Friday, April 24, 2009

Agency/ insurance law: What is “personal knowledge” of a corporation?

Mann v. Adventure Quest (2007-443) (24-Apr-2009), 2009 VT 38 (Dooley, J.)

This suit arises out of the conduct of, the executive director of Adventure Quest who sexually abused both plaintiffs when they were minors and attended Adventure Quest. Plaintiffs appeal from the Windsor Superior Court’s grant of summary judgment to intervenor-insurer Virginia Surety Company, determining that insurer would not owe indemnification to Adventure Quest should it be found liable to plaintiffs for sexual abuse they experienced while attending Adventure Quest’s school. On appeal, plaintiffs argue that insurer was not entitled to summary judgment because the superior court should not have imputed knowledge of the sexual abuse to Adventure Quest and because a material fact remained in dispute. The insurance policy exclusion insurer seeks to apply is invoked only if Adventure Quest has “personal knowledge of any sexual abuse, sexual molestation, sexual exploitation, or sexual injury.” The superior court granted summary judgment to insurer because the executive director’s knowledge of his own misconduct must be imputed to Adventure Quest, so that it can be said to have had “personal knowledge” of the abuse thereby precluding coverage under the exclusion quoted above. We agree that a material fact remains in dispute and reverse and remand.

Under agency law, the executive director’s knowledge of his own misconduct must be imputed to Adventure Quest, so that it can be said to have had “personal knowledge” of the abuse in this case only if the executive director controls and dominates the corporation. Any notice or knowledge received by an officer or agent authorized to receive the same is imputed to the corporation itself, unless it is received by the agent outside the scope of the agent’s authority. When an agent’s interests in the subject matter are so adverse as to practically destroy the agency relationship, there is no imputation of knowledge to the principal. This is the adverse-interest exception. There is an exception to the adverse interest exception when an adverse agent is the sole representative of the principal.

We adopt the sole-representative doctrine as applied when an agent controls and dominates the corporation. Although we generally view this case as turning on agency principles, the policy language does not necessarily adopt these principles. The use of the word “personal” suggests a more rigorous standard. Our duty is to construe the policy as it is written and not to rewrite it using language we can more easily construe. It is important that we not broadly allow imputation of knowledge of misconduct through a sole-representative doctrine. We view the very limited policy language requiring “personal” knowledge as addressing that concern.

From this record we cannot determine whether the executive director controlled and dominated Adventure Quest. There are clearly disputed questions of material fact that prevent the grant of summary judgment.

Sunday, April 19, 2009

Stealing plaintiffs’ money and then lying to them about the theft, notwithstanding fiduciary duty, was malice as a matter of law.

New trial on amount of punitive damages granted, even though plaintiff made no Rule 50 motion. DeYoung v. Ruggerio, 2009 VT 9 (Dooley, J.)

This is an action by clients against a lawyer who misappropriated funds belonging to the clients. The lawyer failed to answer the complaint, and the superior court entered a default judgment in favor of plaintiffs. The court held a trial on damages, and a jury awarded no punitive damages based on a special interrogatory that it did not find malice. On appeal, we conclude that the element of malice was demonstrated as a matter of law in this case. Even though Plaintiff made no Rule 50 motion on this issue, we reverse the judgment in part and remand the matter for the jury to determine how much in punitive damages, if anything, to award plaintiffs.

Our longstanding definition of malice has been a source of confusion by referring not only to “conduct manifesting personal ill will” but also to “conduct showing a reckless disregard to the rights of others.” Although defendant acknowledges stealing plaintiffs’ money and then lying to them about the theft for years notwithstanding his fiduciary duty to them, he contends that the jury could reasonably have found no malice because (1) he did not intend to harm them, and (2) he always intended to return the money to them sooner rather than later. We conclude that even if the jury accepted this explanation entirely, defendant’s fraudulent conduct demonstrated bad motive and malice as a matter of law.

