McDaniel v. Troy Design Services Co. , 186 Ariz. 552 ( 1996 )

OPINION

TOCI, Judge.

Troy Design Services Company (“Troy Design”) appeals from the trial court’s entry of summary judgment against it. The trial court concluded that Troy Design’s employee, Rhett Schaller, was a “lent employee” under the exclusive control of General Motors Corporation (“GM”). Nevertheless, the trial court ruled that Troy Design was vicariously liable for Sehaller’s negligence in harming a fellow employee working at GM.

The issue before us is whether a general employer can be held vicariously liable for the negligent actions of a lent employee in the exclusive control of a special employer. We hold that a general employer is vicariously liable for the tortious conduct of a lent employee only if the general employer has control of or the right to control the performance of the lent employee’s work. Because the trial court found that the lent employee was under the exclusive control of GM, we reverse and remand for entry of judgment in favor of Troy Design.

I. FACTS AND PROCEDURAL BACKGROUND

In November 1988, Robert McDaniel was riding in a cart driven by Schaller on the GM proving grounds. The cart was involved in an accident with a parked vehicle. As a result of the accident, McDaniel suffered serious injuries that culminated in the amputation of his leg.

When the accident occurred, both men were employed by labor brokers. McDaniel was employed by Kett Engineering and Schaller by Troy Design. The services of both men had been furnished to GM by their respective employers, under contract, and both employees were assigned by their employers to work at the GM proving grounds.

The day of the accident, McDaniel and Schaller were assigned by their supervisor at GM to transport tires and wheel assemblies to the tire shop. After the assignment was completed, Schaller ran into a parked vehicle, causing McDaniel’s injuries. McDaniel filed this personal injury action naming Troy Design, GM, and Schaller as defendants. McDaniel sought to hold Troy Design liable for the negligence of its lent employee, Schal-ler, under the doctrine of respondeat superi- or.

Defendants filed a joint motion for summary judgment. McDaniel filed a cross-motion for summary judgment on the issue of Troy Design’s vicarious liability. The trial court granted summary judgment in favor of GM and Schaller, dismissing them from the lawsuit.¹ It also granted McDaniel’s cross-motion, entering summary judgment against Troy Design on the issue of its vicarious liability for any negligence attributable to Schaller. Troy Design moved for a new trial, asking that the court reconsider its ruling. The trial court denied the motion. This appeal followed.

II. DISCUSSION

A. Standard of Review

Summary judgment “should be granted if the facts produced in support of the claim or defense have so little probative value, given the quantum of evidence required, that reasonable people could not agree with the conclusion advanced by the proponent of the claim or defense.” Orme Sch. v. Reeves, 166 Ariz. 301, 309, 802 P.2d 1000, 1008 (1990). Appellate courts review summary judgments on the basis of the record made in the trial court. United Bank of Arizona v. Allyn, 167 Ariz. 191, 195, 805 P.2d 1012, 1016 (App. 1990). The determination of whether summary judgment was proper is essentially de novo. Id.

B. Vicarious Liability for the Acts of Lent Employees

Vicarious liability “rests upon the employment of the servant by the master and the master’s right to exercise direction and control over his work in the conduct of his business.” Ray v. Tucson Medical Ctr., 72 Ariz. 22, 33, 230 P.2d 220, 227 (1951). “[G]ain or profit has no reasonable relation to the doctrine____” Id. The ability to control an employee’s actions in the performance of his work is the foundation of an employer’s liability for its employee’s torts.²

Arizona follows the “control or right to control” test to determine if a general employer is vicariously liable for the negligent acts of a lent employee. Lee Moor Contracting Co. v. Blanton, 49 Ariz. 130, 136, 65 P.2d 35, 37-38 (1937); see also Larsen v. Arizona Brewing Co., 84 Ariz. 191, 198, 325 P.2d 829, 834 (1958).³ “The key word is ‘control’, [sic] which relates to the right of control over the performance of the work to the extent of prescribing the manner in which it is to be executed.” Williams v. Wise, 106 Ariz. 335, 338, 476 P.2d 145, 148 (1970). Consequently, if a general employer does not have actual control over or the right to control the performance of a lent employee’s work, the general employer cannot be held vicariously liable for the acts of the lent employee.

