“The Law of Agency,” with University of Virginia School of Law Vice Dean George Geis

“The Law of Agency,” with University of Virginia School of Law Vice Dean George Geis

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Good afternoon, everyone. I’m George Geis and I want to talk to you
today about something that probably few if any of you have heard of. It’s called the law of agency. This is a session on business law and agency
law is one type of business law. Now, if you’re like me, you’ve read some of
those books on preparing for law school, right? They’re always like: “Slaying the Law School
Dragon” or “Inside Confidential Law School” or “Exorcising the Law School Demon,”
that sort of thing. They do a pretty good job, I think, of giving
you a basic overview of the first year classes. They’ll talk to you about criminal law and
contract law and that sort of thing. But they probably don’t say much, if anything,
about the law of agency. Nevertheless, agency is a fundamental issue
of law. In fact, agency used to be a first year class. It actually used to be offered as a first
year class. So what is it? Why are we talking about agency law? Well, you may have heard of a movie agent,
right, a Hollywood agent, a sports agent. But the fact is that anybody can have an agent. I’ll bet some of you have an agent right now,
perhaps without even knowing it. You might say, “So what? Why should I care?” Well, once you have an agent, a number of
legal implications follow. Including this one: you may be legally responsible
for the acts of someone else. I’ll say that again: you may be legally responsible
for the acts of someone else. You might say, “Woah, hold on a second, I
can barely be responsible for my own acts legally, and now you’re telling me that I
might be on the hook for something that someone else has done?” And the answer is yes. Under certain circumstances, if you’ve got
an agency relationship — you’re the principle, they’re your agent — you may be legally responsible
for what it is that they do. So you then might say, “Alright then, how
do I know whether I have one of these agency things? I’d like to know who I might be legally responsible
for.” And the answer is that there are three major
requirements, three things you need to have in order to form an agency relationship. Here they are: the first thing you have to
have is an agreement. The agreement will run between the principle
and the agent and it can either be an explicit agreement — something like, can I hire you
as my agent and employee — or it might be not that explicit. It might be something like: here’s five dollars,
will you go buy me a cup of coffee? And the agent then has to say yes, right? So you don’t have to explicitly say you’re
an agent, there just has to be some sort of agreement. Secondly, the agent has to be acting on behalf
of the principal, right? The agent has to be doing something that is furthering
the principal’s interest, helping out the principal. And finally, the third requirement is the
agent has to be subject to the principal’s control. This doesn’t mean that the principal has to
kind of micromanage everything that the agent’s going to be doing, rather, the principal just
has to have the general right to tell the agent, you know, “Please work on this,” or
“please work on that,” or “please do these sorts of things for me.” Once you have those three things, you automatically
have this special legal relationship called an agency relationship and a whole bunch of
legal implications follow. Let me give you some examples. Who might be an agent? Well, this guy, I don’t know if any of you
watch that HBO show “Entourage,” right, Ari was a famous agent of Vince. What that meant is that when Ari signed contracts,
Vince was legally bound, even if Vince didn’t actually sign the contract. Ari could act for Vince. A second example might be a realtor. Some of you or your friends may have bought
a home and typically when you buy a home, you hire a realtor and they will represent
you and act in your interest and become your agent. A third example might be a famous CEO. Or a non-famous CEO. Think about Steve Ballmer at Microsoft or
Larry Ellison at Oracle, they are agents for the corporation. Steve Ballmer is an agent and Microsoft is
the principal. In fact, this is why agency law is so important
for those of you that are interested in business law issues. A few years ago Apple Computer ran an advertising
series, it was called “PC Guy and Mac Guy.” Some of you may remember this and
they had these two guys stand up with the white background and they’d say, “I’m a Mac,”
“I’m a PC” and they’d kind of personify these two different types of computer systems and
the PC guy would be this sort of bumbling, stodgy guy. He would never get the answer right. And the Mac guy would be this kind of cool,
hip guy that would solve some sort of technology problem with a bunch of elegance. Well, if it was like this and corporations
were people then we wouldn’t have to ask what the corporation was doing, we’d
just look to see what Mac guy and PC guy did. And if Mac guy signed a contract with Best
Buy to sell a bunch of computers, you’d know that was Mac’s contract. But of course this is not how it works. Corporations are separate legal people, but
they’re not separate real people at least last time I checked. And the only way that corporations can act
are through their agents. So all the employees of a corporation should
be understood as an agent. That again is why this issue of agency is
a foundational one when you’re dealing with any types of issues in corporate law. Now, armed with this knowledge — here it
is again — in order to have an agency relationship, you’ve gotta have an agreement on behalf of
the principal and subject to her control. I don’t know if all of you can see that but
I’ll put it back up in a minute. I want to put you in the position of judge
and jury — not executioner, just judge and jury — and ask you to decide a couple of
cases with me. Help me think through a couple of cases involving
these agency principles. You have all the law now that you need to
know. I handed out one of the cases, you probably
haven’t had time to read it, we’re not going to start with that one. We’re going to start with another case that
you don’t have in front of you but I can give you all of the facts very quickly and you
