Archive for the ‘Agency’ Category

Ethics and Ellipsis. Ly v. Jimmy Carter Commons, LLC (Ga. 2010)

Thursday, February 7th, 2013

Probably, every lawyer has used an ellipsis to show that a portion of the text was left out of a quotation. But what are the ethics of elision and inclusion?

Consider, if you will, the opinion in Ly v. Jimmy Carter Commons, LLC, 286 Ga. 831, 691 S.E.2d 852 (2010). A manager of an LLC (Byun) purported to borrow money on behalf of the LLC in connection with a real estate development. As part of the closing documents, the manager gave the lender a purported “Unanimous Consent of the Manager and Members” that authorized the manager to borrow the money, sign the promissory note, and the mortgage on the LLC’s land to secure payment of the note. As it turned out, one of the signatures was forged. When the LLC defaulted on the note, the LLC sued the lender to enjoin foreclosure, and to void the note and mortgage, on the grounds that the manager lacked the authority to borrow the money, or to sign the note and the mortgage. The trial court granted summary judgment in favor of the LLC. The Georgia Supreme Court reversed, holding that there was a question of fact.

What is interesting about the opinion is not the result; rather it is the reasoning of the opinion, and the way the opinion used the Georgia LLC statute.

* * * … there is still a genuine issue of material fact as to whether Appellants had knowledge that the unanimous consent documents were ineffective and did not give Byun the authority to act alone on behalf of Jimmy Carter Commons.

[T]he act of any manager [of a limited liability company] … binds the limited liability company, unless the manager so acting has, in fact, no authority to act for the limited liability company in the particular matter, and the person with whom he or she is dealing has knowledge of the fact that the manager has no such authority. (Emphasis supplied.)

OCGA § 14-11-301(b)(2). Thus, “[n]o act of a manager … in contravention of a restriction on authority shall bind the limited liability company to persons having knowledge of the restriction.” OCGA § 14-11-301(d).

Consequently, even if Byun acted beyond his authority as a manager of Jimmy Carter Commons, the limited liability company may still be bound by his actions if Appellants did not know that he lacked such authority. In its summary judgment order, the trial court did not cite, and Jimmy Carter Commons has not identified, undisputed evidence showing that Appellants knew that Choi’s signatures on the consent documents were forged. * * *

691 S.E.2d at 853.

Here is the complete text of Section 14-11-301:

§ 14-11-301. Powers, duties, and authority of members and managers

(a) Except as provided in subsection (b) of this Code section, every member is an agent of the limited liability company for the purpose of its business and affairs, and the act of any member, including, but not limited to, the execution in the name of the limited liability company of any instrument for apparently carrying on in the usual way the business and affairs of the limited liability company of which he or she is a member, binds the limited liability company, unless the member so acting has, in fact, no authority to act for the limited liability company in the particular matter, and the person with whom he or she is dealing has knowledge of the fact that the member has no such authority.

(b) If the articles of organization provide that management of the limited liability company is vested in a manager or managers:

(1) No member, acting solely in the capacity as a member, is an agent of the limited liability company; and

(2) Every manager is an agent of the limited liability company for the purpose of its business and affairs, and the act of any manager, including, but not limited to, the execution in the name of the limited liability company of any instrument for apparently carrying on in the usual way the business and affairs of the limited liability company of which he or she is a manager, binds the limited liability company, unless the manager so acting has, in fact, no authority to act for the limited liability company in the particular matter, and the person with whom he or she is dealing has knowledge of the fact that the manager has no such authority.

(c) An act of a manager or a member that is not apparently for the carrying on in the usual way the business or affairs of the limited liability company does not bind the limited liability company unless authorized in accordance with a written operating agreement at the time of the transaction or at any other time.

(d) No act of a manager or member in contravention of a restriction on authority shall bind the limited liability company to persons having knowledge of the restriction.

(emphasis added).

