Deck 17: Management of Employee Conduct: Agency

Question 1

Public Relations Issues, Strategy, and the Problem Employee
Former Indiana University basketball coach Bobby Knight had a long history of violent temper eruptions both on and off the court. Nonetheless, he had been a successful coach for the team, often taking Indiana to the NCAA Final Four competition. The flamboyant coach had been known to confront officials during games, throw chairs during games, and use colorful language continually. A videotape captured the coach lunging for the throat of an Indiana University student and player during a practice session.
Coach Knight initially denied that it happened, and then the videotape was produced. The trustees of Indiana University placed the coach on probation and wrote in a letter to him that any violation of the terms of the probation-including no striking of students, no temper eruptions, no foul language- was grounds for termination.
Many fans and alumni were outraged at the agreement and defended keeping the coach in good standing because he never had any NCAA violations (i.e., he ran a "clean" program) and he saw to it that most of his players also graduated from college in addition to playing basketball or being recruited by professional teams.
Write a memo explaining why the trustees took the action they did. Be sure to include discussion of the principles of agency law, potential liability, and the rights of Coach Knight with regard to his employment contract.

Answer 1

Here, is the case of a flamboyant basketball coach who had behaved badly with staffs and students. He was a successful coach as he made his team won many matches. But he was known for a violent temper eruptions and foul language both off and on the court. His outraged behavior was videotaped by some students and was produced before the trustees of the Indiana University.
The trustees of the Indiana University placed the coach on probation and also declared the terms of probation. It said that the coach would be terminated if he tries to be violent again. Some of coach's fans and alumni were against the action. But the action taken by the trustees of the organization was legal and ethical. The coach was able to give good results to his team but he could also do it without being violent. The trustee has just kept terms of probation in order to stop violations on the team members.

Question 2

Did McDonald's violate any Oregon statute?

Answer 2

Yes, McDonald did violate the statute of Oregon by making Mr. Theurer work longer hours even when it is not legal to work beyond a specific time mentioned in the statute. Thus it warns employers that they would have liability if an employee acts in negligent manner off-premises and after work due to excess work.

Question 3

What changes the application of the employment-at-will doctrine to Dillon?

Answer 3

Theory of promissory estoppel:
• It is a legal principle that a promise is enforceable by law when the promisor makes a promise to the promisee, who relies on it to his or her detriment.
• A promissory estoppel allows a party to recover on a promise.
The application of employment-at-will can be changed if the employee can prove wrongful discharge from duties by the employer under the theory of promissory estoppel. But since, Ms. Dillon herself informed the managed of her completion of the training it cannot be proved that the employer made wrongful discharge.