can help me decided, how would this case be resolved? What does agency law say the outcome should
be? So here’s the setup. The case is called Gorton vs. Doty. There was a woman named Ms. Doty who was a
high school teacher. I don’t know what she taught, it was at some
small-town high school in I think Soda Springs, Idaho. And one afternoon, she’s kind of walking around
the school and the football coach comes up to her, Coach Garst, and she’s talking to
the football coach and she says, “Coach, I understand you have a big football game coming
up this Friday, do you have enough drivers to get the team to where they need to go? Do you have enough cars to get there?” And the coach said, “No, actually, we’re a
little bit short. We need some help to get the football players
over to where they’ve gotta be for the game.” And so Ms. Doty said, “I’ll tell you what,
Coach Garst, I will loan you my car and let you use it to take the football players to
the game as long as you’re the one who drives it. I don’t want a bunch of those rowdy 17 year
old or 18 year old football players driving my car. If you drive it, you can use it.” And the coach said, “Ok, I will.” The coach drove the team over in her car,
they played the game, we don’t know if they won or lost, but on the way back, Coach Garst,
driving her car, got in an accident. He crashed her car. And one of the players who was riding in the
car with Coach Garst was hurt. His name was Gorton. Gorton was the player who was injured in the
accident on the way home from the football game while Coach Garst was driving. That’s our basic setup. Let me pause for a minute. Put on your plaintiff lawyer’s hats. I know this is a business law session, right,
but let’s play plaintiff lawyers for a minute. Imagine that young Mr. Gorton comes in, tells
you these facts, he’s hurt, he’s got a lot of medical bills and he asks, “Who can I sue?” Who? What do you tell him, right? Who can Gorton sue? — You would sue both Ms. Doty and Coach Garst. — Ok, you might want to start with Coach
Garst. Why? — Because he was the one driving. But you also might assume that Ms. Doty —
— Alright, so the first step would be to say, “Well, let’s sue the coach,” right? And I’ll tell you one other additional piece
of information, let’s assume that Coach Garst was driving negligently. Coach Garst wasn’t behaving appropriately,
right, he was exhilerated with the win, or mad about the loss, whatever. So he was swerving around. Let’s stipulate that he was negligent. The automatic place you might want to go is,
well, let’s sue the coach. He’s the one who blew it, who made the legal
mistake — that’s a tort — let’s go and recover from him. There’s a problem there. Coach Garst died in the automobile accident. Coach Garst died. Apparently it was quite a bad accident, and
I guess his estate doesn’t have enough money to cover the accident. So you said that another candidate for us
to go sue is Ms. Doty. I want to get to that in a minute. Is there anyone else you might think about
suing? I’d sue the school, right, before we go after
the poor teacher. I might say, “Let’s go try to sue the high
school.” That might be every 17 year old’s dream. I guess — I don’t think this is the law now
— but I guess back at the time of the case, there was some issue of immunity. The school had some sort of immunity privilege
and so they couldn’t go after the school. And so, what Gorton decided to do was exactly
what you suggested, “I’m gonna go and sue Ms. Doty. I’m gonna go and sue Ms. Doty.” And the case is gonna turn on the issue we
talked about a minute ago: is Ms. Doty legally responsible for Coach Garst’s negligent driving? We know he drove negligently. We have to ask, is she gonna be responsible
for that? And the answer is gonna turn on whether we
have a principal-agency relationship. What do you think? I talked about the three factors. Let’s start with the first one: is there an
agreement here? Is there enough of an agreement that we think
there might be an agency relationship? What do you guys think? You don’t see the relationship? — I see the relationship because talking
about — especially — car insurance. Because if you think about car insurance,
usually you have to sign something, “I can legally drive my parents’ car, they’re responsible
if I crash it.” Or if I rent a car, lend it to somebody and
they crash it, I’m responsible. So, especially if you think about it in terms
of insurance, she would be liable under her insurance policy because it’s her car. If somebody else crashes it it’s still her
car. So if you think about it that way she’s liable,
in terms of — — There may be a whole other set of rules
and issues related to insurance, right, and what does your insurance cover and is there
a presumption one way or the other. Totally true. I guess the question I’m interested in is:
does agency law suggest that she might be liable, even apart from the insurance? And maybe you’re saying more than that. Maybe you’re saying, there’s policy reasons
why we might want to make her responsible from insurance. What about an agreement? — While there is an agreement that she is
letting him drive the car under the condition that he doesn’t let anyone else drive it,
it was not for her behalf, it was for the coach’s behalf. — So she said, “You can drive my car.” And he said, “Ok.” So, maybe we have an agreement. I don’t know if it’s enough of an agreement. We might have a question about whether it’s
enough of an agreement. But you don’t have to have an explicit agreement
— you will be my agent — you just have to agree to be doing something. They’re agreeing to do something, right? She’s agreeing to let him drive her car. What about this “subject to control?” Is Coach Garst subject to her control? — She did request that he is the one to drive
her car. So I don’t know if that qualifies as control
but it seems like it might. — So she didn’t say, “Only drive this fast. Only take this route.” But she did condition how he could be using
the car. The court looked at that and they said, “Yeah. There’s an agreement and this demonstrates
enough control because she was able to say, ‘You’ve gotta drive the car,’ and he said,
‘Fine, I will.'” So apparently, according to the court, she
had the right to control it. Now what about this “on behalf of?” You came back to this. Was this agreement on behalf of the teacher? No. Why not? — Because it’s not for her purposes or her
