Urban v. American Legion Dept. of Minnesota, No. A04-1409.

• Decision Date: 19 October 2006
• Docket Number: No. A04-1409.
• Citation: 723 N.W.2d 1
• Parties: Marcus Robert URBAN, et al., Appellants, v. The AMERICAN LEGION DEPARTMENT OF MINNESOTA, Respondent, The American Legion and its Subdivisions, Respondent.
• Court: Minnesota Supreme Court

Page 1

723 N.W.2d 1

Marcus Robert URBAN, et al., Appellants, v. The AMERICAN LEGION DEPARTMENT OF MINNESOTA, Respondent, The American Legion and its Subdivisions, Respondent.

No. A04-1409.

Supreme Court of Minnesota.

October 19, 2006.

Leo F. Feeney, Richard L. Gill, Randall Matthew Tietjen, Robins, Kaplin, Miller & Ciresi, L.L.P., