Opinion ID: 835882
Heading Depth: 1
Heading Rank: 4

Heading: Jury Instructions on Agency

Text: The foregoing discussion demonstrates that, properly framed, the issue on review is whether the jury instructions correctly stated the law regarding when an international union can be held liable for particular wrongful actions of an affiliated local union. International proposed the following jury instruction on agency: The International Union cannot be liable for the wrongful acts of Local 49 or any of Local 49 officers or employees absent an agency relationship between the International and Local 49 or the International and any Local 49 officer or employee such as defendant Medley or defendant Ouellette. This agency relationship can be established only if the international instigated, supported, ratified, or encouraged the local's wrongful acts. Knowledge of a local's possibly illegal activities does not impose a duty upon the international to intervene. (Emphasis added.) Instead, the trial court gave the following instruction, to which International objected: The International can only be liable for Local 49's act if Local 49 was the agent of the International and acted in the scope of that agency or if the International ratified Local 49's actions. I instruct you a principal [is] responsible for the acts of an agent who is acting within the scope of the agency. An agent is authorized to act for and is subject to the control or right to control of the principal. An agent acts within the scope of his agency if, at the time of commission of the act in question, he was performing a service for the principal in furtherance of the principal's business. The acts of an agent within the scope of that agent's authority are to be considered by you as the acts of the principal. You must determine if Local 49 was the agent of the International union, and you must determine whether or not the International union ratified Local 49's action. (Emphasis added.) International makes several arguments regarding the jury instructions set out above. International first argues that the second instruction quoted above, read together with several related instructions, was erroneous because it improperly suggested that International, as a matter of law, was liable for all acts of Local and Local's employees. International asserts that the Court of Appeals erred in construing International's constitution to conclusively establish, as a matter of law, that an affiliated local union is an actual agent of the International for all purposes. International notes that its constitution is substantially similar to the constitutions of other international labor unions. International cites provisions in the constitution that, it asserts, provide for substantial autonomy for the local unions affiliated with it. [4] It also cites federal cases holding that certain union constitutions do not establish, for all purposes, an agency relationship between International and its locals. [5] The problem with that argument is that, contrary to International's assertion, the Court of Appeals did not hold that International's constitution, standing alone, affirmatively established agency as a matter of law for all purposes. On the contrary, that court merely held that the constitution and other evidence made the relationship between International and Local similar enough to other relationships previously subjected to Oregon's common law of agency that Local could be found by a reasonable jury to be an agent of International. Jensen, 170 Or.App. at 52, 11 P.3d 678. We discuss that conclusion by the Court of Appeals in greater detail below. At this point, however, it is sufficient to note that, contrary to International's assertion, neither the trial court nor the Court of Appeals ruled that International's constitution established, as a matter of law, that Local was the agent of International for all purposes. We also reject International's second argument that, because the constitution does not establish agency affirmatively as a matter of lawand we agree that it does notLocal, as a matter of law, cannot be the agent of International. International does not argue and, indeed, could not argue, that the constitution is not evidence to be considered in determining whether an agency relationship exists for particular purposes. That is all that the constitution was used for here, and there was nothing inappropriate in using it as evidence of the relationship between International and Local. We now turn to International's argument that the trial court's instruction incorrectly stated the applicable law of agency. Much of the dispute between the parties centers on whether federal labor law or Oregon's common law of agency should have been the basis for the agency instruction, and the parties' arguments in that regard are the same arguments that they made before the trial court and the Court of Appeals. International argues that the federal common law of agency, as set out in Carbon Fuel Co. v. United Mine Workers, 444 U.S. 212, 100 S.Ct. 410, 62 L.Ed.2d 394 (1979), should apply to the question whether International is vicariously liable for Local's conduct towards plaintiff. In that case, the Court held that an international union was not liable under the Labor Management Relations Act (LMRA) for damages that an employer suffered as a result of wildcat strikes that the international had opposed, but that had been undertaken by an affiliated local, because the international had not instigated, supported, ratified, or encouraged any of the work stoppages. 