Any partnership lawyer will recognize subsections (a), (b)(2), and (d) as taken from section 9 of the Uniform Partnership Act, and adapted for member-managed and manager-managed LLCs. Any partnership lawyer will also recognize the centrality of the language omitted by the court, especially the portion in bold italics. As written, Section 14-11-301 conditions a manager’s power to bind the LLC by an unauthorized act to acts “apparently carrying on the the usual way the business and affairs of the LLC.” As subsection (c) makes clear, unauthorized acts that are not apparently carrying on in the usual way the business and affairs of the LLC do not bind the LLC. The result of the misquotation–the ellipsis–is a radical expansion of the apparent authority of LLC’s manager: not just usual acts, but any act, without regard to its nature.

This seems to me to be a particularly pernicious use of the ellipsis; one that changes the character of the quotation. Even non-lawyers recognize that intentionally omitting important information is unethical. Thanks to Seinfeld, we even have an expression that describes an elision made in bad faith: “yada, yada.

The question here is whether the justices on the Court knew that a key part of the statute had been dropped out. One might attribute the misquotation to the not-uncommon phenomenon of unfamiliarity with agency principles, and unincorporated business entity law, or, instead, to an overcrowded docket. Still, it is hard to imagine that none of the justices read Section 14-11-301 closely, or that, on close reading, none noticed its limits on apparent authority.

That said, the result–overturning the summary judgment–is probably correct. Whether borrowing money is apparently carrying on in the usual way the LLC’s business is a question of fact that turns on the nature of the LLC’s business. Jimmy Carter Commons, LLC seems to have been a real estate development 0company. Such companies are more likely to be customary frequent borrowers than, say, a company selling advertising slots on a border radio station. See, Burns v. Gonzalez, 439 S.W.2d 128 (Tex Civ. App. 1969).

But, as I suggested in my earlier post, Conflating Tests for Agents and Servants, there is no such thing as a “harmless” misstatement of the law by a court. Given that the misstatement here is by the Georgia Supreme Court, only a later opinion of that court can put Georgia law back on the right course.

Gary Rosin

Conflating Tests for Agents and Servants: Greater Houston Radiation Oncology, P.A. v. Sadler Clinic Association, P.A. (Tex. App. 2012)

Monday, January 28th, 2013

Courts are prone to use “agent” when they mean “servant.” Many opinions involving the application of respondeat superior use “agent,” instead of “servant.” That is a mistake, in that principals are generally not liable for the incidental torts of agents; rather masters are liable for the torts of servants committed in the scope of employment. Such opinions then define “agent” using the test for whether someone is a servant: does the putative master (often also improperly called the principal) have the right to control the conduct of the person or the details of the work?

At this point you might wonder what the problem is: regardless of nomenclature, the court applied the right test for potential respondeat superior liability. Even before the advent of databases of opinions that let you search cases for words, there were Words and Phrases, West head-notes, and the rote application of sentences taken from opinions.

The danger in such opinions is that a later court might use the wrong test for control in a case where the issue is whether a person was an agent. That was one of the issues confronted by the court in Greater Houston Radiation Oncology, P.A. v. Sadler Clinic Association, P.A., 384 S.W.3d 875 (Tex. App. 2012) (slip opinion). Greater Houston Radiation Oncology, P.A. (and its affiliates) agreed to the operate, maintain, and provide professional services for, a radiation oncology center on behalf of Sadler Clinic. The relationship between the two soon deteriorated in claims and counter-claims.

One of the claims was that Greater Houston Radiation Oncology (or one of its affiliates) had breached the fiduciary duties that it owed Sadler Clinic. The court held that no fiduciary duties were owed Sadler Clinic, because none of the Greater Houston Radiation Oncology companies was its agent:

To prove an agency relationship between parties, the party asserting the agency must prove the principal has the right to assign the agent’s task and the right to control the means and details by which the agent will accomplish its assigned task.