use. It’s only to help him. It’s almost as if she’s letting him borrow
the car. — So she’s doing a favor for the coach. He’s not acting on her behalf. Anyone see it differently? — Didn’t she offer the car to him? Didn’t she go to him as a teacher at the school
and sort of volunteer? She’s rooting for the team —
— Would it change your answer if I told you, “Yes, she went out initially and said, ‘Hey
coach, do you have enough cars for the game?’ versus him saying to her, ‘We’re struggling
for cars, we can’t get them’?” — Yeah, I mean if she initiates the offer
than it is sort of on her behalf. She’s trying to help out the school. It’s her business as well. — Ok, so what’s the benefit that she gets? — She’s a fan of the school. — So she feels good about helping out the
school. She has school — her school spirit is increased. — Would this be limited to quantitative benefits
or could it also be, a benefit? — Not always. I mean, normally that’s why we would expect
you to hire an agent, right. You’re trying to do something. But we’re not necessarily gonna have to get
into an evaluation issue. — So if she was supposed to drive but she
said, “Hey coach, can you drive for me, I need to save some time, I’m busy,” that might
create an agency relationship. — Alright. — In this instance, it’s an offer. If after I throw away my pen, she offers me
my pen, that does not create an agency relationship. — Well, hold on. I mean, an agency is not a contract, right? They’re different things. You can have an agency relationship without
having an explicit contract. Separate issue of law. You necessarily have to have consideration,
you don’t have to have all the things you need in contract law. All you need is to ask: was this on behalf
of her? Was he doing something on behalf of her? — But don’t agents have a responsibility
to always act in the interest of the principal? And by driving negligently, he wasn’t doing
that? — Well, there’s lots of things that an agent
has to do. But, we’ve gotta answer the gateway question,
which is: was he even her agent? He may have not done things. He may have also breached a duty to her. Because you’re right, they do have a lot of
duties to the principals. But we’re asking the gateway question: was
he her agent? The court here said, “Yes.” They said, “Yes. He was her agent, the coach was her agent.” They said, “There was an agreement, there
was enough control, she had conditioned it and this was on behalf of the teacher. Now, the court was amazingly silent on why
this was on her behalf. When I go back to this case, I say, “Come
on! How can be the right outcome, right?” Maybe we can make out a claim that she was
kind of suffering greater school spirit or she felt good about doing the school a favor,
but I think it’s a pretty tortured interpretation of what “on behalf” means. I think what might be really going on is there’s
some sort of understanding that she had insurance and if she didn’t pay out of the claim, the
poor student wouldn’t have been compensated for. Something like that. This is a situation where the court said,
“Yes, there’s enough of an agency relationship such that she is going to be legally responsible
for the coach’s bad driving.” Maybe this was a wrongly decided case. I mean, this is what you’re going to be studying
in law school, you’re gonna be basically looking at all of these issues and if we want
to kind of map out the divide between an agent and a non-agent, you might study a case way
over here where it’s pretty easy to say they’re an agent, right? The CEO of a corporation. But generally you’re going to be studying
cases kind of like this one, right at the line, where you’ve got to figure out what
does “on behalf of” really mean? What does control really mean? And I think — my personal opinion, right,
is that this case probably was on one side of the line and the court said it was on the
other but that’s a lot of what law school is about, right, you’re trying to figure out
how we draw that exact line and what’s where. Alright. Let’s try a few other hypotheticals. Here’s my watch. Are you my agent? — No, I didn’t take it. — Does it matter if you took it? — I think so. — You think so. How can you be my agent? I’m just giving you my watch. She didn’t agree to anything, right. Even if she touches it she’s not agreeing,
right. She’s just kind of — there’s my watch. So you’re not my agent, right. Even if you touch the watch. Even if you take the watch. We’re in a donee, donor relationship. I’ve given you something but without more,
we don’t know what I want you to do with it. We don’t know anything, right? That’s not an agency relationship. Here’s my watch. Will you sell it for me, and you say, “Sure.” Are you my agent. — Yeah, probably. — Probably. How come? — Because I agreed to do something on your
behalf and I — — Ok, so I want to know a little bit more
about how much control do I have over what you’re gonna be doing to sell the watch but
again, I don’t have to micromanage everything, I just am asking you to do something, can
you sell the watch? And presumably we’ve come to an agency relationship,
right, so probably you are my agent given the set of circumstances. Alright. Now, you buy my watch for fair value — probably
five dollars, right — looking to resell it for a profit, right? You’re in the watch business, watch retail
business. Are you my agent? — I don’t think so. — Why not? — Because I didn’t agree to any sort of relationship
with you. — Sure you did. You agreed to buy my watch from me. — Not about the resale of your watch. — Ok. — Buying it, so that transaction’s already
over. — Yeah. — So it’s completely separate. — So a going forward basis right? — dealing with you, so she would be dealing
with him? — But a new situation, new situation. You didn’t sell the watch. I had to take it back and try to resell it
to her if I want to sell it. Yeah, how should we think about this? — There’s no subject control if you can’t
really do anything to the watch shop, they’re really the ones with the power. — I can’t get the watch back. It’s her watch now, right? We’re in a distributor-retailer relationship,
perhaps. We’re not in an agency relationship, right? It’s over, that’s exactly right. You know, she’s not doing anything for me. Now some of you may have heard about a consignment
sale. Consignment sale. What’s this, right? I give my watch to another retailer and they’re