Question 4

Montoya v Grease Monkey Holding Corp.
904 P.2d 468 (Colo. 1995)
A Grease Monkey's Uncle, er, Agent
Facts
Grease Monkey Holding Corporation is a Utah corporation, and Grease Monkey International is a wholly owned subsidiary of Grease Monkey Holding Company. From 1983 through 1991, Arthur Sensing was Grease Monkey's President, COO (chief operating officer), and Chairman of the Board. During that time, Mr. Sensing ran Grease Monkey and had broad authority to act as general officer and agent for Grease Monkey. Mr. Sensing had authority to raise capital from banks and other lenders.... Mr. Sensing did not need Board approval to obtain loans unless they exceeded $500,000.
Nick and Aver Montoya (respondents) were married for over fifty years. The trial court found Nick Montoya to be a person of "average investor sophistication" Aver Montoya was a factory worker for approximately seventeen years, and she left financial matters primarily to her husband.
Nick Montoya met Mr. Sensing in the mid-1960s when Mr. Sensing was a teller at a bank where Mr. Montoya was a customer. During the 1960s and 1970s, Mr. Sensing gave Mr. Montoya investment advice. Mr. Montoya was impressed by Mr. Sensing, who ultimately became vice-president of the bank before leaving. Mr. Montoya also knew Mr. Sensing through a church connection.
From 1983 through 1991, Mr. Sensing got payments from the Montoyas under the guise that the payments were investments in Grease Monkey. Mr. Sensing told the Montoyas that because Grease Monkey was a new company it did not have its own account, and that as President and Chairman of the Board, Mr. Sensing used his personal account as the corporate account. Mr. Sensing took Mr. Montoya to the Grease Monkey offices and showed him a promotional slide show presentation used by Grease Monkey to solicit franchise business. However, none of the payments were invested in Grease Monkey, and Grease Monkey did not receive any of the funds. Rather, Mr. Sensing used the Montoyas' money for his own personal benefit.
Generally, about a week after writing an investment check, the Montoyas received a promissory note as evidence of their investment. When Mr. Sensing delivered interest payments to the Montoyas, he brought charts showing the growth and success of Grease Monkey. Mailings to the Montoyas concerning their investments were on Grease Monkey letterhead, and calls regarding the investments were made to Mr. Sensing at Grease Monkey. Mr. Sensing gave the Montoyas many Grease Monkey promotional items, such as pens, hats, and sweatshirts.
Dreams turned to dust, and the Montoyas sought to put the monkey on the back of the corporation and filed suit against Grease Monkey, as Mr. Sensing's employer, for breach of contract, fraud, misrepresentation, breach of duty of good faith and fair dealing, promissory estoppel, extreme and outrageous conduct, and negligent hiring and supervision.
After a trial to the court, the Montoyas prevailed on their fraud and misrepresentation claims, and their other claims were dismissed. The trial court entered judgment against Grease Monkey for the outstanding balance due on the promissory notes. The court of appeals affirmed the trial court's "judgment... because, Mr. Sensing, as its [President, acting within the scope of his apparent authority as an agent of the corporations, engaged in conduct which was customary for an individual employed in Sensing's position, and was placed in that position by Grease Monkey." Grease Monkey appealed.
Judicial Opinion
ERICKSON, Justice
Section 261 of the Restatement (Second) of Agency provides that "[a] principal who puts a servant or other agent in a position which enables the agent, while apparently acting within his authority, to commit a fraud upon third persons is subject to liability to such third persons for the fraud." The application of section 261 is not limited to principals and agents but extends also to masters and servants..
Under the doctrine of respondeat superior, "a master is liable for the unauthorized torts of his servant if committed while the servant is acting within the scope of his employment." Because "the master's peculiar liability is based on the physical activities of servants, including their batteries,.. he is liable only if the servant's conduct was in some way caused by an intent to serve his employer's interests and connected with his authorized acts."
A master may also be liable for tortious conduct by a servant, as he would be for the conduct of any agent, whether servant or not. Acts that are apparently authorized or committed within an agent's inherent powers or where the agent's position enables him to commit a tort exemplify the situations where a principal may be liable for the torts of servants and non-servant agents- Apparent authority liability is not based upon the rules of respondeat superior, and it is not "essential to find that the agent was motivated by an intent to act for his master's purposes." Actions for misrepresentations and fraud generally fit into the category of torts which do not lie within the scope and principles of respondeat superior. In many of these situations, the agent's position enables him to perpetrate the fraud, and the agent acted for his own purposes. However, "[t]he fact that the agent is acting from purely personal motives is immaterial unless this is known to the other party."
A principal is subject to liability for physical harm to the person or the tangible things of another caused by the negligence of a servant or a non-servant agent...
The application of section 261 to the present case squares with the misrepresentation or fraud analysis of the principal-agent doctrine. Respondeat superior and master-servant principles constitute an aspect of agency law distinct from fraud based on the apparent authority.
In the present case, Grease Monkey did not possess the right to control the physical movements or activities of Sensing, who was the Chief Operating Officer of Grease Monkey. Sensing was expected to perform certain tasks for Grease Monkey. Grease Monkey did not monitor Sensing's physical activities, but was only concerned with the results achieved.
Generally, "[a] principal is not bound by the false representations of his agent made without his knowledge, consent, or authority. However, if an agent acts with apparent authority, a principal may be liable even though the agent acts solely for his own purposes. Applying an apparent authority theory, "'[liability is based upon the fact that the agent's position facilitates the consummation of the fraud, in that from the point of view of the third person the transaction seems regular on its face and the agent appears to be acting in the ordinary course of the business confided to him.' In both state and federal misrepresentation cases, "[c]ourts have commonly imposed liability based on 'apparent authority'... particularly when the person making the misrepresentation is an important corporate official"...
Under section 261, a plaintiff must establish that the servant or other agent was put in a position which enabled the agent to commit fraud, the agent acted within his apparent authority, and the agent committed fraud. First, the trial court found that Sensing was the highest authority at Grease Monkey. He had authority to raise up to $500,000 without Board approval, and as general officer and agent for Grease Monkey, he had broad authority to act without corporate restrictions. The findings of the trial court support a conclusion that Grease Monkey put Sensing in a position where he could commit fraud if he had a mind to.
Second, the trial court found that Sensing acted within his apparent authority when he raised capital from individuals such as respondents. We also note that "[u]nder section 261 and the theory of apparent authority.. the agent's conduct is seen through the eyes of the third party."..
Third, the trial court found that Sensing made false representations to respondents. Sensing made these representations with the awareness they were false and with intent to induce respondents to rely on the representations. The representations were material, and respondents reasonably relied on the representations to their detriment. The trial court found for respondents on their claim of fraud and misrepresentation, and we are unwilling to disturb that finding on review.
Grease Monkey contends that the use of section 261 amounts to strict liability for the principal. However, "'few doctrines of the law are more firmly established or more in harmony with accepted notions of social policy than that of the liability of the principal without fault of his own."' Our decision recognizes the legal principle that "when one of two innocent persons must suffer from the acts of a third, he must suffer who put it in the power of the wrongdoer to inflict the injury" This policy motivates organizations to see that their agents abide by the law.
Affirmed.
What did the CEO of the corporation do to a third party?

Question 5

Was Mr. Theurer acting within the scope of employment?

Question 6

What is the dissenting justice's concern?

Question 7

What is the purpose of the apparent authority doctrine?

Question 8

Is McDonald's liable to Mr. Faverty?

Question 9

Why is this case different from one in which an employee "rescues" a member of the public from fraud in bids or injury from defective products?

Question 10

What duties does apparent authority impose on principals?

Question 11

What counterpoints does the dissenting judge make?

Question 12

Did Mr. Gardner do the right thing in leaving his truck unattended? What were his ethical obligations under the circumstances? What would you have done?

