law101-Interactive Activity

Choose one of the following cases, then analyze the cases in the Questions and Problems.

Case A: Chapter 33 (5 and 6) and Chapter 34 (5 and 6) in Dynamic Business Law

Case B: Chapter 33 (7 and 9) and Chapter 34 (8 and 9) in Dynamic Business Law

For each assigned case, write an analysis of the issue based on the following criteria:

Identify the parties involved in the case dispute (who is the plaintiff and who is the defendant).

Identify the facts associated with the case and fact patterns.

Develop the appropriate legal issue(s) in question (i.e., the specific legal issue between the two parties). Provide a judgment on who should win the case – be clear.

Support your decision with an appropriate rule of law.

Be prepared to defend your decision and to objectively evaluate the other points of view.

Questions & Problems
1. Explain when a principal is or is not contractually
liable for agreements made by an agent.
2. When might a principal be liable for torts commit-
ted by an agent?
3. What terminates an agency relationship?
4. Land Transport employed Oscar Gonzalez to oper-
ate a Land Transport tractor-trailer rig. One day
while working, Robert Nichols and Gonzalez were
driving west on Route 9 toward Brewer, Maine.
Gonzalez tried several times to pass Nichols in
no-passing zones. Angered by Gonzalez’s driving,
Nichols made an obscene gesture to Gonzalez on
two occasions. Thereafter, Gonzalez began to tail-
gate Nichols for several miles and continued to try
to pass him. The two trucks then stopped at a traffic
light. Nichols saw Gonzalez get out of his cab, and
Nichols did the same. On approaching Gonzalez,
Nichols attacked Gonzalez with a rubber-coated
chain-linked cable. Nichols then grabbed Gonzalez,
and they fell to the ground. During the scuffle,
Gonzalez got up, brandished a knife, and stabbed
Nichols. Nichols sued Gonzalez and Land Trans-
port for the injuries he suffered. Land Transport
moved for summary judgment. Was Land Trans-
port successful with its motion for summary judg-
ment? Why? [Nichols v. Land Transport Corp., 103
F. Supp. 2d 25 (1999).]
5. Eleanor Schock discovered that her late father’s
attorney, Pat Nero, had embezzled from the estate of
her father, Miller, including the sum of $23,331.72
in Miller’s savings account at Old Stone Bank. At
the time Nero withdrew the funds, Old Stone was
being run under the conservatorship of the Reso-
lution Trust Corporation (RTC), the FDIC’s statu-
tory predecessor. As holder of her father’s estate’s
claims, Schock sued the FDIC, as receiver for Old
Stone, for breach of contract, alleging that the
bank permitted an unauthorized signatory (Nero)
to withdraw funds on deposit in the Miller sav-
ings account. The FDIC receiver argued that the
bank had paid Nero, a fiduciary who was autho-
rized to receive the money in the account, in good
faith and should not be held liable because Nero
misappropriated the money. Schock argued that
Nero’s apparent authority to withdraw the money
as Miller’s agent ended by operation of law
when Miller died. In response, the FDIC receiver
argued that apparent agency terminates only
when a third party has notice of the termination.
Schock offered evidence that the bank had actual
notice that Miller had died when it permitted the
Nero savings account withdrawal. Schock’s evi-
dence included a bank employee’s statement that
the bank had in place a procedure for checking the
obituaries in the local paper to see whether bank
clients had died, as well as the fact that an obitu-
ary for Miller appeared in that paper. Was Schock
successful at trial? Did the publication of an obit-
uary constitute actual notice? [Shock v. United
States, 254 F.3d 1 (2001).]
6. Water, Waste, & Land, Inc., is a land development
and engineering company doing business under the
name “Westec.” Donald Lanham and Larry Clark
were managers and also members of Preferred
Income Investors (PII), LLC. PII is a limited lia-
bility company. Clark contacted Westec about the
possibility of hiring Westec to perform engineering
work in connection with a development project. In
the course of preliminary discussions, Clark gave
his business card to representatives of Westec. The
business card included Lanham’s address, which