Slip Op., at 39 (emphasis added). The two cases relied on by the court, Hanna v. Vastar Res., Inc., 84 S.W.3d 372 (Tex.App. 2002) and O’Bryant v. Century 21 S. Cent. States, Inc., 899 S.W.2d 270 (Tex.App. 1995), were both respondeat superior cases in which the court had incorrectly used “agent,” rather than “servant.”

Greater Houston Radiation Oncology, P.A. v. Sadler Clinic Association, P.A. is similar to Green v. H & R Block, Inc., 355 Md. 488, 735 A.2d 1039 (1999). in Green, taxpayers who had used H & R Block tax preparation services, and who also taken out “Refund Anticipation Loans” arranged by H & R Block, sued H & R Block for breach of fiduciary duty. The trial court dismissed the taxpayers’ claims, on the ground that H & R Block was not their agent. The trial court reasoned that, among other things, the taxpayers did not control the details of H & R Block’s work. The Court of Appeals held that the trial court had improperly applied the test for the master-servant relationship, saying:

H & R Block misconstrues the level of control necessary for establishing a principal-agent relationship. The control a principal must exercise over an agent in order to evidence an agency relationship is not so comprehensive. A principal need not exercise physical control over the actions of its agent in order for an agency relationship to exist; rather, the agent must be subject to the principal’s control over the result or ultimate objectives of the agency relationship.

* * *

The level of control a principal must exercise over the agent becomes more clear when it is contrasted with the control exercised by the master in a master-servant relationship. * * *

* * *

[T]he level of control a principal exercises over an agent is less than the level of control a master has over a servant. Indeed, the level of control a master exercises over a servant is a key factor distinguishing the master-servant subset of the set of principal-agent relationships. In other words, all masters are principals and all servants are agents, but only when the level of control is sufficiently high does a principal become a master and an agent a servant. See Restatement (Second) of Agency § 2 cmt. a (1958) (“A master is a species of principal, and a servant is a species of agent.”). Thus, principals who are not masters exercise a much lesser degree of control over their agents than masters do over their servants.

In sum, the control a principal exercises over its agent is not defined rigidly to mean control over the minutia of the agent’s actions, such as the agent’s physical conduct, as is required for a master-servant relationship. The level of control may be very attenuated with respect to the details. However, the principal must have ultimate responsibility to control the end result of his or her agent’s actions; such control may be exercised by prescribing the agents’ obligations or duties before or after the agent acts, or both.

735 A.2d at 1050-52.

The same result should follow in Greater Houston Radiation Oncology, P.A. v. Sadler Clinic Association, P.A.: setting the task of the Greater Houston Radiation Oncology group of companies is enough control to satisfy the test for agency.

The history of the case shows that a petition for review was filed with the Texas Supreme Court. So, as they say in the NFL, pending further review…. The difference is that the case probably falls under that Court’s discretionary jurisdiction. And, as the history of the single business enterprise doctrine shows, the mere fact that bad law is circulating among the lower courts is not, by itself, a sufficient basis for the Supreme Court to intervene.

Of course, the Texas Supreme Court itself has sometimes been too casual in its use of “agent” and “servant.” See, Arvizu v. Estate of Puckett, 364 S.W.3d 273, 276-77 (Tex. 2012) (per curiam) (citing with approval opinions using “principal, “agent” and the right to control the details of the work in the context of respondeat superior cases).

Gary Rosin

More on Power to Bind by an Unauthorized Act

Friday, August 26th, 2011

In Sources of Apparent Authority, I discussed the apparent authority requires a holding out  (manifestation) by the principal; as a general rule apparent authority cannot be based only on the conduct of an agent.  That said, one of the traditional sources of apparent authority is appointing an agent to a position that, by custom, carries with it certain authority to act for the principal.  In most of the cases involving “power of position,” the principal does not communicate directly with the third person;  the only affirmative act by the principal is the appointment to the position.  That raises the question:  how is that apparent authority, as opposed to estoppel to deny agency power? That question leads to these further observations:

