Patterson v. Domino's Pizza, Llc: the California Supreme Court Examines Franchisor Liability for Tortious Conduct of Franchisee Employees
| Publication year | 2015 |
| Author | Paul A. Schiffin and Caitlin Johnson |
Paul A. Schiffin and Caitlin Johnson
Paul Anton Schiffin is a business attorney and founder of the Law Offices of Paul A. Schiffin P.C. based in Los Angeles. He regularly represents both foreign and domestic businesses in a variety of international commercial transactions, investments, and disputes. Prior to founding his own firm, he practiced at two international AmLaw 100 firms. He graduated from the Georgetown University School of Foreign Service, and received his Juris Doctor from the Georgetown University Law Center. He speaks fluent German and Mandarin, and is qualified to practice in California and New York. Currently, he serves as a member of the Commercial Transactions Committee of the Business Law Section of the State Bar of California. He can be reached via email at paul@ schiffin.com.
Caitlin Johnson is a paralegal at the Law Offices of Paul A. Schiffin P.C. She graduated from Duke University with a degree in public policy studies and previously served as the corporate counsel reporter at the Daily Journal in Los Angeles.
Across the country, one of the hottest topics in franchise law is the treatment of franchisees as either independent contractors or agents of their franchisors. This determination is critical in deciding whether—and to what extent—plaintiff-employees can pursue the presumably deeper pockets of franchisors in employment litigation.
In Patterson v. Domino's Pizza, LLC,1 the California Supreme Court ("Court") held in a 4-3 decision that franchisor Domino's Pizza, LLC ("Domino's") was not liable for the tortious conduct allegedly committed by an assistant manager employed by a Domino's franchisee. The Court held that the dispositive factor in determining whether a franchisor can be held liable for the actions of its franchisee is control. If a franchisor is found to substantially and significantly control the operations of its franchisee, the franchisee can be considered an agent or employee of the franchisor, and therefore, the franchisor can be held liable for the torts of its franchisee under the doctrine of respondeat superior.
In the Patterson case, the Court ruled that Domino's did not wield the requisite degree of control needed to establish the franchisee as an agent of Domino's because it left key operations such as hiring, discharge, and day-to-day oversight in the discretion of the franchisee. The Court reversed the appellate court, which had overturned the trial court's grant of summary judgment in the franchisor's favor.
The dissent reasoned that the determination of whether a franchisor controlled a franchisee was a factual analysis that should be left to a jury to decide, and thus, the trial court was wrong to grant summary judgment in favor of the franchisor.
The plaintiff, Taylor Patterson ("Patterson"), alleged that she was sexually harassed and assaulted by her shift manager, Renee Miranda ("Miranda"), on numerous occasions while on the job at a Domino's Pizza franchise.
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Patterson sued Miranda, the franchisee (Sui Juris LLC- "Sui Juris"), and the franchisor (Domino's), for sexual harassment, failure to take reasonable measures to avoid harassment, retaliation for reporting harassment in violation of the California Fair Employment and Housing Act (FEHA), assault and battery, as well as other intentional tort claims. Patterson claimed that both Sui Juris and Domino's were vicariously liable for the tortious acts of Miranda under the doctrine of respondeat superior.
Essentially, Patterson argued that Domino's employed the franchisee Sui Juris, and therefore, Sui Juris was acting as an agent of Domino's. Consequently, Patterson argued that Miranda not only was an employee of Sui Juris, but also an agent and employee of Domino's.
Domino's countered that, as a matter of law, it should not be liable for the actions of Sui Juris's employee, because it had neither a contractual employment relationship with Patterson nor operational control over Sui Juris. Moreover, Domino's took the position that, traditionally, franchisees are treated as independent contractors of the franchisor, and should not be characterized as agents or employees.
Domino's sought summary judgment against Patterson in November 2010, claiming that its lack of day-to-day control of Sui Juris prevented the agency relationship needed to expose it to liability. Domino's cited excerpts from its franchise agreement with Sui Juris, and from the depositions of franchisee owner Daniel Poff ("Poff") and Patterson. Domino's also submitted a declaration from its director of franchise services, Joseph Devereaux. The evidence demonstrated that while Domino's prescribed comprehensive standards for selling its pizzas, Sui Juris was a distinct legal entity and business. Poff hired Patterson, and she followed policies established and enforced by him alone. Contractually, Domino's could not interfere in these processes.
Patterson countered that the "area leaders" of Domino's nonetheless held a great deal of influence over the franchisee's business format and general operations, and that such control made it a party to the contractual obligations of Sui Juris. Patterson relied on the deposition testimony of Domino's area leader Claudia Lee ("Lee") to support her assertion that Domino's controlled Sui Juris. In her deposition, Lee testified that she made recommendations to franchisees for the purpose of maintaining operational and marketing standards to protect the Domino's brand. Of particular importance to Patterson's position was that Lee made suggestions that certain individual employees of Sui Juris were not the right persons for the job, and specifically, that upon learning of the alleged assault, Lee stated that Miranda should be fired. Patterson supplemented this evidence with Poff's deposition wherein he...
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