gonna try to sell it. I still have title to the watch and if they
sell the watch successfully, you know, the store takes 30% of the cut and I’ll take 70%
of the cut. Is a consignment transaction an agency transaction? Yeah. — I think it could be. Especially if you put conditions on at what
price they could sell the watch. Like if you said, “You can have 30%,” and
they say, “Great, I’m gonna sell it for a dollar,” so they can make a big profit without
your consent, maybe not. But if you say, “I’ll accept any price, you
know, nothing below five dollars.” — So consignment is usually one of these
that are right about on that line. I think in many cases a consignment arrangement
is understood as an agency relationship for that reason. But we may need to get into the nitty-gritty
on how much control do you have over what the price is gonna be, can you take the watch
back at any time if you don’t like the way that they’re selling it, or not selling it. All of those things can speak to whether or
not you have an agency relationship. Ok. Let’s move on. Now, come back to a general framework for
agency law. As we said a minute ago, once you have an
agency relationship, a whole bunch of legal implications follow, right? We’ve been talking all along — so far — about
what it takes to create an agency relationship. Now let’s assume we’ve got an agency relationship,
what does it mean? Lots of things. There are at least three important ones. The first is the agent can bind the principal
to a contract with a third party. So typically there are always three important
players whenever you’ve got an agency situation: you’ve got the principal, you’ve got the agent
— they’re the one’s that establish the initial relationship — and then the agent says to
some third party, “Hey, would you like to enter into a contract with the principal? I can bind them.” Right? Ari can bind Vince to make the movie, right? This is why we often use agents is we don’t
want to be bothered to write contracts ourselves, let other people act on our behalf. The second implication is that the principal
may be responsible for the torts of the agent. We saw an example of this a minute ago, right? This is exactly Coach Garst and Ms. Doty,
right, once we have this agency-principal relationship the principal may be responsible
for the agent’s torts, the agent’s wrongs, in certain types of circumstances. And finally, this was the one that was mentioned
earlier, the agent is going to owe special fiduciary duties to the principal. So this is a special legal relationship and
there are a lot of things that the agent has to do to look out for the principal’s interests. In fact, when you turn to study corporate
law, you’ll learn — if you don’t know already — that these fiduciary duties are really
important in corporate law and they were born in the law of agency. So again, when you take a corporate law class,
you’ll typically start with a few classes on agency law because the fiduciary duties
that were formed in agency law typically translate over into various corporate law regimes. Alright, I’m gonna skip over part one, and
I’m gonna turn to a couple of other problems and ask you to help think through with me
a couple of different problems involving agency law and tort liability. Now before we get to the cases, I need to
talk a little bit more about the law here so you can be an informed judge and decide
how another case should come out. There are a number of different theories that
might hold a principal liable for the torts of the agent. The one we’re gonna be working with is a theory
called respondeat superior. Respondeat superior. What it means is: let the employer answer
for the torts of the employee. That’s kind of how it works. And in order to make out a successful claim
under respondeat superior, you have to generally argue two different things: first, you have
to say, “This was a really close agency relationship”, right? It was an employee-type agency relationship
and not what’s called an independent contractor-type agency relationship. Both can be types of agents, but we’re gonna
ask, “Is this a really close agency relationship where the principal — the employer — has
a lot of control over exactly what it was that the agent was doing?” The other question that always comes up is
whether or not the tort — the wrong — was committed in the scope of employment. What does this mean? When the agent did something wrong, were they
trying to do it to serve the employer, right? This is sometimes called the “purpose to serve
test.” Were they doing this activity in furtherance
of the employer’s business, in furtherance of the principal’s business? There’s another test that’s sometimes used,
which is: was it foreseeable that this sort of bad behavior might have come about because
the agent was trying to work for the principal, was engaged in the principal’s business. But in general, right, you’ve gotta be a close
type of an agent — an employee-type and agent — and also the tort has to be committed within
the scope of employment. We have a little bit of guidance on the first
issue — whether you’re an employee or whether you’re an independent contractor. It turns out that this is another important
issue that transcends agency law. You may have heard about employment law, there
are all kinds of tax consequences if someone is classified as an employee versus an independent
contractor. You see a lot of litigation about that. And so we’ve been given some guidelines as
to how we distinguish one from the other. I won’t go through all these factors but in
general you want to look for things like: how much control does the principal actually
have over what the agent is doing? Does the agent have a distinct business? What’s the degree of supervision, who supplies
all the equipment? These sorts of things. The easiest way to think about this is to
imagine two different types of gardeners. On the one extreme, you might imagine hiring
a gardener to help you with your yard where they come around maybe once every couple of
weeks, they’re going to see a bunch of different houses. They come, they work for a couple hours, they
mow, they blow and they go, you never see them again. That’s an independent contractor-type of gardener. You’re not really telling them what to do,
they may be an agent during the limited time they’re there, but you don’t have close control