Question 13

Montoya v Grease Monkey Holding Corp.
904 P.2d 468 (Colo. 1995)
A Grease Monkey's Uncle, er, Agent
Facts
Grease Monkey Holding Corporation is a Utah corporation, and Grease Monkey International is a wholly owned subsidiary of Grease Monkey Holding Company. From 1983 through 1991, Arthur Sensing was Grease Monkey's President, COO (chief operating officer), and Chairman of the Board. During that time, Mr. Sensing ran Grease Monkey and had broad authority to act as general officer and agent for Grease Monkey. Mr. Sensing had authority to raise capital from banks and other lenders.... Mr. Sensing did not need Board approval to obtain loans unless they exceeded $500,000.
Nick and Aver Montoya (respondents) were married for over fifty years. The trial court found Nick Montoya to be a person of "average investor sophistication" Aver Montoya was a factory worker for approximately seventeen years, and she left financial matters primarily to her husband.
Nick Montoya met Mr. Sensing in the mid-1960s when Mr. Sensing was a teller at a bank where Mr. Montoya was a customer. During the 1960s and 1970s, Mr. Sensing gave Mr. Montoya investment advice. Mr. Montoya was impressed by Mr. Sensing, who ultimately became vice-president of the bank before leaving. Mr. Montoya also knew Mr. Sensing through a church connection.
From 1983 through 1991, Mr. Sensing got payments from the Montoyas under the guise that the payments were investments in Grease Monkey. Mr. Sensing told the Montoyas that because Grease Monkey was a new company it did not have its own account, and that as President and Chairman of the Board, Mr. Sensing used his personal account as the corporate account. Mr. Sensing took Mr. Montoya to the Grease Monkey offices and showed him a promotional slide show presentation used by Grease Monkey to solicit franchise business. However, none of the payments were invested in Grease Monkey, and Grease Monkey did not receive any of the funds. Rather, Mr. Sensing used the Montoyas' money for his own personal benefit.
Generally, about a week after writing an investment check, the Montoyas received a promissory note as evidence of their investment. When Mr. Sensing delivered interest payments to the Montoyas, he brought charts showing the growth and success of Grease Monkey. Mailings to the Montoyas concerning their investments were on Grease Monkey letterhead, and calls regarding the investments were made to Mr. Sensing at Grease Monkey. Mr. Sensing gave the Montoyas many Grease Monkey promotional items, such as pens, hats, and sweatshirts.
Dreams turned to dust, and the Montoyas sought to put the monkey on the back of the corporation and filed suit against Grease Monkey, as Mr. Sensing's employer, for breach of contract, fraud, misrepresentation, breach of duty of good faith and fair dealing, promissory estoppel, extreme and outrageous conduct, and negligent hiring and supervision.
After a trial to the court, the Montoyas prevailed on their fraud and misrepresentation claims, and their other claims were dismissed. The trial court entered judgment against Grease Monkey for the outstanding balance due on the promissory notes. The court of appeals affirmed the trial court's "judgment... because, Mr. Sensing, as its [President, acting within the scope of his apparent authority as an agent of the corporations, engaged in conduct which was customary for an individual employed in Sensing's position, and was placed in that position by Grease Monkey." Grease Monkey appealed.
Judicial Opinion
ERICKSON, Justice
Section 261 of the Restatement (Second) of Agency provides that "[a] principal who puts a servant or other agent in a position which enables the agent, while apparently acting within his authority, to commit a fraud upon third persons is subject to liability to such third persons for the fraud." The application of section 261 is not limited to principals and agents but extends also to masters and servants..
Under the doctrine of respondeat superior, "a master is liable for the unauthorized torts of his servant if committed while the servant is acting within the scope of his employment." Because "the master's peculiar liability is based on the physical activities of servants, including their batteries,.. he is liable only if the servant's conduct was in some way caused by an intent to serve his employer's interests and connected with his authorized acts."
A master may also be liable for tortious conduct by a servant, as he would be for the conduct of any agent, whether servant or not. Acts that are apparently authorized or committed within an agent's inherent powers or where the agent's position enables him to commit a tort exemplify the situations where a principal may be liable for the torts of servants and non-servant agents- Apparent authority liability is not based upon the rules of respondeat superior, and it is not "essential to find that the agent was motivated by an intent to act for his master's purposes." Actions for misrepresentations and fraud generally fit into the category of torts which do not lie within the scope and principles of respondeat superior. In many of these situations, the agent's position enables him to perpetrate the fraud, and the agent acted for his own purposes. However, "[t]he fact that the agent is acting from purely personal motives is immaterial unless this is known to the other party."
A principal is subject to liability for physical harm to the person or the tangible things of another caused by the negligence of a servant or a non-servant agent...
The application of section 261 to the present case squares with the misrepresentation or fraud analysis of the principal-agent doctrine. Respondeat superior and master-servant principles constitute an aspect of agency law distinct from fraud based on the apparent authority.
In the present case, Grease Monkey did not possess the right to control the physical movements or activities of Sensing, who was the Chief Operating Officer of Grease Monkey. Sensing was expected to perform certain tasks for Grease Monkey. Grease Monkey did not monitor Sensing's physical activities, but was only concerned with the results achieved.
Generally, "[a] principal is not bound by the false representations of his agent made without his knowledge, consent, or authority. However, if an agent acts with apparent authority, a principal may be liable even though the agent acts solely for his own purposes. Applying an apparent authority theory, "'[liability is based upon the fact that the agent's position facilitates the consummation of the fraud, in that from the point of view of the third person the transaction seems regular on its face and the agent appears to be acting in the ordinary course of the business confided to him.' In both state and federal misrepresentation cases, "[c]ourts have commonly imposed liability based on 'apparent authority'... particularly when the person making the misrepresentation is an important corporate official"...
Under section 261, a plaintiff must establish that the servant or other agent was put in a position which enabled the agent to commit fraud, the agent acted within his apparent authority, and the agent committed fraud. First, the trial court found that Sensing was the highest authority at Grease Monkey. He had authority to raise up to $500,000 without Board approval, and as general officer and agent for Grease Monkey, he had broad authority to act without corporate restrictions. The findings of the trial court support a conclusion that Grease Monkey put Sensing in a position where he could commit fraud if he had a mind to.
Second, the trial court found that Sensing acted within his apparent authority when he raised capital from individuals such as respondents. We also note that "[u]nder section 261 and the theory of apparent authority.. the agent's conduct is seen through the eyes of the third party."..
Third, the trial court found that Sensing made false representations to respondents. Sensing made these representations with the awareness they were false and with intent to induce respondents to rely on the representations. The representations were material, and respondents reasonably relied on the representations to their detriment. The trial court found for respondents on their claim of fraud and misrepresentation, and we are unwilling to disturb that finding on review.
Grease Monkey contends that the use of section 261 amounts to strict liability for the principal. However, "few doctrines of the law are more firmly established or more in harmony with accepted notions of social policy than that of the liability of the principal without fault of his own."Our decision recognizes the legal principle that "when one of two innocent persons must suffer from the acts of a third, he must suffer who put it in the power of the wrongdoer to inflict the injury" This policy motivates organizations to see that their agents abide by the law.
Affirmed.
Is Grease Monkey liable to the Montoyas?

Question 14

What previous indications did Nabisco have that Mr. Lynch might cause some problems?

Question 15

Does this case create any affirmative legal duty to help those in danger?

Question 16

Explain how Mr. Grappolini breached his fiduciary duty.