  • The traditional view is that an agent has implied authority to tell third persons the position to which the agent has been appointed.  A statement by the agent–a holding out–”I am the General Manager” (for example)–can be deemed to be a statement by the principal.  In Tutti Mangia Italian Grill v. Amer. Textile Maintenance Co., if the person who signed the contract as General Manager was, in fact, the General Manager (an additional fact), then the holding out by the GM was a holding out by the principal.
  • To the extent that you don’t buy the traditional view, then estoppel to deny agency power can apply.  The principal appoints the agent to a position with customary power.  The principal should reasonably foresee that the agent will tell his position to third persons, who will reasonably believe that the agent has the customary authority.  If the principal limited the agent’s authority, the principal’s failure to warn third parties of that limitation can form the basis of estoppel to deny agency power.
  • Where the agent is a general agent, apparent authority by position would also be inherent agency power (which Restatement Third of Agency rejects).

The point is that the Restatement categories tend to overlap.  Many states, such as California, tend to lump them all together into ostensible authority. 

As I tell my students, all these doctrines are just judges and professors trying to explain the circumstances in which power to bind by an unauthorized act arises.  But, as the Zen koan put its:  the finger that points at the moon is not the moon.

When Learned Hand was pointing at the moon, he probably didn’t intend to invent a new doctrine, inherent agency power.  Because he was the Revered Learned Hand, that’s what happened.  The Restatement Third would abolish the doctrine. Good luck with that.

posted by Gary Rosin

 

Sources of Apparent Authority: Tutti Mangia Italian Grill v. Amer. Textile Maintenance Co. (Cal. Ct. App.)

Wednesday, August 24th, 2011

In Tutti Mangia Italian Grill v. Amer. Textile Maintenance Co., No. B227191 (Cal. Ct. App. 7/18/11), one of the issues was whether an agent who signed a contract containing an arbitration agreement was authorized to sign the contract.  The Court held that there was substantial evidence to support a finding of “ostensible” authority:

First, Christian signed the written agreement as the “General Manager” for TMIG, and a general manager generally has the authority to enter into agreements for the corporation. Second, the arbitrator found, based upon testimony at the arbitration hearing, that Christian “was in fact holding himself out as the General Manager and as one authorized to sign.” Accordingly, we affirm the trial court‟s finding that Christian was TMIG‟s ostensible agent, and thus, we conclude that there was a valid arbitration clause that required TMIG to arbitrate this matter.

Slip Op., at 12-13 (citations omitted) (emphasis added).

I know that “California’s a brand new game.” But apparent authority, and the other forms of power to bind by an unauthorized act, generally require some sort of conduct (or possibly negligence) on the part of the principal, and not just assertions by the agent alone.  It even says that in Section 2317 of the California Civil Code:

Ostensible authority is such as a principal, intentionally or by want of ordinary care, causes or allows a third person to believe the agent to possess.

So, the the arbitrator, the trial court and the Court of Appeal (Second District, Division 4) all misapplied the law.

But the arbitrator also found some of the facts necessary for a ratification:

There was never any disavowal of said Agreement by [TMIG] who impliedly accepted the benefits of same by operating thereunder.

Slip Op. at 4-5.  The contract was for “the provision of restaurant linens,” id. at 2, so the restaurant presumably took delivery of, and used, the linens.  That’s probably the acceptance of benefits to which the restaurant was not entitled, except under the contract.  The ” no partial ratifications” rule would prevent accepting only part of the contract (the linens), but not the other part (the arbitration agreement). 

That said, the existence of an arbitration clause may be a material fact that might allow the restaurant to “avoid” its implied ratification, if it did not know of the clause.

posted by Gary Rosin

Comparative Durable Powers of Attorney

Monday, September 28th, 2009

In Curbing the License To Steal:  A Discussion of English Law and Possible reforms for the Durable Power of Attorney, 44 Real Prop. Tr. & Est. L.J. 31(2009), Amy Jo Conroy compares durable powers of attorney under the Uniform Power of Attorney Act with lasting powers of attorney under England’s Mental Capacity Act (2005).