Malice or “bad motive” does not arise exclusively from “personal ill will” toward a particular person. Malice may also be found when the defendant engages in deliberate and outrageous conduct aimed at securing financial gain or some other advantage at another’s expense, even if the motivation underlying the outrageous conduct is to benefit oneself rather than harm another. To find malice, the jury was not required to determine that defendant’s motive in stealing plaintiffs’ estate funds was to harm them rather than enrich himself. Especially this case involving wrongdoing by a fiduciary, Defendant’s admitted motive to enrich himself and promote the interests of his company, in and of itself demonstrates a bad motive.

The trial court could have found malice as a matter of law, in light of the record demonstrating his intentional course of wrongdoing, committed with conscious and deliberate disregard for plaintiffs’ rights, and pursuant to an illegitimate motive. In the absence of a Rule 50 motion, the court should have granted plaintiffs’ post-hearing motion for a new trial based on the complete absence of evidence to support the jury’s finding of no malice. Accordingly, we reverse and remand for the jury to consider the proper amount of punitive damages, if any, without requiring them to make the threshold determination of whether malice existed.

Depositions at trial: prejudicial error to admit video “preservation” deposition of expert w/o showing witness unavailable.

Nichols and Nichols, Guardians of Nichols v. Brattleboro Retreat d/b/s/ Retreat Healthcare (2007-310) (23-Jan-2009) (Reiber, C.J.; Burgess, J., dissenting.)

Plaintiffs in this medical negligence action appeal from a judgment based on a jury verdict, in favor of defendant, the Brattleboro Retreat. Plaintiffs contend the court erred in admitting the deposition testimony of an expert witness without finding that the witness was unavailable. We conclude that the admission of the deposition testimony was error, and reverse and remand.

The trial court did not make the requisite finding that the witness was unavailable as a basis for admission. Instead, because the sole purpose of the deposition was to preserve testimony for trial, the court found that plaintiffs had waived the objection by failing to raise it at the deposition. We agree with plaintiffs that the facts and the law do not support the court’s finding of a waiver. There is no question, to be sure, that plaintiffs were aware of the stated purpose of the deposition and extensively examined the witness with this understanding. Nevertheless, plaintiffs expressly denied having entered into any stipulations at the start of the deposition, and, more importantly, were under no affirmative obligation to raise an objection at that time; it remained defendant’s burden, as the proponent, to establish a foundation for the deposition’s admission at trial. See Duto v. Mitchell, 158 Vt. 653, 654, 609 A.2d 988, 989 (1992) (mem.) (although plaintiffs had informed defendant of their intent to introduce deposition at trial and defendant did not object, defendant “never agreed affirmatively to waive its right to require the in-court appearance” of the witness, and defendant’s silence did not amount to acquiescence). Hence, we cannot conclude that the record supports a finding that plaintiffs waived their objection to the deposition or implicitly agreed to its admission. Moreover, there was no finding that the witness actually was unavailable. Accordingly, it was error to admit the deposition. The admission of the deposition was prejudicial because it was the sole evidence offered by defendant on a central issue.

Burgess, J., dissenting, would have held the “absence of Dr. Rabinowitz’s physical appearance in court “ was harmless error. The deposition was preceded by plaintiffs’ initial discovery deposition when the nature and scope of Dr. Rabinowitz’s opinion and the basis therefore could be known in advance of the preservation deposition. The deposition at issue was specifically noticed and conducted as a “preservation” deposition where objections could be interposed for ruling at trial. The doctor’s preserved testimony was videotaped, so that his tone and demeanor on direct and cross-examination could be observed. Plaintiffs were therefore prepared to vigorously cross-examine the expert at the second deposition, and the record shows that this is precisely what occurred.

Exculpatory release is clear, valid and enforceable to preclude negligence liability.

Provoncha v. Vermont Motocross Assn. 2009 VT 29 (Skoglund, J.)(Johnson, J., dissenting.)

