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____________________________________ Michigan Supreme Court Lansing, Michigan 48909

C hief Justice Justices Maura D. Corrigan Michael F. Cavanagh Elizabeth A. Weaver Marilyn Kelly Clifford W. Taylor Robert P. Young, Jr. 

# Opinion

Stephen J. Markman

FILED JULY 23, 2002

ALFONSO E. ROGERS, Personal Representative of the Estate of Daimon Ja’Von Rogers, Deceased, Plaintiff-Appellee,

v No. 118766 J. B. HUNT TRANSPORT, INC., Defendant-Appellant and WESLEY HOWARD CRENSHAW, Defendant.

BEFORE THE ENTIRE COURT WEAVER, J. Inthis wrongful death action, we address whether a default entered against an employee that conclusively determinedthe emp loye e’s negligence for the purpose of the employee’s personal liability is also a proper foundation for an order holding his employer vicariously liable. The Courtof Appeals held that it was, thereby extending the effect of the default to the employer and precluding the employer from contesting its vicarious liability. We reverse the decision of the Court of Appeals and remand to the circuit court. I This action arises fr om an automobile accident that occurredin the early afternoon on June 17, 1996. The decedent, Daimon Rogers, was killed when his vehicle left the roadway and struck a tractor-trailer rig parked on the north shoulder of the westbound I-96 expressway in Eaton County, Michigan. It is undisputed that defendant-appellant J. B. Hunt o wned the tractor-trailer and that defendant Wesley Crenshaw had been operating the tractor-trailer in the course of his employment with J. B. Hunt. J. B. Hunt terminated Crenshaw’s employment in July 1996. Subsequently, on July 23, 1996, the personal representative of Daimon Rogers’ estate filed a complaint against Crenshaw and J. B. Hunt. It alleged Crenshaw was negligent and that his negligence was a proximate cause of Daimon Rogers’ crash and death. It also alleged J. B. Hunt’s vicarious liability. J. B. Hunt filed an answer on its own behalf denying Crenshaw’s negligence and causation. However, Crenshaw failed to personally file an answer or appear in response to two

summonses. On March 20, 1997, the Eaton Circuit Court issued

2a third summons andan order permitting alternative service of process by publication and by service on c odefen dant, J. B. Hunt. Thereafter, J. B. Hunt’s attorney purported to file an answer on behalf of Crenshaw. Crenshaw repeatedly failed to appear for depositions over

a fourteen-month period. On August 6, 1998, plaintiff obtainedan order of default pursuant to MCR 2.313(B) and (D) against Crenshaw. During the hearing on plaintiff’s moti on for the default of Crenshaw, J. B. Hunt’s attorney moved to withdraw as counsel of record for Crenshaw. The trial court grantedboth motions. J. B. Hunt did not object to the entry of the order of default. OnDecember 15, 1998, plaintiff moved for partial summary dispositionregarding the liability of J. B. Hunt. Plaintiff arguedthat the default that was entered against defendant Crenshaw settled the question of J. B. Hunt’s liability and, therefore, J. B. Hunt could not contes t the issues of negligence and causation at trial. Plaintiff also argued that J. B. Hunt was precluded from presenting the affirmative defense of comparative negligence. The circuit court granted plaintiff’s motion in part, concluding that J. B. Hunt wa s vica riously liable for the negligence of Crenshaw and could not contest at trial the issues of negligence and p roxima te
cause. However, the trial court also denied the motion in

3part, concluding that J. B. Hunt could raise the defense of the decedent’s comparative negligence and whether his comparative negligence was a proximate cause of the accident. The Court of Appeals affirmed, citing “compelling policy consideration[s]” involving vicarious liability. 244 Mich App 600, 610; 624 NW2d 532 (2001) . Specifically, the panel stated, “[e]mployers are held vicariously liable not because of their ability to control their employees’ cond uct, but because they stand to profit from their employees’ conduct.” Id . at 610-611. With this, the panel discarded the linchpin justifying vicarious liability between an emplo yer a nd an employee—that the employee committed an act producing a claim inthe scope of emplo yment. The panel’s reasoning suggests that if the employer financially profits from an employee’s act ivities, the employer is vicariously liable not only fo r everything the employee does within the scope of employment, but also to all acts tangentially related to that employment

or occurri ng outside the scope of employment, even if they occurredafter the employee leaves the employment. We granted leave to appeal because the panel’s suggestion that an employer may be vicariously liable not only for employees’ torts committed within the scope of employment, but also for wrongful conduct outside the scope of employment is worthy of review.

