Kelly on Malpractice

The doctrine of respondeat superior is usually implicated in medical malpractice actions. Whether you sue a hospital or physician’s practice group, the imputation of agent liability to the principal is the cornerstone to maximizing recovery for your client. It is very important for you to know when the principal’s liability for the agent’s negligence is affected by legal determinations involving the agent. One procedural mistake involving the agent can destroy imputation to the principal. The purpose of this primer is to acquaint you with the contemporary maxims of respondeat superior so that you can avoid fatal mistakes in medical malpractice litigation.

In Grigsby v. UT Medical Center, 2006 WL 408053 (Tenn.Ct.App.), Grigsby filed his medical malpractice action against UTMC and Drs. Hatcher and Mounger due to the loss of one of his kidneys. UTMC filed a motion to dismiss, asserting that the complaint made no allegations of negligence specifically against UTMC, nor did the complaint allege a deviation from the standard of care. Grigsby filed a response in opposition to the motion to dismiss, supported by his own affidavit. Drs. Hatcher and Mounger filed a motion for summary judgment, supported by the affidavit of Dr. Hatcher and Grigsby’s own medical records. The trial court entered an order granting UTMC’s motion to dismiss and granting summary judgment to Drs. Hatcher and Mounger. Grigsby filed a notice of appeal as to the dismissal of UTMC. However, Grigsby did not file a notice of appeal regarding the summary judgment for Drs. Hatcher and Mounger. Grigsby argued in his appellate brief that the doctor defendants were not entitled to summary judgment. On appeal, the issue was whether the summary judgment in favor of Drs. Hatcher and Mounger absolved UTMC under the doctrine of respondeat superior.

The Court of Appeals determined that Grigsby had proceeded against UTMC solely on the theory of respondeat superior, alleging that UTMC was vicariously liable for the acts of its agents, Drs. Hatcher and Mounger. Grigsby’s complaint did not allege negligence on UTMC’s part that was independent of the actions of the Defendant doctors. The Court of Appeals revisited Johnson v. LeBonheur Children’s Medical Center, 74 S.W.3d 338 (Tenn.2002), wherein the Supreme Court was presented with the question of whether a physician resident’s personal immunity from a lawsuit prohibited the hospital where the resident worked from being held vicariously liable under the respondeat superior doctrine based upon the resident’s actions. The Court answered in the negative. The rule of Johnson v. LeBonheur states the following bases for extinguishing vicarious liability:

A principal may not be held vicariously liable under the doctrine of respondeat superior based upon the acts of its agent in three instances:

(1) when the agent has been exonerated by an adjudication of non-liability, or

when the right of action
against the agent is extinguished by operation of law, or

(3) when the injured party extinguishes the agent’s liability by conferring an affirmative, substantive right upon the agent that precludes assessment of liability against the agent.

The Supreme Court reiterated this principle a year later in Shelburne v. Frontier Health, 126 S.W.3d 838(Tenn.2003).

The Court of Appeals then turned to the trial court’s summary judgment in favor of Drs. Hatcher and Mounger. “A motion for summary judgment goes directly to the merits of the litigation.” A summary judgment that has become final carries with it res judicata effect. Then, the Court of Appeals stated, “We are of the opinion that a summary judgment that has become final serves to exonerate the agent by an adjudication of non-liability.” Consequently, under Johnson and Shelburne, the principal, UTMC, could not be held vicariously liable under respondeat superior because the agents, Drs. Hatcher and Mounger, had been exonerated by an adjudication of non-liability. The principle of agency law espoused by the Supreme Court in Johnson and Shelburne rendered all other issues moot, because regardless of the outcome of any other issue, Grigsby could not recover under respondeat superior against UTMC when Grigsby’s cause of action against the doctors had been extinguished.

In Creech v. Addington, 2009 WL 838102 (Tenn.), the Plaintiffs, investors in a failed real estate development, suffered losses when the financing did not materialize as promised. The Plaintiffs sued the principals and their agent for breach of contract and on fraud theories. The trial court entered an order of dismissal as to the agent on the breach of contract claim. Later, the trial court granted summary judgment in favor of D.C. Parker and Richard Flowers, the principals. When judgments had been entered as to all of the Defendants, the Plaintiffs appealed, but only as to Parker and Flowers. The Supreme Court had to decide whether a judgment of dismissal for the agent as to the breach of contract claims barred the fraud action imputed to the principal.

The scope of the doctrine of “agent exoneration” in relation to the vicarious liability of principals set forth in Johnson v. LeBonheur implicated the res judicata doctrine. The Supreme Court had to decide whether dismissal of the breach of contract claim against the agent barred the fraud claim against the principal due to res judicata. The Court held that the dismissal for failure to state a breach of contract claim against the agents was not “an adjudication of non-liability” that would absolve Parker and Flowers ipso facto from vicarious liability. Res judicata requires more in the context of “agent exoneration.” There was a gap in the Tennessee law, so the Court adopted “transactional standard” for determining whether a prior judgment and a pending suit are the same cause of action for purposes of applying res judicata. The Supreme Court found that the breach of contract claim against the agent was the “same cause of action” against Parker and Flowers as the fraud theory. The Court held that the claims arose out of the same transaction or series of transactions in regard to the failed development project. Therefore, the Plaintiff’s right of action against the agent was “extinguished by operation of law” (res judicata) under the rationale set forth in Johnson v. LeBonheur. This meant that the Plaintiffs could not proceed on a claim of vicarious liability against the principals, Parker and Flowers, for the fraudulent misrepresentations of the agent. Imputation of liability was destroyed. There was no liability for Parker and Flowers under the doctrine of respondeat superior.

Grigsby and Creech are cases that should always be on your mind when you are tailoring your complaint, facing dispositive motions, and appealing judgments. I suggest that you allege an independent theory against the principal whenever possible. Don’t ever dismiss or release an agent and expect to recover against the principal. You should retain an expert for the agents and the principal whenever possible. It is an expensive endeavor, but it may save your case. A penny wise is a pound foolish. Finally, you should appeal every claim when respondeat superior is a theory of recovery. Tighten the rope and don’t let go!