Kerl v. Dennis Rasmussen, Inc.
273 Wis. 2d 106, 2004 WI 86, 682 N.W.2d 328 (2004)
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Rule of Law:
A franchisor may be held vicariously liable for the tortious conduct of its franchisee only if the franchisor has control or a right of control over the daily operation of the specific aspect of the franchisee's business that is alleged to have caused the harm. General operational and quality standards designed to protect the franchisor's trademark are insufficient to establish such control.
Facts:
- Arby's, Inc. is a national franchisor of fast-food restaurants.
- Dennis Rasmussen, Inc. ('DRI') operated an Arby's franchise in Madison, Wisconsin, under a licensing agreement with Arby's.
- The agreement required DRI to conform to Arby's operational standards but specified that DRI shall 'hire, train, maintain and properly supervise' its own personnel.
- DRI hired Harvey Pierce, who was a work-release inmate at the Dane County Jail.
- On June 11, 1999, Pierce left his job at the Arby's restaurant during his shift without permission.
- Pierce went to a nearby Wal-Mart, where he ambushed and shot his former girlfriend, Robin Kerl, and her fiancé, David Jones.
- Jones was killed, and Kerl sustained serious, permanent injuries. Pierce then killed himself.
Procedural Posture:
- Robin Kerl and the estate of David Jones sued Dennis Rasmussen, Inc. (DRI) and Arby's, Inc. in the Circuit Court for Dane County, the trial court of first instance.
- The plaintiffs alleged Arby's was vicariously liable for DRI's negligent supervision of its employee, Harvey Pierce.
- Arby's moved for summary judgment, arguing it had no control over DRI's employees and thus no basis for vicarious liability.
- The circuit court granted summary judgment in favor of Arby's, dismissing the claims against it.
- The plaintiffs, as appellants, appealed the circuit court's decision to the Wisconsin Court of Appeals.
- The court of appeals, in a published decision, affirmed the summary judgment in favor of Arby's, the appellee.
- The plaintiffs then petitioned the Supreme Court of Wisconsin for review of the court of appeals' decision.
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Issue:
Does a franchisor become vicariously liable for the negligent supervision of a franchisee's employee when the franchise agreement imposes general quality and operational standards but does not grant the franchisor control over the daily supervision of personnel?
Opinions:
Majority - Sykes, J.
No. A franchisor is not vicariously liable for the negligent supervision of its franchisee's employee where the franchise agreement provides for general operational control but does not vest the franchisor with control over the daily supervision of the franchisee's personnel. Vicarious liability under the doctrine of respondeat superior requires a master-servant relationship, which is defined by the principal's control or right to control the physical conduct of the agent. Applying this test broadly to franchising would be inappropriate, as the quality and operational standards common in franchise agreements are necessary to protect the franchisor's trademark under the Lanham Act and do not equate to the day-to-day control required for a master-servant relationship. Therefore, the court adopts a more focused test: liability attaches only if the franchisor controls or has the right to control the daily operation of the specific aspect of the franchisee's business—the 'instrumentality'—that allegedly caused the harm. Here, the alleged harm resulted from negligent supervision of an employee. The agreement between Arby's and DRI gave Arby's no right to control the daily hiring, firing, or supervision of DRI's employees; that power rested solely with DRI. Thus, no master-servant relationship existed with respect to employee supervision, and Arby's cannot be held vicariously liable.
Analysis:
This decision establishes a clear and narrow test for franchisor vicarious liability in Wisconsin, aligning the state with the modern trend in other jurisdictions. It shields franchisors from liability arising from standard franchise agreements, which must contain quality controls to protect brand integrity and trademarks. By adopting the 'specific instrumentality' test, the court requires plaintiffs to prove a franchisor's control over the precise activity that caused harm, rather than relying on general brand standards. This precedent makes it significantly more difficult to hold franchisors liable for the torts of their franchisees, forcing future litigation to focus on specific contractual clauses or actual practices demonstrating direct control over the source of the injury, such as employee management or security protocols.