Question 17

Lange v National Biscuit Co.
211 N.W.2D 783 (Minn. 1973)
Shelf Space Is My Life
Facts
Jerome Lange (plaintiff) was the manager of a small grocery store in Minnesota that carried Nabisco (defendant) products. Ronnell Lynch had been hired by Nabisco as a cookie salesman-trainee in October 1968. On March 1, 1969, Mr. Lynch was assigned his own territory, which included Mr. Lange's store.
Between March 1 and May 1,1969, Nabisco received numerous complaints from grocers about Mr. Lynch being overly aggressive and taking shelf space in the stores reserved for competing cookie companies.
On May 1, 1969, Mr. Lynch came to Mr. Lange's store to place Nabisco merchandise on the shelves. An argument developed between the two over Mr. Lynch's service to the store. Mr. Lynch became very angry and started swearing. Mr. Lange told him to either stop swearing or leave the store because children were present. Mr. Lynch then became uncontrollably angry and said, "I ought to break your neck." He then went behind the counter and dared Mr. Lange to fight. When Mr. Lange refused, Mr. Lynch viciously assaulted him, after which he threw cookies around the store and left.
Mr. Lange filed suit against Nabisco and was awarded damages based on the jury's finding that although the acts of Mr. Lynch were outside the scope of employment, Nabisco was negligent in hiring and retaining him. The judge granted Nabisco's motion for judgment notwithstanding the verdict, and Mr. Lange appealed.
Judicial Opinion
TODD, Justice
There is no dispute with the general principle that in order to impose liability on the employer under the doctrine of respondent superior it is necessary to show that the employee was acting within the scope of his employment. Unfortunately, there is a wide disparity in the case law in the application of the ''scope of employment" test to those factual situations involving intentional torts. The majority rule as set out in Annotation, 34 AX.R.2d 372, 402, includes a twofold test: (a) Whether the assault was motivated by business or personal considerations; or (b) whether the assault was contemplated by the employer or incident to the employment.
Under the present Minnesota rule, liability is imposed where it is shown that the employee's acts were motivated by a desire to further the employer's business. Therefore, a master could only be held liable for an employee's assault in those rare instances where the master actually requested the servant to so perform, or the servant's duties were such that that motivation was implied in law.
The fallacy of this reasoning was that it made a certain mental condition of the servant the test by which to determine whether he was acting about his master's business or not. Moreover, with respect of all intentional acts done by a servant in the supposed furtherance of his master's business, it clothed the master with immunity if the act was right, because it was right, and, if it was wrong, it clothed him with a like immunity, because it was wrong. He thus got the benefit of all his servant's acts done for him, whether right or wrong, and escaped the burden of all intentional acts done for him which were wrong. Under the operation of such a rule, it would always be more safe and profitable for a man to conduct his business vicariously than in his own person. He would escape liability for the consequences of many acts connected with his business springing from the imperfection of human nature, because done by another, for which he would be responsible if done by himself. Meanwhile, the public, obliged to deal or come in contact with his agents, for intentional injuries done by them, might be left wholly without redress. A doctrine so fruitful of mischief could not long stand unshaken in an enlightened system of jurisprudence.
In developing a test for the application of respondent superior when an employee assaults a third person, we believe that the focus should be on the basis of the assault rather than the motivation of the employee. We reject as the basis for imposing liability the arbitrary determination of when, and at what point, the argument and assault leave the sphere of the employer's business and become motivated by personal animosity. Rather, we believe the better approach is to view both the argument and assault as an indistinguishable event for purposes of vicarious liability.
We hold that an employer is liable for an assault by his employee when the source of the attack is related to the duties of the employee and the assault occurs within work-related limits of time and place. The assault in this case obviously occurred within work-related limits of time and place, since it took place on authorized premises during working hours. The precipitating cause of the initial argument concerned the employee's conduct of his work. In addition, the employee originally was motivated to become argumentative in furtherance of his employer's business. Consequently, under the facts of this case we hold as a matter of law that the employee was acting within the scope of employment at the time of the aggression and that plaintiff's post-trial motion for judgment notwithstanding the verdict on that ground should have been granted under the rule we herein adopt. To the extent that our former decisions are inconsistent with the rule now adopted, they are overruled.
Plaintiff may recover damages under either the theory of respondent superior or negligence. Having disposed of the matter on the former issue, we need not undertake the questions raised by defendant's asserted negligence in the hiring or retention of the employee.
Reversed and remanded.
Was the attack of Mr. Lange within the scope of employment?

Question 18

Can an employee in Washington be fired for assisting a citizen who is a crime victim?

Question 19

Warren Lesch had a leak in his car's gas tank that had been repaired by Malcolm Weeks, an employee of Walker's Chevron, Inc., in Bel Air, Maryland. The tank was not repaired properly, and Dr. Lesch's home and garage were destroyed when the gas tank exploded. Dr. Lesch and his wife were severely burned as a result.
Walker's Chevron is a "branded" station: It displays only Chevron signs and colors and sells only Chevron gas and oil. The Lesches have sued Mr. Weeks, Walker's Chevron, and Chevron USA. Who is liable for the explosion? [ Chevron USA, Inc. v Lesch, 570 A.2d 840 (Md. 1990)]

Question 20

What lessons can you learn about contracts, suppliers, and product launches from the case?

Question 21

What test does the court give for determining scope of employment?

Question 22

On September 29, 1984, Wilton Whitlow was taken to Good Samaritan Hospital's emergency room in Montgomery County, Ohio, because he had suffered a seizure and a blackout. He was examined by Dr. Dennis Aumentado, who prescribed the anti-epileptic medication Dilantin. Mr. Whitlow experienced no further seizures and was monitored as an outpatient at Good Samaritan over the next few weeks.
Mr. Whitlow complained to Dr. Aumentado of warm and dry eyes, and his Dilantin dose was reduced. On October 20, 1984, he was again admitted to the emergency room with symptoms that were eventually determined to be from Stevens-Johnson syndrome, a condition believed to be caused by a variety of medications. Mr. Whitlow sued Dr. Aumentado and Good Samaritan for malpractice and Parke-Davis, the manufacturer of Dilantin, for breach of warranty.
The hospital maintains it is not liable because Dr. Aumentado was an independent contractor. Is the hospital correct? [ Whitlow v Good Samaritan Hosp., 536 N.E.2d 659 (Ohio 1987)]

Question 23

Explain why the court decided to award both lost profits and punitive damages.