over what it is that they’re doing. On the other end of the spectrum, you might
imagine a live-in gardener. Someone’s got a big mansion and they hire
a live-in gardener full-time. They live on site, they don’t own any of the
equipment or machinery, only the homeowner owns all that and every morning the gardener
gets up and says, “Well, what do you want me to do today?” And the homeowner says, “Go trim my forsythia
or go do whatever” and you’re exactly telling them what to do. That’s an employee-type gardener. For many of you, this distinction would be
intuitive. You have a sense already of the difference. Armed with respondeat superior, let’s apply
this law to another case. This is the case of Ira Bushey vs. United
States. It’s the case that I handed out to you a minute
ago but don’t worry if you haven’t had time to read it. I’ll quickly set up the facts of the case. A Coast Guard ship was sitting in a dry dock,
kind of like this. And it turned out that while it was sitting
in dry dock all of the sailors of the ship were allowed to remain in residence on the
ship. So I guess they were taking some kind of shore
leave, this was in Brooklyn. And so they’d get off the ship, they’d do
whatever they wanted to do on shore leave, they’d come back but they would live and sleep
on the boat while the boat was being repaired in dry dock. One evening, Seaman Lane, who was a sailor
on the Coast Guard ship, went out with a bunch of his friends and got drunk. Got really, really drunk. On the way back from the bars, he went through
the security guard tower, walked on the catwalk and there were these three different valves
all kind of sitting on the side of the catwalk and Seaman Lane decided to — for who knows
why — spin each of these three valves 20 times. 20 times he spun each of these three valves. Guess what. These three valves were water intake valves
and after he did that, about 20 minutes later, when he went to bed, the water started coming
in to the dry dock and the ship rose up on one side and it crashed over into the dry
dock and it damaged the dry dock quite badly. Ira Bushey, it turns out, was the owner of
the dry dock and Ira Bushey was not very pleased with the fact that Seaman Lane had demolished
a bunch of the dry dock’s property and had damaged the dry dock. So Ira Bushey wants to sue somebody. The first possible candidate, I guess, would
be Seaman Lane, right? He’s the idiot that stayed up all night drinking
and let the water in and ruined the dry dock. Are we gonna get a lot of money out of Seaman
Lane? Seaman Lane is what we call “likely judgment-proof,”
he was court-martialed, he left the Coast Guard, we never head from him again and even
if he was around he probably wasn’t gonna have enough money to help us repair this dry
dock. So Seaman Lane is not gonna be a very promising
defendant in this case which leads us to our next likely defendant: Seaman Lane worked
for the U.S. Coast Guard, he was a sailor with them. Last I checked — although it’s, you know,
not always true — the U.S. has a relatively large amount of money. They’ve got enough money that it’s quite possible
we could go after them. And so Bushey said, “I’m gonna sue the United
States for Seaman Lane’s tort.” And Bushey tried to essentially make out a
claim of respondeat superior in agency law saying, “U.S. Coast Guard, you need to answer
for the acts of Seaman Lane, you’re gonna be on the hook legally for what Seaman Lane
did.” We need to try to flesh this one out. We know already that respondeat superior is
going to depend on the two types of things: is the agent an employee, not an independent
contractor, and was this wrong conducted within the scope of employment? Those are the two types of issues we need
to figure out. So let me ask for your help with the first
issue related to respondeat superior: do we think that Seaman Lane was likely to be an
independent contractor-type agent or likely to be an employee-type agent? What do you guys think? — Employee. — Employee! Everyone raises their hand. Was anyone in the Coast Guard, does anyone
here have a military background at all? Yeah. When you’re in the military — and I’m assuming
a seaman is a relatively low ranking person in the Coast Guard — do you generally have
a lot of flexibility and freedom of what you’re going to be doing on a day-to-day basis? Do you get up and say, “Hmm, maybe I’ll swab
the decks today or maybe I’ll do that tomorrow or are you basically told what to do? — You’re just basically what to do. — Told what to do! This is a classic type of employee-type relationship. We know that the Coast Guard was telling Seaman
Lane exactly what to do all the time when he was on duty at least. And so I think it’s relatively easy for us
to see that in this spectrum of employee or independent contractor, Seaman Lane’s probably
an employee. That doesn’t seem to be a difficult issue
for us to decide. That’s way on one side of the line. Now, we come to the next issue which is: was
Lane acting within his scope of employment during the incident? What do you think about this one? — I think he was. — You think he was. How come? — Because they were — even though the ship was being
repaired, They were asked to still stay on the ship
which is part of their employment. So I see that as —
— One of the tests the courts will use when they’re trying to figure this out is whether
the action was conducted with a purpose to serve. Seaman Lane was conducting this action because
he was trying to further the business of the Coast Guard. I’m gonna go and spin these valves 20 times
because I think it’s gonna help the business of the Coast Guard. Under that test is he in the scope of employment? Harder to see it, isn’t it? How could he possibly be helping the Coast
Guard’s business? — Mistaken judgment. — How? — He could have thought the ship was off-kilter
or something and he needed to spin these valves. — It’s 12:30 at night, I’ve been drinking
all night at the bars, what I really want to do now is try to right this ship that’s
unbalanced. Maybe, if we could facts that way. Maybe we could say he was trying to further
the business — I don’t think those facts are in front of us, I think he doesn’t know
why he did it. No one knows why he did it. He just did it! But if we had other facts, maybe we’d try
to fit it in to a purpose to serve test. The court here seems to reject the purpose
