks.” Id. Whether having an employee commute to work in a
specially equipped vehicle each day is “among the potential harms — the risks”
that make Performance’s failure to verify Weese’s driving record a cause of the
Raleighs’ injuries, is a question best left to the jury.
The majority cites only one case, Hare v. Cole, 25 S.W.3d 617 (Mo.App.2000),
involving an employer’s liability for an employee’s commuting accident. Maj. op. at
1018. Hare does not support the majority’s decision to rely upon an analysis of
duty; rather, that case turned on an analysis of causation. The Hare court rejected
the employer’s suggestion that it find employers have no duty as a matter of law
“to check the license status or driving record of applicants for driving positions.” 25
S.W.3d at 621. I view Hare as consistent with my understanding that causation,
not duty, is the way to analyze and impose appropriate limitations on an
employer’s liability for its employee’s acts in an off-duty driving case.
A similar causation analysis was employed by a federal court applying Texas law
in a negligent hiring case where an employee-driver rear-ended a pick-up, killing
the driver and severely injuring the passenger. McDorman ex rel Connelly v.
Texas-Cola Leasing Co., 288 F.Supp.2d 796 (N.D.Tex. 2003). The court held that,
while the employer owed the plaintiffs a duty, the employer’s hiring of the driver
was not the proximate cause of the plaintiffs’ injuries because “it was not
foreseeable that someone with [the driver’s] background would be involved in this
accident.” Id. at 805. The driver’s motor vehicle record revealed that he had a
suspended license for failure to pay child support, and a seat belt violation. In the
court’s opinion, the driver’s citations “were not of the type that a reasonable mind
could have anticipated the harm that occurred, a traffic accident.” Id. at 806. I note
that in the present case, the majority agrees that Weese’s driving record showed
he was an unsafe driver.
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1023
I am concerned that the majority’s reliance on duty will have the effect of
foreclosing employer liability in all off-duty commuting cases even though the
majority does not intend that result. The Georgia appellate court took a similar duty
approach limiting employer liability for off-duty driving accidents. The result has
been that, in Georgia, an employer is not liable to a third party injured by an
employee in an off-duty accident even if the employee is driving a vehicle
furnished by the employer. In Georgia, the tortious act must occur “during the
tortfeasor’s working hours.” Lear Siegler, Inc. v. Stegall, 184 Ga.App. 27, 360
S.E.2d 619, 620 (1987); see also TGM Ashley Lakes, Inc. v. Jennings, 264
Ga.App. 456, 590 S.E.2d 807, 815 (2003) (“an employee’s regular commute is not
considered to be under color of employment, and therefore, the cause of action
[for negligent hiring] does not extend to torts committed on members of the public
during an employee’s commute.”). The employer in Lear Siegler was found to owe
no duty to the driving public even though the record revealed that the employee’s
duties included driving, the employee had a prior conviction for driving under the
influence of alcohol, and the employee caused a traffic accident during his early
morning commute in the employer-provided vehicle while intoxicated. *1023 Surely
that is not an approach that the majority would condone.
Like the majority, I have no wish to extend negligent hiring liability to all employers
for all employees who cause accidents when commuting between work and home.
Maj. op. at 1018. Under my approach, only an employer who, as a direct result of
the hiring, places an employee in a position to inflict harm on third parties will be
liable. A jury is competent to weigh the evidence and determine whether the
employer’s negligence caused injury to a third party.
Accordingly, I respectfully dissent. I would reverse the court of appeals and
reinstate the jury’s verdict holding Performance liable to the Raleighs.
[*] Chief Justice MULLARKEY would grant the Petition.
[1] The issues we took on review are:
1) Whether the court of appeals improperly restricted the tort of negligent hiring when it ruled that an
employer cannot be directly liable for negligent hiring if the employee acts outside the “scope of
employment,” a requirement for finding an employer vicariously liable under the separate doctrine of
respondeat superior?
2) Whether an employee is within the scope of employment while driving his truck home from work
when his employer requires him to bring his personal truck back and forth between home and work for
use on the job each day?
[2] Although the husband filed claims against Performance Plumbing for negligence and loss of
consortium, this opinion focuses on the negligent hiring and respondeat superior claims by the mother
and son.
[3] Weese’s driving record includes a 1990 careless driving conviction involving an accident; a 1991
conviction for violation of a red light signal; a 1991 defective vehicle conviction; a 1992 careless driving
conviction involving an accident, and driving without insurance. As a result of accumulated points, his
license was suspended until August 13, 1992. Prior to reinstatement, he drove without a valid license
and reinstatement was deferred for one year, until August 12, 1993. His license was reinstated on
November 4, 1993. In April, 1995, Weese received a ticket for speeding 1-4 miles per hour over the
limit. In November 1995, he was convicted of failure to signal for a turn and did not have liability
insurance. As a result, his license was suspended until January 17, 1996. At the time Performance
Plumbing hired him, he was eligible for license reinstatement upon providing proof of insurance
coverage and paying a reinstatement fee, but he did not proceed to obtain insurance and have his
license reinstated.
[4] The trial court ordered the following judgment against Performance Plumbing on the Raleighs’
negligent hiring claims: judgment in favor of Carolyn A. Raleigh in the amount of $1,187,319 plus
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Raleigh v. Performance Plumbing and Heating, 130 P. 3d 1011 – Colo: Supreme Court 2006 – Google Scholar
prejudgment interest in the amount of $552,565 for a total judgment of $1,739,884; judgment in favor of
Kevin C. Raleigh in the amount of $795,000 plus prejudgment interest in the amount of $369,984 for a
total judgment of $1,164,984. The trial court also entered judgment against Performance Plumbing and
in favor of Kevin P. Raleigh on his claims of negligence and loss of consortium in the amount of
$94,200 plus prejudgment interest in the amount of $43,840 for a total judgment of $138,040. The jury
found that the Raleighs were not negligent in any regard, and that Performance Plumbing was 30%
negligent and Weese was 70% negligent in the accident.