Question 24

Lange v National Biscuit Co.
211 N.W.2D 783 (Minn. 1973)
Shelf Space Is My Life
Facts
Jerome Lange (plaintiff) was the manager of a small grocery store in Minnesota that carried Nabisco (defendant) products. Ronnell Lynch had been hired by Nabisco as a cookie salesman-trainee in October 1968. On March 1, 1969, Mr. Lynch was assigned his own territory, which included Mr. Lange's store.
Between March 1 and May 1,1969, Nabisco received numerous complaints from grocers about Mr. Lynch being overly aggressive and taking shelf space in the stores reserved for competing cookie companies.
On May 1, 1969, Mr. Lynch came to Mr. Lange's store to place Nabisco merchandise on the shelves. An argument developed between the two over Mr. Lynch's service to the store. Mr. Lynch became very angry and started swearing. Mr. Lange told him to either stop swearing or leave the store because children were present. Mr. Lynch then became uncontrollably angry and said, "I ought to break your neck." He then went behind the counter and dared Mr. Lange to fight. When Mr. Lange refused, Mr. Lynch viciously assaulted him, after which he threw cookies around the store and left.
Mr. Lange filed suit against Nabisco and was awarded damages based on the jury's finding that although the acts of Mr. Lynch were outside the scope of employment, Nabisco was negligent in hiring and retaining him. The judge granted Nabisco's motion for judgment notwithstanding the verdict, and Mr. Lange appealed.
Judicial Opinion
TODD, Justice
There is no dispute with the general principle that in order to impose liability on the employer under the doctrine of respondent superior it is necessary to show that the employee was acting within the scope of his employment. Unfortunately, there is a wide disparity in the case law in the application of the ''scope of employment" test to those factual situations involving intentional torts. The majority rule as set out in Annotation, 34 AX.R.2d 372, 402, includes a twofold test: (a) Whether the assault was motivated by business or personal considerations; or (b) whether the assault was contemplated by the employer or incident to the employment.
Under the present Minnesota rule, liability is imposed where it is shown that the employee's acts were motivated by a desire to further the employer's business. Therefore, a master could only be held liable for an employee's assault in those rare instances where the master actually requested the servant to so perform, or the servant's duties were such that that motivation was implied in law.
The fallacy of this reasoning was that it made a certain mental condition of the servant the test by which to determine whether he was acting about his master's business or not. Moreover, with respect of all intentional acts done by a servant in the supposed furtherance of his master's business, it clothed the master with immunity if the act was right, because it was right, and, if it was wrong, it clothed him with a like immunity, because it was wrong. He thus got the benefit of all his servant's acts done for him, whether right or wrong, and escaped the burden of all intentional acts done for him which were wrong. Under the operation of such a rule, it would always be more safe and profitable for a man to conduct his business vicariously than in his own person. He would escape liability for the consequences of many acts connected with his business springing from the imperfection of human nature, because done by another, for which he would be responsible if done by himself. Meanwhile, the public, obliged to deal or come in contact with his agents, for intentional injuries done by them, might be left wholly without redress. A doctrine so fruitful of mischief could not long stand unshaken in an enlightened system of jurisprudence.
In developing a test for the application of respondent superior when an employee assaults a third person, we believe that the focus should be on the basis of the assault rather than the motivation of the employee. We reject as the basis for imposing liability the arbitrary determination of when, and at what point, the argument and assault leave the sphere of the employer's business and become motivated by personal animosity. Rather, we believe the better approach is to view both the argument and assault as an indistinguishable event for purposes of vicarious liability.
We hold that an employer is liable for an assault by his employee when the source of the attack is related to the duties of the employee and the assault occurs within work-related limits of time and place. The assault in this case obviously occurred within work-related limits of time and place, since it took place on authorized premises during working hours. The precipitating cause of the initial argument concerned the employee's conduct of his work. In addition, the employee originally was motivated to become argumentative in furtherance of his employer's business. Consequently, under the facts of this case we hold as a matter of law that the employee was acting within the scope of employment at the time of the aggression and that plaintiff's post-trial motion for judgment notwithstanding the verdict on that ground should have been granted under the rule we herein adopt. To the extent that our former decisions are inconsistent with the rule now adopted, they are overruled.
Plaintiff may recover damages under either the theory of respondent superior or negligence. Having disposed of the matter on the former issue, we need not undertake the questions raised by defendant's asserted negligence in the hiring or retention of the employee.
Reversed and remanded.
What is the "motivation test"?

Question 25

On March 29, 1983, Barry Mapp was observed in the JCPenney department store in Upper Darby, Pennsylvania, by security personnel, who suspected that he might be a shoplifter. Michael DiDomenico, a security guard employed by JCPenney, followed Mr. Mapp when he left the store and proceeded to Gimbels department store. There, Mr. DiDomenico notified Rosemary Federchok, a Gimbels security guard, about his suspicions. Even though his assistance was not requested, Mr. DiDomenico decided to remain to assist in case Ms. Federchok, a short woman of slight build, required help in dealing with Mr. Mapp if he committed an offense in Gimbels. It came as no surprise when Mr. Mapp was observed taking items from the men's department of the store; when he attempted to escape, he was pursued. Although Ms. Federchok was unable to keep up, Mr. DiDomenico continued to pursue Mr. Mapp and ultimately apprehended him in the lower level of the Gimbels parking lot. When Ms. Federchok arrived with Upper Darby police, merchandise that had been taken from Gimbels was recovered. Mr. Mapp, who had been injured when he jumped from one level of the parking lot to another, was taken to the Delaware County Memorial Hospital, where he was treated for a broken ankle.
Mr. Mapp filed suit against Gimbels for injuries sustained while being chased and apprehended by Mr. DiDomenico. He alleged in his complaint that Mr. DiDomenico, while acting as an agent of Gimbels, had chased him, had struck him with a nightstick, and had beaten him with his fists. Gimbels says it is not liable because Mr. DiDomenico was not its agent. Is Gimbels correct? [ Mapp v Gimbels Dep't Store, 540 A.2d 941 (Pa. 1988)]

Question 26

Evaluate the ethics of Mr. Grappolini's conduct. Why did Vegetal's officers refer to Mr. Grappolini as a "bad boy"?

