Vicarious Liability, Direct Liability and What These Concepts Mean to Your Georgia Commercial Litigation Action

In commercial litigation, the law may provide multiple different avenues to sue, and seek compensation from, various defendants. Sometimes, the case may assert direct wrongdoing; other times, the case may revolve around a defendant who is allegedly liable for the wrongful acts of another. Whether you are seeking to hold someone else liable for the acts of another, or are defending against such a claim, it is important to be as well equipped as possible for your litigation by retaining knowledgeable Georgia business counsel.

A recent case, which focused on the sale of a 150-acre parcel of land in West Point, Georgia, involved this legal concept of vicarious liability. The owner and president of a real estate investment business marketed the property to another entity as a viable investment opportunity. The investor provided $1 million in earnest money. The real estate company’s president allegedly proceeded to misappropriate the money.

This alleged misappropriation led the investor to sue multiple people and entities. When you have a case where many people and/or entities may be liable, it is important to make sure you have named everyone who might be liable to you. Sometimes, you may be able to pursue claims against entities that you did not deal with directly. The legal theories of vicarious liability and agency may allow you to obtain compensation against these defendants. Alternately, if an entity sues you based upon an agency theory, it is important to make sure you present the evidence needed to show that there was no agency relationship.

In this case, the real estate company was the Georgia franchisee of a California company. The investor sued, among others, the franchisor. The investor’s case argued that the franchisor was directly liable for its negligence in the way that it screened and chose its franchisees. The investor also argued that the franchisor was liable under the theory of vicarious liability because there was an agency relationship between the franchisor and the Georgia franchisee.

It is important to understand that there are different types of agency. There is actual authority, which means that the agent and the principal have a relationship because the principal, either by express action of implication, authorized the agent to act on its behalf. Apparent authority means that the principal held out the alleged agent as having authority, that the injured party was reasonable in relying on the agent and the plaintiff’s reliance was what caused its harm.

Proving agency requires offering evidence targeted in some very specific ways. As the court in this case explained, in order to prove that the franchisee was the franchisor’s agent, the investor “was required to show that” the franchisor “controlled the time, manner, and method” of the franchisee’s “day-to-day operations.”

This franchisor received a favorable decision because the evidence showed it did not have that degree of control. The franchise agreement gave the franchisor the power to audit the franchisee to make sure it was receiving its contractual fees and the ability to terminate the franchise, but did not give the power to control day-to-day operations. That document evidence proved to be the key to franchisor’s success.

Whether your commercial litigation involves direct liability or vicarious liability, you need to ensure that you have legal counsel who knows what it takes to get the outcome you need. The experienced Atlanta business attorneys at Poole Huffman, LLC are here to help. Our attorneys spent many years implanting effective business litigation strategies to protect and enhance our clients’ interests. Contact our attorneys online or by calling 404-373-4008 to schedule your confidential consultation.

More blog posts:

Georgia Court Allows Judgment Creditor to Pursue an LLC’s Managing Member for Preferential Payment, Atlanta Business Litigation Attorneys Blog, Dec. 15, 2017

Confirmation Letters – Avoiding Potential Conflict Regarding Agreement Terms, Atlanta Business Litigation Attorneys Blog, April 5, 2016