[5] Thus, we overrule the court of appeals’ duty, breach of duty, and causation holdings in Raleigh II,
109 P.3d at 980-82.
[6] The tort of negligent hiring is independent of a respondeat superior theory; under appropriate
circumstances, this tort may apply to impose liability even though the employee is acting outside the
scope of the employment. Connes, 831 P.2d at 1320-21. In fact, the vast majority of negligent hiring
cases involve intentional torts committed by an employee who is not acting within the scope of his or
her employment. In Connes, although we recognized a duty upon the employer of a commercial truck
driver to hire a safe driver, we declined to require the employer to check the employee’s criminal record
which, if checked, would have revealed a criminal record that included violent acts. In that case, the
employee sexually assaulted a woman while he was on a cross-country commercial trip. We held that
the driver’s contact with the woman was incidental to his employment, and the employer had no duty to
further inquire into the employee’s denial of a criminal record in the course of the hiring process. Id. at
1321-23.
[7] The pipe rack was for hauling pipe from construction trailers to job sites. The pipe rack was not
installed until at least eight months after Weese was hired.
[8] As we suggested in Connes, 831 P.2d at 1323, when driving is part of the job duties, the employer
has a greater responsibility in making the hiring decision than simply asking the employee whether she
or he possesses a valid driver’s license. Nevertheless, the fact that an applicant has had one or more
moving violations does not necessarily mean that she or he has a dangerous propensity for causing
accidents. Had Performance Plumbing inquired into Weese’s driving record instead of accepting his lie
on its face, it would have discovered his fault in causing two accidents. Thus, the existence of his
dangerous propensity could have been a jury question, if the Raleighs had come into contact with
Weese through his employment.
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Malorney v. B & L Motor Freight, Inc., 496 NE 2d 1086 – Ill: Appellate Court, 1st Dist. 1986 – Google Scholar
Malorney v. B & L Motor Freight, Inc., 496 NE 2d 1086 – Ill: Appellate Court, 1st Dist. 1986
Read
How cited
146 Ill. App.3d 265 (1986)
496 N.E.2d 1086
KAREN MALORNEY, Plaintiff-Appellee,
v.
B & L MOTOR FREIGHT, INC., Defendant-Appellant.
No. 85-2310.
Illinois Appellate Court — First District (5th Division).
Opinion filed July 18, 1986.
266
*266 Dowd & Dowd, Ltd., of Chicago (Michael E. Dowd and Joel S. Ostrow, of
counsel), for appellant.
Frank M. Bonifacic, of Madigan, Stanner, Kahn, Bonifacic & Getzendanner, and
William J. Harte, of William J. Harte, Ltd., both of Chicago, for appellee.
Order affirmed and cause remanded.
JUSTICE MURRAY delivered the opinion of the court:
This is an interlocutory appeal pursuant to Supreme Court Rule 308 (87 Ill.2d R.
308) by defendant B & L Motor Freight, Inc. (B & L), from a trial court order
denying its motion for summary judgment. This court granted defendant’s motion
for leave to appeal upon certification of the issue by the trial court. The issue
certified is whether defendant had a duty under the circumstances of this case to
investigate Edward Harbour’s nonvehicular criminal record and to verify his
negative response regarding criminal offenses which he furnished on his
employment application prior to employing him and furnishing him an over-theroad truck with sleeping facilities.
267
The circumstances of this case are as follows. Edward Harbour applied for a
position of over-the-road driver with defendant B & L. On the employment
application, Harbour was questioned as to whether he had any vehicular offenses
or other criminal convictions. His response to the vehicular question was verified
by B & L; however, his negative answer regarding criminal convictions was not
verified by B & L. In fact, Harbour had a history of convictions for violent sexrelated crimes and had been arrested the year prior to his employment with B & L
for aggravated sodomy of two teenage hitchhikers while driving an over-the-road
*267 truck for another employer. Upon being hired by B & L, Harbour was given
written instructions and regulations, including a prohibition against picking up
hitchhikers in a B & L truck.
Subsequently, on January 24, 1978, at an Indiana toll-road plaza, Harbour picked
up plaintiff Karen Malorney, a 17-year-old hitchhiker. In the sleeping compartment
of his truck, he repeatedly raped and sexually assaulted plaintiff, threatened to kill
her, and viciously beat her. After being released, plaintiff notified police. Harbour
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Malorney v. B & L Motor Freight, Inc., 496 NE 2d 1086 – Ill: Appellate Court, 1st Dist. 1986 – Google Scholar
was arrested, convicted, and sentenced to 50 years’ with no parole. Plaintiff’s
complaint charges defendant B & L with recklessness and wilful and wanton
misconduct in negligently hiring Harbour as an over-the-road driver without
adequately checking his background and providing him a vehicle with a sleeping
compartment. Plaintiff seeks compensatory and punitive damages from B & L.
Defendant B & L filed a motion for summary judgment contending that it had no
duty to verify Harbour’s negative response to the question regarding criminal
convictions. In denying defendant’s motion, the trial court found that (1) Harbour
was hired as an over-the-road driver and furnished with a truck equipped with
sleeping quarters; (2) B & L instructed Harbour not to pick up hitchhikers; and (3) it
is common knowledge that hitchhikers frequent toll plazas which would show that
B & L knew drivers are prone to give rides to hitchhikers. The court concluded that
these facts show that B & L had a duty to check Harbour’s criminal background
and certified the issue for interlocutory appeal.
Defendant argues that it had no duty to investigate Harbour’s nonvehicular criminal
background nor to verify his denial thereof because of a lack of foreseeability that
he would use the truck to pick up and sexually assault a hitchhiker. To impose
such a duty would be against public policy by placing too great a burden on
employers. On the other hand, plaintiff posits the argument that factual issues exist
which preclude summary judgment and require a jury determination. We agree
and must affirm the trial court for the following reasons.
