New Jersey’s Highest Court Rejects “Absolute Liability” Standard for Employee Assault of Patient

By: Lynne Anne Anderson and Jerrold Wohlgemuth

The New Jersey Supreme Court in Davis v. Devereux Foundation, 209 N.J. 269 (2012), recently rejected an attempt to impose absolute liability against a residential health care facility for a criminal assault committed by an employee against a resident patient.  The Court determined that the facility should be held to the traditional reasonable duty of care towards its patients.   Further, the traditional “scope of employment” analysis should be applied to determine whether the employer could be held liable for the tortious conduct of its employee.

In Davis, a resident counselor employed by Devereux, a residential institution for the developmentally disabled, engaged in a pre-meditated act of aggression when she assaulted a residential patient by pouring boiling water on him.  The counselor was arrested and imprisoned for criminal assault, and the patient’s guardians obtained a default judgment against her for assault in the ensuing civil action.

The family also brought a civil action against the health care facility.  Reversing the trial court’s grant of summary judgment in favor of the facility, the Appellate Division remanded for trial and imposed an absolute liability standard on the employer under the common law “non-delegable duty” analysis, which imposes a duty on the master to protect those entrusted to its care in an in loco parentis relationship, such as a school or health care facility, and subjects the master to liability for the acts of its employees whenever they fail to meet their duty of care.  Under that common law approach, the non-delegable duty imposed on the employer cannot be satisfied by any level of care taken by the employer in hiring or supervision of its staff, but is based solely on the level of care taken by the employee.

The Supreme Court reversed and reinstated summary judgment in favor of the health care facility.  The Court observed that the “non-delegable duty” would unfairly impose absolute liability on the employer regardless of the level of care engaged in by the employer.  “Once an employee has committed a tortious act, the duty would effectively impose absolute liability upon residential institutions” even if the employer had acted reasonably in screening applicants and supervising its employees.

The Court instead determined that traditional principles of the duty of reasonable care should be followed with respect to the actions of employees of facilities responsible for in loco parentis care.  The Court observed that such facilities are expected to take reasonable measures to assure that their staff members are not endangering the safety of the patients entrusted to their care, and that liability for the tortious acts of their employees would be determined under traditional “scope of employment” principles.  Finding in this case that Devereux acted reasonably in screening individuals prior to hiring, and in supervising the relationship of its employees with the residential patients, the Court determined that the facility had met its duty of care to its patients.  The Court further determined that the counselor had acted far outside the scope of her employment in pouring boiling water on the patient where she acted out of personal anger and frustration, and not in any way to further the interests of her employer.

New York High Court: No At-Will Exception For Complaining Hedge Fund Executive

By: William R. Horwitz

The New York State Court of Appeals declined this week to recognize an exception to the at-will employment doctrine for a hedge fund’s Chief Compliance Officer who alleged that he was fired for objecting to his employer’s unlawful trading practices.  In Sullivan v. Harnisch, Plaintiff Joseph Sullivan was an employee and minority owner of Defendants Peconic Partners LLC and Peconic Asset Managers LLC (collectively, “Peconic”), holding various titles including Chief Compliance Officer.  Defendant William Harnisch was the majority owner, President and Chief Executive Officer.  Sullivan filed a lawsuit for wrongful discharge, alleging that Peconic fired him for objecting, in his capacity as Chief Compliance Officer, to Harnisch’s “manipulative and deceptive trading practices.”  The trial court denied Defendants’ motion for summary judgment seeking to dismiss the claim.  The Appellate Division, First Department, reversed and Sullivan appealed.

According to the Court of Appeals, the “gist of Sullivan’s claim is that the legal and ethical duties of a securities firm and its compliance officer justify recognizing a cause of action for damages when the compliance officer is fired for objecting to misconduct.”  The Court reiterated the at-will employment doctrine, explaining that, “absent violation of a constitutional requirement, statute or contract,” an employer has the right to terminate employment at will.  The Court indicated that it has “recognized an exception” to this doctrine “only once.”

That exception arose in Wieder v. Skala, in which a law firm had allegedly fired a lawyer for insisting that it comply with the profession’s ethical obligations.  According to the Court, that decision “stressed both the ethical obligations of members of the bar and the importance of those obligations to the employment relationship between a lawyer and a law firm.”  Moreover, the decision focused on the legal profession’s “unique function of self-regulation.”

In Sullivan, the Court emphasized the narrow scope of the Wieder decision.  Although the Court left open the possibility that “there are some employment relationships, other than those between a lawyer and a law firm, that might fit within the Wieder exception,” the Court concluded that “the relationship in this case is not one of them.”  Distinguishing Wieder, the Court explained that Sullivan’s regulatory and ethical obligations were not inextricably tied to his duties as an employee.  Indeed, the Court observed, Sullivan “was not even a full-time compliance officer.”  The Court also stated that regulatory compliance was not at the “very core” and the “only purpose” of Sullivan’s employment.

The Court affirmed the Appellate Division’s decision.  In a strongly-worded dissent, Chief Judge Lippman charged that the “majority’s conclusion that an investment adviser like defendant Peconic has every right to fire its compliance officer, simply for doing his job, flies in the face of what we have learned from the Madoff debacle, runs counter to the letter and spirit of this Court’s precedent, and facilitates the perpetration of frauds on the public.”

Notwithstanding the dissent’s alarm that New York employers are now free to fire employees who allege wrongdoing, prudent employers – particularly in highly regulated fields like the securities industry – take such allegations seriously and investigate them, and are careful to avoid allegations of retaliation.

$100 Million Pattern-or-Practice Gender Discrimination Suit Doomed By Company’s Arbitration Agreement

A federal district court in Massachusetts effectively gutted a prominent plaintiff’s class action firm’s attempt to avoid arbitration agreements and litigate on a class-wide basis in federal court in Boston. This ruling comes on the heels of a series of class and collective actions filed in federal courts against major U.S.-based and international employers by the Sanford Wittels & Heisler law firm.

In Karp v. CIGNA Healthcare, Inc., the plaintiff-employee was a senior contract manager at CIGNA who asserted discrimination claims in a proposed $100 million putative class action alleging systemic gender discrimination in violation of Title VII of the Civil Rights Act of 1964. Karp’s efforts to represent a class of potentially thousands of current and former female employees were halted when, the district court effectively foreclosed her from proceeding on a class-wide basis either in federal court or in arbitration.

To read the full alert authored by John Ridley and Larry Del Rossi click here.