Posts Tagged ‘agency’

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