Reed v. House of Decor, Inc.
1985 La. LEXIS 9242, 468 So. 2d 1159 (1985)
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Rule of Law:
An employer is not vicariously liable for the tortious acts of an employee when the act is performed for the personal benefit of a corporate shareholder, is unrelated to the corporation's business, provides no benefit to the corporation, and occurs outside of business hours and premises.
Facts:
- William Cusack and Steven Tomoletz were the sole shareholders of House of Decor, Inc., a gift shop.
- Cusack and Tomoletz, as individuals, leased a property where the gift shop operated on the ground floor and they resided on the upper floor.
- They sublet an apartment in the rear slave quarters of the property to Chuck Williams.
- Williams performed occasional, uncompensated odd jobs for House of Decor, such as cleaning the sidewalk and acting as a watchman.
- Cusack and Tomoletz were preparing to move their personal residence to a new property.
- Cusack asked John V. Reed, an acquaintance, to help Williams move a refrigerator from Williams' apartment to Cusack and Tomoletz's new residence.
- The moving occurred on a Sunday, before the gift shop's business hours.
- While moving the refrigerator down the stairs, Williams lost his grip, causing it to fall on and injure Reed's ankle.
Procedural Posture:
- John V. Reed filed suit against House of Decor, Inc. and its insurer, Gulf Insurance Company, in a Louisiana trial court.
- A jury returned a verdict for Reed, finding through special interrogatories that Williams was an employee of House of Decor and his negligence caused Reed's injuries.
- The trial court entered judgment in favor of Reed.
- House of Decor and Gulf Insurance, as appellants, appealed to the Louisiana Fourth Circuit Court of Appeal.
- The Court of Appeal first reversed and remanded for a new trial due to flawed jury instructions.
- The Supreme Court of Louisiana granted review and summarily remanded, ordering the Court of Appeal to decide the case on the existing record.
- On remand, the Court of Appeal reversed the trial court's judgment, concluding Williams was not acting in the course and scope of his employment.
- The Supreme Court of Louisiana then granted certiorari to review the Court of Appeal's decision.
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Issue:
Is a corporation vicariously liable for the negligent act of an occasional employee when the act was performed at the request of a corporate shareholder for the shareholder's personal benefit and was unrelated to the corporation's business?
Opinions:
Majority - Justice Lemmon
No. A corporation is not vicariously liable for an employee's negligence when the employee's act is not within the course and scope of employment. For an act to be within the course and scope, it must have a sufficient relationship to the employer's business. Here, Williams's act of moving the refrigerator was for the personal benefit of the corporation's shareholders, Cusack and Tomoletz, not for the corporation itself. The act provided no benefit to House of Decor, occurred when the business was closed, had no relationship to the gift shop's operations, and was not controlled by the corporation. The policy of allocating business-generated risks to the employer does not apply when the employer had only a marginal relationship with the risk-creating act and did not benefit from it.
Dissenting - Justice Calogero
Yes. The court should have found the corporation vicariously liable. The majority's distinction between a 'regular' and 'occasional' employee for the purposes of applying vicarious liability policy is 'hair splitting.' Given that Williams frequently performed work for the corporation and its owners on the same premises, it is difficult to conclude he was not acting in the course and scope of his employment. Furthermore, even if Williams was not an employee of the corporation at that moment, he was acting as an agent for Cusack and Tomoletz individually, and their liability insurance policy with Gulf Insurance Company likely provided coverage for such an event, making the insurer liable regardless of the corporation's status.
Analysis:
This decision clarifies the 'course and scope of employment' doctrine, particularly for closely-held corporations where the personal affairs of the owners and corporate business may overlap. The court established that for vicarious liability to attach to the corporation, the employee's act must have a tangible connection to and provide some benefit for the corporate enterprise itself, not just its individual shareholders. The ruling narrows the scope of corporate liability by refusing to automatically impute an employee's actions to the company when those actions are personal favors for corporate principals, thereby reinforcing the legal distinction between a corporation and its owners.
