The Michigan Supreme Court has granted leave in a case involving vicarious liability for a pizza delivery driver’s employer.
Last year, the Michigan Court of appeals held for a second time that an injured woman who settled with the pizza delivery driver who rear-ended her vehicle could not hold the delivery driver’s employer vicariously liable based on a release executed as part of the settlement.
The appeals court reached that conclusion after they were directed by the justices on remand to resolve “whether the 1995 amendment to MCL 600.2925d(a) abrogated the common-law rule regarding vicarious liability.”
Judge Brock A. Swartzle said it had not in Malone v. McRell ( MiLW 07-107320 , 5 pages).
“Because the common law has not been abrogated, our prior holding in this case stands: ‘[T]he settlement agreement released Malone’s claims against McRell. Because [the employer] could only be liable through McRell’s actions, the release also released Malone’s claims against [the employer] despite its attempt to do otherwise,’” he explained in the October 2023 published decision .
The justices directed the parties to file supplemental briefs addressing two issues: whether the 1995 amendment of MCL 600.2925d(a) abrogated the common-law rule that “a valid release of an agent for tortious conduct operates to bar recovery against the principal on a theory of vicarious liability, even though the release specifically reserves claims against the principal”; and if that amendment did not abrogate this common-law rule, whether it should nevertheless be abandoned.
The justices invited the Michigan Association for Justice and the Michigan Defense Trial Counsel, Inc. to file briefs amicus curiae. Others interested in the matter may move for permission to file briefs amicus curiae.
Settlement
Conor McRell was delivering pizzas when he rear-ended and injured Heather Malone.
Malone sued McRell for negligently crashing into her and his employer, Zhetman Brighton, LC, for vicarious liability under the respondeat superior doctrine.
After facilitation, Malone and McRell entered into a settlement agreement. In relevant part, the agreement said she would “accept $50,0000 in full settlement of her action against McRell only. The settlement will not affect the Plaintiff’s cause of action against Defendant Zhetman Brighton LC . The Defendant McRell shall be dismissed from the present action . The action is to be dismissed with prejudice and without costs as to Defendant McRell only, and appropriate Releases will be forwarded and signed.”
The agreement also said it had no effect on Malone’s lawsuit against Zhetman.
Malone dismissed her claims against McRell with prejudice in a stipulated court order.
Based on the settlement agreement, Zhetman moved to dismiss Malone’s claims against it under MCR 2.116(C)(7) because it could only be vicariously liable based on McRell’s actions.
The Livingston County Circuit Court granted summary disposition to Zhetman.
Malone’s motion to set aside the stipulated order was unsuccessful. So was her motion for reconsideration after she argued for the first time that the settlement was a covenant not to sue rather than a release.
High court first weighs in
In what it dubbed an “unusual case,” a 2-1 Michigan Court of Appeals panel held in September 2022 that the settlement agreement functioned as a release rather than a covenant not to sue.
But the Michigan Supreme Court vacated the part of that ruling that said the settlement agreement didn’t prevent Zhetman from succeeding on its motion for summary disposition after McRell was dismissed from the case.
The justices directed the appeals court on remand to consider if the 1995 amendment of MCL 600.2925d(a) repealed the common-law rule that “a valid release of an agent for tortious conduct operates to bar recovery against the principal on a theory of vicarious liability, even though the release specifically reserves claims against the principal.”
No abrogation of common-law rule
In the 1995 amendment to MCL 600.2925d(a) 1995 PA 161 the Legislature replaced “persons” with “tortfeasors” in subsection (a). Malone claimed this was significant because “persons” implies that the statute encompasses all individuals and corporate bodies including those who would only be liable under a theory of respondeat superior.
“To begin, the plain language of subsection (a) itself says nothing about respondeat superior or the common-law rule involving the release of a principal,” Swartzle pointed out. “Even though the term ‘persons’ implicitly could include principals whose agents released their liability, this Court will not ‘lightly presume that the Legislature has abrogated the common law.’”
Looking to the Supreme Court’s holding in 1988’s Theophelis v. Lansing General Hospital , Swartzle noted that the court addressed this question in the context of an earlier amendment added by the Legislature in 1974 PA 318.
There, the Legislature gave no indication that it intended to breach or dissolve that doctrinal distinction. Thus, the Theophelis court held that the Legislature did not “abrogate the common-law doctrine that release of an agent discharges the principal.”
Swartzle again affirmed the trial court’s ruling, concluding that the Legislature, even with the enactment of 1995 PA 161, hasn’t plainly signaled its intent to abrogate this common-law rule.
“[T]here is nothing in MCL 600.2925d itself, as amended by 1995 PA 161, that speaks to ‘principal’ or ‘agent,’ nor is there any mention of those terms in the immediately surrounding sections,” Swartzle explained. “In fact, MCL 600.2925a through 600.2925d all deal generally with matters involving contribution in the context of joint-and-several liability. This makes sense, as other amendments made by our Legislature with 1995 PA 161 similarly involve matters of contribution and joint-and-several liability.”
While not directly on point, the judge also found informative the Supreme Court’s 2012 decision in Velez v. Tuma , which involved the subsection immediately after the one at issue here.
“The Court concluded in Velez that the common law had not been abrogated, as subsection (b) ‘was but one part of comprehensive tort-reform legislation,’ and there was no conflict between 1995 PA 161 and the common-law rule regarding setoff,” Swartzle wrote. “Similar to subsection (b), subsection (a) of MCL 600.2925d does not abrogate the common-law rule that the release of an agent acts as a release of the principal. The amendment that altered subsection (a) was one part of a comprehensive tort-reform package focused on contribution and joint-and-several liability, and the common-law rule regarding vicarious liability does not conflict with that legislation.”
If the Legislature wants to abrogate the common law, it must do so in no-uncertain terms and it didn’t do so here, Swartzle said.
“[W]e hold that 1995 PA 161 did not abrogate the common-law rule that a release of the agent acts as a release of the principal when the theory of liability is respondeat superior,” he concluded.
Judges James Robert Redford and Kristina Robinson Garrett joined Swartzle’s decision.
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