to serve test. They say, “This can’t quite meet the purpose
to serve test.” But Judge Friendly goes further and he says,
“I don’t like the purpose to serve test” and he wants to use another test. Does anyone — maybe you haven’t had time
to read — does anyone know what test he uses? Yeah. — I don’t know what the name of it was but
essentially he said that this couldn’t have happened to a normal person. He only was able to be in a position to spin
the wheels — because he had to walk past the guard —
— Ok, so he’s concerned about the fact that this person is here because he’s there. Or the foreseeability test. So one of the other tests that has arisen
in order to flesh out whether this act was conducted within the scope of employment is:
was it foreseeable that an employee might do this type of thing? Even under the foreseeability test, I could
think of a lot of things that sailors might do but spinning a valve 20 times and toppling
over a ship is not high up on the list of foreseeable actions. Nevertheless, Judge Friendly says, “It is
foreseeable enough that this sort of thing might happen.” And so at the end of the day the Coast Guard
was liable. The Coast Guard was liable under respondeat
superior for Seaman Lane’s tort. I want to ask you, can this possibly be right? Is Judge Friendly taking liberties with what
foreseeability means? — I don’t think so. I agree with him. — You think he’s right? — I think that the idea that sailors get
drunk is foreseeable. They’re kind of known for it. And that when you’re drunk, you may do stupid
things. It just tends to happen. Plus it says that the quartermaster noticed
that he had been drinking but let him go up and do whatever anyway. So they basically let him loose. — So we don’t like the way that the whole
thing is behaved. Other thoughts, yeah the back. — I think it may be a stretch to say outright
that this particular instance was foreseeable but it was incredibly reasonable to think
that some damage could be caused by letting these sailors stay on the ship and the Coast
Guard should know that the tending towards damage is there —
— So something bad might happen, even if we don’t anticipate it was this exact string
of events. — But I mean foreseeable to whom? The Coast Guard doesn’t know how Bushey has
his dry dock set up. They didn’t know whether these valves would
necessarily be here. Does he not take any blame for having this
be so available to the sailor? These things are just there, anyone can mess
with them — — Do we think that they should have locks
on the valves to prevent them from spinning? Most other people do. Yeah, in the back. — I think they should have had locks. I would also think in this kind of stretch
of foreseeability the level of precautionary measures that accompanies — are quite strangling. — Why so? — Because they have to theoretically cover
everything. For example —
— So we don’t necessarily want them take all precautions. We just want to make them take sensible precautions. This is what the judge said — I won’t ask
you to read the whole thing, but this is basically his reasoning: “Here was foreseeable” — I’m
reading near the bottom of page two — “the crewmembers crossing the dry dock might do
damage negligently or even intentionally — such as pushing a Bushey employee, or kicking property
into the water. Moreover, the proclivity of seamen to find
solace for solitude by copious resort to the bottle while ashore has been noted in opinions
too numerous to warrant citation. Once all this is granted, it is immaterial
that Lane’s precise action was not to be foreseen.” So they came out the way many of you did,
which was, “Look I’m not sure I can predict this exact string of events, but it’s foreseeable
that there might be some measure of damage that took place and because of that reason,
this did occur within the scope of employment and so the Coast Guard is going to be liable.” Now I have to tell you, this case probably
stretches the meaning of scope of employment much, much further than most courts would
be willing to stretch it. There are many cases that are going to resort
back to a purpose to serve test. The foreseeability test has been jettisoned
a little bit. We’re going to ask more, “Is this Seaman Lane
acting as ‘Seaman Lane?’ Or is this Seaman Lane acting as an employee
or a representative of the Coast Guard?” The problem is, it’s a little bit difficult
to tell in some cases, and that’s maybe what’s going on here. Alright, we have time for one more case. Let me set the stage. It was a beautiful spring day, sort of like
today, and we’re up in Boston, up in Fenway Park, and the Red Sox are playing the Orioles. We’ve got a great baseball game going. Now, Ross Grimsley was a pitcher for the Orioles
and he was warming up in the bullpen, a relief pitcher. Here’s a picture of Ross Grimsley. You can guess, perhaps, what decade this case
was decided in. Anyway, Ross Grimsley is warming up in the
bullpen and there is another person named Manning who is a Red Sox fan. And Manning is kind of hanging over the edge
of the fence, just heckling Grimsley like crazy. “Grimsley, you bum! You can’t pitch at all! You’re the worst baseball player!” He’s just going and going and going and going
and going. And Grimsley’s kind of ignoring him and ignoring
him. Finally, Grimsley can’t take it anymore. And so Grimsley kind of stands there like
he’s ready to warm up and throw the pitch and basically steps towards it and then turns
and throws right at Manning. He throws this bean ball right at Manning. Well, there was hole in the fence and it went
through and it hit Manning and Manning got hurt. Manning was really hurt. Again, put on your plaintiff’s lawyer’s hat,
Manning comes to you, he’s really mad. He says, “I want to sue someone to recover
my healthcare bills.” And the first thing you might say to Manning
is, “Why don’t you sue the Red Sox, or whoever owns Fenway? They’re the ones that didn’t build a fence
and had this hole in the fence.” And Manning looks at you and says, “I don’t
want to sue the Red Sox, they’re my team! They’re who I root for. I don’t want to sue them.” So, who else are you gonna tell him to sue? Grimsley and the Orioles. Now, in this case, I don’t know how wealthy
this guy is but at least we might have a little bit of a better chance of recovering something
