Torts-Johnson v. LeBonheur Children's Medical Center: Private Hospitals May be Held Vicariously Liable Under Agency Theory for the Negligence of State-Employed Physician Residents

On November 4, 1991, Amman Johnson (Amman) underwent heart surgery1 at LeBonheur Children's Medical Center (LeBonheur).2 Amman suffered cardiac arrest during the surgery that resulted in permanent neurological damage.3 Dr. Michael Citak and Dr. Michael Martindale were physician residents who, as part of the University of Tennessee (UT) training program, were working on rotation at LeBonheur.4 While providing services at LeBonheur, both doctors were obligated "to follow LeBonheur's protocols, rules, and regulations."5 Each was compensated by UT, and, pursuant to section 8-42-101 (3)(A) of the Tennessee Code, each was considered an employee of the State.6 Both physician residents were directly involved in the ill-fated surgery.7

Mary Johnson (Ms. Johnson), Amman's mother, brought suit against LeBonheur8 claiming the private hospital was liable as principal of the physician residents.9 The complaint specifically alleged, among other things, that "[Drs. Citak and Martindale] were acting as the agents and servants of LeBonheur during Amman's surgery and that LeBonheur [was] vicariously liable under the doctrine of respondeat superior for [the doctors'] negligence."10 LeBonheur, in its motion for partial summary judgment, contended that vicarious liability could not be based solely upon the negligence of state-employed physician residents who were immune from liability under the Tennessee Claims Commission Act.11 From the trial court's order denying LeBonheur's motion for partial summary judgment, an interlocutory appeal was granted, and the court of appeals affirmed the trial court's order.12 Certiorari was granted, and the Tennessee Supreme Court held, affirmed.13 A private hospital may be held vicariously liable under the doctrine of respondeat superior based solely upon the tortious conduct of a state-employed physician resident, when the resident is acting as an agent of the hospital. Johnson v. LeBonheur Children's Medical Center, 74 S.W.3d 338 (Tenn. 2002).

Historians dispute the origins of modern vicarious liability in western law.14 Although scholars differ as to which culture gave rise to the maxim of respondeat superior, most agree that the doctrine's modern treatment in the United States derives from English law.15 Respondeat superior is one type of vicarious liability.16 Vicarious liability is liability imputed to one person based on the relationship shared with another.17 Although the term vicarious liability is used interchangeably with other terms like "imputed negligence," the legal theory most commonly attached to vicarious liability is based upon the principle of respondeat superior.18 Respondeat superior liability is generally imposed on an employer when the relationship between the employer and the actual tortfeasor implicates the principles of agency.19 Therefore, under the doctrine of respondeat superior, if an agent commits a tort while acting within the scope of his employment, the plaintiff can bring a tort action against the principal of the tortfeasor.20 For example, a hospital-employer may be held liable for the negligence of a physician-employee.21

The historical justification behind the principle of respondeat superior is the notion that a master who "does a thing through another does it himself."22 Therefore, principles of fairness and equitable risk allocation provide reasons for imposing liability on the master.23 The master who is subject to respondeat superior liability is typically an employer who has engaged in and profited from business which, through the torts of its employees, inevitably results in harm to others.24 This employer is typically financially responsible and capable of satisfying a judgment.25 The employer, as opposed to the employee, is more easily able to absorb the losses associated with defending a lawsuit and spread those costs to the public.26 Consequently, the rationale behind the doctrine of respondeat superior is that the allocation of the risk be placed upon the employer.27 The doctrine allows the blameless plaintiff to recover for damages by skirting the typically insolvent employee and proceeding against the more solvent employer.28

In Tennessee, Puryear v. Thompson29 generally illustrates the origins of respondeat superior liability.30 In Puryear, the defendant hired a slave away from the plaintiff for the year of 1842.31 While attempting to "humble" the slave for running away, the slave's overseer, an agent for the defendant, whipped the slave enough to kill him.32 Subsequently, the plaintiff brought suit against the defendant to recover for the value of the slave.33 The supreme court stated that "[n]o principle of the common law is better settled than that a master is liable for the injuries done to others by his servant's negligent conduct while in his employment."34

Later, in McDonald v. Dunn Construction Co.,35 the Tennessee Supreme Court set forth factors to be employed in determining whether an agency relationship exists.36 The McDonald court approved the rule that the amount of actual control exerted by the employer over the means and method used by the employee was determinative in establishing the existence of an agency relationship.37 The court suggested, however, that the mere right to control the employee, although a relevant factor, was not determinative of an agency relationship.38 In assessing the scope of a principal's liability, the supreme court in Luttrell v. Hazen39 stated that to be held vicariously liable for the negligence of the servant, the master need not direct nor even have knowledge of the negligent act or omission.40 The Luttrell court held that where a master-servant relationship exists, "it is enough that the servant or agent was acting in the business of his superior."41

Tennessee courts also hold that an agent may serve dual masters contemporaneously, so long as service for both does not entail contrary objectives.42 This position is in accordance with the Restatement (Second) of Agency, which provides that "[a] person may be the servant of two masters, not joint employers, at one time as to one act, if the service to one does not involve abandonment of the service to the other."43 Where the two employers enter into one agreement "to share the services of the agent, the employee may act as agent to both employers while subject to their mutual control.44 Therefore, an agent's negligence may impose liability upon both employers if the negligent "act is within the scope of employment for both."45

Although principles of agency allow for the imposition of liability on employers, there are exceptions. In Tennessee, three categories of cases are recognized where an agent's negligent act or omission will not impose vicarious liability upon the principal. The first scenario precluding respondeat superior liability is "when the agent has been exonerated by an adjudication of nonliability."46 D. B. Loveman Co. v. Bayless47 illustrates this first line of cases.

