Sept.22, 2009 – An employer is not vicariously liable when its own employee conspires against it, the Wisconsin Court of Appeals held on Sept. 9.

In James Cape & Sons Co. v. Streu Construction Co., 2008AP1517,   the court of appeals reversed the circuit court which had found that the employee had partially acted in his employer’s interests when he sought to undermine the employer’s efforts to bid on new work. Specifically, the circuit court agreed with arguments that the employee was concerned that the employer might obtain more work than it could handle.

“What a world it would be if employees were allowed, without recourse, to decide for themselves the means and methods an employer uses to earn the revenue projected in its plans,” the court of appeals remarked. “It is for the employer to decide the question of how it is going to make money to survive and grow. An employee cannot take unilateral ownership of that question. Allowing anarchy to control employer-employee relationships is not a policy the courts have endorsed. And we do not do so now.”

Compromised bidding

  Daniel Beaudoin was an area manager for James Cape & Sons Company when he began sharing Cape’s bid information with rivals Streu Construction Co. and Vinton Construction Co. in 1997. In 2003, Cape discovered the scheme and reported Beaudoin to federal authorities, triggering an FBI investigation.

Beaudoin, Streu, and Vinton were convicted in federal court for sharing bid information in violation of the Sherman Antitrust Act. The FBI gave Cape an immunity letter since Cape was not involved in the scheme.

Cape eventually filed for bankruptcy, blaming the conspiracy for its demise. Cape filed suit against Beaudoin, Streu, and Vinton for damages, but the circuit court granted summary judgment for the defendants on the basis that respondeat superior prevented Cape’s action.

Respondeat superior provides that an employee’s conduct is imputed to the employer when the employee is acting within the scope of his or her employment. The circuit court found it to be undisputed that Beaudoin intended, at least in part, to benefit Cape by seeking to prevent Cape from becoming overextended through his collusion with Cape’s rivals.

No benefit shown

In an opinion authored by Chief Judge Richard Brown, the court of appeals first disputed the notion that Cape was somehow at fault in this case.

The court of appeals observed that the defendants’ theory is premised on the doctrine of in pari delicto, a subject of discussion in Evans v. Cameron, 121 Wis. 2d 421 (1985). “[The doctrine] means that when the parties are in equal fault, the defendant’s position is stronger,” the court of appeals explained. “The public policy reason is the refusal to decide a cause of action founded on an immoral or illegal act.”

In this case, the court of appeals said the record does not support application of in pari delicto.

“Realizing that Cape did not personally engage in any negligence or wrongdoing, the defendants argue that Cape is nonetheless liable because it vicariously stood to benefit from Beaudoin’s good intentions,” the court wrote. “Cape responds that Beaudoin did this all on his own and claims that Beaudoin’s assertion of wanting to ‘help’ Cape is simply a lie. And even if Beaudoin’s assertion is taken as true, there is no showing of how Cape vicariously was supposed to benefit from this bid-sharing arrangement.”

Not vicariously liable

Likewise, the court of appeals rejected the defendants’ arguments that Cape is vicarious liable for Beaudoin’s actions because Cape, as an employer, has the right to control its employee.

“In most respondeat superior cases, the dispute is whether the employee was acting within the scope of his or her employment,” the court said. “When scope is the issue, the focus is on the employee’s intent. And so long as the employee was not entirely motivated by his or her own purposes, but intended, at least in part, to serve his or her employer, the employee’s conduct is imputed to the employer.”

“But the facts of this case do not fall into any previous situation where a court held respondeat superior applies,” the court continued. Rather, this case recalls Zulkee v. Wing, 20 Wis. 408 (1866), in which the Wisconsin Supreme Court held that in a suit between master and servant, the servant cannot impute wrongs committed without the master’s assent or direction.

“It would be strange if the servant, in answer to such an action, could say: ‘Respondeat superior. I was your servant at the time of the injury; my act was your act, my negligence your negligence; and therefore you cannot recover,’” the court of appeals wrote, quoting Zulkee.

“We are bound by Zulkee,” the court of appeals concluded. “Moreover, its commonsense logic makes as much sense today as it did in 1866. Holding otherwise would mean that employees could disregard their employer’s business model in favor of a model wholly to the employees’ own liking.”