444 U.S. at 218, 100 S.Ct. 410. International based its proposed instruction, quoted above, on those words from Carbon Fuel. Plaintiff responds, as she did below, that the instruction regarding International's liability for the acts of Medley and Local should be based on Oregon's common law of agency. She argues that, under applicable principles of agency law, International could be held liable for the wrongful acts of Medley and Local if it had the right to control Medley and Local and if, at the time of the wrongful acts, Local was performing a service in furtherance of International's business. Plaintiff based her proposed jury instruction, quoted above, on what she argued were similar Oregon cases applying the common law of agency. As discussed above, the trial court gave plaintiff's proposed instruction and declined to give International's proposed instruction. The Court of Appeals agreed with that decision, stating that the trial court properly had declined to give International's proposed instruction because there had been no reason to use a standard that Congress had adopted under the LMRA in a case involving a state law employment claim by a nonmember employee of a local union. 170 Or.App. at 50, 11 P.3d 678. The Court of Appeals then turned to Oregon's common law of agency to determine whether the trial court's instruction, proposed by plaintiff, accurately stated the law: Under Oregon law, the common law of agency relationships has developed around the `right to control' standard, as set forth in the jury instruction that the trial court gave the jury. Although the test is most often used in an employer-employee agency relationship, it also has been used to determine agency relationships between certain types of business entities. Most notably, it has been applied to franchiser-franchisee relationships and manufacturer/distributor-dealer relationships that are in some ways analogous to the international-local union relationship at issue in this case. Id. at 50, 11 P.3d 678. The court then discussed Peeples v. Kawasaki Heavy Indust., Ltd., 288 Or. 143, 603 P.2d 765 (1979), and Miller v. McDonald's Corp., 150 Or.App. 274, 945 P.2d 1107 (1997), in which the right to control test was applied to determine whether one business entity could be liable for the torts of another entity. As discussed in greater detail below, the Court of Appeals agreed with plaintiff that those decisions supported the jury instruction that based liability on whether International had a right to control Local. On review, International argues that, whether considered solely as a matter of the common law of agency or with reference to federal labor law standards based on Carbon Fuel, the right to control test is inapplicable here. Instead, International argues, it can be liable for the actions of Local, its non-servant agent, only if it actively participated in or ratified Local's actions. Plaintiff counters that Peeples and Miller correctly state the common-law agency principles applicable here and that the Court of Appeals correctly affirmed the trial court's decision to give a jury instruction that focused on whether International had the right to control Local. For the reasons that follow, we agree with International. As noted in our earlier discussion of agency law, an employer generally is liable for the torts of its employees when the employees are acting within the scope of their employment. The familiar right-to-control test, as the Court of Appeals observed in this case, is most often used in the employer-employee agency relationship. Jensen, 170 Or.App. at 50, 11 P.3d 678. If one has the right to control the physical conduct of a person in the performance of a service, that person is usually considered a servant or employee. Schaff v. Ray's Land Sea Food Co., Inc., 334 Or. 94, 99-100, 45 P.3d 936 (2002); see also Restatement at § 220 (1958) (defining servant). In extending the right-to-control test from the employer-employee context to the International-Local relationship, the Court of Appeals, as noted, relied on this court's decision in Peeples and the Court of Appeals' own decision in Miller. Those cases, however, do not support the trial court's jury instruction at issue here. In Peeples, a motorcyclist claimed that a motorcycle manufacturer and a distributor were vicariously liable for the negligence of a dealer who had performed service work under terms of a warranty agreement. This court affirmed a jury verdict against the distributor, because the contract between the distributor and the dealer gave the distributor the right to control the manner in which the dealer performed warranty service   . 288 Or. at 149-50, 603 P.2d 765 (emphasis added). However, the court reversed the judgment against the manufacturer, because there was no comparable evidence that the manufacturer had the right to control the dealer's performance of service work. Id. at 150, 603 P.2d 765. In Miller, the Court of Appeals reversed summary judgment for a fast-food franchiser on a claim by a customer for damages resulting from a foreign object in the customer's hamburger. The court examined in detail the contractual relationship between the franchiser and the franchisee and the aspects of the franchisee's business operations that were subject to the franchiser's control. That contract gave the franchiser the right to control the franchisee's food handling and preparation, which had been the precise part of its business that allegedly resulted in plaintiff's injuries. 