In Loveman, Bayless brought suit against his employer, Loveman Company, a mercantile corporation, and two of Loveman's servants, for false imprisonment, assault and battery, and slander.48 The jury returned a verdict in favor of the two servants but against the corporation, finding respondeat superior liability as the only basis for the judgment against the corporation.49 The supreme court in Loveman reversed the jury verdict against the employer and articulated the rule that, when a master's basis of liability is predicated solely upon the doctrine of respondeat superior, a verdict exonerating the servants from any liability absolves the master as well.50 The policy underlying this rule is that in cases involving agency relationships, when the evidence proves the servant's innocence, "it is contradictory and absurd to find the master guilty on the same evidence."51 The master, therefore, has no "duty to respond for the fault of [the] servant," if there is no actual fault.52

Raines v. Mercer53 represents the second category where a principal may avoid vicarious liability for his agent's tortious conduct. When the right of action against the agent is precluded by law, the Raines court held that the principal may not be held vicariously liable based upon the doctrine of respondeat superior.54

In Raines, Mercer brought suit against her fiance's father, Raines.55 Raines gave his son permission to use his car to drive to the theatre and back.56 While returning from the theatre, the couple was involved in a collision, resulting in injuries to Mercer.57 Mercer sued her future father-in-law, Raines, for injuries sustained in the collision.58 After commencement of the action, but before the trial, Mercer married Raines' son.59 In light of the rule of marital unity60 that prevented Mercer from bringing a tort action against her husband, the Raines court concluded she that "could not avoid the forbidden frontal attack [against her husband] by an encircling movement against [her father-in-law]."61 In other words, the court "would not permit to be done indirectly what could not be done directly."62 The court reasoned that if she had no right of action against her husband, then she could not reach her husband's father without independent grounds for liability.63

The third and final category of cases in Tennessee where a principal may avoid respondeat superior liability involves the situation where a plaintiff and the negligent agent enter into a settlement agreement comprising a covenant not to sue.64 For example, in Stewart v. Craig,65 the plaintiffs were injured in an automobile accident with the employee of the defendant.66 The plaintiffs and the employee entered into a pre-suit settlement agreement employing a covenant not to sue.67 The plaintiffs then brought suit against the employer based upon the negligence of the employee/driver.68 The Tennessee Supreme Court held that a covenant not to sue, which bars an action against the agent, operates as a release of the employer's liability when the sole basis of the employer's liability is predicated upon the doctrine of respondeat superior.69

Applying the foregoing principles, the Tennessee Supreme Court in Johnson v. LeBonheur Children's Medical Center70 addressed the issue of whether a private hospital may be held vicariously liable for the tortious acts of state-employed resident physicians who are granted governmental immunity. Under Tennessee law, in order for LeBonheur to escape respondeat superior liability, the Johnson court would have to find that one of the three previously noted exceptions applied to LeBonheur.

The Johnson court began its analysis with an examination of the pertinent provisions of section 9-8-307 of the Tennessee Code.71 Resting on principles of statutory construction, the court concluded that the legislative purpose behind the Tennessee Claims Commission Act (Act) was "to protect state employees from individual liability for acts or omissions that occur in the scope of their employment."72 The court then proceeded to examine whether anything in the language of section 9-8-307 provided immunity for a private hospital when a medical malpractice claim was brought under an agency liability theory.73 First, the court stated that when a claim is brought against the State because of the alleged malfeasance or nonfeasance of a state-employed medical resident, section 9-8-307 gives the claim commission exclusive jurisdiction.74 Also, the Act provides that a claim brought against the State serves as a waiver of any right of action against the resident based on the same act or omission.75 Finally, the court stated that the Act provides state employees with absolute immunity "unless their acts or omissions are willful, malicious, criminal, or done for personal gain."76

After assessing what section 9-8-307 affirmatively provides, the supreme court concluded that "[n]othing in the statute . . . immunizes a private hospital from liability for the acts or omissions of [state-employed physician residents] who are also acting as agents or servants of the private hospital."77 Thus, the court held that if either physician resident was found to be acting as LeBonheur's agent, section 9-8-307 would not bar an action against LeBonheur under a theory of vicarious liability.78

The supreme court then turned to the question of whether the law of agency provided for the imposition of vicarious liability upon LeBonheur for the acts of liability-immune physician residents.79 After concluding "that a physician resident may be the agent of both the [s]tate and a private hospital," the court disposed of LeBonheur's initial argument that a rule allowing state-employed physician residents to simultaneously act as agents of a private hospital would serve to defeat the physician residents' absolute immunity, and therefore undermine the legislature's intent.80 The court stated, however, that LeBonheur's argument incorrectly presumed that an agent cannot concurrently serve two principals.81 The court reasoned that, while on rotation at a private hospital, the resident's acts or omissions may come within the scope of employment "of both the state and [the] private hospital."82 As such, a "finding of dual masters . . . does not . . . abolish the absolute immunity granted to a state-employed physician resident."83

The court next addressed LeBonheur's second argument that a principal "may not be held vicariously liable" for the tortious "conduct of an agent who is immune from liability."84 In support of this argument, LeBonheur cited Loveman, Raines, and Steward.85 The Johnson court analyzed these cases and the line of authority each represents, concluding that there are three instances when a principal may avoid respondeat superior liability for his agent's tortious conduct:

(1) when the agent has been exonerated by an adjudication of non-liability, (2) 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.86

In applying these three scenarios to determine whether LeBonheur could be protected from vicarious liability, the court found that the first and third categories were inapplicable.87 In this case, neither physician resident had been "exonerated by an adjudication of non-liability," but, rather, the physician residents' freedom from liability was due to statutory immunity from suit.88 Also, the court found the third line of cases unhelpful for LeBonheur because Ms. Johnson had taken no affirmative action to release the physician residents from liability, such as executing a covenant not to sue.89

The Johnson court concluded its analysis by distinguishing the facts in the present case from other cases where a principal is insulated from vicarious liability because the plaintiff's ability to bring suit against the agent is precluded by law.90 The court explained that a rule such as the marital unity rule extinguished the spouse's right of action.91 Section 9-8-307 of the Tennessee Code, however, does not eliminate a claimant's right of action.92 Instead, the statute only protects individual physician residents from monetary liability.93 The court declared that, under the statute, claims may still be brought against the State based upon torts committed by the physician residents.94 Thus, the Johnson court concluded that "Ms. Johnson's right of action against the [physician] residents survive[d]," and, through section 9-8-307, the State assumed liability for any fault charged to the residents.95 Therefore, if the statute granting immunity to the physician residents did not preclude an action against the State, then, correspondingly, the residents' immunity did not prevent an action against a private hospital.96 In light of that conclusion, the court held that LeBonheur could be held vicariously liable under the principle of respondeat superior for the tortious conduct of a resident physician, notwithstanding the statutory immunity of the resident physician.97

LeBonheur responded by arguing that the result mandated by the court's holding "would violate common law indemnity principles."98 LeBonheur contended that because section 9-8-307 provides residents with complete immunity from monetary liability, the law, in effect, disallows LeBonheur from seeking indemnification against the physician residents.99 Combined with the fact that the State had not waived its own sovereign immunity in the context of indemnity claims based upon the actions of state employees,100 LeBonheur was barred from seeking compensation from anyone.101 The court responded to this argument by stressing that, under these circumstances, section 9-8-307(h) of the Tennessee Code abolishes "the common law right to indemnification."102 Accordingly, the court was not persuaded by the inability of LeBonheur to seek indemnification against the State.103

Finally, the court disposed of LeBonheur's last argument that the supreme court's decision in Car roll v. Whitney104 mandated that LeBonheur be granted immunity equal to that of the physicians residents.105 Expounding on Carroll,106 the court noted that nothing in that decision abolished respondeat superior liability.107 Further, the court explained that extinguishing respondeat superior liability for private hospitals that use state-employed physician residents would ill-serve public policy by "encourag[ing] private hospitals to shift the risk of liability to the State simply because the residents are employed by the State."108 Thus, the court justified its holding based upon the underlying principle of respondeat superior-fairness to the parties.109

By applying basic principles of agency jurisprudence in Johnson, the Tennessee Supreme Court developed a fair and workable solution for establishing liability in scenarios where a negligent actor is immune from liability. Private hospitals, like LeBonheur, certainly benefit from the services of physician residents who provide the hospital with staffing and allow the hospital to provide treatment for potential patients. The residents' salaries are, at least in part, paid by the State.110 If the plaintiff chooses to sue the private hospital, holding the hospital responsible for the torts of its physicians is fair when the services that provide the hospital with benefit inevitably create a basis for liability. Additionally, the private hospital is in the best position to allocate the risk of potential liability "through prices, rates or liability insurance . . . to the community at large."111 If a plaintiff were precluded from proceeding under the doctrine of respondeat superior against a private hospital that used state-employed physician residents, then private hospitals could simply minimize potential liability by employing state-employed resident physicians, thus shifting the risk of liability to the State.112

Utilizing agency law will increase predictability in lawsuits. Attorneys will know what to expect and what direction to take when counseling hospital-clients regarding steps that can be taken to prevent possible litigation. This potential of liability will prevent private hospitals from taking advantage of the immunity granted to state-employed resident physicians. As the law stands currently, if private hospitals wish to be able to seek indemnification against the State, they will have to lobby for that right in the legislature.

SCOTT G. BAKER*

* Senior Staff, The University of Memphis Law Review; J. D. Candidate, May 2004, University of Memphis, Cecil C. Humphreys School of Law; B.S., 2000, Middle Tennessee State University.

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