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A Better Partnership
January 05, 2015

MSC vacates COA’s opinion where it provides a hypothetical that modifies the defendants’ business purpose

In lieu of granting leave to appeal, the Michigan Supreme Court in Bailey v. Schaaf, No. 149311, vacated part of the Court of Appeals opinion that set forth a hypothetical scenario in which several defendants, Hi-Tech Protection and its two security guards, were not in the business of providing security. The Court then denied the application for leave to appeal in all other respects because the Court was not persuaded that the questions presented should be reviewed.
 
In this case, Bailey sued several parties for injuries he sustained after Gerome Schaaf shot him at an apartment complex. Bailey also sued Evergreen, the owner of the apartment complex, Hi-Tech Security, the business that provided security for the complex, and Hi-tech’s owner and two security guards. Bailey alleged that the two security guards ignored warnings that an individual at the apartment was threatening others with a gun. The trial court dismissed the claims against all defendants except Schaaf, who the trial court entered a default judgment against.
 
On remand, the Court of Appeals concluded that a principal may be held liable for negligence caused by its employee or agent while the employee or agent’s actions do not amount to negligence in his or her individual capacity. For a more in depth explanation of that opinion, click here. The Court of Appeals clarified its holding through a hypothetical. It explained that Evergreen, as the owner of the apartment complex, may still be liable for negligence even if Hi-Tech and its employees were not in the business of providing security. The Court of Appeals opined that even if Evergreen hired Hi-Tech to provide maintenance, and had two maintenance men been informed of the threat while working, the outcome might be the same; Bailey could have alleged that the two men were Evergreen’s agents, that Evergreen had notice of the ongoing emergency through their agents, and that the agents’ knowledge triggered Evergreen’s duty to involve the police, which could be breached if the police were not then involved.
 
The Michigan Supreme Court vacated the Court of Appeals opinion that put forth the hypothetical and reasoned that its conclusion is contrary to law. The Court cited Upjohn Co. v. New Hampshire Ins. Co., 438 Mich. 197, 214 (1991), which held that “knowledge possessed by a corporation about a particular thing is the sum total of all the knowledge which its officers and agents, who are authorized and charged with the doing of the particular thing acquire, while acting under and within the scope of their authority.” The Court then denied leave for all other parts of the Court of Appeals judgment. 

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