IN THE SUPREME COURT
STATE OF GEORGIA
RAWLINS R. KISSUN et al., Petitioners,
v.
HUMANA, INC., Respondent.
CASE NO. S96C1335
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BRIEF OF AMICUS CURIAE GEORGIA TRIAL LAWYERS ASSOCIATION
IN SUPPORT OF PETITION FOR CERTIORARI
COMES NOW the Georgia Trial Lawyers Association
and files this Brief in Support of the Petition for Certiorari for
consideration by the Court:
Rule 42 Disclosure. Amicus Curiae Georgia Trial
Lawyers Association is an association comprised of members of the
State Bar of Georgia which is committed to the preservation of the
jury system and the protection of the interests of, among others,
consumers of medical services. The Association, through its Amicus
Curiae Committee, frequently submits briefs in favor of or in opposition
to positions taken in the courts on a variety of issues. Amicus submits
the within brief in support of the petition for certiorari filed in
this case.
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Reasons for Granting the Writ
1.THE COURT SHOULD GRANT CERTIORARI TO PRESERVE THE APPARENT
AGENCY AND JOINT VENTURE THEORIES OF LIABILITY.
In its unprecedented opinion, the Court of Appeals
held that:
Standing alone, the lawful uses of a subsidiary
corporation by its parent corporation cannot support a claim against
such parent under a theory of apparent agency or joint venturer.
Such claims must rest upon factors other than those which the
law contemplates and approves
.Opinion, 10 (emphasis added). This simple statement
threatens to overturn all prior decisions involving apparent agency
and joint venture, not just those involving parent-subsidiary corporations.
One corporation's act in holding out employees of another corporation
as its own agents differs in no tenable respect from any individual's
act in holding out independent contractors as agents. Corporations
are entitled at most to equality with, not privilege over, natural
citizens. Parent corporations have no "safe harbor," no
legislative immunity, no special privilege, to ignore the laws of
apparent agency and joint venture that govern the affairs of other
citizens. If the italicized language above is true of parent corporations,
it is true of all citizens; if that language is false for other citizens,
the Court of Appeals erred in applying it to Humana.
The essential error in the Court of Appeals' reasoning
is its ad hoc addition of an element of wrongdoing to support a claim
under the apparent agency and joint venture doctrines. By requiring
plaintiffs to pierce the corporate veil, the Court of Appeals requires
a showing that the parent corporation's relation with the subsidiary
is a sham and that recognizing the separate identities would promote
injustice or protect fraud [Opinion, 2]. Thus the Court of Appeals
imported an element of wrongdoing into doctrines that never included
wrongdoing as an element.
Most if not all of the cases which have upheld apparent
agency involved conduct by the apparent principal that is every bit
as lawful, and every bit as entitled to "legal contemplation
and approval," as Humana's conduct here. For example, there is
nothing unlawful, immoral, unjust, or fraudulent in a hospital's holding
out its emergency room physicians as its employees; it must simply
bear the consequences of causing reliance on the representation. Richmond
County Hosp. Auth. v. Brown, 257 Ga. 507 (1987). As this Court discussed
in Brown,
Suppose a cab company holds itself out to the public
as a safe, efficient supplier of transportation causing the public,
including plaintiff-passenger, to justifiably believe the drivers
are its employees. But suppose there is a secret arrangement unknown
to the public and this passenger which renders the drivers independent
contractors in their relationship to the cab company. If a taxi
driver in a single collision negligently injures a passenger and
a pedestrian on the street, the passenger may successfully pursue
a claim against the cab company on apparent agency principles. ...
The passenger justifiably relied on the skill of the driver as an
employee of the company which reliance led to the passenger's injury.
257 Ga. at 509. The cab company committed no act of
immorality, nothing outside of "what the law contemplates and
approves." The relation of employer-employee and of employer-independent
contractor are both relations that the law "contemplates and
approves." The law "contemplates and approves" that
employers and employees can keep their contractual relationships private,
thus authorizing "secret arrangement[s] unknown to the public"
even when they create an employer-independent contractor relationship.
The cab company is therefore liable not because of wrongdoing, but
because it caused reliance on the representation that the drivers
were its employees. The apparent agency doctrine exists to protect
citizens' justifiable reliance.
Likewise, joint venture liability is based on shared
control of a venture, not on the wrongdoing of the party sought to
be charged with liability as a joint venturer. "Broadly, there
is a joint enterprise or adventure when two or more combine their
property or labor, or both, in a joint undertaking for profit, with
rights of mutual control, provided the arrangement does not establish
a partnership." City of Eatonton v. Few, 189 Ga. App. 687, 689
(2) (1988). The law "contemplates and approves" the agreements
of individuals and corporations to accomplish a common end by contributing
labor and resources. The law simply treats such ad hoc partnerships
in the same way that ongoing partnerships are treated. Cf. Fort &
Turner Enterprises, Inc. v. Scrocca, 195 Ga. App. 554 (1990) (Three
companies could be liable for torts of one because they held themselves
out to the public as components of a single business operation, collectively
entered into contracts for their common benefit, and participated
together in actions to collect debts).