• 1 Defendant correctly argues that the existence of a duty is a question of law to
be determined by the court, rather than by the factfinder. (Curtis v. County of Cook
(1983), 98 Ill.2d 158, 163, 456 N.E.2d 116, 119.) However, once a duty has been
found, the question of whether the duty was properly performed is a fact question
to be decided by the trier of fact, whether court or jury. Johnson v. Hoover Water
Well Service (1982), 108 Ill. App.3d 994, 1003, 439 N.E.2d 1284, 1290.
268
• 2, 3 The existence of a legal duty is not dependent on foreseeability *268 alone,
but includes considerations of public policy and social requirements. (Zimmerman
v. Netemeyer (1984), 122 Ill. App.3d 1042, 1047, 462 N.E.2d 502, 506.) In Illinois,
two duties, among others not pertinent here, are imposed by law on owners of
vehicles who permit or hire other persons to drive on our highways. The first duty
requires that the degree of care which an owner should exercise in selecting a
driver is that which a reasonable person would exercise under the circumstances.
(Tansey v. Robinson (1960), 24 Ill. App.2d 227, 236, 164 N.E.2d 272, 276-77.) An
owner or employer also owes a duty in connection with the entrustment of vehicles
to others. In other words, a vehicle owner has a duty to deny the entrustment of a
vehicle to a driver it knows, or by the exercise of reasonable diligence could have
known, is incompetent. (See Seward v. Griffin (1983), 116 Ill. App.3d 749, 754,
452 N.E.2d 558, 563.) In addition to these duties, it is well settled in Illinois that a
cause of action exists against an employer for negligently hiring a person the
employer knew, or should have known, was unfit for the job. Easley v. Apollo
Detective Agency, Inc. (1979), 69 Ill. App.3d 920, 931, 387 N.E.2d 1241, 1248.
• 4 B & L contends that a reasonable and prudent motor carrier could not foresee
that one of its drivers would rape and assault a hitchhiker. The court in Neering v.
Illinois Central R.R. Co. (1943), 383 Ill. 366, 367, 50 N.E.2d 497, in discussing
foreseeability stated that the ultimate injury must be the natural and probable result
of the negligent act or omission such that an ordinary and prudent person ought to
have foreseen as likely its occurrence as a result of the negligence. It is not
essential that one should have foreseen the precise injury which resulted from the
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Malorney v. B & L Motor Freight, Inc., 496 NE 2d 1086 – Ill: Appellate Court, 1st Dist. 1986 – Google Scholar
act or omission. 383 Ill. 366, 380, 50 N.E.2d 497.) This interpretation thus requires
an employer to exercise that degree of care reasonably commensurate with the
perils and hazards likely to be encountered in the performance of an employee’s
duty, i.e., such care as a reasonably prudent person would exercise in view of the
consequences that might reasonably be expected to result if an incompetent,
careless, or reckless agent were employed for a particular duty. Western Stone
Co. v. Whalen (1894), 151 Ill. 472, 485, 38 N.E. 241, 244.
269
• 5 Applying these principles to the present case, it is clear that B & L had a duty to
entrust its truck to a competent employee fit to drive an over-the-road truck
equipped with a sleeping compartment. Lack of forethought may exist where one
remains in voluntary ignorance of facts concerning the danger in a particular act or
instrumentality, where a reasonably prudent person would become advised, on the
theory that such ignorance is the equivalent of negligence. (See 57 Am.Jur.2d
Negligence sec. 56 (1971).) Bearing in mind the facts that B *269 & L gave Harbour
an over-the-road vehicle with a sleeping compartment and that B & L probably
knew, or should have known, that truckers are prone to give rides to hitchhikers
despite rules against such actions, the question now becomes one of fact —
whether B & L breached its duty to hire a competent driver who was to be
entrusted with a B & L over-the-road truck.
• 6 Regarding defendant’s public-policy argument, there is no evidence in the
record to justify the contention that the cost of checking on the criminal history of
all truck-driver applicants is too expensive and burdensome when measured
against the potential utility of doing so.
• 7 Finally, we note that a question of foreseeability is at times a question for the
court and at times, if varying inferences are possible, a question for the jury. (Ney
v. Yellow Cab Co. (1954), 2 Ill.2d 74, 83, 117 N.E.2d 74, 80.) In the present case,
B & L did have a duty to check into Harbour’s background so as to ascertain
whether he would be a fit employee. Based on the circumstances of this case, it is
apparent that reasonable persons could arrive at different conclusions as to
whether B & L used due care in the performance of this duty when it employed
Harbour. Questions which are composed of such qualities sufficient to cause
reasonable persons to arrive at different results should never be determined as
matters of law. (Ney v. Yellow Cab Co. (1954), 2 Ill.2d 74, 84, 117 N.E.2d 74, 80.)
Questions of negligence, due care, and proximate cause are questions of fact to
be determined by the factfinder. Johnson v. Hoover Water Well Service (1982),
108 Ill. App.3d 994, 1003, 439 N.E.2d 1284, 1290.
In affirming the trial court’s denial of summary judgment, we are not expressing
any opinion as to the resolution of the facts in this case. Plaintiff has the heavy
burden of proving that defendant B & L negligently performed a duty it owed her in
entrusting Harbour with an over-the-road truck, and if negligence is found, that it
proximately caused her injury. These questions, including the issue of whether
defendant negligently hired Harbour by not checking his criminal background, are
questions for the trier of fact and become a question of law only when the ultimate
facts have been determined by the factfinder.
For these reasons, the order denying summary judgment for defendant is affirmed
and the cause is remanded for further proceedings.
Affirmed and remanded.
LORENZ and PINCHAM, JJ., concur.
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Malorney v. B & L Motor Freight, Inc., 496 NE 2d 1086 – Ill: Appellate Court, 1st Dist. 1986 – Google Scholar
https://scholar.google.com/scholar_case?case=4195436759662276740&q=Malorney+v.+B%26L+Motor+Freight,+Inc.&hl=en&as_sdt=2006[11/3/2018 9:15:17 AM]
CHAPTER 7
Negligence and Strict Liability
TNT Well Service Inc. hired Melvin Clyde as a rig operator. Clyde’s duties called for him to
travel to various well sites within approximately 100 miles of Gillette, Wyoming. TNT provided
Clyde with a company-owned pickup, which he used for work-related purposes and for travel to
and from his home. Although TNT had a general policy of drug-testing prospective employees,
TNT did not drug-test Clyde before hiring him and furnishing him with the pickup. Neither did
TNT look into whether Clyde had any history of impaired driving or illegal drug use. Had TNT
done such checking, it would have discovered that during roughly the preceding eight years,
Clyde had been convicted twice for driving under the influence of alcohol and once for
possession of a controlled substance.