was also the address listed as PII’s principal office
and place of business. While PII’s name was not on
the business card, the letters “PII” appeared above
the address on the card. However, there was no
indication as to what the acronym meant or that PII
was a limited liability company. Although Westec
never received a signed contract, it did receive ver-
bal authorization from Clark to begin work. Westec
completed the engineering work and sent a bill for
$9,183.40 to Lanham. No payments were made
on the bill. Westec filed a claim against Clark and
Lanham individually as well as against PII. At trial,
PII admitted liability for the amount claimed by
Westec. Accordingly, the court dismissed Clark
from the suit, concluding that he could not be held
personally liable, and entered judgment in the
amount of $9,183 against Lanham and PII. Lanham
appealed. On appeal, was Lanham found liable for
the amount due to Westec? Why? [Water, Waste, &
Land v. Lanham, 955 P.2d 997 (1998).]768
Part 6 Agency
7. Maria D., the plaintiff, alleged that she was raped
by an on-duty security guard who worked for the
Westec company. At approximately 2 a.m., she was
driving along Pacific Coast Highway. The Westec
security guard detained her by shining a spot-
light from his patrol car into her moving vehicle.
He asked, “How much have you been drinking
tonight?” Maria D. thought the security guard was
a police officer because the spotlight was shining
in her face. The security guard ordered Maria D.
to perform field sobriety tests and then told her
to get her purse because he was going to take
her to the station. Instead, Maria D. says he took
her to another location where he raped her. The
security guard denied that he had pulled the plain-
tiff over. He testified at his deposition that he saw
her car on the side of the road and stopped to offer
assistance and at no point did he rape her. At the
time of the encounter, the security guard was on-
duty, wearing a uniform and driving a Westec vehi-
cle equipped with a spotlight, and he carried a gun
and handcuffs on his belt and had a second firearm
on the front passenger seat of his car. Maria D. sued
Westec, claiming that the company was vicariously
liable for the actions of the security guard under
the doctrine of respondeat superior. Westec argues
that the security guard was acting outside the scope
of his employment when he allegedly detained and
raped her. Do you think the court found that Westec
should be held vicariously liable under respondeat
superior? Why or why not? [Maria D. v. Westec
Residential Security, Inc., 85 Cal. App. 4th 125
(2000).]
8. Doug Hartmann Productions, L.L.C., and the
Regal Riverfront Hotel, which was owned by Gate-
way Hotel Holdings, entered into an agreement
for a professional boxing match to be held at the
hotel. The contract contained a provision stating
that a $5 million indemnity insurance policy was
to be provided and Hartmann Productions was to
provide a doctor at ringside for the match and an
ambulance on stand-by at the hotel the night of
the event. Maldonado was a professional boxer
who participated in the match. The fight ended
when Maldonado was knocked out and later lost
consciousness in his dressing room. There was
no ambulance on site. An ambulance was called,
and Maldonado was taken to a hospital. He suf-
fered severe brain damage as a result of his injury.
The damage could have been less severe had an
ambulance been on-site for the boxing match.
Maldonado sued Gateway, asserting that Hartmann
Productions was an independent contractor hired
by Gateway to perform an inherently dangerous
activity. As such, Gateway had a duty to take spe-
cial precautions to prevent injury during the inher-
ently dangerous activity. Therefore, Maldonado
argued that Gateway should be held liable for the
damages resulting from the boxing match. Should
the boxing match be considered an inherently dan-
gerous activity? Did the court find Gateway liable?
[Maldonado v. Gateway Holdings, L.L.C., 154
S.W.3d 303 (2003).]
9. In 1989, William Petrovich’s employer, the Chicago
Federation of Musicians, provided health care cov-
erage to all of its employees by enrolling them all
in Share Health Plan of Illinois. Share is an HMO
and pays only for medical care that is obtained