In the United States, the durable power of attorney is a commonly used instrument, but cases of financial exploitation are increasingly finding their way into the courts. Horror stories of exploitation litter the case reporters, and many more likely go unreported.  While the durable power is a useful instrument, its use is too powerful to be left to the unfettered discretion of an agent.

     * * *

States must take action to protect their vulnerable citizens. A first step is to require that all durable powers follow a statutory form. Second, all durable powers should be registered to be effective. A third step is to require notice to be given to family members, similar to notice requirements in a guardianship proceeding. Lastly, legislators must increase court or governmental oversight by providing automatic inquiry jurisdiction so that if abuse is suspected, the initiation of guardianship proceedings is not the only solution. These safeguards will reduce the simplicity of the durable power, but that is an acceptable sacrifice to better protect our country’s vulnerable senior citizens.

44 Real Prop. Tr. & Est. L.J. at 53.

Gary Rosin

Guardianships and Durable Powers of Attorney. Russell v. Chase Investment Services Corp. (OK 2009)

Tuesday, September 22nd, 2009

In Russell v. Chase Investment Services Corp., 212 P.3d 1178, 2009 OK 22 (2009)(on certified question), the Oklahoma Supreme Court, held that, under Oklahoma law, the appointment of a guardian for the estate of a person does not terminate an earlier Durable Power of Attorney.

Section 1074.A of the Oklahoma version of the Uniform Durable Power of Attorney Act provided:

If, following execution of a durable power of attorney, a court of the principal’s domicile appoints a conservator, guardian of the estate, … the attorney-in-fact is accountable to the fiduciary as well as to the principal. The fiduciary has the same power to revoke or amend the power of attorney that the principal would have had if he were not disabled or incapacitated.

29 OK 22 at ¶12 (emphasis in original).  The last sentence of Oklahoma Section 1074(b) differs from the bracketed last sentence of Section 108(b) the Uniform Act.

[The power of attorney is not terminated and the agent’s authority continues unless limited, suspended, or terminated by the court.]

Unif. Durable Power of Att’y Act § 108(b) (emphasis added).

Gary Rosin

LLC Not Bound by Agreement Signed by Manager. Credit Suisse Securities (USA) LLC v. West Coast Opportunity Fund LLC (Del Ch. 2009)

Friday, August 21st, 2009

The facts in Credit Suisse Securities (USA) LLC v. West Coast Opportunity Fund, LLC, C.A. No. 4380-VCN (Del. Ch. Ct. July 30, 2009) are fascinating, though complicated. 

  • Evans was the sole member and manager of Investment Hunter LLC (“Holding LLC”), which was the sole member of WindHunter LLC. 
  • In December 2006, Holding LLC became the controlling shareholder of GreenHunter Energy, Inc. (“Operating Corp.”) after a reverse-merger of WindHunter into an insolvent corporation.  Evans became Operating Corp.’s CEO and President.
  • In March 2007, Operating Corp. entered into a PIPE transaction with group of investors.  That is, it issued shares, and agreed that “as soon as possible” (but within a year) register the shares for resale to the public (“registration rights”). 
  • In connection with the registration rights, all of the executive officers of Operating Corp., including Evans entered into a Lock-up Agreementagreeing that they would not, without the consent of the lead investor, pledge or sell, directly or indirectly, any shares of Operating Corp. until 360 days after the effective date of the registration statement covering the shares purchased by the investors.
  • Evans signed the Lock-Up Agreement in his own name, and described himself as “Chief Executive Officer”, but did not name either Operating Corp. or Holding LLC.
  • In July 2008, Holding LLC opened a margin account with, and borrowed substantial sums from, Credit Suisse.  At that time, Holding LLC pledged its shares of Operating Corp. to secure repayment of the loan.
  • “Within a few months” the value of the Operating Corp. shares dropped, and Credit Suisse issued a margin call.  Operating Corp. and the lead investor claimed that any sale of the pledged shares by Credit Suisse would violate the lock-up agreement.
  • On December 29, 2009, a registration statement covering the sale of the lead investor’s shares was declared effective.