Here, the trial court found that it was clear from the record that GM had the right to control the actual work done by Schaller on a day-to-day basis. According to the trial court, “the control and supervision of these employees was exclusively with General Motors Corporation.” (Emphasis added.) We agree with the trial court’s finding.

The evidence is undisputed that GM had the exclusive right to control Schaller’s work activities at the GM proving ground. According to Schaller, all the supervision of his daily work activities was done by GM employees. Joseph Mitchell, President of Troy Design, stated that GM was in charge of all of Schaller’s working conditions at the proving grounds, including where, when, and how to work. Although Richard Reed, Troy Design’s regional manager at the time of the accident, stated that he was on site two to three times a week to handle administrative matters, he testified that he never directed actual work activities.

C. McDaniel’s Arguments

McDaniel makes three arguments in favor of affirming the entry of summary judgment against Troy Design. First, McDaniel argues that the facts of this case establish Troy Design’s concurrent control of Schaller’s actions. Second, McDaniel contends that the law provides that a servant can have two masters, both vicariously liable for his actions. Finally, he asserts that GM’s control of Schaller did not negate his employment relationship with Troy Design, who retained the right to control Schaller. Consequently, McDaniel concludes, Troy Design can be vicariously liable for Schaller’s negligence. We examine these arguments in turn.

1. Troy Design Had Concurrent Control

McDaniel contends that the undisputed facts of this case establish Troy Design’s concurrent control of Schaller. McDaniel first points to the contract between GM and Troy Design which provides that Troy Design was responsible (1) to hire and fire employees, (2) to require employee compliance with GM work rules, (3) to sign time records, and (4) to comply with equal employment opportunity laws. Additionally, McDaniel argues that Troy Design had the right to reassign employees from the proving grounds to other clients and the right to withdraw employees from GM, provided that they were replaced at GM’s option. Finally, according to McDaniel, Troy Design’s regional manager, Reed, went to the proving grounds at least twice a week to resolve employee problems.

These facts presented by McDaniel do not establish the elements necessary to charge Troy Design with vicarious liability. Although Troy Design had some degree of control over its employees assigned to GM, the sine qua non of vicarious liability — the control or right to control by Troy Design over the assigned employees’ work performance at GM — is lacking. Once GM had the exclusive right to control Schaller in the performance of his duties at GM, Troy Design was no longer vicariously liable for Schaller’s negligence. See Hartford Ins. Group v. Mile High Drilling Co., 96 Mich.App. 455, 292 N.W.2d 232, 235 (1980) (test is whether in the particular service performed the lent employee becomes subject to the control of employer to whom employee is loaned).

2. A Servant Can Have Two Masters

McDaniel next contends that a servant may have two masters, so long as each exercises control and the servant furthers the interests of both. We agree with McDaniel that a servant can have two masters and that each of them may be vicariously liable for his actions. In this case, however, GM possessed the exclusive right to control the performance of the lent employee’s work. Thus, Troy Design did not have the joint right to control the performance of Schaller’s work at GM.

McDaniel cites Lee Moor and the Restatement (Second) of Agency, § 227 (1958), for the proposition that as long as Schaller was “furthering the business” of Troy Design, a labor broker, Troy Design is vicariously liable. Although Lee Moor contains language supporting McDaniel’s argument, that language must be read in context. Immediately following the language relied upon by McDaniel, the court in Lee Moor stated the following rule:

[A]s long as the employee is furthering the business of his general employer by the service rendered to another, there will be no inference of a new relation unless command has been surrendered, and no inference of its surrender from the mere fact of its division. Charles v. Barrett, 233 N.Y. 127, 135 N.E. 199, 200.

Control or right to control determines liability.

Lee Moor, 49 Ariz. at 136, 65 P.2d at 37-38 (citation omitted) (emphasis added).

Here, the evidence is uncontroverted that Troy Design had surrendered to GM command of Schaller’s performance at GM’s proving grounds.