Heidi and Clint Provoncha appeal from the Orleans County Superior Court’s grant of summary judgment in favor of Vermont Motocross Association (VMA). The Provonchas filed suit alleging negligence in connection with injuries Mr. Provoncha sustained while participating in a motocross event sponsored by VMA. The superior court ruled that the “Race Day Entry Form,” which Mr. Provoncha signed the day before the event, operated as a waiver of the negligence claim. The form releases VMA "from liability, loss, claims, and demands that may accrue from any loss, damage or injury, including paralization and/or death to my person or property, in anyway arising while engaged in competition or in practice or preparation therefore, or while entering or departing the premises, from any cause what so ever." The Provonchas contend on appeal that the Race Day Entry Form does not release VMA from liability because: (1) it is not sufficiently clear as required by our decision in Thompson v. Hi Tech Motor Sports, Inc., 2008 VT 15, ___ Vt. ___, 945 A.2d 368; and (2) it violates public policy. We affirm the superior court’s grant of summary judgment.

The question of whether the Race Day Entry Form at issue in this case was sufficiently clear to release VMA and Driver from liability for negligence is governed by Douglass v. Skiing Standards, Inc., 142 Vt. 634, 459 A.2d 97 (1983) (release was sufficiently clear for purposes of exculpating ski area from negligence liability notwithstanding its failure to include the word “negligence” in its terms.) We recently reaffirmed Douglass in Thompson, where we held that, unlike Douglass, an agreement releasing a motorcycle dealership from “any claim” was not sufficiently clear to exculpate it from its own negligent acts. The release at issue in Thompson read: “The undersigned waives any claim that he/she may have now or in the future against [defendant] . . . for injury to him/her self as a result of his/her operation . . . of a motorized vehicle owned by . . . [defendant].” In contrast, the Race Day Entry Form, like the Douglass release, is comprehensive as to type of claim—"liability, loss, claims, and demands that may accrue from any loss, damage or injury.” The Race Day Entry form is sufficiently clear as to operate as a release of negligence claims against defendants.

We explained in Thompson that “evaluating whether a release from liability contravenes public policy does not follow a strict formula because no single formula will reach the relevant public policy issues in every factual context.” Id., ¶ 6 (quotation omitted). “Rather,” we continued, “we consider the totality of the circumstances and societal expectations to determine whether sufficient public interest exists to avoid a release.” Id. We conclude, given the totality of the circumstances of this case, the nature of the activity, and the expectations of society, that there are no public policy barriers to effectuating the Race Day Entry Form.

Johnson, J., dissents for the simple and obvious reason that this case is plainly controlled by Thompson v. Hi Tech Motor Sports, Inc., 2008 VT 15, ___ Vt. ___, 945 A.2d 368, where the Court held that a similar contractual release was insufficiently clear and unambiguous to insulate the defendant from liability for its own negligence.

Workers Comp. Act bars action against supervisor exercising managerial prerogative.

Garger v. Desroches, 2009 VT 37 (mem.)

Plaintiff Michael Garger appeals from the superior court’s order dismissing his complaint against his former co-employee and supervisor. Plaintiff filed an action for damages, alleging that defendant negligently ordered him to surmount a steep incline while driving an all-terrain vehicle, which resulted in an accident that caused him severe injury. The court dismissed the complaint as barred by the Workers’ Compensation Act . On appeal, plaintiff argues that his cause of action is not barred because it is not against his employer. We affirm.

For someone to be “other than the employer” and not per se immune from suit, the person must not be acting as the employer—that is, he must not be performing a nondelegable duty of the employer and must not be exercising “managerial prerogatives.” We conclude that defendant can be acting as the employer even though he is not an owner or officer of the employer corporation. The order was given as a managerial duty in that, as plaintiff alleges, defendant was acting as his supervisor at the time.

A failure to ensure that the equipment is appropriate for the job is part of an employer’s nondelegable duty to provide a safe workplace. Any negligence was in failing to assure that the equipment and the operator were safe and appropriate for the task of driving up the steep slope. Whether the alleged negligence is characterized as arising from an affirmative act or from an omission, the fact remains that defendant may not be sued because any breach was of the duty to provide a safe work environment. Thus, defendant’s act is not excepted from § 624(a)’s exclusivity clause.