In February, 2009, Credit Suisse sued, claiming, among other things, that the lock-up agreement did not prevent its sale of the pledged shares to meet the margin call.   Vice Chancellor Noble held that the Holding LLC was not bound by the lock- up agreement, and granted judgment on the pleadings on that claim.

Evans does not own the GreenHunter stock in question. It is entirely the property of [Holding LLC] , and Evans’s status as a member does not alter this fact.  Evans did not sign the Lockup Agreement in his capacity as a member or manager of Investment Hunter, and there is, as noted, no evidence of an intent to act in that capacity. Therefore, the Lockup Agreement does not serve to bind [Holding LLC]. ‘[T]he ordinary rule is that only the formal parties to a contract are bound by its terms.  Because [Holding LLC]  is not a party to the Lockup Agreement it is not bound by it. Evans cannot encumber property he does not own.

Id.at 8-9 (footnotes omitted) (emphasis added).   It does not appear that Credit Suisse claimed that Evans acted on behalf of Holding LLC.  Because Evans was not designated as the ‘Chief Executive Officer’ of Holding LLC, the addition of that language does not show an intent to act on behalf of the LLC.  Still, given that the Chancellor was dismissing on the pleadings, it seems odd for him to refer to the lack of evidence that Evans was acting on behalf of Holding LLC.  I’m a transactional sort, but I thought that evidence came after the pleadings.

As to the argument that the “directly or indirectly” language of the lock-up agreement was broad enough to include the Holding LLC’s shares, Chancellor Noble responded

Perhaps [the parties] intended that the Lockup Agreement prohibit the very behavior Evans is alleged to have engaged in. Yet, nothing on the face of the Lockup Agreement evinces such an intent to bind [Holding LLC] or any other entity with which Evans has a relationship. Instead, it binds only Evans.

Slip Op., at 9.  Earlier, in a footnote, the Chancellor had noted that there were no allegations sufficient to make out a claim for disregard of the corporate fiction.  Id. at 9 n.23.

 

Hat-tip Francis G.X. Pileggi.

Lawyer Duties to Third-Parties. Moore v. Weinberg (SC 2009)

Saturday, August 15th, 2009

In Moore v. Weinberg, Opinion No.  26702 (SC August 12, 2009), a lawyer was representing a plaintiff in a law suit in which $100,000 had been deposited in escrow with the clerk of the court.  The lawyer’s client borrowed money from Lender, and gave Lender a security interest in the client’s interest in the escrowed funds.  The lawyer had drafted the documents for the loan and lien.  When the lawsuit settled, and the lawyer received the funds in escrow, the lawyer apparently forgot about the lien, and paid the money to the client. 

Lender sued lawyer for negligence and conversion, and the trial court granted summary judgement in favor of the lawyer.  On the negligence claim, the Supreme Court reasoned that the lawyer had assumed the role of an escrow agent:

[Lawyer] contends that allowing a cause of action against an attorney under these circumstances will intrude upon the attorney/client relationship and greatly hinder an attorney’s ability to represent his client.  In our view, [this] argument misses the mark.  [Lawyer] acted as the escrow agent and owed a fiduciary duty to [Lender] by virtue of this role.  Therefore, it makes no difference that [Lawyer] was [the client's]  lawyer and represented him in other matters.  Under the facts of this case, the duty arises from an attorney’s role as an escrow agent and is independent of an attorney’s status as a lawyer and distinct from duties that arise out of the attorney/client relationship. 

* * * … [Lawyer]  essentially admitted that he was negligent in failing to disburse the funds in accordance with the agreement by testifying that he simply overlooked the terms of the agreement. 

I would agree with the Court if the lawyer had assumed the role of escrow agent.  According to the opinion, the funds were in the registry of the Court–the county clerk was the escrow agent.  It seems to me that the lawyer never assumed the role of escrow agent.  If that’s the case, it’s hard to see how the lawyer owed fiduciary duties to Lender.  Still, the opinion only reversed the summary judgment; there is no finding by the fact-finder that the lawyer acted as escrow agent.  There’s still time to get this issue right.