Late one afternoon approximately a year after he began working for TNT, Clyde was driving the
TNT pickup when it crossed the highway’s center line and collided head-on with a tractor-trailer
driven by Rodney Shafer (the tractor-trailer’s owner). Clyde died in the accident. A post-accident
blood test revealed the presence of controlled substances in his blood. Shafer sustained serious
injuries in the collision, and his tractor-trailer was damaged beyond repair.
Shafer and his wife sued TNT in a Wyoming court. In seeking to have TNT held liable, the
Shafers were unable to rely on a frequently involved legal basis for imposing liability on
employers. Under the doctrine of respondeat superior, an employer is liable for its employee’s
tort if the tort was committed within the scope of employment. Respondeat superior would not
apply in this case, however, for either of two reasons: First, evidence offered by TNT indicated
that Clyde had been fired from his job earlier in the afternoon of the accident (meaning that he
would not have been TNT’s employee at the time of the accident); second, even if Clyde was
still TNT’s employee at the time of the accident, he was outside the scope of employment
because he was driving in an area that was outside TNT’s business territory. (In this chapter, you
will read other cases in which the respondeat superior theory is applicable.)
However, respondeat superior’s inapplicability would not necessarily bar the Shafers from
succeeding in their case against TNT. Whereas respondeat superior provides a basis for an
employer to be held liable for an employee’s tort, an employer may sometimes be held liable for
the employer’s own tort. Look back over the facts set forth above and consider these questions as
you study Chapter 7:
Are there things that TNT failed to do, but probably should have done? If so, what? Why those
things?
Are there things that TNT did, but probably should not have done? If so, what? Why those
things?
How do the things you have identified relate to the above-described accident and to the Shafers’
attempt to have TNT held legally liable?
On what legal basis would the Shafers be relying in their lawsuit against TNT?
page 7-2
LOLearning Objectives
After studying this chapter, you should be able to:
7-1Identify the elements necessary for a valid negligence claim to exist (duty, breach of duty,
and causation of injury).
7-2Explain what the reasonable care standard contemplates.
7-3Explain the role of foreseeability in determining whether a defendant owed the plaintiff a
duty of reasonable care.
7-4Explain what goes into a determination of whether a defendant breached the duty of
reasonable care.
7-5Explain the differences among the respective duties of care owed by owners or possessors of
property to invitees, licensees, and trespassers.
7-6Explain what the doctrine of negligence per se does and when it applies.
7-7Identify the types of injuries or harms for which a plaintiff may recover compensatory
damages in a negligence case.
7-8Explain the difference between actual cause and proximate cause.
7-9Explain what an intervening cause is and what effect it produces.
7-10Explain the difference between traditional contributory negligence and the comparative
negligence doctrine now followed by almost all states.
7-11Explain the difference in operation between pure comparative negligence and mixed
comparative negligence.
7-12Identify circumstances in which strict liability principles, rather than those of negligence,
control a case.
THE INDUSTRIAL REVOLUTION THAT changed the face of 19th-century America created
serious strains on tort law. Railroads, factories, machinery, and new technologies meant
increased injuries to persons and harm to their property. These injuries did not fit within the
intentional torts framework because most were unintended. In response, courts created the law of
negligence.
Negligence law initially was not kind to injured plaintiffs. One reason was the fear that if infant
industries were held responsible for all the harms they caused, the country’s industrial
development would be seriously restricted. As a viable industrial economy emerged in the 20th
century, this concern began to fade. Also fading over the same period was the 19th-century belief
that there should be no tort liability without genuine fault on the defendant’s part. More and
more, the injuries addressed by tort law have come to be seen as the inevitable consequences of
life in a high-speed, technologically advanced society. Although 21st-century negligence rules
have not eliminated the fault feature, they sometimes seem consistent with a goal of imposing
tort liability on the party better positioned to bear the financial costs of these consequences. That
party often is the defendant. However, it is important to remember that even though negligence
law may seem to have become more pro-plaintiff in recent decades, statistics indicate that
defendants win negligence cases at least as often as plaintiffs do.
Because most tort cases that do not involve intentional torts are governed by the law of
negligence, the bulk of this chapter will deal with negligence principles. In a narrow range of
cases, however, courts dispense with the fault requirement of negligence and impose strict
liability on defendants. Strict liability’s more limited application will be addressed during the
latter part of this chapter. The chapter will conclude with discussion of recent decades’ tort
reform movement, whose primary aims are to reduce plaintiffs’ ability to prevail in tort cases and
limit the amounts of damages they may receive when they win such cases.
Negligence
LO7-1Identify the elements necessary for a valid negligence claim to exist (duty, breach of duty,
and causation of injury).
The previous chapter characterized negligence as conduct that falls below the level reasonably
necessary to protect others against significant risks of harm. The elements of a negligence claim
are that (1) the defendant owed a duty of care to the plaintiff, (2) the defendant committed a
breach of this duty, and (3) this breach was the actual and proximate cause of injury experienced
by the plaintiff. In order to win a negligence case, the plaintiff must prove each of these
elements, which will be examined in the following pages. Later in the chapter, defenses to
negligence liability will be considered.
page 7-3
Duty and Breach of Duty
Duty of Reasonable Care
LO7-2Explain what the reasonable care standard contemplates.
