Cengage Advantage Books: Fundamentals of Business Law Today 10th Edition by Roger LeRoy Miller

Exercise 26

A Question of Ethics-Agency. Emergency One, Inc. (EO), makes fire and rescue vehicles. Western Fire Truck, Inc., contracted with EO to be its exclusive dealer in Colorado and Wyoming through December 2003. James Costello, a Western salesperson, was authorized to order EO vehicles for his customers. Without informing Western, Costello e-mailed EO about Western's financial difficulties, discussed the viability of Western's contract, and asked about the possibility of working for EO. On EO's request, and in disregard of Western's instructions, Costello sent some payments for EO vehicles directly to EO. In addition, Costello, with EO's help, sent a competing bid to a potential Western customer. EO's representative e-mailed Costello, "You have my permission to kick [Western's] ass."
In April 2002, EO terminated its contract with Western, which, after reviewing Costello's e-mail, fired Costello. Western filed a lawsuit against Costello and EO, alleging that Costello breached his duty as an agent and that EO aided and abetted the breach. [ Western Fire Truck, Inc. v. Emergency One, Inc., 134 P.3d 570 (Colo.App. 2006)] (See Liability in Agency Relationships.)
1. Did Costello owe Western a duty? If so, what was the duty? Did Costello breach it? How?
2. A Colorado state statute allows a court to award punitive damages in "circumstances of fraud, malice, or willful and wanton conduct." Did any of these circumstances exist in this case? Should punitive damages be assessed against either defendant? Why or why not?