The exclusivity provision bars any claim against an employer short of intentional injury. Since defendant was exercising a nondelegable duty of the employer and was thus acting as the employer, defendant must have either had a specific intent to injure or have known with substantial certainty that injury would result, for the exclusivity provision not to bar plaintiff’s claim. Plaintiff has not alleged such facts.

Failure to exhaust administrative remedies bars VPAA hostile school environment claims based on peer harassment.

Allen v. University of Vermont (2008-132) (27-Mar-2009) 2009 VT 33 (Burgess, J.) (Johnson, J., dissenting.)

Plaintiff, a former University of Vermont (UVM) student, sued the university for monetary damages, claiming discrimination under the Vermont Public Accommodations Act (VPAA). The VPAA, 9 V.S.A. §§ 4500-4508 creates a private right of action for persons discriminated against in places of public accommodation, including educational institutions. See Washington v. Pierce, 2005 VT 125, ¶ 18, 179 Vt. 318, 895 A.2d 173 (concluding that “the VPAA encompasses hostile school environment claims based on peer harassment”). Plaintiff complained that UVM did not treat her report of rape by another student as a harassment claim and did not investigate her charge as required by 16 V.S.A. § 14, a statute designed to prevent harassment in educational institutions. The superior court granted summary judgment in favor of UVM on the ground that plaintiff failed to exhaust her administrative remedies, which the same statute requires as a precondition to her cause of action. Id. § 14(b).

Absent an applicable exemption, a private cause of action under the VPAA against an educational institution is generally barred unless the plaintiff first satisfies the statutory precondition of bringing a claim of harassment to the attention of the persons designated by the institution to handle such complaints. 16 V.S.A. § 14(b). It was undisputed that plaintiff did not complain to the officials specifically designated by UVM to receive and respond to harassment claims. On appeal, plaintiff argues that (1) UVM’s failure to provide her with a copy of its harassment policy at the time she reported the assault precluded UVM’s failure-to-exhaust-administrative-remedies defense; (2) existing statutory exceptions to the exhaustion requirement apply to this case; and (3) even if those existing exceptions are not applicable here, the facts in this case should compel this Court to recognize an additional, extra-statutory exception to the legislated exhaustion requirement. We disagree with each of these arguments and affirm the superior court’s judgment.

In Washington, rather than adopt the subjectively based “deliberately indifferent” or “knew or should have known” standards applied respectively in Title IX and Title VII cases, we focused on the Legislature’s exhaustion requirement to satisfy the second element of a student-to-student hostile-school-environment claim. Id. ¶¶ 23-34.
UVM is entitled to have its designated employees answer an express harassment claim before its opportunity to examine and correct its position is foreclosed. The reality is that plaintiff never expressed her complaint in terms of “harassment.” Plaintiff complained about being raped, and the Victim’s Advocate, as well as the Center’s Assistant Director, simply responded to a rape complaint. As the trial court concluded, nobody—neither plaintiff nor university officials—apparently perceived that they were dealing with harassment. Not too surprisingly, the Victim’s Advocate did not view plaintiff’s report of rape as one of civil harassment.

Washington, 2005 VT 125, ¶ 35 also holds that a plaintiff bringing a VPAA action based on a hostile school environment created by student-student harassment must show, in addition to exhaustion of administrative remedies, that “he or she was the victim of harassing conduct so severe, pervasive, and objectively offensive that it deprived him or her of access to the educational opportunities or benefits provided by the school”. Nothing of that sort was brought to the attention of the Victims’ Advocate or to the Center’s Assistant Director. For the reasons stated in Washington, we will not undermine the plain intent of the Legislature to require administrative exhaustion as an express precondition to civil harassment claims under the VPAA

Justice Johnson, in dissent, would not allow the university to escape the lawsuit at this stage, given the labyrinth it created, its failure to disclose critical information to the student, and its failure to respond to the complained-of conduct, claiming the majority ruling “makes a mockery of the Legislature’s purpose.”