from Grimsley. I mean, he’s playing major league baseball,
presumably he’s making some money. Again, this was back in the ’70s, so salaries
weren’t quite what they are today but nevertheless we probably do want to try to sue Grimsley
but, wouldn’t it be fun to sue the Orioles too? I mean that’s who we really didn’t like. We don’t like the team. Let’s see if we can extrapolate this even
greater. And so Manning did exactly that. He sued Grimsley and he also sued the Orioles. The Grimsley case is probably pretty easy. I mean, this is a case of battery, or some
sort of intentional tort. You can’t do that, you can’t try to throw
a baseball at someone. Maybe even if you don’t think it’s going to
hit — perhaps that’s negligence, whatever. We don’t have to worry about the Grimsley
case. For our purposes, we’re interested in the
Orioles case. Let me ask you, do you think that the plaintiff,
Manning, is going to be able to successfully recover from the Baltimore Orioles? How should this case come out? — I think the Baltimore Orioles should technically
absolutely be liable because he’s an employee of this team. He’s working when this happens. He’s currently doing his job of employment. It’s not like the seaman who could technically
be off-duty. He’s actually —
— So you think this is an easier case than the last one? — Oh yeah. Because he’s working, he’s actually doing
— — So first question we have to ask: Is he
an independent contractor-type of an agent or is he an employee-type of agent. Why? — Because he has a dedicated length of time
contract with the Orioles. I don’t like baseball at all but I know that
they have contracts and they say, “I will work for your team for this many years.” — Independent contractors have contracts
too. You hire someone to fix your roof, you sign
a contract with them to fix your roof. — It’s a closer relationship than an independent
contractor. And, so, not only is he an employee, he’s
currently doing his job of employment: playing baseball, warming up, he’s on the field during
a set time. He’s also in their uniform so he’s technically
representing them not even as an employee but as a player. It says Baltimore Orioles and, I mean, obviously
a fan wouldn’t be an employee if they’re in uniform but he clearly is in uniform working
while assaulting someone. — So you see him easily as on the employee
side of the divide. And you say this is within the scope of employment. He did it while he was pitching! Other thoughts on this case. — He’s trying to further the goals of the
— — Well I don’t know. Why’d he do it? Was this Grimsley doing something dumb as
Grimsley, or is this Grimsley doing something dumb as the employee of the Orioles to further
their business? — I don’t know if that would further their
business. — This was just him being an idiot on his
own behalf. He’s a hot head. — I did have a question about the facts of
the case. You said he turned to throw it at the guy. — I think so, he was kind of warming up and
then he turned and went this way. It was like when you’re trying to pick someone
off first base. You kind of throw it that way. — It’s difficult to find he’s acting in the
scope of employment if he just turned way away from where he’s supposed to be pitching
and just chucks it at somebody. He’s not really doing his job at that point. — No intent to further the business. — He’s defending the honor of his team. — He’s defending the honor of his team! — Don’t heckle the Orioles. — So this was to further the interest. — I don’t think it is. I think if he was a hockey player and he was
the enforcer, maybe he is acting as — — If somebody gets in a fight in a hockey
game, it’s what you’re expected to do. The fans come to see a fight. But in this case, it was him. Maybe let me make the extreme case, just to
try to figure out where to draw the line. If the same thing happened and Grimsley, instead
of throwing the bean ball, pulled out a gun and started shooting at the fans or something,
dude, something’s wrong with you! We want to blame you, we don’t want to blame
your employer necessarily. Is this like that or is this him trying to
protect the honor of the team or do something else? The lower court decided for the Orioles. They said, “No way.” On appeal, the case was reversed and sent
back. Here was the logic of the appeals court, it
was kind of like yours, it said, “There’s at least the possibility that Grimsley was
doing this in furthering the Orioles’ business because the fan, by heckling, was preventing
him from doing his job, which was warming up to pitch. And because of that reason it’s within the
scope of employment. Now the case settled on the remand so we don’t
know exactly how it would legally come out but again we’re in this kind of borderline
issue there. We’re trying to figure out where exactly to
draw the line. We should stop here, let me just summarize
real quick with a couple of thoughts. There are, by the way, a lot of interesting
policy implications and you can talk a lot about when and what’s the right time to have
this sort of liability. But I don’t want to get into that. In general I want to just quickly summarize. The law of agency will sometimes hold you
responsible for what other people do. That’s just the way it is. The goal of it to allow you to do more. To act through others. But it also does carry this risk that you
might sometimes be responsible for what other people are doing. It’s grounded in a policy goal. We do want to encourage people to take different
types of business precautions. But in the end, as we’ve seen just in the
last 45 minutes, the legal treatment of this issue is going to turn on some pretty fine
distinctions. Some really interesting nuances between this
and that side of the line. This drives non-lawyers crazy sometimes but
this, in part, is what you’re going to be doing next year. You’re going to be trying to figure out, “Where
exactly do I draw the line. Which side of the line am I on in this given
situation?” And then also talking more about what should
the law be irrespective of what it seems to be currently now. So with that, I hope you have a wonderful
visit. Thanks again for coming to Charlottesville. I’ll stick around for a few minutes in case
you have any questions about this or the Law in Business Program and I encourage you to
please head over and attend the reception right now. I’ll see you over there in Caplin. Thank you.

