Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—Tex. App.: Domino’s not liable for negligent acts of franchisee’s driver, (Mar 20, 2015)

By Edward L. Puzzo, J.D.

Domino’s Pizza was not vicariously liable for the negligent acts of one of its franchisee’s employees involved in a fatal vehicle collision during a pizza delivery, the Texas Court of Appeals in Beaumont has ruled. Domino’s could not be held liable because it lacked actual control or a right of control over the franchisee’s employees (Domino’s Pizza, LLC v. Reddy, March 19, 2015, McKeithen, S.).

MAC Pizza Management, Inc. was a franchisee of Domino’s Pizza. One of MAC’s delivery drivers, Joshua Balka was involved in a collision with another vehicle that resulted in the death of Ruth Christopher and injuries to Devavaram Christopher. At the time of the collision, the driver was cited for failing to control his speed and for having an unsafe or defective tire.

A representative of the decedent and the injured party sued both MAC and Domino’s Pizza for negligence. A settlement was reached with MAC. A jury found the driver 10 percent negligent, MAC 30 percent negligent, and Domino’s 60 percent negligent. The jury also found that the driver had been operating his vehicle in furtherance of a mission for the benefit of Domino’s and was subject to Domino’s control. Domino’s appealed.

Vicarious liability. The lower court determined that Domino’s was vicariously liable for the driver’s negligent acts, based on findings that Domino’s had a right to control MAC’s day-to-day operations and had exercised control over the injury-producing acts. Domino’s challenged that determination.

To determine whether a franchisor is vicariously liable for a franchisee’s conduct, a court must examine the franchisor’s right to control the conduct of the franchisee, with respect to the specific activity from which the injury arose. The right to control may be shown by either (1) a contractual agreement that explicitly assigns the franchisor a right to control, or (2) the franchisor’s actual exercise of control.

According to the franchise agreement in question, MAC was required to abide by all specifications, standards, operating procedures, and rules prescribed for the operation of its store. Domino’s was given full access to all of MAC’s computer data and systems and all the information and reports, including information on the delivery times for each order.

Employer. Potential employees often complete an application on Domino’s website, which is then forwarded to MAC to handle the details of hiring. Under the franchise agreement, MAC is responsible for hiring its own employees and solely responsible for training the employees to legally and safely perform their duties. The agreement contains MAC’s express understanding that Domino’s is not responsible for MAC’s employees, nor does it have the legal right to direct MAC’s employees.

Drivers and deliveries. A Domino’s Manager’s Reference Guide covered driver requirements and conduct. The Guide required that the driver’s delivery vehicle be inspected at the time of hire and periodically thereafter.

The franchise agreement also required that the franchisee’s delivery area be within 9 minutes of the store, based on 21 minutes for preparation time, allowing delivery to occur within 30 minutes of the time the order is placed, as promised in Domino’s advertising. MAC’s store manager testified that Domino’s encouraged competition to improve job performance, so he created a competition for drivers and posted results on who made deliveries the fastest. He admitted that Domino’s never ratified this competition, nor suggested any incentive for fast deliveries. MAC’s vice-president of operations testified that Domino’s did not promote pay incentives for drivers based on the speed of delivery.

Right of control. Plaintiff asserted that the ‘independent contractor’ aspect of the franchise agreement was a sham because Domino’s had both contractual and actual control of MAC employees such as the driver. In support of this contention, plaintiff stated that under the franchise agreement, MAC was required to comply with Domino’s standards and operating procedures, including standards regulating driver age and history, safety, vehicle inspections, and driver conduct during deliveries.

The appellate court stated that Domino’s rights to terminate the franchise agreement, to receive evaluations and other reports, to require MAC to comply with Domino’s procedures and rules, and to modify those rules and regulations were not evidence that Domino’s had the right of control.

The court further noted that MAC had its own training director, and trained its own drivers and other employees, activities that supported its independent contractor status. Neither an occasional assertion of control or sporadic action directing the details of the work was sufficient to destroy the agreement forming the basis of the parties’ independent contractor relationship, the court continued.

Increasing risk. However, plaintiff further alleged that corporate guidelines and time tracking, plus bonuses and incentives, encouraged speeding among delivery drivers in order to meet job performance standards, making Domino’s liable for unreasonably increasing the risk of harm. The plaintiff alleged that Domino’s failed to implement appropriate safety rules and regulations, but the court answered that the failure to implement a safety rule did not amount to actual control. Also, MAC was responsible for training its own employees and Domino’s did not approve incentives for faster deliveries. MAC conducted no independent safety inspections of delivery vehicles. Nevertheless, to hold that the imposition of contractual safety requirements on independent contractors subjected the employer to liability for an independent contractor’s negligence in failing to comply with safety requirements would deter general contractors from imposing even minimum safety rules and requirements.

Based on the above, the court concluded that the evidence was legally insufficient to support the jury’s finding that Domino’s controlled or had the right to control the details of the injury-producing acts or omissions of MAC and its employees. The appellate court therefore reversed the trial court’s judgment.

The case is Civil Action No. 09-14-00058-CV.

Attorneys: Kenna M. Seiler (Hope & Causey, PC) for Raghurami Reddy. R. Michael Northrup (Cowles & Thompson, PC), and J. Philip Griffis (Law Office of Phil Griffis) for Domino's Pizza, LLC.

Companies: Domino’s Pizza, LLC

Cases: FranchisingDistribution TexasNews