Negligence law rests on the premise that members of society normally should behave in ways
that avoid the creation of unreasonable risks of harm to others. As a general rule, therefore,
negligence law contemplates that each person must act as a reasonable person of ordinary
prudence would have acted under the same or similar circumstances. This standard for assessing
conduct is often called either the “reasonable person” test or the “reasonable care” standard. In
most cases, the duty to exercise reasonable care serves as the relevant duty for purposes of a
negligence claim’s first element. The second element—breach of duty—requires the plaintiff to
establish that the defendant failed to act as a reasonable person would have acted. Negligence
law’s focus on reasonableness of behavior leads to a broad range of applications in everyday
personal life (e.g., a person’s negligent driving of a car) and in business and professional
contexts (e.g., an employer’s negligent hiring of a certain employee or an accountant’s,
attorney’s, or physician’s negligent performance of professional obligations).
Recent years have witnessed attempts to extend negligence principles to contexts not previously
explored in litigation. For instance, numerous former National Football League (NFL) players
sued the NFL for alleged failures to disclose the full extent of the long-term health risks posed by
concussions (particularly of the repeated variety) and for alleged failures to develop appropriate
protocols that would guard against players being put back on the field too soon after a head
injury. Negligence was among the legal theories being invoked by the plaintiffs. The players and
the NFL eventually agreed to a settlement in which the NFL would, among other things, set up a
very large fund against which the ex-players could make claims.
Was the Duty Owed?
LO7-3Explain the role of foreseeability in determining whether a defendant owed the plaintiff a
duty of reasonable care.
Of course, there could not have been a breach of duty if the defendant did not owe the plaintiff a
duty in the first place. It therefore becomes important, before we look further at how the
reasonable person test is applied, to consider the ways in which courts determine whether the
defendant owed the plaintiff a duty of reasonable care.
Courts typically hold that the defendant owed the plaintiff a duty of reasonable care if the
plaintiff was among those who would foreseeably be at risk of harm stemming from the
defendant’s activities or conduct, or if a special relationship logically calling for such a duty
existed between the parties. Most courts today broadly define the group of foreseeable “victims”
of a defendant’s activities or conduct. As a result, a duty of reasonable care is held to run from
the defendant to the plaintiff in a high percentage of negligence cases—meaning that the
outcome of the case will hinge on whether the defendant breached the duty or on whether the
requisite causation link between the defendant’s breach and the plaintiff’s injury is established.
In Magri v. Jazz Casino Co., which follows, the court considers whether the defendant casino
owed and breached a duty of reasonable care to the plaintiff customer whose foot was injured
while he was playing blackjack.
Magri v. Jazz Casino Co., LLC275 So. 3d 352 (La. Ct. App.2019)
On January 18, 2012, Mr. Magri went to Harrah’s Casino [owned by Defendant Jazz Casino
Company, LLC] to celebrate his birthday. Mr. Magri was seated on a high stool at the blackjack
table, with an empty stool situated to Mr. Magri’s immediate left. Because Mr. Magri recently
had undergone a left knee replacement, he rested his left leg and ankle on the bottom of the
empty stool and faced the dealer. While Mr. Magri was playing blackjack, the pit boss called for
an employee to empty a trash can in the area. When the employee, Nakeisha McCormick,
attempted to empty the trash can, she moved the stool upon which Mr. Magri’s left foot was
resting. Mr. Magri claims that she yanked the stool, twisting his left foot and ankle. After the
incident, Harrah’s employees applied ice and wrapping to Mr. Magri’s left foot.
On January 15, 2013, Mr. Magri filed suit against Harrah’s and others alleging various theories
of negligence, including failure to exercise reasonable care, failure to warn of an unsafe
condition, and failure to properly train employees. After a two-day bench trial, on October 17,
2018, the trial court rendered a judgment in favor of Mr. Magri and against Harrah’s in the
amount of $601,689.31, after reducing the amount of the original judgment by 30%, based on
Mr. Magri’s comparative fault.
Harrah’s timely appealed.
CHAPTER 36
Third-Party Relations of the Principal and the Agent
You are vice president of acquisitions for a medium-sized consumer food products company,
Bon Vivant Foods Inc. The company’s board of directors has given you authority to negotiate
acquisitions of consumer food brands on behalf of Bon Vivant. The board has told you in written
and oral instructions that you have the power to acquire any consumer products brand if the
acquisition price is not greater than $30,000,000, which is the authority typically held by most
vice presidents of acquisitions for businesses like yours. The board’s written instructions also
indicate, however, that you have no authority to purchase or negotiate the purchase of a cola
drink brand. Others in your position in the consumer food industry typically have authority to
purchase a cola drink brand for their companies. The board also tells you that the company wants
to buy the Eddie’s ice cream brand from its owner, Eddie Ghahraman, at a price not greater than
$28,000,000. The board is fearful, however, that if Eddie knows the company wants to buy the
Eddie’s ice cream brand, he will demand a higher price. The board tells you, therefore, not to
disclose to Eddie that you are buying for Bon Vivant, and instead to make it appear that you are
buying for your own company. It suggests you make up a name for this fictitious company. You
decide to use the name LHIW Inc.
Assess the risks to you and Bon Vivant. Consider the following questions:
If you make a contract in the name of Bon Vivant to buy a snack-cracker brand for $15,000,000,
will Bon Vivant be bound on that contract?
If you make a contract in the name of Bon Vivant to buy a cola brand for $13,500,000, will Bon
Vivant be bound on that contract?
If you make a contract in the name of Bon Vivant to buy an organic canned soup brand for
$40,000,000, will Bon Vivant be bound on that contract? Will Bon Vivant be bound on that
contract if you present the contract to the board, the board decides to accept the contract, and
then the board later rejects the contract as too costly?
Suppose you make a contract for Bon Vivant to purchase the Eddie’s ice cream brand for
$26,200,000. The contract is signed by Eddie. You sign LHIW’s name and also your own name
as agent for LHIW. Who is liable on that contract?
LO LEARNING OBJECTIVES
After studying this chapter, you should be able to:
36-1Know when an agent has authority to bind a principal to a contract.
36-2Understand when an agent may be liable on contracts made for the principal.