4II The law regarding respondeat superior and, inparticular, how the entry of a default against an employee affects the liability of an employer where the employer’s sole source of liability is vicariou s a re questions of law. We review questions of law de novo. Kelly v Builders Square, Inc, 465 Mich 29, 34; 632 NW2d 912 (2001). The grant of a motion for summary disposition is also reviewed de novo. MacD ona ld v PKT, Inc, 464 Mich 322, 332; 628 NW2d 33 (2001). III Inaddressing this issue as posed by the Court of Appeals, it is important to cla rify why the courts have imposedliability on those who were not the actors, but merely the masters of the actors. The reason is that “a master is responsible for the wrongful acts of his servant committed while performing some duty within the scope of his employment.” Murphy v Kuhartz, 244 Mich 54, 56 ; 221 NW 143 (1982). An employer is no t vicariously liable for acts committedby its employees outsi de t he scope of employment, because the employee is not acting for the employer or under the employer’s control. For example, it is well established that an employee’s negligence committed while on a frolic or detour, Drobnicki v Packard Motor Car Co, 212 Mich133; 180 NW 459 (1920), or after hours, Eberle Brewing Co v Briscoe Motor 5Co, 194 Mich 140; 160 NW 440 (1916), is not imputed to the employer. In ad dit ion, even where an employee is working, vicarious liability is not without its limits. For example,

we have held that “there is no liability on the part of an employer for torts intentionally or recklessly committed by an employee beyond the scope of his master’s business.” Bradley v Stevens, 329 Mich 556, 562; 46 NW2d 382 (1951). Likewise, respondeat superior or vicarious liability principles do not support imposing liability on J. B. Hunt in the present case merely on the basis of Cre nshaw’ s default. WhenCrenshaw failed to participate in this litigation, he was not acting within the scope of employment. Rather, Crenshaw

was acting on behalf of himself only in regard to the litigation. In fact, his procedural failures were committed whenhe was a former employee of J. B. Hunt. Because his nonparticipationwas not in the course of his employment with J. B. Hunt, extending liability to J. B. Hunt for Crenshaw’s nonparticipation is beyond the scope of vicarious liability. Inthis regard, we emphasize that the basis of vicarious liability is not merely that an employer typ icallyhas a greater ability to pay than an employee. As a leading treatise on American tort law explains, additional rationales for vicarious liability for acts of agents within the scope of employment include providing an incentive for employers to

6attempt to reduce tortious conduct by their employees and the fair distribution of risk associated with activity characteristic of a business or other entity. See Dobbs, Torts, § 334, pp 908-910. Risks typically associated with operating trucks may fairly be said to be characteristic of J. B. Hunt’s business activities. However, an employee’s refusal to participate in litigation is not a characteristic risk of operating a trucking business. Accordingly, such nonpar tic ipationis not something that an employer can

rea sonably be expected to deter or fairly be expecte d t o absorb as a cost of doing business. Here Crensh aw was not, in his capacity as a litigant, acting for J. B. Hunt. To bind an employer to the actions of a party who was not acting within the scope of employment at the time those actions occur, violates the central tenet o f vicarious liability that a master’s liability is derivative of the ser van t’s. In sum, the rationales that support the impositionof vicarious liability on a master also support limiting such liability to conduct that occur s wi thin the scope of employment. Id., p 910. By misapplying the policies underpinning vicarious liability, the Court of Appeals panel in this case took the doctrine too far. Moreover, the Cour t of Appeals approach is contrary to longstanding legal principles related to the effect of a

7default. As a sanction for Crenshaw’s failure t o coop erate with the discovery process, the trial court entered an order of default against him. It is well settled under the law that this default operates as an admission of Crenshaw’s negligence. However, a traditional rule of default provides that the default of one party is not anadmission of liability

on the part of a nondefaulting coparty. Allstate Ins Co v Hayes , 442 Mich 56, 73; 499 NW2d 743 ( 199 3). Thus, the default entered against Crenshaw does not estab lish a ny liability on the part of J. B. Hunt. While the doctrine of vicarious liability allocates the risk of an employee’s negligent acts occurr ing during the

course of employment on the emp loyer, we cannot agree that this rule justifies the extension of the effect of a default to a codefendant. Default is a punitive measure, appropriate in defined circumstances, the threat of which encourages the cooperation of parties to a suit. Our court rules governing the entry of defaults and default judgments are narrowly designed to sanction an uncooperative party. Nowhere in the rules is it contemplated that a cooper ating party can be sanctionedfor a coparty’s procedural shortcomin gs. 1

