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Kerl v. Rasmussen

682 N.W.2d 328 (Wis. 2004).

This case involves a claim of franchisor vicarious liability under the doctrine of respondeat superior. At issue is whether and under what circumstances a franchisor may be vicariously liable for the negligence of its franchisee.

I. FACTS AND PROCEDURAL HISTORY

... Arby's is a national franchisor of fast-food restaurants. DRI operates an Arby's restaurant on the west side of Madison as an Arby's franchisee.

The relationship between Arby's and DRI is governed by a 1985 licensing agreement pursuant to which DRI is authorized to use Arby's trademarks, service marks, and trade names in accordance with Arby's Operating Standards Manual. Subsequent provisions in the agreement contain specific requirements governing, among other things, building design, construction, and remodeling; purchasing; food service a ron to or 2 0 ad monthly royal aments or 35 a

of DRI's gross sales. ...

FrEeboary 1999, Dihie avey Prote at the atis restaurant

At the Feb, Pierce was a work release Piece walked othe County San At the mine, Premo of did hi t99, Pine Wa-Mart the in inau

primesion. He on ot this ket, is Former it or at meas

Jones he lay int, both Wal-art at ph both in the el and domes emer, her ma the bulding, Piece ht thin humen the head. He then sustained serious injuries and is permanently disabled.

shergen fl: Jones and Pierce died of theily disnee Kerl survived but Kerl and Jones' estate ... alleged that Arby's was liable theorier a actual or constructive agency" respondeat superior andor

"active negligence," which we interpret to mean direct negligence.

III. DISCUSSION

A. Vicarious Liability

A person is generally only liable for his or her own torts. Under certain circumstances, however, the law will impose vicarious liability on a person who did not commit the tortious conduct but nevertheless is deemed responsible by virtue of the close relationship between that person and the tortfeasor. The doctrine of respondeat superior ("let the master answer"), less frequently referred to as the master/servant rule, has been well-settled in the law of agency for perhaps as long as 250 years. Vicarious liability under respondeat superior is "liability that a supervisory party (such as an employer) bears for the actionable conduct of a subordinate or associate (such as an employee) because of the relationship between the two parties." Black's Law Dictionary 927 (7th ed. 1999).

Under the doctrine of respondeat superior, a master is subject to liability for the tortious acts of his or her servant. A prerequisite to vicarious liability under respondeat superior is the existence of a master/servant relationship.

In Heims v. Hanke, this court adopted the definition of "servant" in 8 220 of the Restatement (Second) of Agency: "[a] servant is one employed to perform service for another in his affairs and who, with respect to his physical conduct in the performance of the service, is subject to the AW'a control or right to control." Heims u. Hanke, 5 Wis.22 465, 468, 9.

N. W.22 455 (1958) (citing Restatement (Second) of Agency 8220); sonversely, a "master" is "a principal who employs an agent to performin service in his affairs and who controls or has the right to control the Restatement (Second) of Agency, § 2(1).

Revie conduct of the other ontols op has the ris he to co serie The master/servant relationship is a species of agency; all servants are agents but not every agent is a servant. Arsand, 83 Wis.2d at 48, 264 N.W.2d 579; Giese v. Montgomery Ward, Inc., 111 Wis.2d 392, 414-15,

331 N.W.2d 585 (1983). Unless an agent is also a servant, his principal will not be vicariously liable for his tortious conduct except under certain limited circumstances.2

Vicarious liability is a form of strict liability without fault. A master may be held lable for a servant's torts regardless of whether the master's own conduct is tortious. Although a plaintiff who suffers a single injury may plead both vicarious and direct liability claims against a party who is asserted to be a master (as was done here), vicarious liability is a separate and distinct theory of liability, and should not be confused with any direct liability that may flow from the master's own fault in bringing about the plaintiffs harm. Vicarious liability is .. imposed upon an innocent party for the torts of another because the nature of the agency relationship specifically the element of control or right of control-justifies it.

Vicarious liability under

respondeat superior typically arises in

employer/employee relationships but is not confined to this type of agency. A servant need not be under formal contract to perform work for a master, nor is it necessary for a person to be paid in order to occupy the position of servant. ...

A person who contracts to perform services for another but is not a servant is an independent contractor. An independent contractor is "a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking." Restatement (Second) of Agency, § 2(3). The use of the label "independent contractor" in the contract between the parties is not by itself dispositive; the test looks beyond labels to factual indicia of control or right to control.

The requirement of control or the right to control derives from the earliest manifestations of the doctrine and survives today as a justification for vicarious liability. "In early times the servant was a member of the family or of the mercantile household, and intimacy of relation is still the basic idea which today distinguishes the servant from the non-servant." Restatement (Second) of Agency § 219, cmt. a. Persons subject to vicarious liability under the early common law-keepers of servants, fathers of families-were, in fact, endowed with powers of control and as such, able to take responsibility for the conduct of others.

Id.. More specifically: The conception of the masters abit wit third persons appeas come an outgrow hef the idea that within the tine f seriars the master can enercise he idea over the physical actice of the servant. From this the idea of responsibility lor thivitie done by the servant's activities followed naturally: The as hapti dof control is a usual aisor imposing tort liability when the thing controlled causes haom it is true that normally onen control of tangible things is not liable without fault. But inthe law of master and servant the use of the fiction that "the in the the sovant is the act of the master" has made it seem fait a subiet the non-faulty employer to liability for the negligent and other faulty conduct of his servants.

Id.

The modern consensus is that vicarious liability is also justified on common law policy grounds as a device for spreading risk and encourasing safety and the exercise of due care by en ployees/servants.

Exposure to vicarious liability creates an incentive for masters who copts or have the right to control the conduct of their servants to take steps to ensure that their servants exercise due care in carrying out the master's business. Employees (the most frequent kind of servant) are usually less able to satisfy a judgment for damages, and are therefore less responsive to the threat of tort liability than their employers.

Employers (the most frequent kind of master) are usually better able financially to absorb the resulting costs of increased supervision and safety measures or to insure against the risk.

Although the rationale for vicarious liability has expanded and the circumstances of its application have become more diverse, the basic formula for respondeat superior has remained the same:.. If a principal does not control or have the right to control the day-to-day physical conduct of the agent, then the opportunity and incentive to promote safety and the exercise of due care are not present, and imposing liability without fault becomes difficult to justify on fairness grounds.