Question 27

Lange v National Biscuit Co.
211 N.W.2D 783 (Minn. 1973)
Shelf Space Is My Life
Facts
Jerome Lange (plaintiff) was the manager of a small grocery store in Minnesota that carried Nabisco (defendant) products. Ronnell Lynch had been hired by Nabisco as a cookie salesman-trainee in October 1968. On March 1, 1969, Mr. Lynch was assigned his own territory, which included Mr. Lange's store.
Between March 1 and May 1,1969, Nabisco received numerous complaints from grocers about Mr. Lynch being overly aggressive and taking shelf space in the stores reserved for competing cookie companies.
On May 1, 1969, Mr. Lynch came to Mr. Lange's store to place Nabisco merchandise on the shelves. An argument developed between the two over Mr. Lynch's service to the store. Mr. Lynch became very angry and started swearing. Mr. Lange told him to either stop swearing or leave the store because children were present. Mr. Lynch then became uncontrollably angry and said, "I ought to break your neck." He then went behind the counter and dared Mr. Lange to fight. When Mr. Lange refused, Mr. Lynch viciously assaulted him, after which he threw cookies around the store and left.
Mr. Lange filed suit against Nabisco and was awarded damages based on the jury's finding that although the acts of Mr. Lynch were outside the scope of employment, Nabisco was negligent in hiring and retaining him. The judge granted Nabisco's motion for judgment notwithstanding the verdict, and Mr. Lange appealed.
Judicial Opinion
TODD, Justice
There is no dispute with the general principle that in order to impose liability on the employer under the doctrine of respondent superior it is necessary to show that the employee was acting within the scope of his employment. Unfortunately, there is a wide disparity in the case law in the application of the ''scope of employment" test to those factual situations involving intentional torts. The majority rule as set out in Annotation, 34 AX.R.2d 372, 402, includes a twofold test: (a) Whether the assault was motivated by business or personal considerations; or (b) whether the assault was contemplated by the employer or incident to the employment.
Under the present Minnesota rule, liability is imposed where it is shown that the employee's acts were motivated by a desire to further the employer's business. Therefore, a master could only be held liable for an employee's assault in those rare instances where the master actually requested the servant to so perform, or the servant's duties were such that that motivation was implied in law.
The fallacy of this reasoning was that it made a certain mental condition of the servant the test by which to determine whether he was acting about his master's business or not. Moreover, with respect of all intentional acts done by a servant in the supposed furtherance of his master's business, it clothed the master with immunity if the act was right, because it was right, and, if it was wrong, it clothed him with a like immunity, because it was wrong. He thus got the benefit of all his servant's acts done for him, whether right or wrong, and escaped the burden of all intentional acts done for him which were wrong. Under the operation of such a rule, it would always be more safe and profitable for a man to conduct his business vicariously than in his own person. He would escape liability for the consequences of many acts connected with his business springing from the imperfection of human nature, because done by another, for which he would be responsible if done by himself. Meanwhile, the public, obliged to deal or come in contact with his agents, for intentional injuries done by them, might be left wholly without redress. A doctrine so fruitful of mischief could not long stand unshaken in an enlightened system of jurisprudence.
In developing a test for the application of respondent superior when an employee assaults a third person, we believe that the focus should be on the basis of the assault rather than the motivation of the employee. We reject as the basis for imposing liability the arbitrary determination of when, and at what point, the argument and assault leave the sphere of the employer's business and become motivated by personal animosity. Rather, we believe the better approach is to view both the argument and assault as an indistinguishable event for purposes of vicarious liability.
We hold that an employer is liable for an assault by his employee when the source of the attack is related to the duties of the employee and the assault occurs within work-related limits of time and place. The assault in this case obviously occurred within work-related limits of time and place, since it took place on authorized premises during working hours. The precipitating cause of the initial argument concerned the employee's conduct of his work. In addition, the employee originally was motivated to become argumentative in furtherance of his employer's business. Consequently, under the facts of this case we hold as a matter of law that the employee was acting within the scope of employment at the time of the aggression and that plaintiff's post-trial motion for judgment notwithstanding the verdict on that ground should have been granted under the rule we herein adopt. To the extent that our former decisions are inconsistent with the rule now adopted, they are overruled.
Plaintiff may recover damages under either the theory of respondent superior or negligence. Having disposed of the matter on the former issue, we need not undertake the questions raised by defendant's asserted negligence in the hiring or retention of the employee.
Reversed and remanded.
Does this court adopt or reject the "motivation test"?

Question 28

Nineteen-year-old Lee J. Norris was employed by Burger Chef Systems as an assistant manager of one of its restaurants. On a day when he was in charge and change was needed, Mr. Norris left to get change but also decided to get Kentucky Fried Chicken at a nearby store for his lunch to take back to Burger Chef. The bank where Mr. Norris usually got change is 1.6 miles from Burger Chef, and the Kentucky Fried Chicken outlet is 2.5 miles from Burger Chef. After Mr. Norris left the bank and was on his way to the Kentucky Fried Chicken restaurant, he negligently injured Lee J. Govro in an accident. Is Burger Chef liable for the accident? [ Burger Chef Systems v Govro, 407 F.2d 921 (8th Cir. 1969)]

Question 29

What did Ms. Coady agree to when she became a Harpo employee?

Question 30

What is the general position of the courts on the liability of churches and dioceses for the sexual misconduct of priests?