1 MCR 2.3 13(D)(1)(a) provides that “just” sanctions are app ropriate where a party fails to appear for depositions after being served proper notice. MCR 2.313(B)(2)(c) provides for “rendering a judgment by default against the disobedient party.” 8Obviously, J. B. H unt could not force its former employee, Crenshaw, to participate in discovery. Indeed, it has never beencontend ed t hat J. B. Hunt controlled Crenshaw’s litigationactivity or participated in misconduct that produced Crenshaw’s default. Therefore, the goal of forcing defendants to properly cooperate withlitigation would not be reasonably furthered by extending the consequ ences of the default to J. B. Hunt. As recognized by Stillwell v City of Wheeling , 210 W Va 599, 606; 558 SE2d 598 (2001), penalizing

a party that has no control over a co-party’s default would “have no deterrent effect.” Our decision is informed by our court system’s preference for disposition of issues on their merits. North v Dep’t of Ment al Health , 427 Mich 659, 662; 397 NW2d 793 (19 86 ) (addressing this preference in the context of a dismissal with prejudice). For this reason, defaults and default judgments

are not favored in the law. Wood v Detroit Automobile Inter- Ins Exch, 413 Mich 573, 586; 321 NW2d 653 (1982). In this regard, it is important to emphasize that the entry of a default against Crenshaw does not establishtha t he was actually negligent in connectionwith the accident underlying this case. Ra ther, the entry of the default bars him from contesting the issue of his negligence because of his failure to properly participate in the litigation. Unlike Crenshaw,
9J. B. Hunt has participated in the litigation. Thus, there is nothing incons ist ent in allowing J. B. Hunt to contest the allegednegligence of Crenshaw eve n th ough Crenshaw himself wouldnot be allowed to do so in light of the default entered against him. Our decision does not undercut the validity of default as

a sanction for discovery abuses. Contrary to the Court of Appeals concerns, allowing J. B. Hunt to contest Cren shaw ’s negligence and causation does not render the punitive purposes of the default meaningless. The default remains in force against Crenshaw and forecloses his ability to present proofs denying his own neglig en ce. 2 Potentially, plaintiff is prejudicedto the extent that he cannot depose Crenshaw. However, J. B. Hunt’s defense is similarly potentially prejudicedby the absence of Crenshaw’s testimony. The possible prejudicial consequences of a party’ s fai lure to appear and resultant default do not justify the extension of the punitive effect the sanction to an appearing party or denying that party the opportunity to present its defense. IV We c onclude that, where a party’s sole source of liab ility is vicarious, a default entered against a coparty

2 As Cre nshaw’s alleged negligence has yet to be l itigat ed, we express no opinion on the merits of the negligence or proximate cause issues. 10does not preclude the former from contesting its vicarious liability. The decision of the Court of Appeals is reversed andthis matter remanded to the circuit court for further proceedings consistent with this opinion. C O RRIGAN , C.J., and T AYLOR , YOUNG, and M ARKMAN , JJ., concurred with WEAVER , J. CAVANAGH, J., concurred in the result only.

11___________________________________ v S T A T E O F M I C H I G A N SUPREME COURT

ALFONSO E. ROGERS, personal representative of the estate of Daimon Ja'Von Rogers, deceased, Plaintiff-Appellee, No. 118766 J. B. HUNT TRANSPORT, INC., Defendant-Appellant, and WESLEY HOWARD CRENSHAW. KELLY, J. ( dissenting ). I disagree with the majority's narrow view of vicarious liability. The Court of Appeals held, for legal and pub lic po licy reasons, that it i s proper to hold the employer, J. B. Hunt Transport, Inc., liable for a tort that was es tab lished by default. In doing so, it followed the law: Where several defendants are treated as one, as in cases involving employers and employees, but one defaults, the d efau lter still has the benefit of any contributory negligence established against the plaintiff by the remaining defendant. Thus, where vicarious liability is found, the court shouldtell the jury that the defa ulti ng employee has beenfound negligent, and his negligence shouldbe compared to that of the plaintiff in determining the defendants' liability. [57B Am Jur 2d, Negligence, § 1276, p 174.] I agree with the Court of Appeals, which used the default of the driver, Wesley Crenshaw, to preclude Hunt from denying liability for Crenshaw's negligence. The majority relies on the notion that Hunt's "control" of Crenshaw at the time of the default is the key to whether Hunt is liable. It assumes that the only time when liability for Crenshaw's acts could attach was when Crenshaw was an employee of Hunt. Certainly, contr ol is one of the considerations upon which respondeat superior liability reposes. However, it is not the only consideration. When the majority uses control as its only consideration, it confuses liability arising from respondeat superior with vicarious liability arising from another doctrine, agency. The difference between the two is explained by 27 Am Jur 2d, Employment Relationship, § 460, pp 897-898: Vicarious liability based on agency is distinct from liability based on respondeat superior in that the employer is not liable for the acts of the employee under the former theory unless the employee acted on behalf of or under the authority of the employer and unless the empl oyer clearly approved of the wrongful conduct. The majority is using an agency theory to support v icario us liability. Because Hunt had no control over Crenshaw when the

