Taylor v. Toone

• Decision Date: 28 January 2021
• Docket Number: Case No. 19-cv-936-JPG
• Parties: MOLLY C. TAYLOR, Plaintiff, v. JACOB Q. TOONE, HAWX SERVICES, LLC, and SHAD HOLDINGS, LLC, Defendants.
• Court: U.S. District Court — Southern District of Illinois

MOLLY C. TAYLOR, Plaintiff, v. JACOB Q. TOONE, HAWX SERVICES, LLC,and SHAD HOLDINGS, LLC, Defendants.

Case No. 19-cv-936-JPG

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF ILLINOIS

January 28, 2021

MEMORANDUM AND ORDER

This matter comes before the Court on defendantShad Holdings, LLC's ("Shad")motion for summary judgment(Doc. 62).PlaintiffMolly C. Taylor has responded to the motion (Docs. 66-91), and Shad has replied to that response (Doc. 94).This case stems from an automobile accident between Taylor and defendantJacob Q. Toone, who is alleged to have been working as an agent of defendantsHawx Services, LLC("Hawx") and Shad at the time of the accident.Shad asserts that Taylor cannot show Toone was acting as its agent at the time of the accident.

I.Summary Judgment Standard

Summary judgment must be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."Fed. R. Civ. P. 56(a);seeCelotex Corp. v. Catrett, 477 U.S. 317, 322(1986);Spath v. Hayes Wheels Int'l-Ind., Inc., 211 F.3d 392, 396(7th Cir.2000).The court must construe the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in favor of that party.SeeAnderson v. Liberty Lobby, Inc., 477 U.S. 242, 255(1986);Chelios v. Heavener, 520 F.3d 678, 685(7th Cir.2008);Spath, 211 F.3d at 396.Nevertheless, the "favor toward the nonmoving party does not extend to drawing inferences that are supported by only speculation or conjecture."Monroe v. Ind. Dep't of Transp., 871 F.3d 495, 503(7th Cir.2017)(internal quotations and citations omitted).

II.Facts

All parties appear to agree as to the essential facts of this case, although they disagree about their legal implications.It is clear that Taylor and Toone were in an automobile accident on July 13, 2019, that severely injured Taylor and totaled her car.Toone was working as a salesperson for Hawx, a pest control service, at the time of the accident.Although Toone's work agreement with Hawx stated he was not an agent or employee of Hawx, Hawx controlled many of the details of Toone's performance of his work.

The role of Shad is less clear.Prior to the accident Hawx had obtained an automobile liability insurance policy listing Shad as the named insured, although at the time, Shad had not yet officially organized as a Utah limited liability company("LLC").When Hawx filed personal injury claims under the insurance policy based its own agents' conduct—up until Toone's accident—the insurer paid them without questioning the discrepancy between the name of the claimant and the named insured.As for Toone himself, he never knowingly communicated with Shad and did not even know what Shad was.

On November 11, 2019, almost four months after Toone's accident with Taylor, the Utah Department of Commerce's Division of Corporations and Commercial Code filed and approved Shad's certificate of organization.Hawx was the sole member of the new LLC.

Taylor first filed this negligence lawsuit against Toone and Hawx in August 2019.In that pleading, she sought to hold Hawx vicariously liable under a respondeat superior theory as the principal of Toone, who was alleged to have caused the accident during the course of his agency.Taylor amended her complaint to add Shad in April 2020, also seeking to hold Shad vicariouslyliable as Toone's principal.

Shad asks the Court for summary judgment on Count III, the claim against it, on the grounds that no reasonable jury could find that Toone was an agent of Shad, which did not even exist until four months after the accident.Taylor points to Hawx's use of the name "Shad" prior to its existence as evidence that Shad actually controlled Toone and Hawx and was therefore Toone's principal.Alternatively, she asserts that Hawx and Shad are, in fact, the same entity that should be liable for Toone's negligence.

III.Analysis

The first question the Court must answer is whether Toone was an agent of Shad.It is undisputed that a third party can hold a principal or employer vicariously liable under the doctrine of respondeat superior for the wrongful acts of its agents or employees.Lawlor v. N. Am. Corp. of Ill., 983 N.E.2d 414, 427(Ill.2012);Moy v. Cty. of Cook, 640 N.E.2d 926, 927-28(Ill.1994).¹Whether respondeat superior can apply depends on the existence of an agency relationship—that usually means whether the alleged principal had the right to control the worker's work—and whether the agent's conduct was within the scope of the agency.Bogenberger v. Pi Kappa Alpha Corp., 104 N.E.3d 1110, 1119(Ill.2018).

"An agency is a consensual fiduciary relationship between two legal entities whereby the principal has the right to control the conduct of the agent, and the agent has the power to [a]ffect the legal relations of the principal."Advantage Mktg. Grp., Inc. v. Keane, 143 N.E.3d 139, 148(Ill. App. Ct.), app. denied, 132 N.E.3d 326(Ill.2019)(emphasis added; internal quotations omitted);seeRestatement (Third) of Agency§ 1.01(an agency is "the fiduciary relationship thatarises when one person (a 'principal') manifests assent to another person (an 'agent') that the agent shall act on the principal's behalf and be subject to the principal's control, and the agent manifests assent or otherwise consents so to act").

There could not have been an agency relationship between Shad and Toone at the time of the accident because Shad was not an LLC or any other kind of legal entity at that time; it was simply a name that Hawx used—rightly or wrongly—to conduct some of its business activities.LLCs are creatures of state law, specifically in Utah, of the Utah Revised Uniform Limited Liability Company Act, Utah Code Ann. § 48-3a-101 et seq.Under Utah law, an LLC is formed by delivering a certificate of organization to the Utah Department of Commerce's Division of Corporations and Commercial Code.Utah Code Ann. § 48-3a-201(1).The certificate of organization is effective and the LLC comes into existence, at the earliest, when the Division files the certificate.Utah Code Ann. §§ 48-3a-201(4),48-3a-206.Here, that occurred on November 19, 2019.Before that date, Shad was not a separate legal entity from Hawx and could not therefore have been an agent or principal to anyone.

One might argue that Shad was a de facto LLC that could be liable for its conduct before its actual formation.Indeed, the de facto corporation has been recognized under Utah law where incorporators made a bona fide attempt to incorporate a corporation, but the efforts inadvertently did not completely comply with the legal requirements.SeeShelter Mortg. Corp. v. Castle Mortg. Co., L.C., 117 F. App'x 6, 13 n. 7(10th Cir.2004).At least one state has extended the principle to LLCs as well.SeeWells Fargo Advisors, LLC v. Bongiorno Family, LLC, No. FSTCV126013831S, 2018 WL 1385252, at *4(Conn. Super. Ct.Feb. 16, 2018).However, even if de facto LLCs were recognized in Utah, there is no evidence Shad's organizers made a good faith effort to organize it before the accident, yet inadvertently fell short of the staterequirements.It simply could not reasonably...