Tuesday, January 30, 2007

On Hughes v. Doe and unpublished opinions

I have sometimes written my opposition to unpublished opinions.

The Supreme Court's decision earlier this month in Hughes v. Doe involves almost precisely the same issue as what was before the Court in a case I had years ago and lost 7-0, in an unpublished opinion, whereas Doe only lost 5-2. This was the case where Justice Compton glared at me and declared, "Mr. Minor, what you're saying can't possibly be true." And, it might not be true, but the best reason why it is not true continues to escape the Court in Hughes, as it did in my case. The best argument is simply to recognize that the limitations defense of the employee is personal and cannot be asserted by the employer, just like a discharge in bankruptcy or qualified immunity in a section 1983 case. In effect, the employer lacks standing to assert the employee's limitations defense.

Instead of this simplified analysis, the Court has gone off on a tangent, declaring a limitations dismissal "not on the merits," in a way that will surely generate litigation for years to come. So, if I bring a claim on an oil and gas lease that involves some performance in Virginia and some in Kentucky (as I have done, in fact) in Virginia court and the Virginia court rules the claim is time-barred under the relatively short five-year Virginia statute of limitations for claims on a written contract, I can pack up and refile in Kentucky where the contract limitations used to be 10 years and nothing that happened in Virginia will be res judicata, because it was not "on the merits." Is that what the Court intended? I suspect not.

In my unpublished case, I was the appellee, having evidently hypnotized the trial court judge. I thought I had made a stylish argument, with lots of authority on each point, but the Supreme Court did not believe it for a second. Justice Hassell said he didn't understand it, that it didn't make any sense. (I should add that every other Virginia lawyer who read the brief at the time said pretty much the same thing.) Here is what I wrote, in part:

As a general rule, on claims solely based on vicarious liability, an employer cannot be liable if its employee is not liable, and the employer is entitled to assert the employee’s defenses. This general rule include the defense of statute of limitations: courts have held that if a claim against an employee is time-barred, then a vicarious claim against the employer is barred as well. Such a rule would be consistent with Virginia law regarding statute of limitations: in Virginia, the statutes of limitations are broadly construed and in other kinds of “derivative” tort claims, the Virginia Supreme Court has held that the derivative claim is untimely if the primary claim is untimely. Plainly, the statute of limitations has expired as to Company’s employee in this case, Company’s Employee, who has never been sued by Mr. Plaintiff. Consequently, because Company’s Employee could not be liable to Mr. Plaintiff and because Mr. Plaintiff’s claim against Company is based solely on the alleged negligence of Company’s Employee, Mr. Plaintiff’s claim against Company is barred as well.

Because of the derivative nature of respondeat superior liability, it is a fundamental prerequisite to the imposition of vicarious liability that the agent or employee must be liable to the third party. The discussion in Federal Land Bank of Baltimore v. Birchfield, 173 Va. 200, 3 S.E.2d 405 (1939) is instructive. In Birchfield, the defendant corporation was sued for defamation based on the acts of its agent.

Defendant corporation . . . is liable, if at all, on the theory of respondeat superior. If the agent who committed the tort would not have been personally liable for the words he uttered as an agent of the corporation, then the corporation for whom the agent at the time was acting is not liable.

173 Va. at 225, 3 S.E.2d at 415. The Birchfield Court approved the language of the United States Supreme Court, that “[i]t would seem on general principles that if the party who actually causes the injury is free from all civil or criminal liability therefor, his employer must also be entitled to a like immunity.” 173 Va. at 226, 3 S.E.2d at 416 (emphasis added).

Because of the derivative nature of vicarious liability, Virginia courts have held that a verdict in favor of the servant exonerates the master when both are sued together. “It is well settled in Virginia that where master and servant are sued together in tort, and the master’s liability, if any, is solely dependent on the servant’s conduct, a verdict for the servant necessarily exonerates the master.” Roughton Pontiac Corp. v. Alston, 236 Va. 152, 156, 372 S.E.2d 147, 149 (1988). By the same reasoning, the principal or employer can generally assert the same defenses available to its agent or employee, even when the employee is not joined as a defendant. “[E]mployers are generally entitled under traditional principles of respondeat superior to assert all defenses available to their employees.” Norton v. United States, 581 F.2d 390, 397 (4th Cir. 1978). Compare Polygram International Publishing, Inc. v. Nevada/TIG, Inc., 855 F.Supp. 1314, 1334 (D.Mass. 1994) (“Under theories of agency and respondeat superior, the defenses of the servant may be asserted by the master. . .”).

In the Restatement of Agency, Second, the authors recognized this rule, offering that a master can have the benefit of all the servant’s defenses, with the exception of some kinds of immunity based on the personal relationships of the servant. Compare RESTATEMENT (2D) AGENCY § 219 & comment c (master can use servant’s defenses); RESTATEMENT (2D) AGENCY § 217 (master can assert servant’s defenses with exception of privileges based on status); Carter v. Carlson, 447 F.2d 358, 367 n. 26 (D.C. Cir. 1971) (“It is generally recognized . . .that the master can assert . . . the servant’s substantive defenses”); Sundance Cruises Corp. v. American Bureau of Shipping, 799 F.Supp. 363, 391 (S.D.N.Y. 1992) (same); see also RESTATEMENT (2D) AGENCY § 180 (undisclosed principal can assert agent’s defenses to contract claims).

In line with the general rule that an employer can assert its employee’s defenses in a case based on vicarious liability, some courts have held that employers or principals are entitled to the benefit of their servants’ or agents’ defense based on statutes of limitations. In the leading case of Ware v. Galveston City Company, 111 U.S. 170 (1884), the United States Supreme Court observed that the limitations defense of an agent would also protect those on whose behalf the agent acted as agent. 111 U.S. at 174 (“But manifestly the statute of limitations that barred the claims against Menard . . . would equally protect those on whose behalf Menard acted as agent”). Citing Ware, the authors of CORPUS JURIS SECUNDUM state the following rule:

An agent may be protected by the statute of limitations in respect of personal liability; and a statute of limitations that bars a claim against an agent equally protects those on whose behalf he acted as agent.

54 C.J.S. Limitations § 15. Likewise, the authors of AMERICAN JURISPRUDENCE cite Ware in stating the rule that “a statute that bars a claim against an agent equally protects those in whose behalf he acted as agent. . . .” 3 AM. JUR. 2d Agency § 339.

This rule has been applied to negligence cases where the liability of the principal or master or employer was based on the doctrine of respondeat superior. Courts have held that where the action against the employee or agent is barred by the statute of limitations, an action against the principal or employer is also barred. See Greco v. University of Delaware, 619 A.2d 900, 903-04 (Del. 1993); Lowery v. Statewide Healthcare Service, Inc., 585 So.2d 778 (Miss. 1991); Hewett v. Kennebec Valley Mental Health Association, 557 A.2d 622, 624 (Me. 1989); Panther Air Boat Corp. v. MacMillan-Buchanan & Kelly Ins. Agency, 520 So.2d 601, 603 (Fla. App. 1987); Wilhelm v. Traynor, 434 So.2d 1011 (Fla. App. 1983); Grondahl v. Bulluck, 318 N.W.2d 240, 244 (Minn. 1982) (dicta); Kambas v. St. Joseph’s Mercy Hospital, 33 Mich. App. 127, 189 N.W.2d 879 (1971), reversed on other grounds, 389 Mich. 249, 205 N.W.2d 431 (1973); Davis v. Eubanks, 167 N.E.2d 386, 390 (Ohio Ct. Com. Pl. 1960); see also Owen v. King, 130 Tex. 614, 111 S.W.2d 695 (1938) (quoting Gibson, supra); Gibson v. Jensen, 48 Utah 244, 158 P. 426, 428 (1916) (“The general rule is that, if a cause of against is barred against the agent of an undisclosed principal, it is also barred against such principal”).

In Greco, plaintiff, a college student, sought recovery from the university for the negligence of the doctor employed in the student health center. Plaintiff conceded that the limitations had run as to any claim against the doctor. 619 A.2d at 902. The Court concluded that “[s]ince Dr. Talbot (the employee) is not liable to Greco on the merits, because Greco’s claims are barred by the medical malpractice statute of limitations, there is no vicarious liability imputed to Dr. Talbot’s employers, the University and the Student Health Care Center.” 619 A.2d at 904. The Court considered separately the plaintiff’s allegations of direct negligence by the University and the Student Health Center and concluded that they, too, were untimely. 619 A.2d at 904-907.

In Hewett, the plaintiff sought recovery from the Association for the negligent acts of a psychologist employed by the Association. The Court held that “the Association’s liability under Count II being vicarious to Dr. Robinson’s liability, the Association had available the same statute of limitations defense that was available to Dr. Robinson.” 557 A.2d at 624 (citing Ware and RESTATEMENT (2D) OF AGENCY § 219 comment c). Moreover, as to other counts where the responsible actors were not named, the Court observed that “since the Association’s liability is necessarily only vicarious to that of its employees,” the other claims were also barred because the malpractice limitations period would apply to those claims as well. 557 A.2d at 624-25.