36-3Recognize when an agent is able to make a principal liable for torts committed by the agent.
page 36-2
BY LETTING PRINCIPALS CONTRACT through their agents and thereby multiply their
dealings, agency law stimulates business activity. For this process to succeed, there must be rules
for determining when the principal and the agent are liable on the agent’s contracts. Principals
need to predict and control their liability on agreements their agents make. Also, third parties
need assurance that such agreements actually bind the principal. Furthermore, both agents and
third parties have an interest in knowing when an agent is bound on these contracts. The first half
of this chapter discusses the principal’s and the agent’s contract liability.
While acting on the principal’s behalf, agents sometimes harm third parties. Normally, this
makes the agent liable to the injured party in tort. Sometimes, moreover, a principal is liable for
an agent’s torts. Because tort judgments can be expensive, the rules for determining the
principal’s and the agent’s tort liability are of great concern to principals, their agents, and third
parties. Thus, we examine these subjects in this chapter’s second half.
The law in this chapter, as in Chapter 35, reflects the rules of the Restatement (Third) of Agency.
The Restatement (Third) was adopted by the American Law Institute in 2006.
Contract Liability of the Principal
LO36-1Know when an agent has authority to bind a principal to a contract.
A principal normally is liable on a contract made by an agent if the agent had actual or apparent
authority to make the contract on the principal’s behalf. Yet even when the agent lacks any
authority to contract, a principal may be bound by later ratifying a contract made by an
unauthorized agent.
Actual Authority An agent has actual authority to take an action “designated” or “implied” in the
principal’s manifestations to the agent and acts necessary or incidental to achieving the
principal’s objectives of the agency. The agent’s reasonable understanding of the principal’s
manifestations and objectives determines the agent’s actual authority. Actual authority, therefore,
is the authority the principal wants the agent to possess. It is based on communications or
manifestations from the principal to the agent.
Courts separate an agent’s authority into two parts: express and implied. Express authority is
actual authority that the principal has specified in very specific or detailed language. For
example, suppose that Microsoft instructs its agent Gates to contract to sell a Windows 10
software license for $175 or more. If Gates contracts to sell the software license to Dell for $200,
Microsoft is liable to Dell on the basis of Gates’s express authority. However, Gates would not
have express authority to sell the software license for $150 or to sell a different software license.
An agent generally has implied authority to do whatever it is reasonable to assume that the
principal wanted the agent to do, in light of the principal’s manifestations to the agent and the
principal’s objectives of the agency. Relevant factors include the principal’s express statements,
the nature of the agency, the acts reasonably necessary to carry on the agency business, the acts
customarily done when conducting that business, and the relations between principal and agent.
Implied authority usually derives from a grant of express authority by the principal. On occasion,
however, implied authority may exist even though there is no relevant grant of express authority.
Courts generally derive implied authority from the nature of the agency business, the relations
between principal and agent, customs in the trade, and other facts and circumstances. There may
be implied authority to make a certain contract if the agent has made similar past contracts with
the principal’s knowledge and without his objection or if the agent’s position usually gives an
agent the power to make a certain contract.
No matter what its source, an agent’s implied authority cannot contradict the principal’s express
statements. Thus, there is no implied authority to contract when a principal has limited her
agent’s authority by express statement or clear implication and the contract would conflict with
that limitation. But as we will see, apparent authority may still exist in such cases.
Examples of Implied Authority Courts have created general rules or presumptions for
determining the implied authority of certain agents in certain situations. For example:
1. An agent hired to manage a business normally has implied authority to make contracts that are
reasonably necessary for conducting the business or that are customary in the business. These
include contracts for obtaining equipment and supplies, making repairs, employing employees,
and selling goods or services. However, a manager ordinarily has no power to borrow money or
issue negotiable instruments in the principal’s name unless the principal is a banking or financial
concern regularly performing such activities.
page 36-3
2. An agent given full control over real property has implied authority to contract for repairs and
insurance and may rent the property if this is customary. But such an agent may not sell the
property or allow any third-party liens or other interests to be taken on it.
3. Agents appointed to sell the principal’s goods may have implied authority to make customary
warranties on those goods. In states that still recognize the distinction, a general agent described
in Chapter 35 is more likely to have such authority than a special agent.
Apparent Authority Apparent authority arises when the principal’s manifestations cause a third
party to form a reasonable belief that the agent is authorized to act in a certain way. In other
words, apparent authority is based on (1) manifestations by the principal to the third party (2)
that cause the third party to believe reasonably that the agent has such authority. Background
factors such as trade customs and established business practices often determine whether it is
reasonable for the third party to believe that the agent has authority. In other words, apparent
authority exists because under the circumstances it reasonably appears that the agent may act for
the principal, based upon the principal’s words or conduct (action or inaction).
Principals can give their agents apparent authority through the statements they make, or tell their
agents to make, to third parties and through the actions they knowingly allow their agents to take
with third parties. Thus, a principal might create apparent authority by telling a third party that
the agent has certain authority or by directing the agent to do the same. A principal might also
create apparent authority by appointing an agent to a position that customarily involves the
authority to make certain contracts. For instance, if Exxon makes Alba its gasoline sales agent,
and if that position customarily involves the power to sell gasoline, Alba would have apparent
authority to sell gasoline. Here, Exxon’s behavior in appointing Alba to the position of gasoline
sales agent, as reasonably interpreted in light of business customs, gives Alba apparent authority.
However, because agents cannot give themselves apparent authority, there would be no such
authority if, without Exxon’s knowledge or permission, Alba falsely told third parties that he was
Exxon’s gasoline sales agent.
Apparent authority protects third parties who reasonably rely on the principal’s manifestations
that the agent has authority. It assumes special importance in cases where the principal has told
the agent not to make certain contracts that the agent ordinarily would have actual authority to
make, but the third party knows nothing about this limitation and has no reason to know about it.
Suppose that Prince employs Arthur as general sales agent for its tennis racquet manufacturing
business. Certain warranties customarily accompany the racquets Prince sells, and agents like
Arthur ordinarily are empowered to give these warranties. But Prince tells Arthur not to make
any such warranties to buyers, thus cutting off Arthur’s express and implied authority. Despite
Prince’s orders, however, Arthur makes the usual warranties in a sale to Modell, who is familiar
with customs in the trade. If Modell did not know about the limitation on Arthur’s authority,
Prince is bound by Arthur’s warranties.