Question 31

Dewey Nabors operates a real estate brokerage under the trade name Nabors Company, which shares an office, telephone, and secretary with Midtown, a real estate management corporation that had hired Robert Keaton to oversee the completion of a shopping center. Mr. Nabors asked Mr. Keaton to order siding, pipes, and flooring for his personal residence and directed him to order these materials in the name of Nabors Company. Mr. Keaton contracted with Richardson, Inc., for the flooring. Richardson understood that Mr. Keaton was working for Midtown and billed Midtown for Mr. Nabors's materials. Mr. Nabors refused to pay for the materials because he was dissatisfied. Is Midtown liable? What theory is Richardson using? [ Midtown Properties, Inc. v Richardson, Inc., 228 S.E.2d 303 (Ga. 1976)]

Question 32

Does it matter whether the covenant was part of the employee manual or part of a contract?

Question 33

What must a plaintiff allege to be able to recover from a church or diocese?

Question 34

Reverend John Fisher is the pastor of St. James Episcopal Church in Ohio. Catherine Davis served there as parish secretary from 1978 until six months after Reverend Fisher arrived at St. James in January 1988. Reverend Fisher fired her after she went to the bishop of the diocese to complain about sexual harassment by Reverend Fisher. The bishop promised an investigation, which was not conducted because Reverend Fisher denied the allegations. Ms. Davis then brought suit against the Episcopal Diocese. The diocese denied liability, claiming it was not in control of Reverend Fisher's actions because he was an independent contractor. Do you agree? [ Davis v Black, 591 N.E.2d 11 (Ohio 1991)]

Question 35

Is there a difference between a confidentiality agreement and a covenant not to compete?

Question 36

What must a plaintiff prove to be able to recover from a church or diocese?

Question 37

Lennen Newell, Inc. (L N), is an advertising agency hired by Stokely-Van Camp to do its advertising. L N contracted for the purchase of ad time from CBS, but no Stokely representative's signature is on the contract. If L N does not pay for the ad time, is Stokely liable? [ CBS, Inc. v Stokely-Van Camp, Inc., 456 F Supp. 539 (E.D.N.Y. 1977)]

Question 38

Does this restrictive covenant prevent Ms. Coady from working as a journalist?

Question 39

Is there liability for negligent supervision of priests?

Question 40

John Guz, 49, first hired in 1971, had worked for Bechtel Corporation for 22 years. In 1986, he was assigned to BNI, a division specializing in engineering, construction, and environmental remediation that focuses on federal government programs, principally for the Departments of Energy and Defense (BNI-MI). Mr. Guz worked his way up through Bechtel and BNI both, going from administrative assistant, beginning at a salary of $750 per month, to financial reports supervisor, earning $70,000 per year. During his time with Bechtel and BNI, Mr. Guz had been given generally favorable performance evaluations, steady pay increases, and a continuing series of promotions.
During this time, Bechtel maintained Personnel Policy 1101, dated June 1991, on the subject of termination of employment (Policy 1101). Policy 1101 stated that "Bechtel employees have no employment agreements guaranteeing continuous service and may resign at their option or be terminated at the option of Bechtel."
Between 1986 and 1991, BNI-MI's size was reduced from 13 to 6 persons, and its costs were reduced from $748,000 in 1986 to $400,000 in 1991. Bechtel eventually eliminated Mr. Guz's division. Mr. Guz was discharged, as were all the employees in the division. Mr. Guz brought suit against Bechtel alleging that he had an "implied-in-fact contract" with Bechtel that prevented the company from terminating him as long as the company was performing well financially.
The trial court granted Bechtel's motion for summary judgment and dismissed the action. In a split decision, the Court of Appeal reversed. Bechtel appealed. Who should prevail on appeal? [ Guz v Bechtel, 8 P3d 1089 (Cal. 2000)]