Apart from the negligence claim, there was also a conversion claim.  As to that, the Court found that there a material issue was a material question of fact on the issue of whether the lawyer had knowing converted the funds by [paying them to the client.

Hat tip Legal Profession Blog.

Gary Rosin

Employer-Supplied Laptops & Attorney-Client Privilege. Stengart v. Loving Care Agency, Inc. (N.J. Super. Ct. App Div. 2009)

Friday, June 26th, 2009

Employer lent Employee an employer-owned laptop for use at home.  Shortly before Employee resigned, she used the laptop to send and receive emails using her own email account to communicate with an attorney about suing Employer for discrimination.  After Employee resigned (and returned the laptop), she sued Employer.  Employer made an image of the laptops hard drive, and found the emails.  Were the emails protected by the attorney-client privilege?  That was the issue before the Court in Stengart v. Loving Care Agency, Inc., No. A-3506-08T1 (N.J. Super. App. Ct. June 26, 2009) (unpublished).  The Court held that the emails were protected: 

  1. It was not clear that Employer had adopted and promulgated an electronic communications policy, Slip Op. at 4-8;
  2. It was not clear that the purported policy applied to emails sent from a personal account, Slip Op. at 8-12;
  3. As applied,the purported policy to personal email was unenforceable because it did not further any legitimate business of Employer, Slip Op. at 13-23; and
  4. The policy was unenforceable because it intruded on the attorney-client privilege:

In weighing the attorney-client privilege, which attaches to the emails exchanged by plaintiff and her attorney, against the company's claimed interest in ownership of or access to those communications based on its electronic communications policy, we conclude that the latter must give way. Even when we assume an employer may trespass to some degree into an employee's privacy when buttressed by a legitimate business interest, we find little force in such a company policy when offered as the basis for an intrusion into communications otherwise shielded by the attorney-client privilege.

Slip Op. at 25-26 (emphasis added).

Hat-tip to Mike Frisch, Legal Profession Blog (No Right to Rummage).

posted by Gary Rosin

Exhausted Commuters: No Employer Duty to Public. Nabors Drilling USA Inc. v. Escoto (Tex. 2009)

Thursday, June 25th, 2009

Hornbook law so basic that it has its own name, the coming-and-going rule:  employee negligence in coming and going to work are outside the scope of employment, to the employer is not vicariously liable for an employee's negligence while commuting.  To be sure, there are scattered cases imposing liability on an employer for its own negligence.  In Otis Engineering Corp. v. Clark, 668 S.W.2d 307 (Tex.1983), an employer that had sent an intoxicated worker home early, and had poured the employee into his car, was found negligent, and liable for the inevitable accident on the way home.

Nabors Drilling USA, Inc. v. Escoto,No. 06-0890 (Tex. June 19, 2009), involved yet another accident while commuting from a drilling company job-site.  The employee (Ambriz) worked one-week on and one-week off, with 12-hour shifts (alternating a week of days, a week off, and a week of nights.  One morning, the employee fell asleep at the wheel.  The plaintiff argued that the drilling company was negligent, but the Court declined to extend Otis.   First, there was no showing the drilling company knew the employee "was impaired when leaving work on the day of the accident." Slip Op., at 6.  Second, the drilling company did not

… affirmatively exercise control over the incapacitated employee.  Unlike the employer in Otis, however, Nabors did not exercise any post-incapacity control over its employee. Ambriz completed his shift without incident and was not sent home early because of any impairment. Nabors did not instruct Ambriz to drive home or escort him to his car. * * * We have never extended Otis to create a duty where an employer’s only affirmative act of control preceded the employee’s shift and incapacity and amounted only to establishing work conditions that may have caused or contributed to the accident.

Slip Op. at 7-8 (citations omitted) (emphasis in original).

posted by Gary Rosin