11 thoughts on ““The Law of Agency,” with University of Virginia School of Law Vice Dean George Geis

  • Eurisko Omni Importante Naturalis Lex (nil-emolumentum) Post author

    Ooh, trendy:)

  • Lucius Vorenus Post author

    Saul Goodman

  • bythedog Post author

    O.k. Professor Geis… riddle me this!  Is the one using the legal NAME then deemed 'agent' for the legal NAME (by the STATE?) that I'm led to believe is property of the STATE?  If so… how?  By whom?  Is this implied by conduct?  Does simply using the legal NAME make the 'agent' liable for everything done in the legal NAME?!  If so… how?  If not… who would be liable???  Is 'agent' synonymous with 'trustee' or having similiar duties (trustee de son tort?)?  Anxiously awaiting (but not anticipating) a reply.  Lol!

  • bythedog Post author

    17:00  "My watch'.  Define 'my'.  Are you claiming 'ownership' of the watch?  Can you prove that? How did you 'pay' for it… with FEDERAL RESERVE NOTES?  Then does 'The FED' have a first lien position on the watch?  If one doesn't 'own' the watch in the first place… how can one put another in the position of 'agent' for something one doesn't have ownership of in the first place?

  • Jacob Estes Post author

    Look at how proud of himself he is when he says "semen."

  • SaintNobody Post author

    A fun review. Thanks for publishing!

  • Louise Bell Post author

    federal notes are legal tender. by law

  • VASANTHA SHETTY Post author

    This class is good for law students and young lawyer. Thank for urs jobs sharing to common people. (by: M. Vasantha Shetty, Advocate, Bengaluru, India. _ mobile no. 9845717217 email : [email protected]

  • kauigirl808 Post author


  • kauigirl808 Post author

    Perfect example for this is Real Estate Agent. Studying for the license exam and this helped a lot!!

  • JITU BURMAN Post author

    For disclosed agency, explicit in nature, vicarious liability lies on principal but since having no personal control for offence committed, criminal liability can be avoided by principal for violative act never sought to be performed by agent….

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