2latter defaulted, the majority will not allow vica rious liability to attach. Vicarious liability should be found in this case not on the basis of agency, but on the basis of the doctrine of respondeat superior. Holding the employer li able for the underlying tort, even though its employee defaulted, would satisfy vital policy interests, such as justice, convenience, deterrence, social justice, and the ability to give the victim

aneffective remedy. These approaches have been explained in Am Jur 2d: The modern basis for vicarious liability is that, as a matt er o f public policy, an enterprise or an activity should bear the risk of a tort- -­ committed or resulting from omission- - -of those who, infact, carry on the enterpri se, ac tivity or operation. It is a part of the cost of doing business or carrying on various activities; and, in modern society, in Western countries at least, the cost is spread throughout industries or even the public at large by use of liability insurance an d similar self-insurer devices---rather than being borne by some hap less injury victim. Thus, the doctrine has been developed and extended out of the necessity of changing social and economic conditions. [57B Am Jur 2d, Negligence, § 1753, pp 447-448.] The authors of Torts, Prosser and Keeton, also assert that vicario us lia bility is not a mere question of control, and that other bases exist for it: The losses caused by t he torts of employees, whichas a practical matter are sure to occur in the conduct of that employer's enterprise, are placedupon that enterp rise itself, as a required cost of doing business. They are place d upon the 3employer because, having engaged in an enterprise, whichwill on the basis of all past experience in volve harm to others through the torts of th e employees, and sought to pr ofit by it, it is just that he, rather than the innocent injured plaintiff should bear them; and because he is better able to absorbthem, and to distribute them, through prices, rates or liability insurance, to the public, and so to shift them to society, to the community at large. [Prosser & Keeton, Torts (5th ed), § 69, pp 500-501.] Therefore, the majority errs by givi ng u ndue weight to control. Had Crenshaw been held liable after a trial, Hunt wouldhave been liable for Crenshaw's negligence, even though it has no control over what Crenshaw did, said, or admitted at trial. This is because, on a respondeat superior theory, the employer is normally liable for the employee' s und erlying tort. There is another goodreason to hold the employer liable here. Default is considered to be a punitive measure, but it is accepted in the law because it is needed to preserve a fair tribunal, free of egregious discovery ab uses . Despite this need, the majority allows the employer a potential benefit from the driver's default, the driver's absence from trial as a major witness. Moreover, the policy reasons cited by the ma jorit y sup port the use of the default against Hunt. As i t point s out, the imposition of vicarious liability serves as an incentive for employers to reduce tortious conduct and

4promotes a fair distributionof risk. Trucking companies hire drivers to traverse multiple states where theymight become involvedin accidents. They must be held to know that a lawsuit and the potential defa ult of an out-of-state driver

are risks to be expected in their bu si ness. 1 In balance, it is better that Hunt not be allowed a potential benefit from the absence of Crenshaw at trial. Finally, it should be noted th at t he imposition of vicarious liability on Hunt would not render it defenseless at trial. A default would establish negligence on the part of Crenshaw, but it would not determine the extent of Hunt's liability. Under the Court of Appeals decision, Hunt would still be able to contest up to ninety-nine percent of its liability at trial. Because I believe that the majority's analysis is too restrictive a view of vicarious liability based on respondeat superior, I dissent.

1 Infact, it has happened before that a trucking company's driver, resident in another state, became involved inan accident and defaulted upon being sued. See, e.g., J B Hunt Transport, Inc v Bentley , 207 Ga App 250; 427 SE2d 499 (1993). 5