within its network of physicians. To qualify for
benefits, a Share member must select a primary
care physician, who will provide that member’s
overall care and authorize referrals when neces-
sary. Share gives its members a list of participating
physicians from which to choose. Inga Petrovich,
William’s wife, selected Dr. Marie Kowalski from
Share’s list and began seeing Kowalski as her pri-
mary care physician.
In September 1990, Mrs. Petrovich saw Kowalski
because she was experiencing persistent pain in
her mouth, tongue, throat, and face. She also com-
plained of a foul mucus in her mouth. Kowalski
referred her to Dr. Friedman, an ear, nose, and throat
specialist who had a contract with Share. When
Friedman ordered that an MRI be done, Kowalski
refused and instead sent a copy of an old MRI. In
June 1991, after Mrs. Petrovich had made multiple
visits to both doctors, Friedman found cancerous
growths in Mrs. Petrovich’s mouth. He performed
surgery to remove the cancer later that month.
Petrovich subsequently sued Share for medi-
cal malpractice. The complaint alleges that both
Kowalski and Friedman were negligent in failing
to diagnose Inga Petrovich’s cancer in a timely
manner and that Share is vicariously liable for
their negligence. Share filed a motion for summary
judgment, arguing that it cannot be held liable for
the negligence of Kowalski or Friedman because
they were acting as independent contractors, not asChapter 34 Liability to Third Parties and Termination
Share’s agents. How should the court decide? What
reasons should it give? [Petrovich v. Share Health
Plan of Illinois, 719 N.E.2d 756 (1999).]
10. Lisa was 19 years old and pregnant when she had to
seek treatment at Memorial Hospital’s emergency
room. The initial examining physician ordered an
ultrasound for Lisa. Bruce Wayne Tripoli, the ultra-
sound technician, administered the examination.
A third party was not present during the ultrasound.
Tripoli asked the plaintiff if she would like
to know the sex of the baby. When she said yes,
Tripoli falsely explained that to determine the
sex he would have to scan “much further down.”
Then Tripoli inappropriately touched the plaintiff.
Believing that contact in that private area was part
769
of the examination, Lisa did not stop Tripoli. After
describing Tripoli’s behavior to her regular obste-
trician, Lisa discovered that the behavior was not
necessary and was inappropriate. Lisa then brought
suit against Tripoli and the hospital, among others.
The issue was whether Tripoli committed the sex-
ual assault within the scope of his employment,
thereby rendering the hospital “vicariously liable.”
For the type of liability the plaintiff was seeking,
the employment situation must create a foreseeable
risk that the employee might commit an offense.
Was the hospital liable? [Lisa M. v. Henry Mayo
Memorial Hospital, 907 P.2d 358 (Supreme Court
of California 1995).]
Looking for more review material?
The Online Learning Center at www.mhhe.com/kubasek2e contains this chapter’s “Assignment on the
Internet” and also a list of URLs for more information, entitled “On the Internet.” Find both of them in
the Student Center portion of the OLC, along with quizzes and other helpful materials.回
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Questions & Problems
1. What are the similarities and differences between
the types of agency relationships?
2. How is apparent agency, or agency by estoppel, dif-
ferent from expressed agency?
3. What are a principal’s duties to an agent and an
agent’s duties to a principal?
4. William Roberts operated a McDonald’s restaurant
under a franchise agreement with McDonald’s Cor-
poration. Roberts hired 23-year-old David Mabin,
who was just released from jail for robbery, drug
use, and theft, as an hourly worker. Soon Roberts
promoted Mabin to assistant manager on the night
shift at the restaurant. A 15-year-old girl began
•7•9
Chapter 33 Agency Formation and Duties
working at the McDonald’s, and she quickly became
involved with Mabin, who provided her with free
food, alcohol, and drugs (including ecstasy) and
kissed her openly in the workplace. Just before
the girl’s 16th birthday, Mabin took her to a motel
where they spent the night and engaged in sexual