150 Or.App. at 281, 945 P.2d 1107. In those circumstances, the court held, the franchisee could be the agent of the franchiser. Id. Here, the Court of Appeals examined various aspects of the contractual relationship between International and Local. It noted that, under International's constitution and bylaws, local unions come into existence by applying for a charter and being accepted by International; that a local's constitution and bylaws must conform to International's; that International may revoke a local's charter whenever necessary or advisable, with the assets of the local reverting to International; that detailed rules and requirements apply to a local's receipt, handling, and transfer of payments from local union members to International; and that International may impose a trusteeship upon a local to deal with financial mismanagement or carry out other legitimate objects of the organization. Jensen, 170 Or.App. at 51-52, 11 P.3d 678. Based on the foregoing review, the Court of Appeals concluded that the relationship between the International and Local was similar enough in nature to an agreement between a franchiser and a franchisee to be subject to the same common-law `right to control' test of agency under Oregon law. Id. at 52, 11 P.3d 678. It held that the jury instruction the trial court gave satisfactorily described that common-law test. Id. The flaw in the Court of Appeals' reasoning, and in plaintiff's argument, is that the instruction that the trial court gave failed to connect the International's right to control to the conduct that was the basis for plaintiff's complaint. As we previously noted in our discussion of agency law, whether one entity can be liable to a third party for the wrongful conduct of another entity in a context other than master-servant depends not only on whether the second entity is an agent of the first for some purpose, but also on whether the principal authorized or intended the agent to act on its behalf with respect to the conduct that gave rise to the third party's claim. The trial court's instruction here was based on the abstract question whether Local was authorized to act for and subject to the control or right to control of the principal. In Peeples, this court stressed that the distributor was liable for the dealer's negligence only because the distributor had had the right to control the manner in which the dealer performed the particular kind of work that had provided the basis for the complaint. Similarly, in Miller, the Court of Appeals noted that the franchiser could be liable because it had the right to control the franchisee in the precise part of its business that had provided the basis for plaintiff's complaint. Here, however, nothing in the trial court's instruction told the jury that it was to determine whether Local had been authorized to act for and had been subject to the control or right to control of International with respect to Local's hiring and firing of an employee. Indeed, the only evidence that was introduced regarding the nature of International's right to control indicated that International had had the right to control Local's organizational structure and the way that Local collected and accounted for union dues, but that International had had no authority over Local's employment policies, including its decision to reduce plaintiff's hours or terminate her employment. Unlike the Court of Appeals, we do not find the nature of the relationship between International and Local to be so similar to the business relationships in Peeples and Miller that the right-to-control test used in the trial court's instruction was the appropriate standard to determine whether Local had been the agent of International for purposes of Local's own employment practices. As discussed above, the fact that a principal has the right to control some acts of its non-servant agent in furtherance of the principal's business does not mean that the principal has the right to control all those acts. If a principal were liable for all the torts of a non-servant agent performed in furtherance of the principal's business, whenever there was some evidence that the principal had a right to control the agent only in some respects, then the principal could face liability for conduct of the agent that the principal did not in fact control or have a right to control. The law of agency does not extend that far. Both the trial court's contrary conclusion, and the Court of Appeals affirmance of it, were error. In summary, the trial court's instructions allowed the jury to hold International liable for all acts of Local related to union business, so long as International had the right to control anything that Local did. The instruction thus allowed the jury to impose liability on International for Local's acts in circumstances in which neither Oregon's existing agency cases, such as Peeples and Miller, common-law agency principles outlined in the Restatement, nor federal cases such as Carbon Fuel would permit. The instruction was erroneous.