Can a Respondeat Superior Claim Survive Dismissal of the Underlying Negligence Claim? Arizona Supreme Court Reverses Course.

For nearly eighty years, Arizona courts have held that if a negligence claim against an employee is dismissed with prejudice, any corresponding claim against an employer based on the theory of respondeat superior must likewise be dismissed. But in Laurence v. Salt River Project Agricultural Improvement District & Power District,[1] the Arizona Supreme Court recently overruled its own longstanding precedent and held that dismissal of a claim against an employee does not require dismissal of a respondeat superior claim against the employer. The 4-3 decision is notable both as a matter of Arizona tort law and as a sign of the Arizona Supreme Court’s approach to the doctrine of stare decisis.

Jacob Laurence sued the Salt River Project Agricultural Improvement & Power District (District) and one of its employees, alleging that the employee had injured him and his son in a car accident and that the District was vicariously liable for the employee’s negligence.[2] The employee moved for summary judgment based on Laurence’s failure to comply with Arizona’s notice-of-claim requirements. The trial court granted the motion and dismissed the claim against the employee with prejudice. It subsequently granted summary judgment for the District on Laurence’s respondeat superior claim on account of the Arizona Supreme Court’s 1945 holding in DeGraff v. Smith. In that case, the court ruled that when a negligence action against an employee is dismissed with prejudice for any reason, this effectively means the employee has “been adjudged as not guilty of any negligence,” and therefore “the master . . . cannot be held liable” under respondeat superior either.[3]

The Arizona Court of Appeals affirmed, and the Arizona Supreme Court granted review in order to consider “the ongoing viability of DeGraff.”[4] The court reversed, overruling DeGraff and holding that dismissal with prejudice of a negligence claim against an employee does not require dismissal of a respondeat superior claim against the employer.

Vice Chief Justice Ann Scott Timmer, writing for the court, framed the decision within the doctrine of stare decisis, which “cautions against overruling a prior opinion unless the reasons underlying it no longer exist or the opinion was ‘clearly erroneous or manifestly wrong.’”[5] The court found “[s]everal compelling reasons” to overrule DeGraff despite its eighty-year ascendancy.[6]

First, it concluded DeGraff was “clearly erroneous or manifestly wrong.” It observed that the Arizona Rules of Civil Procedure permit a court to “place conditions on [a] dismissal,” including conditioning an employee’s dismissal on “continuing adjudication” of a respondeat superior claim against the employer. It also explained that under both the state and federal rules, a dismissal with prejudice “does no more than bar refiling the same claim in the same court”; it does not necessarily “exonerate the employee from wrongdoing,” and thus it has no bearing on the merits of a corresponding claim against an employer.

Second, the court noted that it had already abrogated other parts of DeGraff (dealing with the doctrine of issue preclusion), and it argued that sustaining DeGraff’s holding as to respondeat superior claims “would be confusing and unnecessary.”[7]

Third, the court reasoned that DeGraff conflicted with other authority “recognizing that under the doctrine of respondeat superior, an employee is vicariously liable for an employee’s tortious acts, not the employee’s adjudicated liability.”[8] Fourth, and relatedly, the court highlighted the tension between DeGraff and Arizona case law recognizing that “employers sued under respondeat superior cannot assert defenses personal to their employees”—suggesting that employer liability is “freestanding” and does not necessarily depend on the outcome of an underlying claim against the employee.[9]

Finally, the court concluded that public policy did not support upholding DeGraff, as the issue was “a matter of court procedure” rather than substantive law and thus did not implicate reliance interests.[10]

Justice William Montgomery wrote separately, concurring fully in the majority opinion while also noting “an additional reason” not to apply DeGraff’s approach to tort claims against public entities like the District. He observed that because Arizona law requires a plaintiff to file a notice of claim before suing a public entity, “the upshot of DeGraff” in suits against public entities would be “a de facto requirement that a plaintiff must properly serve a public employee in order to maintain a claim against a public employer under circumstances as we have in this case.”[11] But that would conflict with the plain language of Arizona’s notice-of-claim statute, which does not require serving notice on a public employee when suing an employer for vicarious liability.[12]

Justice John Lopez dissented, joined by Justices James Beene and Kathryn King. The dissenters argued that stare decisis weighed against “upend[ing] nearly eighty years of respondeat superior jurisprudence . . . on the ground that DeGraff . . . is clearly erroneous or manifestly wrong,” given the “debatable nature of the issue.”[13] The dissent framed DeGraff’s approach to respondeat superior as a matter of common-law claim preclusion and Arizona Rule of Civil Procedure 41(b), which both support the idea that “failure to prove the employee’s liability forecloses a derivative action against” an employer.[14] Notably, the dissent suggested that if the court “were writing on a blank slate, perhaps [they] may agree with the majority.”[15] But given that “DeGraff has been the law in Arizona for nearly eighty years . . . it should remain so because the majority has shown only its ‘mere disagreement’ with the case and that its holding is debatable, not that it is clearly erroneous or manifestly wrong.”[16]

The decision in Laurence is a significant development in Arizona tort law, as it means that the viability of a respondeat superior claim against an employer will no longer depend on the outcome of the underlying claim against the employee. It is also noteworthy for all Arizona litigators, as it signals a willingness by the Arizona Supreme Court to overrule even longstanding precedent when it concludes that that precedent is erroneous.

Note from the Editor: The Federalist Society takes no positions on particular legal and public policy matters. Any expressions of opinion are those of the author. We welcome responses to the views presented here. To join the debate, please email us at [email protected].