OBT's Liability in Taxi Accident: Analysis of Claims and Binding Settlement, Exams of Law

Download OBT's Liability in Taxi Accident: Analysis of Claims and Binding Settlement and more Exams Law in PDF only on Docsity! Student Number ______ University of Illinois College of Law Examination Cover Sheet Unincorporated Business Entities Professor Amitai Aviram Fall Semester 2005: Dec. 14, 2005 Number of Pages: 4 (including this page) Time Allotted: 3 hours Exam Instructions 1. Permissible material: This is an open book exam. You may use any materials you want, whether in hardcopy or electronic format. You may not communicate with anyone about the exam until it is over, and you may not access the internet while taking the exam. 2. Anonymity: The exams are graded anonymously. Do not put your name or anything else that may identify you (except for your student number) on the exam. 3. Legibility: If you handwrite your exam, please write legibly. I will do my best to read your handwriting, but will have to disregard (and not give you points for) writing that is too small to read or otherwise illegible. 4. Confidentiality: Once you receive this exam form, you are not allowed to discuss the exam with anyone until after the final day of the exam period for this semester (which may be later than the day of the exam). Similarly, students who are enrolled in this course are not allowed to solicit or receive information on the exam if the source of this information (directly or indirectly) is a person who has seen the exam form. Breaching this duty of confidentiality will be considered a violation of the honor code and the breaching student will be subject to disciplinary action. After the last day of the exam period for this semester, you are allowed to freely discuss the contents of the exam. 5. Writing the exam a. You should give appropriate case and statutory authority for your answers, stating how each cited case/statutory provision relates to your answer. b. Answer all issues that arise from the fact pattern, even if your conclusion on one of the issues is dispositive to other issues. c. If you think a question is unclear or cannot be decided without additional facts, state clearly what facts you believe to be necessary to answer the question. Discuss the applicable rule and result for the various possible fact patterns. 6. Applicable law a. If a question specifies the applicable law, then assume that the relevant jurisdiction applies that law. b. If a fact pattern specifies the applicable law (and the specific question does not specify applicable law), then assume that the relevant jurisdiction applies that law. c. If neither the question nor the fact pattern specified the applicable law, then apply the law we addressed in the course. If the issue was addressed differently in different jurisdictions, then state the rule, application and result in each jurisdiction we addressed. 7. Choice: The exam contains three questions. Answer any two of them. I will only grade the two questions you answered first. 8. “Fact” patterns are fiction: The “facts” presented in the exam were constructed for an educational purpose, and were not intended to refer to or inform about any real person or event. Good Luck! 1 Essay Fact pattern (answer TWO of the three questions): It was a cold winter night in Chicago and the streets were covered with snow and ice. As Don turned the corner of a street his car got stuck on a snow bank. His attempts to drive out of it were to no avail. He got out of the car and tried to push it off of the snow bank, again with no success. Carol, a taxi cab driver working for Orange & Blue Taxi Company, LLC (“OBT”), drove by. Seeing Don in distress, Carol stopped to help. She helped Don push the car, but even their combined forces were not enough to get the car un-stuck. Don offered Carol $100 if she would use the cab to tow his car out of the snow bank. Carol did not have the equipment to tow the car, but was willing to use the cab to push Don’s car out of the snow bank. Don paid her $100. Carol moved the cab behind Don’s car and drove slowly forward. For a few seconds, the car wouldn’t budge. Then it pushed out of the snow bank, skidded sideways on the smooth ice that covered the road, and crashed into Paul’s luxury car, which was legally parked on the side of the street. Paul’s car, worth $150,000, was totaled. Assume that, given the icy conditions, a person using a car to push another car without taking additional precautions would be liable for negligence. When Paul discovered his wrecked car (with a post it note providing Don’s contact information), he hired Lisa, a partner at the law firm of Swindle & Crooke, LLP (“S&C”). Lisa discovered that Don has no more than $20,000 in assets. She interviewed Don, who told her how the accident occurred. Lisa found that Carol has only about $30,000 in assets. OBT, however, is a very prosperous company. Lisa’s investigations revealed that OBT owned the cab and had an insurance policy covering traffic accidents, but not accidents caused by using the cab to push other cars. Carol was a salaried employee of OBT – it paid Carol a fixed salary, and Carol remitted to OBT all of the revenue she received from passengers. The accident occurred just minutes after Carol dropped off a passenger, and was told by OBT’s dispatcher to pick up another passenger in 30 minutes. OBT imposes many rules on its taxi drivers, including rules regarding the use of the cab. One of these rules expressly prohibits drivers from using a cab to push or tow cars, requiring that a tow truck would be called instead. OBT never makes active investigations, however, to detect whether taxi drivers violate that rule. Lisa invited Carol to discuss the accident. Lisa explained that according to the evidence she has gathered, Don, Carol and OBT are all liable to Paul for the damage to his car. She and Carol agreed to settle the suit. Lisa and Carol signed a document stating that OBT is accepting responsibility and will pay Paul $120,000, in settlement of all claims Paul has against OBT, Carol and Don regarding the damage to his car. 2 Unincorporated Business Entities – Fall 2005 Memo on the Final Exam Grades: Raw scores were calculated out of a total of 100 points: A 40 point maximum for participation, and 30 points for each of the two essays selected on the exam. Below are the average, median, lowest and highest grades for the exam and for each essay separately: Average Median Lowest Highest Essay 1 20.69 21 8 29 Essay 2 16.14 15 7 25 Essay 3 16.44 16 11 21 Participation 30.13 29 22 40 Total (including participation) 67.31 65 47 90 Grades were given based on the percentile ranking of the exam’s total raw score. Therefore, a grade depended not on the absolute raw score of the exam, but on the relative ranking of a given exam’s raw score compared to all other exams’ raw scores). Below is an outline of what would constitute an excellent exam. This is only an example, not the example. Students may receive credit for very different, but correct and well- explained responses. Question I (OBT’s Claims) 1. Is OBT liable to Paul for the damage to his car? (a) We are to assume that Carol is liable to Paul in torts for her negligence in pushing Don’s car. Carol is clearly OBT’s agent: she drives a cab for OBT, she is subject to OBT’s control (rules imposed by OBT), and consented to this (Restatement §1). (b) OBT’s liability for Carol’s actions depends first on whether Carol is an employee or an independent contractor. Restatement §2(2) and 220(1) define an employee as an agent whose physical conduct is controlled by the principal. Restatement §220(2) offers ten factors in the determination. In this case, it seems that Carol is an employee (servant, in the Restatement (Second) terminology). As in the Parker case, OBT has detailed rules as to her conduct, amounting to control of her physical conduct. She is paid by the hour and does not receive the revenue from her work; OBT supplies her with the instrumentalities of her work (the cab). OBT may not enforce the rules with which it controls its agent’s physical conduct, but it has the legal right to enforce them, and therefore is deemed to have control over the agents’ physical conduct. (c) Was the tort committed within the scope of Carol’s employment? Restatement §230 clarifies that an act may be within the scope of an agents employment even if it was 5 forbidden by the principal, as pushing a car with the cab was in this case. Restatement §228(1) sets the rule for identifying the scope of employment. The conduct that created the tort must be: (i) Of the kind Carol is employed to perform – this does not exist here. Carol’s assistance to Don is of a purely personal nature, as in Bolwin. At most, her job created the opportunity for her to commit the tort, by having her drive by Don’s car. This does not suffice to place the liability on the employer (Haddon); (ii) The tort occurred substantially within the authorized time and space limit – In this case, this element is satisfied – there was no “frolic or detour”; (iii) It is actuated, at least in part, for the purpose of serving OBT – In this case, there does not seem to be any purpose of serving OBT. This element was replaced in some jurisdictions by Bushey’s forseeability element. The existence of a rule prohibiting the use of a cab to push (rather than tow) another car suggests some foreseeability. However, this case fits the two qualifications in Bushey: the risk of a Carol using her cab to push Don is no greater than the risk that this will be done by any other car owner, and Carol’s motivation was unrelated to her employment. Thus, this element is not satisfied under both the purpose and the forseeability tests. (iv) If force is intentionally used by the agent against another, the use of force must not be unexpectable – here, force was not intentionally used against another. Conclusion: The tort was outside of Carol’s scope of employment. (d) Is OBT liable to Carol despite the tort being outside of the scope of employment? Restatement §219(2) specifies the exceptions, and none apply here: OBT did not intend the consequences, nor was it negligent or reckless; the tort did not involve a non-delegable duty assigned to the agent; and Carol did not purport to act on behalf of OBT in a manner that would create apparent authority. Conclusion: OBT is not liable to Paul for Carol’s tort. 2. Is OBT bound by the settlement document signed by Carol? (a) Since OBT did not ratify the settlement nor are there grounds for estoppel against it, OBT would be bound by Carol’s signature of the settlement document only if Carol was its agent and had authority to bind OBT on this matter. (b) Carol is OBT’s agent (see I.1.a). (c) Carol did not have actual authority, since OBT specifically forbade her to use the cab to push other cars. (d) Carol would have apparent authority if: (i) OBT made manifestations to Lisa that are the source of- 6 (ii) Lisa’s actual belief that Carol had authority to sign a settlement that would be binding on OBT; and (iii) Lisa’s reasonable belief that Carol had authority to sign a settlement that would be binding on OBT. OBT’s sole manifestation to Lisa was that Carol was its cab driver. Whether or not this was sufficient to cause Lisa to actually believe that Carol had authority, it is clear that no reasonable lawyer would believe that a cab driver with no legal experience is authorized to settle lawsuits for the company and obligate the company to pay $120,000. Therefore, there is no apparent authority. (e) Does Carol have inherent authority? Lisa knows that OBT is Carol’s principal, so this would be a disclosed principal situation, covered by Restatement §161. Carol would have inherent authority if Lisa’s actual and reasonable belief of Carol’s authority can be based on Carol’s acts that “usually accompany or are incidental to transactions which [Carol] is authorized to conduct.” As a cab driver, Carol is authorized to transport passengers and accept money from them for the transportation. Towing cars is neither incidental nor usually accompanies these. Therefore, Carol has no inherent authority to settle suits for OBT. Conclusion: For lack of authority, OBT is not bound by Carol’s consent to the settlement. Question II (Paul’s Suits) 1. Paul’s suit against S&C [In this answer below, discussion of issues similar to the ones that arose in question 1 will be brief. On the exam, if a student did not answer question 1 or did not refer in question 2 to relevant portions of his or her answer in question 1, a more complete discussion, similar to that in question 1, was expected.] (a) Elmer was negligent. Since S&C hired SSL and not him specifically, we must first check if SSL is liable for Elmer’s negligence. Elmer is an employee of SSL (for the test see I.1.a (Elmer is an agent) and I.1.b (Elmer is a servant). Was his behavior within the scope of his employment? Clearly yes, according to both Restatement §228(1) and Bushey: It is of the kind he is employed to perform, it occurred within the authorized time and space of his employment; it was actuated with the purpose of serving the employer (Restatement version of element 3), and it was foreseeable by the employer that Elmer would use the Indiana laws which he was trained to use (Bushey version of element 3). Thus, SSL is liable for Elmer’s negligence. (b) Is S&C liable for SSL’s negligence? SSL was S&C’s agent: it served process on behalf of S&C, was controlled by S&C (which specified who to serve the process to), and SSL consented to this relationship (Restatement §1). 7