In Lowery, the Court dealt with the timeliness of claims against a hospital and a nurse. The trial court had ruled that the hospital’s liability was “predicated solely upon the doctrine of respondeat superior” and that therefore the limitations bar to an action against the employee likewise barred a claim against the hospital. 585 So.2d at 779. On appeal, the Mississippi Supreme Court agreed, holding that since the only basis for the claim against Statewide was vicarious liability, and the claim against the nurse was time-barred, therefore the claim against Statewide was also barred. Citing CORPUS JURIS, AMERICAN JURISPRUDENCE, Ware, Wilhelm, and Hewett, the Court observed that “[i]t is generally held that a suit barred by a statute of limitation against an agent will likewise bar the same claim against the principal whose liability is based solely upon the principal and agency relationship, and not some act or conduct of the principal separate and apart from the act or conduct of the agent.” 585 So.2d at 780.

In Wilhelm, the claims were against a doctor and a hospital. The Court held quite simply that because the plaintiff’s claim against the employee doctor were time-barred, the claims against his employer the hospital were also untimely. “Because Orlando General Hospital is only vicariously responsible for the acts of Dr. Taylor, and he has no liability, the hospital is not liable.” 434 So.2d at 1013.

In Panther Air Boat, the claim was against an insurance salesman and his principal, Charter Oak Fire Insurance. The Court concluded the claim against the agent was time-barred. As to the vicarious claim against Charter Oak, the Court held, “we affirm the summary judgment in favor of Charter Oak since it could not be vicariously liable when its agent had been relieved of liability.” 520 So.2d at 603 (citing Wilhelm).

In Grondahl, the claims were against a doctor and a medical clinic. The Court concluded that there was a dispute of fact about whether summary judgment was proper as to the doctor based on the statute of limitations. In remanding the case, the Court observed: “The liability of The Duluth Clinic is predicated on the liability, if any, of Dr. Bulluck. If the jury were to find the claims against Dr. Bulluck to be barred by the statute of limitations, the claims against The Duluth Clinic arising from Dr. Bulluck’s treatment would also be barred.” 318 N.W.2d at 244.

In Kambas, the claim was against a hospital. The Court observed: “the plaintiff contends that the hospital is vicariously liable for the nurses’ malpractice. He does not contend that the hospital is guilty of any negligence of its own. On these facts, the malpractice statute of limitations applies to an action against the hospital.” 33 Mich.App.2d at 132, 189 N.W.2d at 881. Thus, the Kambas court concluded that the employee’s limitations defense barred plaintiff’s claim against the employer.

In Davis, the claim was against a nurse and a hospital. The Court observed: “Plaintiff has alleged that the injection of penicillin by Ruth Eubanks was done under an order of the decedent’s physician. No claim is made that the defendant hospital participated in the slightest in said order. Our opinion is that since the Statute of Limitations is effective as a bar to an action against the employee, the registered nurse, it is also effective as a bar against an action against the employer, the defendant hospital.” 167 N.E.2d at 390.

The decisions cited above make plain the importance of the distinction between direct negligence and vicarious liability claims in deciding whether to apply the employee’s limitations defense to claims against the employer. Thus, in Greco, the court considered the vicarious and nonvicarious claims separately. Greco, 619 A.2d at 904. In Hewett, Lowery, Wilhelm, Panther Air Boat, Grondahl, Kambas, and Davis, the courts emphasized that the employers’ liability was solely vicarious and that there was no claim of direct negligence against those employers. This distinction is in accordance with the general rule offered in the Restatement:

If there is an independent ground for finding the principal liable, judgment can be entered against him and for the agent. Thus, if in an action against master and servant for harm caused by an automobile driven by the servant, there is evidence that the vehicle was defective, and that the defect was a cause of the harm, it is possible to ascribe the entire fault to the principal.

RESTATEMENT (2D) AGENCY § 217 B, comment d. Virginia follows the same general rule. See Roughton Pontiac, 236 Va. at 156, 372 S.E.2d at 149-50 (employer may be liable in spite of verdict in favor of servant where master’s liability is not “derived solely” from the servant’s acts but is based on his own tortious acts or the acts of another employee).