The Court of Appeals assigned no valid reason for
special treatment of parent corporations, nothing more than that lawful
business relationships should not be discouraged by imposing the liability
of one entity on another. The same could be said for all of the other
lawful business relationships in which one party has been burdened
with the liabilities of another party under the doctrines of apparent
agency, joint venture, and even respondeat superior, to serve the
higher good of public safety and responsibility. Cf. First Bank &
Trust Co. v. Zagoria, 250 Ga. 844 (1983) (inappropriate for legal
professional to "play hide-and-seek in the shadows and folds
of the corporate veil and thus escape the responsibilities of professionalism");
Gordon v. Title Ins. Co. of Minnesota, 209 Ga. App. 71 (1993) (same).
If the claim against Humana should fall because Humana engaged exclusively
in lawful business activity, what vicarious liability claim could
survive against any employer?
Specifically, this amicus curiae fears that if the
Court of Appeals is allowed to add elements to apparent agency or
joint venture claims in this case, it can add them in any case, and
that defendants in cases yet-to-come will use the decision below to
defeat citizens' justifiable reliance on a well- cultivated appearance
of control and quality. Instead, this Court should grant the writ
and preserve the law of apparent agency and joint venture inviolate.
2.
THE COURT SHOULD GRANT CERTIORARI
TO DETERMINE WHETHER PARENT CORPORATIONS SHOULD BE ENTITLED TO SPECIAL
EXEMPTIONS FROM THE RULES OF LIABILITY THAT GOVERN THE CONDUCT OF
OTHERS.
The decision below poses a basic value judgment:
is a parent corporation so vital to the interests of the community,
to the welfare of the state, that it should be encouraged to hold
out its subsidiaries and their employees as its employees, without
the commensurate liability for causing the public to rely? For if
the decision below is allowed to stand, parent corporations will be
encouraged to convey to the public a falsehood: they will be encouraged
to give the impression that a local enterprise comes within the parent's
high standards of quality and responsibility, whereas in truth the
parent exerts no significant control over the quality and reliability
of the subsidiary. Parents will cultivate this impression to encourage
the public to buy the services of the subsidiary. Parents will profit
from this false impression, as Humana has done (Opinion, 5), by daily
siphoning off the profits generated by the public reliance on quality.
It would be against the parent's financial interest to disclose the
truth.
The Court of Appeals apparently concluded that the
typical parent corporation's services are so valuable to the community
that the normal rules of apparent agency and joint venture could not
be applied, that the parent could only be liable if the corporate
veil could be pierced. The Court's value judgment was that "the
law allow[ing] a parent corporation to use its subsidiary to promote
its own purposes and yet keep its separate identity" (Opinion,
10) superseded all other value judgments. This amicus curiae respectfully
submits that the Court of Appeals erred in this assessment.
We submit that no other entity in Georgia jurisprudence
has been held exempt from the law of apparent agency and that no entity
is entitled to exemption. We submit that the law stands strongly against
false representations of quality. For example, the Georgia Fair Business
Practices Act (OCGA § 10-1- 393 (b)) declares unlawful the following:
(1) Passing off goods or services as
those of another;
(2) Causing actual confusion or actual misunderstanding
as to the source, sponsorship, approval, or certification of goods
or services;
(3) Causing actual confusion or actual misunderstanding
as to affiliation, connection, or association with or certification
by another;
(5) Representing that goods or services have sponsorships,
approval, characteristics, ingredients, uses, benefits, or quantities
[sic] that they do not have or that a person has a sponsorship, approval,
status, affiliation, or connection that he does not have;
(7) Representing that goods or services are of a particular
standard, quality, or grade or that goods are of a particular style
or model, if they are of another;
This amicus curiae does not contend that all parent
corporations and all franchisors should be liable for all acts of their
subsidiaries or franchisees. This amicus does contend, however, that
if the parent corporation holds out the employees of a subsidiary as
its own, it should be liable as an apparent principal unless it clearly
communicates to potential customers that the employees are not its own.
Other companies regularly do this. Holmes v. University Health Service,
Inc., 205 Ga. App. 602 (1992) (patient signed acknowledgment that physicians
were not employees or agents of hospital). Humana apparently did not.
CONCLUSION
For the foregoing reasons, this amicus curiae respectfully
submits that the Court should grant the writ to review the decision
of the Court of Appeals, and to hold that a parent corporation should
not take the benefits of publicly representing subsidiaries' employees
as its own without also incurring the burdens.
Respectfully submitted, this May 22, 1996.
/s/ CHARLES M. CORK, III
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