Agent’s Notification and Knowledge Sometimes, the general agency rules regarding notification
and knowledge affect a principal’s contract liability. If a third party gives proper notification to
an agent with actual or apparent authority to receive it, the principal is bound as if the
notification had been given directly to the principal. Similarly, notification to a third party by an
agent with the necessary authority is considered notification by the principal.
In certain circumstances, an agent’s knowledge of facts is imputed to the principal. This means
that the principal’s rights and liabilities are what they would have been if the principal had
known what the agent knew. Generally, an agent’s knowledge of facts or reason to know facts is
imputed to a principal when it is material to the agent’s duties to the principal. No imputation
occurs, however, if the agent acts adversely to the principal with an intent to act solely for the
agent’s own purposes or those of another person. Suppose that Ames, acting on behalf of Sony,
contracts with Target. Ames knows that Target is completely mistaken about a matter material to
the contract to purchase TVs. Even though Sony knew nothing about Target’s unilateral mistake,
Target probably can avoid its contract with Sony.
Ratification Ratification is a process whereby a principal binds himself to an unauthorized act
done by an agent, or by a person purporting to act as an agent. Usually, the act in question is a
contract. Ratification relates back to the time when the contract was made. It binds the principal
as if the agent had possessed authority at that time.
Conduct Amounting to Ratification Ratification can be express or implied. An express
ratification occurs when the principal manifests assent that his legal relations be affected, such as
stating orally that he wishes to be bound by page 36-4a contract that has already been made.
Implied ratification arises when the principal’s conduct justifies a reasonable assumption that he
consents to the agent’s act. Examples include the principal’s part performance of a contract made
by an agent or the principal’s acceptance of benefits under such a contract. Sometimes, even a
principal’s silence, acquiescence, or failure to repudiate the transaction may constitute
ratification. This can occur when the principal would be expected to object if he did not consent
to the contract, the principal’s silence leads the third party to believe that he does consent, and
the principal is aware of all relevant facts.
Additional Requirements Even if a principal’s words or conduct indicate an intent to ratify, other
requirements must be met before ratification occurs. These requirements have been variously
stated; the following list is typical.
1. The act ratified must be one that was valid at the time it was performed. For example, an
agent’s illegal contract cannot be made binding by the principal’s subsequent ratification.
However, a contract that was voidable when made due to the principal’s incapacity may be
ratified by a principal who has later attained or regained capacity.
2. The principal must have been in existence at the time the agent acted. However, as discussed
in Chapter 42, corporations may bind themselves to their promoters’ preincorporation contracts
by adopting such contracts.
3. When the contract or other act occurred, the agent must have indicated to the third party that
she was acting for a principal and not for herself. The agent need not, however, have disclosed
the principal’s identity.
4. The principal must have legal capacity at the time of ratification. For instance, an insane
principal cannot ratify.
5. The principal must have knowledge of all material facts regarding the prior act or contract at
the time it is ratified. Here, an agent’s knowledge is not imputed to the principal.
6. The principal must ratify the entire act or contract. He cannot ratify the beneficial parts of a
contract and reject those that are detrimental.
7. In ratifying, the principal must use the same formalities required to give the agent authority to
execute the transaction. As Chapter 35 stated, few formalities normally are needed to give an
agent authority. But when the original agency contract requires a writing, ratification likewise
must be written.
Note that a principal’s ratification is binding even if not communicated to the third party. Also,
once a principal has ratified a contract, the principal is estopped from denying its ratification if
the other party has been induced to make a detrimental change in position.
Intervening Events Certain events occurring after an agent’s contract but before the principal’s
ratification may cut off the principal’s power to ratify. These include (1) the third party’s
withdrawal from the contract, (2) the third party’s death or loss of capacity, (3) the principal’s
failure to ratify within a reasonable time (assuming that the principal’s silence did not already
work a ratification), and (4) where it would be inequitable to bind the third party.
Estoppel Closely connected to but different from apparent authority and ratification is the
concept of estoppel, that a person may be liable for an actor’s transaction with a third party who
justifiably is induced to make a detrimental change in position because he believed the actor had
authority to act for the person. The liable person must either
1.Intentionally or carelessly cause the third party’s belief or
2.Having notice that such belief might cause a third party to change his position, fail to take
reasonable steps to notify the third person of the facts.
Estoppel liability is based on the same concepts as promissory estoppel, which is covered in
contract law in Chapter 9.
Estoppel is different from apparent authority because it does not require that the purported
principal has made any manifestation that the purported agent can act for her. For example,
liability for estoppel can arise when a principal is informed that an agent is representing to a third
person that the agent has authority to act for the principal, when in fact she has no such actual or
apparent authority. Because the agent has made the manifestation—not the principal—no actual
or apparent authority exists. If, however, the third party justifiably changes position in reliance
on the agent’s representation, the principal may be estopped from denying the agent’s authority.
It is not clear from the Restatement (Third) when such third-party reliance may be reasonable.
In the following Frontier Leasing case, the Iowa Supreme Court considered whether a golf
course professional had authority to lease a beverage cart on behalf of the golf course and
whether the golf course had ratified the lease or was estopped to deny the authority of the golf
pro to make the lease.
page 36-5
Frontier Leasing Corp. v. Links Engineering, LLC
781 N.W.2d 772 (Iowa 2010)
In January 2004, Royal Links USA solicited Dave Fleming, golf professional and director of golf
for Links Engineering, doing business as Bluff Creek Golf Course, to purchase a nonmotorized
beverage cart. Royal Links told Fleming that advertising revenue from the beverage cart would
cover Bluff Creek’s monthly lease expenses for the cart. On January 21, Fleming, on behalf of
Bluff Creek, applied for financing for the beverage cart and signed a Royal Links USA credit
application. Royal Links sent Bluff Creek’s credit application to C&J Leasing Corp., which
approved Bluff Creek for credit. In February 2004, Fleming and C&J Leasing signed a lease
agreement for the beverage cart.