In Mahony v. Becker, 246 Va. 209, 435 S.E.2d 139 (1993), the Supreme Court dealt with the application of the statute of limitations to the vicarious emotional injury claim of parents for a wrong committed against their child. The Court held that the parents’ claim was “derivative” of the daughter’s claim. 246 Va. at 212, 435 S.E.2d at 141. Because the parents’ claim was derivative, the court held that it accrued at the same time as the child’s claim. 246 Va. at 213, 435 S.E.2d at 141.

Similarly, in other decisions involving “derivative” claims, the Virginia Supreme Court has held that “derivative” tort claims were barred when the limitations period had expired on their respective primary claims. Thus, a subrogation claim of a workers’ compensation carrier was barred when the limitations period on the employee’s claim expired. See United States Fidelity Co. v. Blue Diamond Coal Co., 161 Va. 373, 378-79, 170 S.E. 728 (1933). Similarly, the claim of a decedent’s representative for the decedent’s personal injuries was barred when the limitations period had run against the decedent. See Street v. Consumers Mining Corporation, 185 Va. 561, 39 S.E.2d 271 (1946). One might expect Virginia law would apply the same rule to a shareholder’s derivative suit on behalf of a corporation. See 12B FLETCHER’S CYC. CORP. § 5886 (1993) (“if the cause of action belonging to the corporation, and which is sued on, is itself barred by the statute of limitations, the action by the shareholder as the representative of the corporation is also barred”).

Exceptions to this general rule are the result of specific legislation. Thus, for example, the legislature created a statutory right of contribution in VA. CODE § 8.01-34, non-existent at common law. In Gemco-Ware, Inc. v. Rongene Mold and Plastics Corp., 234 Va. 54, 360 S.E.2d 342 (1987) the Supreme Court held that a statutory claim for contribution from a joint tort-feasor under this statute can be timely even though the limitations period has expired on the underlying claim against the party from whom contribution was sought. In that case, the Court held that by statute, the General Assembly had recognized a distinction between “the main action and the derivative claim for contribution.” 234 Va. at 59, 360 S.E.2d at 345. The legislature reemphasized this distinction with the enactment of VA. CODE § 8.01-249(5), which provides explicitly when a cause of action for contribution or indemnification accrues. The Code provisions regarding contribution provide a legislative basis for differentiating between the principal and derivative claims with respect to limitations that does not exist with other kinds of “derivative” claims, such as the kind of claim asserted by the plaintiff in this case.

Mr. Plaintiff argues that the Virginia law regarding joinder of parties has some effect on the statute of limitations. He submits that because he was not required by the Code and the Rules of Court to sue Company’s Employee along with Company, it cannot be true that the expiration of the limitations period against Company’s Employee affects his claim against Company. Under VA. CODE § 8.01-442, if Mr. Plaintiff had won a judgment in one case against Company’s Employee, he could also seek a judgment against Company in a subsequent action. Under VA. CODE § 8.01-35.1, Mr. Plaintiff could have settled with Company’s Employee then brought an action against Company. These are useful modifications of the common law, supported by public policy in favor of avoiding unnecessary litigation while making a claimant whole, but neither the letter nor the logic of these Code sections have any application to the statute of limitations.

The fact that Mr. Plaintiff could have sued Company’s Employee and Company separately does not mean that he can avoid the consequences of never having sued Company’s Employee at all. Likewise, Mr. Plaintiff cannot complain that the limitations period expired as to Company’s Employee while an action against Company was pending. Compare Ward, 177 Va. at 114-15, 125 S.E.2d at 795-96 (employer can assert judgment in favor of employee in separate action obtained while employer’s appeal was pending); Graves, 344 F.2d at 901 (rejecting plaintiff’s argument that judgment in favor of defendant employee obtained while suit was pending against the employer should not be res judicata as to the employer). The policy underlying the statutes of limitations in Virginia law is so strong that the Virginia Supreme Court has observed that any doubt as to the operation of a statute of limitations should be resolved in favor of applying the statute, that the statutes are to be strictly construed, and that exceptions to the statutes are to be construed narrowly. See, e.g., Westminster Investing Corp. v. Lamps Unlimited, Inc., 237 Va. 543, 547, 379 S.E.2d 316, 318 (1989).

Even though the liability of Company may be joint with that of Company’s Employee, it is also derivative of Company’s Employee’ liability. Consistent with the treatment of other derivative claims, and consistent with the policy supporting strict construction of the statutes of limitations, this Court should hold that Mr. Plaintiff’s claims against Company are barred because of the expiration of the limitations period as to Company’s Employee. Mr. Plaintiff had two years to identify and bring suit against Company’s Employee.

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