Question 41

Coady v Harpo, Inc.
719 N.E.2D 244 (III. App. 1999)
O! Oprah! Do Tell!
Facts
Elizabeth Coady (plaintiff) was employed by Harpo, Inc. (defendant), a company owned by Oprah Winfrey, as a senior associate producer for The Oprah Winfrey Show" from November 1993 until March 1998. Ms. Coady alleged that for some time prior to March 26, 1998, those working at Harpo engaged in conduct so intolerable as to amount to constructive termination. On March 26,1998, Ms. Coady notified Harpo by letter from her attorney that she resigned effectively immediately
Ms. Coady, a trained journalist, indicated her intent to write or otherwise report about her experiences as an employee of Harpo, She asserted that she would write about her experiences as an exercise of her rights of free speech and free press and was not prohibited from doing so by a confidentiality policy, which was entitled "Business Ethics, Objectivity and Confidentiality Policy," contained in Harpo's September 1996 employee manual.
In a letter dated April 24, 1998, Harpo "reminded" Ms. Coady that she had signed a document entitled "Business Ethics, Objectivity, and Confidentiality Policy" on March 12,1995, and provided her a copy of the agreement in the letter. The letter further stated that in the March 12,1995, agreement, Ms. Coady "agreed (among other things) to keep confidential, during her employment and thereafter, all information about the Company, Ms. Winfrey, her private life, and Harpo's business activities which she acquired during or by virtue of her employment with Harpo." Harpo representatives indicated in the letter their intentions to enforce and ensure compliance with the confidentiality agreement.
Ms. Coady filed suit seeking, among other things, a declaration that the covenant is unenforceable. The trial court dismissed the claim, and Ms. Coady appealed.
Judicial Opinion
GREIMAN, Justice
Both the independent document entitled "Business Ethics, Objectivity, and Confidentiality Policy" (hereinafter the 1995 agreement) and the portion of the employee manual with the same title (hereinafter the 1996 employee manual) include a section entitled "Confidentiality Assurances," which provides in pertinent part as follows:
1. During your employment or business relationship with Harpo, and thereafter, to the fullest extent permitted by law, you are obligated to keep confidential and never disclose, use, misappropriate, or confirm or deny the veracity of any statement or comment concerning Oprah Winfrey, Harpo (which as used herein, included all entities related to Harpo, Inc., including Harpo Productions, Inc., Harpo Films, Inc.) or any of her\its Confidential Information. The phrase 'Confidential Information as used in this policy, includes but is not limited to, any and all information which is not generally known to the public, related to or concerning: (a) Ms. Winfrey and\or her business or private life; (b) the business activities, dealings or interests of Harpo and\or its officers, directors, affiliates, employees or contractors; and\or (c) Harpo's employment practices or policies applicable to its employees and\or contractors.
2. During your employment or business relationship with Harpo, and thereafter, you are obligated to refrain from giving or participating in any interview(s) regarding or related to Ms. Winfrey, Harpo, your employment or business relationship with Harpo and\or amy [sic] matter which concerns, relates to or involves any Confidential Information.
The relevant documents also provide that commitment to the stated policies is required as a condition of employment: "Your commitment to the guidelines set forth in this policy is a condition of your employment or business relationship with Harpo."
In addition, defendant's motion to dismiss attached a copy of plaintiff's acknowledgment of the employee manual, which she signed upon the commencement of her employment at defendant in 1993. The acknowledgment signed by plaintiff states in relevant part:
1 acknowledge and understand that I may not use any confidential or proprietary information of HARPO for my own purposes either during or after my employment with HARPO, and I understand that I am prohibited from removing, disclosing or otherwise misappropriating any of HARPO's confidential or proprietary information for any reason.
"A postemployment restrictive covenant will be enforced if its terms are reasonable." To determine the reasonableness of a restrictive covenant, "it is necessary to consider whether enforcement of the covenant will injure the public, whether enforcement will cause undue hardship to the promisor and whether the restraint imposed by the covenant is greater than is necessary to protect the interests of the employer."
The reasonableness of some types of restrictive covenants, such as no solicitation agreements, also is evaluated by the time limitation and geographical scope stated in the covenant. However, a confidentiality agreement will not be deemed unenforceable for lack of durational or geographic limitations where trade secrets and confidential information are involved..
Although restraint of trade is a significant concern, "[a]n equally important public policy in Illinois is the freedom to contract" Furthermore, postemployment restrictive covenants "have a social utility in that they protect an employer from the unwarranted erosion of confidential information."
Unlike the traditional line of restrictive covenant cases, the confidentiality agreement at issue in the instant case does not impose any of the typical restrictions commonly adjudicated in restrictive covenant cases.
Defendant does not seek to restrain plaintiff's future career. Plaintiff is free to choose her future occupation, the locale in which she may choose to work, and the time when she can commence her new career. Defendant does not object to plaintiff becoming a journalist, competing with defendant in the same venue and in any locale, including Chicago, and in beginning her new venture immediately. The confidentiality agreement does not restrict commerce and does not restrict plaintiff's ability to work in any chosen career field, at any time. Instead, the 1995 confidentiality agreement restricts plaintiff's ability to disseminate confidential information that she obtained or learned while in defendant's employ. Most certainly, plaintiff had no problem with keeping confidences as long as she was a senior associate producer and continued her work with defendant.
Moreover, we find unpersuasive plaintiff's argument that the confidentiality agreement is too broad because it remains effective for all time and with no geographical boundaries. Whether for better or for worse, interest in a celebrity figure and his or her attendant business and personal ventures somehow seems to continue endlessly, even long after death, and often, as in the present case, extends over an international domain.
Under the facts of this case and the terms of the restrictive covenant at issue, we find that the 1995 confidentiality agreement is reasonable and enforceable. Accordingly, we affirm the trial court's order dismissing plaintiff's cause of action as stated in count 1 of her complaint.
Affirmed.
Is the Oprah covenant enforceable?

Question 42

What is the effect of the disclaimer in the Jogbra employment manual?

Question 43

Bernice Bisbee is a real estate broker employed by Midkiff Realty, Inc. In September 1972, she obtained from Richard and Marian Silva an exclusive listing agreement for the sale of their property in Kaleheo, Kauai. The land, which fronted on the Kaumualii highway, consisted of 34,392 square feet, one twobedroom house, and one four-bedroom house. The Silvas told Ms. Bisbee that they wanted $100,000 for the property.
Some time later, Ms. Bisbee obtained an offer for the property from David Larsen. The down payment was set at $35,000, with payments of $2,000 a month at 8 percent a year, but Mr. Larsen backed out before closing. After that, a joint venture of six members formed the Pacific Equity Associates to buy the property. Ms. Bisbee was to manage the joint venture and would receive 10 percent of the profits for her services. One of the joint venture members, Toshio Morikawa, appeared as the buyer at the July 1973 closing of the property sale. Ms. Bisbee did not tell the Silvas of the venture nor of her pecuniary interest in it.
In August 1973, Ms. Bisbee prepared for the venture a financial statement that listed the market value of the Silva property at $149,424. Several times the venture was late making payments, which Ms. Bisbee covered. Mr. Silva and his wife were emotionally distressed about the late payments and told Ms. Bisbee. Eventually, because of defaults on the payments, the Silvas brought suit to cancel the contract and for damages for fraud by Ms. Bisbee, naming Midkiff Realty in the suit as well.
The jury returned a verdict for $29,000 in general damages for the Silvas and $50,000 in punitive damages. Ms. Bisbee and Midkiff appealed. Was there a breach of fiduciary duty? Should the damage award stand because of Ms. Bisbee's actions? [ Silva v Bisbee, 628 P2d 214 (Haw. App. 1981)]

Question 44

Of what significance is the fact that Mr. Theurer volunteered for the all-night shift?

Question 45

What is the importance of an ambiguity?

Question 46

The physician for the Philadelphia Eagles football team examined Don Chuy, a player, and determined that because of a medical condition, Mr. Chuy should not play football. The team's general manager then reported to a sports columnist that Mr. Chuy had a fatal blood disease. A report of the illness appeared in print and was picked up by other sources. Mr. Chuy's personal physician never diagnosed the disease. Mr. Chuy sued the football club for defamation. Is the club liable for the remarks made by the general manager? [ Chuy v Philadelphia Eagles Football Club, 595 F.2d 1265 (3d Cir. 1979)]

Question 47

Why would a restaurant association have an interest in the outcome of the case?

Question 48

Why is there no promissory estoppel claim?