3. GM’s Control Did Not Negate Troy Design’s Employment Relationship with Schaller

McDaniel’s third contention is that GM’s extensive control of Schaller’s work performance did not affect Schaller’s employment relationship with Troy Design. McDaniel argues that a special employer’s control over a lent employee’s work activities does not determine the lent employee’s relationship with his general employer. Instead, McDaniel claims that, to avoid liability for Schaller’s acts, Troy Design must have relinquished all control over Schaller to GM.

In support of McDaniel’s argument, he emphasizes the following facts. First, Troy Design retained the right to hire and fire Schaller, the right to replace him at GM, and the responsibility for paying him and his workers’ compensation insurance. Additionally, Troy Design had regular contact with its employees through a representative. Based on these facts, McDaniel contends that Troy Design retained sufficient indicia of control to hold it vicariously liable for Schaller’s acts. We disagree.

Troy Design’s control over the administrative aspects of Schaller’s employment is insufficient to subject Troy Design to vicarious liability for his negligence in the performance of his work. As we have stated above, vicarious liability for a lent employee’s tortious conduct results from the general employer’s right to control the performance of the employee’s work. See Hartford, 292 N.W.2d at 235 (test is whether in the particular service loaned employee is performing he continues under control of original employer). Here, reasonable people could not disagree with the trial court’s conclusion that GM exclusively controlled the particular service Schaller performed at GM. Orme Sch, 166 Ariz. at 309, 802 P.2d at 1008. As a result, Troy Design could not be vicariously liable for Schaller’s actions.⁴

III. CONCLUSION

We hold that in order for a general employer to be held vicariously liable for the negligent acts of a lent employee, the general employer must have control of or the right to control the performance of the employee’s work. The uncontroverted facts of this case establish that Troy Design did not have such control over its lent employee. Consequently, it cannot be held vicariously liable for its lent employee’s negligent conduct. Accordingly, we reverse the entry of summary judgment against Troy Design by the trial court and remand with instructions to enter summary judgment in favor of Troy Design on the issue of vicarious liability.

VOSS, P.J., concurs.

1 . The trial court concluded that, as a matter of law, GM had become the "special employer” of both McDaniel and Schaller and therefore that workers' compensation was McDaniel's exclusive remedy against those two defendants.

2 . A competing theory of justification for vicarious liability is the enterprise theory. This theory is based upon the allocation of risk. It is founded on the proposition that companies engaged in a business are best able to distribute the risk of loss from that particular business to their consumers through pricing mechanisms. Consequently, an employer should be held vicariously liable for any loss caused by an employee in the course of business, regardless of the control over the employee. Some jurisdictions have adopted this approach in the lent servant context. See, e.g., Strait v. Hale Constr. Co., 26 Cal.App.3d 941, 949, 103 Cal.Rptr. 487 (1972); Bright v. Cargill, Inc., 251 Kan. 387, 837 P.2d 348, 363 (1992); Volb v. G.E. Capital Corp., 139 N.J. 110, 651 A.2d 1002, 1013 (1995). This theory is also reflected in the Restatement (Second) of Agency. Restatement (Second) of Agency § 227, cmt. d (general employer is responsible as a master if the act is within the scope of his general employment). Arizona, however, has never adopted this theory and plaintiff does not urge us to do so.

3 . In discussing the determination of whether an employer has control over a lent employee, both parties cite Throop v. F.E. Young & Co., 94 Ariz. 146, 382 P.2d 560 (1963). Throop, however, was an independent contractor case. Because the determination of whether an employee is a servant or an independent contractor is not relevant to the question of vicarious liability for a lent servant, we do not find Throop persuasive.

4 . McDaniel cites Word v. Motorola, 135 Ariz. 517, 662 P.2d 1024 (1983), and Special Fund v. Catalina Trucking Co., 134 Ariz. 585, 658 P.2d 238 (App.1982), as additional authority in support of his argument. As these cases are workers’ compensation cases, they "are not necessarily authority for principles giving rise to common-law liability under the doctrine of respondeat superior.” Throop, 94 Ariz. at 153, 382 P.2d at 564. Thus, we do not follow these cases here.