intercourse. The girl and her family later brought
suit against McDonald’s Corporation on the basis
that McDonald’s Corporation was the principal
to Roberts through apparent agency. McDonald’s
Corporation was supposed to be a business with
a wholesome reputation and safe workplace, but
instead the minor was taken advantage of by her
assistant manager. The girl argued for apparent
agency with McDonald’s as the principal because
she claimed that as far as she was concerned, she
worked for McDonald’s Corporation, not just the
franchise. She had a McDonald’s logo on her uni-
form, her paycheck, and restaurant products. How-
ever, the application she filled out for employment
stated, “I understand that my employer is an inde-
pendent Owner/Operator of a McDonald’s fran-
chise and that I am not employed by McDonald’s
Corporation or any of its subsidiaries. The inde-
pendent Owner/Operator of this restaurant is solely
responsible for all terms, conditions and any other
issues concerning my employment.” Was there an
apparent agency relationship between McDonald’s
Corporation and the franchise? Why or why not?
[D.L.S. et al. v. David Mabin et al., 130 Wn. App.
94; 121 P.3d 1210 (2005).]
5. R. Edwin Powell was CEO and president of
CAIRE, Inc., in addition to being a minority share-
holder in Holdings, owning 11.9 percent of the
company. In 1996, a group of investors decided to
acquire Holdings and CAIRE. They formed MVE
Investors, LLC. MVE purchased the shares of three
retiring Holdings shareholders as part of a recapi-
talization of the company. MVE paid the retiring
shareholders $125.456 per share and became its.
747
price the retiring shareholders had been paid at the
recapitalization. O’Halloran maintained he did not
promise Powell that Holdings would buy Powell’s
stock. But O’Halloran conceded that at the meeting
he gave Powell a detailed chart showing the num-
ber of shares Powell owned and how much money
Powell would receive if those shares were sold or
redeemed at the same price the retiring shareholders
had received. O’Halloran also admitted he wrote a
letter terminating Powell’s employment if he chose
not to resign. In the letter, O’Halloran expressed
Holdings’ intent to buy Powell’s stock in the same
manner as it had bought the retiring shareholders’
stock. Holdings fired O’Halloran from his posi-
tion as CEO and president. Powell brought action
against Holdings, claiming, among other things,
that Holdings had contracted to buy back his shares
and then breached that contract. The district court
found that Holdings had contracted to buy Pow-
ell’s stock and breached the contract. The district
court awarded Powell the amount Powell would
have received had he sold his nonpledged stock for
$125.456 per share. Holdings appealed, claiming
that O’Halloran did not have authority to agree on
its behalf to buy Powell’s stock, the district court’s
finding that O’Halloran and Powell entered into
a contract was contrary to the evidence, and any
agreement was not the parties’ final expression, is
void for lack of consideration, and is against pub-
lic policy. As an agent of Holdings, did O’Halloran
enter into a contract on Holdings’ behalf? Why?
[Powell v. MVE Holdings, Inc., 626 N.W.2d 451
(2001).]
6. Ward Manufacturing, Inc., decided to construct a
casting facility on its property located in Blossburg,
Pennsylvania. Ward entered into a written contract
with Welliver-McGuire, Inc. Under the terms of the
contract, Welliver agreed to indemnify Ward for
any and all claims for bodily injury and property
damage arising out of the performance of the work
++ 4
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94; 121 P.3d 1210 (2005).]
5. R. Edwin Powell was CEO and president of
CAIRE, Inc., in addition to being a minority share-
holder in Holdings, owning 11.9 percent of the
company. In 1996, a group of investors decided to
acquire Holdings and CAIRE. They formed MVE
Investors, LLC. MVE purchased the shares of three
retiring Holdings shareholders as part of a recapi-
talization of the company. MVE paid the retiring
shareholders $125.456 per share and became its
primary owner. Powell did not sell his stock at this
time and remained CAIRE’s CEO and president.
In response to CAIRE’s financial setbacks, David
O’Halloran, Holdings’ CEO and president, met
