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.

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