In 2005, Bluff Creek defaulted on the lease payments. C&J Leasing sent a default letter to Bluff
Creek stating that Bluff Creek could correct the default by paying $1,322. Otherwise, C&J
Leasing would require payment of the entire balance of $14,636, and Bluff Creek would have to
return the equipment.
Upon receiving this letter, the managing owner of Bluff Creek, Lance Clute, called C&J Leasing
and learned of the lease agreement signed by Fleming. Clute requested a copy of the lease, and
upon its receipt, he stopped all payments on the cart. Clute communicated to C&J Leasing that
he wanted the beverage cart removed from his property. Clute submitted an affidavit stating
Fleming did not have authorization to enter into financing agreements. Nonetheless, Bluff Creek
had made some payments on the cart lease to C&J Leasing prior to Clute learning about the
lease.
Bluff Creek was sued for breach of contract. The district court issued a summary judgment that
Fleming had authority to bind Bluff Creek on the contract and that Bluff Creek was liable to the
lessor, Frontier Leasing Corporation, which had acquired from C&J Leasing the rights to collect
on the lease. The Iowa Court of Appeals reversed, and Frontier Leasing appealed to the Iowa
Supreme Court.
Ternus, Chief Justice
An agency relationship can be established through the agent’s actual or apparent authority to act
on behalf of the principal.
Actual authority to act is created when a principal intentionally confers authority on the agent
either by writing or through other conduct which, reasonably interpreted, allows the agent to
believe that he has the power to act. Actual authority includes both express and implied
authority. Express authority is derived from specific instructions by the principal in setting out
duties, while implied authority is actual authority circumstantially proved. Thus, actual authority
examines the principal’s communications to the agent. Restatement (Third) of Agency § 2.01
(2006).
Apparent authority is authority the principal has knowingly permitted or held the agent out as
possessing. Apparent authority focuses on the principal’s communications to the third party.
Restatement (Third) of Agency § § 2.03, 3.03. In other words, apparent authority must be
determined by what the principal does, rather than by any acts of the agent.
A principal may also be liable under the doctrines of estoppel and ratification. Under the doctrine
of estoppel, the principal is liable if he (1) causes a third party to believe an agent has the
authority to act, or (2) has notice that a third party believes an agent has the authority and does
not take steps to notify the third party of the lack of authority. Restatement (Third) of Agency §
2.05. Moreover, based on principles of ratification, a principal may be liable when he knowingly
accepts the benefits of a transaction entered into by one of his agents.
The district court based its ruling that Fleming had actual and apparent authority to enter into the
lease on behalf of Bluff Creek on an affidavit submitted by the director and owner of Bluff
Creek, Lance Clute. Clute stated in his affidavit that Fleming was in charge of the day-to-day
operations of the golf course, Clute was aware of the existence of the beverage cart and did not
disavow the transaction, and Bluff Creek made payments on the cart from August 2004 through
March 2005. The district court noted that Bluff Creek did not provide an affidavit from Fleming
confirming the testimony of Clute. While these facts do support a finding of an agency
relationship, an examination of Clute’s entire affidavit could also cause one to conclude that
Fleming did not have actual or apparent authority to enter into the lease and that Clute did not
ratify the transaction or act in any way that would estop Bluff Creek from rejecting the
transaction.
In particular, Clute’s affidavit refutes the existence of actual authority with Clute’s statement that
Fleming was not authorized to enter into any financing agreements or transactions for the
purchase, lease, or financing of capital assets like the beverage cart, especially given the lease’s
hefty amount of $19,000. Clute’s affidavit refutes the existence of apparent authority with the
statement that it is customary in the golf industry to hire a PGA golf professional to manage the
day-to-day operations of a golf course, and vendors are aware that such professionals do not have
authority to enter into the type of transaction at issue here. Clute’s affidavit also refutes that
estopped from rejecting the transaction and that Bluff Creek ratified the lease. It does so with
Clute’s explanation that, when he saw the cart, he thought it was an “even trade for
advertisement” such as Bluff Creek[s]’ practice with scorecard advertising. Clute page 366stated that with scorecard advertisements, Bluff Creek is given the scorecards for free in
exchange for the advertisements on the cards. Clute’s affidavit also refutes the doctrines of
estoppel and ratification with its statements that he first learned of the lease through a collection
letter that was received when Fleming was no longer employed with Bluff Creek, that he
immediately requested a copy of the lease when it could not be found in Bluff Creek’s records,
that he made the cart available for repossession after determining that the lease was a “scam,”
and that the cart “to this day… sits idle in [Bluff Creek’s] garage taking up space.” Finally, while
Bluff Creek does not submit an affidavit from Fleming supporting Clute’s affidavit testimony, a
jury nevertheless could believe Clute, finding in Bluff Creek’s favor. The absence of testimony
from Fleming simply goes to the weight of Bluff Creek’s evidence, which is something for the
jury to decide, not a court on summary judgment.
Because reasonable minds could draw different inferences from the record as to whether Fleming
had authority to bind Bluff Creek to the equipment lease, we reverse the district court’s grant of
summary judgment.
Judgment for Bluff Creek affirmed. Remanded to the trial court.
Contracts Made by Subagents The rules governing a principal’s liability for an agent’s contracts
generally apply to contracts made by subagents. If an agent has authorized a subagent to make a
certain contract and this authorization is within the authority granted the agent by the principal,
the principal is bound to the subagent’s contract.
Also, a subagent contracting within the authority conferred by the principal (the agent) binds the
agent in an appropriate case. In addition, both the principal and the agent probably can ratify the
contracts of subagents.
Contract Liability of the Agent
LO36-2Understand when an agent may be liable on contracts made for the principal.
When are agents liable on contracts they make on their principals’ behalf? For the most part, this
question depends on a different set of variables than those determining the principal’s liability.
The most important of these variables is the nature of the principal. Thus, this section first
examines the liability of agen…
