Papa John's Intern., Inc. v. McCoy

• Decision Date: 24 January 2008
• Docket Number: No. 2005-SC-000614-DG.,2005-SC-000614-DG.
• Citation: 244 S.W.3d 44
• Parties: PAPA JOHN'S INTERNATIONAL, INC. and RWT, Inc., d/b/a Papa John's Pizza, Appellants v. Gary McCOY, Appellee.
• Court: United States State Supreme Court — District of Kentucky

244 S.W.3d 44

PAPA JOHN'S INTERNATIONAL, INC. and RWT, Inc., d/b/a Papa John's Pizza, Appellants v. Gary McCOY, Appellee.

No. 2005-SC-000614-DG.

Supreme Court of Kentucky.

January 24, 2008.

Janet P. Jakubowicz, Brent R. Baughman, Jesse Allen Mudd, Greenebaum Doll & McDonald, PLLC, Louisville, KY, Counsel for Appellant Papa John's International, Inc.

Pamela T. May, Erich E. Blackburn, Pam May Law Firm, P.S.C., Pikeville, KY, Counsel for Appellant RWT, Inc., d/b/a Papa John's Pizza.

C. Thomas Hectus, Randall S. Strause, Hectus & Strause, PLLC, Louisville, KY, Counsel for Appellee.

J. Kent Wicker, Reed Wicker, PLLC, Louisville, KY, David J. Kaufmann, Daniel Gildin, Kevin M. Shelley, Kaufmann, Feiner, Yamin, Gildin & Robbins, LLP, New York, NY, Counsel for Amicus Curiae International Franchise Association.

Barbara B. Edelman, Alexander J. Moeser, Dinsmore & Shohl, LLP, Lexington, KY, Counsel for Amicus Curiae Kentucky Chamber of Commerce.

Opinion of the Court by Justice MINTON.

I. INTRODUCTION.

This is a case involving the issue of franchisor vicarious liability, an issue of first impression in Kentucky. It arises in the context of a malicious prosecution and defamation lawsuit filed by a customer as a result of a Papa John's pizza delivery gone wrong.

The customer originally sued the delivery driver and Papa John's International, Inc., alleging that Papa John's was vicariously liable as the driver's employer. The driver's employer, however, was RWT, Inc., a Papa John's franchisee. Consequently, the customer filed another lawsuit against RWT; and the circuit court consolidated the cases. The circuit court granted summary judgment in favor of RWT and Papa John's for various reasons, which we will discuss in the following sections of this opinion. The Court of Appeals, however, affirmed in part and reversed in part as to both RWT and Papa John's, concluding that genuine issues of material fact precluded summary judgment.

As is well-settled in our case law, the driver's employer, RWT, is subject to vicarious liability for a tort committed by its employee acting within the scope of employment. We conclude that the acts complained of here occurred within an independent course of conduct that could not have been intended by the driver to serve any purpose of the employer. So, although for different reasons that we will discuss below, we conclude that the circuit court properly granted summary judgment dismissing the malicious prosecution claim against RWT. Accordingly, we reverse the Court of Appeals as to RWT.

The circuit court and the Court of Appeals addressed the vicarious liability of Papa John's using a mixed bag of respondeat superior and ostensible agency principles. Upon review, we conclude that we must take a more precise approach given the ubiquity of the franchise method of doing business in Kentucky. To that end, we adopt a rule in which the franchisor is vicariously liable for the tortious conduct of the franchisee when it, in fact, has control or right of control over the daily operation of the specific aspect of the franchisee's business that is alleged to have caused the harm. Papa John's had no control over the pizza delivery driver's intentional, tortious conduct in this case. So Papa John's cannot be held vicariously liable. Although for different reasons that we will discuss below, we conclude that the circuit court properly granted summary judgment dismissing the malicious prosecution and defamation claims against Papa John's. Accordingly, we reverse the Court of Appeals as to Papa John's.

II. FACTS AND PROCEDURAL HISTORY IN THE CIRCUIT COURT.

Gary McCoy is a resident of Prestonsburg, Kentucky. He owns two businesses, a scrap metal recycling company and a mining equipment leasing company., On the evening of February 18, 2000, he was working late at the scrap metal business. While he was working, his wife called him about dinner and told him that she would like to have Papa John's pizza, which they had never tried. His wife asked him to order one pizza for them for delivery to their home and another pizza for their housekeeper for delivery to her home. He ordered the pizzas from a Papa John's store, taking some time to inquire about how the store placed the pepperoni on the pizza, and set up the two deliveries. And he asked if the delivery driver could stop off at his business for payment because his wife did not have any money with her. The store stated that it could comply with his various requests.