with Powell on January 23, 1997, to fire Powell.
While the two men agreed on a number of provi-
sions in Powell’s severance package, they disagreed
on the terms for the disposition of Powell’s stock.
Powell testified that O’Halloran agreed, on behalf
of Holdings, to buy Powell’s stock at the same
enter into a contract on Holdings’ behalf? Why?
[Powell v. MVE Holdings, Inc., 626 N.W.2d 451
(2001).]
6. Ward Manufacturing, Inc., decided to construct a
casting facility on its property located in Blossburg,
Pennsylvania. Ward entered into a written contract
with Welliver-McGuire, Inc. Under the terms of the
contract, Welliver agreed to indemnify Ward for
any and all claims for bodily injury and property
damage arising out of the performance of the work
identified in the contract. Welliver assumed control,
possession, and responsibility over the construc-
tion site throughout the project. Ward did, how-
ever, maintain an on-site representative to act as
liaison and monitor the status of the project. Ward
also had a safety representative on-site periodically
to inspect the work site. Jonathon Olin worked as
a carpenter for Welliver. Olin, while engaged in
surveying activities on the Ward construction site,
fell into an unbarricaded excavation pit allegedly
748
Part 6 Agency
•7•9
covered with water and mud. As a result of the fall,
Olin purportedly suffered severe injuries. Since the
date of the accident, Olin had received total disabil-
ity workers’ compensation benefits from Welliver.
Olin brought suit against Ward for negligence.
Ward argued that Olin, through Welliver, was an
independent contractor and that Ward therefore
was not liable to Olin for damages. Furthermore,
Ward argued that Welliver, and not Ward, was in
charge of the site. Ward then moved for summary
judgment. Was Ward successful in its motion for
summary judgment? Why? [Olin v. George E.
Logue, Inc., 119 F. Supp. 2d 464 (2000).]
7. Ford Motor Company is the defendant in several
product liability suits pending in the circuit court of
Greene County. In each case, Ford raised a defense
of improper venue and moved to transfer the case
to a county where venue was proper. Venue in Mis-
souri is determined by statute, which requires that
actions be filed where the cause of action occurred
or where the corporation has an office or agent con-
ducting regular business. The cause of action was
not in Greene County, and Ford does not have an
office in Greene County. However, Ford Motor
Credit Company, Ford’s wholly-owned subsidiary,
does maintain an office in Greene County. Ford
Credit has its own offices and directors. It also has
its own articles of incorporation and is organized
under the laws of Delaware. Its principal place of
business is Dearborn, Michigan. Ford Credit is
a vehicle or a dealer’s inventory purchases. Is Ford
Credit an agent of Ford Motor Company? Why?
[State ex rel. Ford Motor Co. v. Bacon, 63 S.W.3d
641 (2002).]
8. John Ray Lawrence, an employee of H.W. Campbell
Construction Company, was killed when his head
was crushed in the “pinch point” area of a crane.
Coastal Marine Services of Texas, Inc., owned the
crane, and Campbell employees were using it on
Coastal’s property when the accident occurred.
Campbell took custody of the crane and began con-
tinued occupation of Coastal’s property. Campbell
was an independent contractor of Coastal, and no
written contract existed between the two com-
panies. Coastal employees were not directing
or supervising Campbell’s work on the project,
nor were they on the job site when the accident
occurred. Lawrence’s surviving family and estate
sued Campbell and Coastal, alleging, among
other things, negligence. During the trial Coastal
asserted that the Lawrences had presented no evi-
dence that Coastal retained the right to control
Campbell’s work, a prerequisite for finding Coastal
liable under a premises liability theory. The trial
court agreed and submitted an instruction preclud-
ing a finding of negligence based on the manner
in which Coastal controlled the premises. The jury
found no negligence on Coastal’s part. At trial,
in response to a series of hypothetical questions,
Campbell employees testified that they would have
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