When Is a manager a managing agent?

• Author: Craig, Ted C.
• Position: Florida; corporate liability for punitive damages

Courts have consistently required the employee to possess a significant degree of companywide responsibility.

For causes of action arising after October 1, 1999, F.S. [sections] 768.72(3) governs the available theories for establishing corporate liability for punitive damages. The provisions of this recently amended statute are both consistent with and supplementary to the Florida Supreme Court's opinion in Schropp v. Crown Eurocars, Inc., 654 So. 2d 1158 (Fla. 1995). In Schropp, the Florida Supreme Court articulated the two theories then available for proving corporate liability for punitive damages. The vicarious liability theory is established through proof of independent corporate fault contributing to the damages caused by an employee's outrageous conduct. Common examples of such fault are negligent hiring and retention of an employee. The subject of this article, the "direct" liability theory, hinges on proof that a "managing agent," a "primary owner" of the corporation, or a corporate representative that "holds a policymaking position" committed the outrageous act or acts. A third theory, corporate ratification of an employee's outrageous conduct, is now codified in [sections] 768.72(3)(b).

For better or worse, the direct liability theory approved in Schropp is preserved by [sections] 768.72(3). Pursuant to the statute, direct corporate liability for punitive damages depends on proof that the "employer, principal, corporation, or other legal entity actively and knowingly participated in such conduct."(1) Because the statute is silent as to which representatives are qualified to impose liability on their employer or corporation for their participation in outrageous conduct, Florida's courts and practitioners must still look to Florida's common law for guidance. Because the opinions on this issue are far from models of clarity, the "managing agent" question persists.

Dicta contained in the Florida Supreme Court's Schropp opinion may lead some to believe that an employee with any management duties whatsoever qualifies to impose corporate liability for punitive damages, that legitimate policymaking authority for the company is not a factual prerequisite to liability. A careful reading of the court's pre-Schropp opinions, coupled with the decisional trends of Florida's courts and those of other jurisdictions, demonstrates that such a reading of Schropp is misguided. In Florida, corporate liability for punitive damages under the direct liability theory depends on a finding that the tortfeasor was a high-ranking employee with real policymaking authority on behalf of the company as a whole.

Court's Holding in Schropp

In Schropp, the court held that there is no corporate vicarious liability for punitive damages based on the conduct of an employee alone; the doctrine of respondeat superior does not apply. F.S. [sections] 768.72(3)(a) maintains this principle. As with any punitive damages theory, the conduct of the individual tortfeasor is first examined independently. If the conduct is sufficient to support a claim for punitive damages against the individual, it must then be determined whether that individual is sufficiently high-ranking to impose liability on the corporation. If the individual tortfeasor is not a "primary owner" of the corporation, a plaintiff must establish that "the person is a managing agent or holds a policymaking position" in order for there to be corporate liability. Schropp, 654 So. 2d at 1161.

A fundamental difficulty with the Schropp opinion and F.S. [sections] 768.72(3)(a) is that both fail to provide any reasoned guidance as to who constitutes a managing agent or holds a policymaking position. Although state and federal courts applying Florida law have considered on numerous occasions whether an officer or employee of a corporation is a "managing agent" for purposes of imposing corporate liability for punitive damages, the courts have never established any usable criteria.

Managing Agent in Florida

The "managing" part of the term "managing agent" is somewhat misleading as it seems to imply that a corporation is liable for punitive damages for the acts of any manager. Florida case law belies this notion. Individuals who manage the corporation as a whole are managing agents, whereas persons who merely have managerial responsibilities are not. A close analysis of the few cases that suggest otherwise demonstrates that these "suggestions" are nothing more than dicta.

The Florida Supreme Court explored the issue of corporate liability for punitive damages for the first time in Mercury Motors Express, Inc. v. Smith, 393 So. 2d 545 (Fla. 1981). The court in Mercury Motors held that corporations are not vicariously liable for punitive damages under the doctrine of respondeat superior for the outrageous actions of their employees.(2) Rather, there must be some independent fault on the part of the corporation aside from the employee's misconduct.

The Florida Supreme Court touched on the managing agent question for the first time when it clarified its Mercury Motors opinion in Bankers Multiple Line Ins. Co. v. Farish, 464 So. 2d 530 (Fla. 1985). The court limited its prior decision by stating that the rule of law requiring proof of independent corporate fault was not meant to apply "where...