The delivery driver that night was Wendell Burke. Burke delivered the two pizzas and then stopped at McCoy's business for payment. Burke and McCoy tell two stories of what occurred next, although their versions are not entirely different.

According to McCoy, after McCoy paid him, Burke remained at McCoy's business in McCoy's office and inquired about employment. McCoy was preoccupied with other matters, and it became obvious to him that Burke had no intention of leaving. So McCoy placed a hunting video in his VCR and told Burke to watch it. McCoy admitted that he had a beer can on his desk while Burke was in his office and a rifle in one corner of his office. The tape lasted about fifteen minutes. When the tape concluded, Burke left. After Burke left, McCoy received a call from the Papa John's store during which they inquired as to Burke's whereabouts.

According to Burke, when he arrived at McCoy's business, McCoy asked him to come in, which Burke did. McCoy took Burke back to his office where he paid him for the two pizzas. McCoy asked. Burke to sit and talk awhile. McCoy expressed to Burke that he had been having suicidal and homicidal thoughts and had visions. While talking to him, Burke alleges that McCoy was drinking liquor and chasing it with beer. And at one point when Burke attempted to leave, McCoy stood up, picked up a rifle, showed it to Burke, and then laid it on his desk. While Burke was there, McCoy took several phone calls. After hanging up from one of the phone calls, McCoy informed Burke that that call had been from the Papa John's store; and they were inquiring as to Burke's where-abouts. Eventually, the subject of deer hunting came up; and McCoy asked Burke to watch a videotape of one of his deer hunting trips with him. When the tape ended, McCoy got up to take the tape out; and Burke slipped out. He returned to Papa John's about an hour and a half to two hours after he first left the store to deliver the pizzas.

Upon hearing Burke's version of the story and observing that Burke was quite upset, another employee of the Papa John's store felt that he should tell the police what had occurred and contacted them for him. Two officers responded to the call and took Burke's statement. The officers also took statements from two female employees who had, spoken by telephone with McCoy that evening to take the pizza order. One employee described McCoy on the telephone as "extremely rude" and either "disoriented or highly irritated." The other described him as "difficult." A few hours later, the officers obtained a warrant and, arrested McCoy at his home on the charge of unlawful imprisonment in the first degree. The local newspaper ran a story about the arrest a few days later.

A little over two months after the arrest, the district court, on McCoy's motion and with no opposition by the county attorney, dismissed the charge against McCoy. Although the record of the proceedings indicates that the county attorney agreed to the dismissal only with the stipulation of probable cause, McCoy was later successful—over two years later and in the midst of this civil lawsuit when confronted with a motion for summary judgment on the malicious prosecution claim on the ground that he could not establish that the criminal proceedings terminated in his favor—in having the final judgment set aside and an amended final judgment entered. The amended final judgment reflected that the district court dismissed the charges against Gary McCoy with prejudice and with no stipulations.

The Papa John's store where Burke worked on the night of the McCoy delivery was a Papa John's franchise that was owned and operated by RWT. Unaware that the store was not company-owned, McCoy filed an action on February 16, 2001, against Papa John's and Wendell Burke in which he alleged (1) wrongful arrest, (2) malicious prosecution, and (3) defamation. In its answer to McCoy's complaint, Papa John's represented that it was the franchisor of the Papa John's store and, that RWT was the owner/operator.

McCoy, in response to Papa John's representation, filed a separate complaint against RWT on March 29, 2001, alleging (1) wrongful arrest, (2) malicious prosecution, (3) defamation, and (4) outrageous conduct. The circuit court consolidated the two civil actions.

On Motions for summary judgment filed by Papa John's, RWT, and Burke, the trial court dismissed the false arrest claims against all three defendants because there was no question that, the officers arrested McCoy according to a valid warrant. As to Papa John's and RWT's claim that Burke was not acting within the course and scope of his employment when he gave a statement to the officers, the circuit court found as a matter of law that Burke was acting within the course and scope of his employment. Consequently for RWT, the circuit court concluded that it would be responsible under the doctrine of respondeat superior if the jury found Burke liable. But the trial court reserved ruling on summary judgment on the specific claims of malicious prosecution, defamation, and outrageous conduct.

RWT and Papa John's filed a joint motion to alter, amend, or vacate the circuit court's conclusion that Burke was acting within the course and scope of his employment. In the motion, they also renewed their previous motion for summary judgment. The trial court granted summary judgment to RWT and Papa John's on all of McCoy's claims against these two defendants. But the trial...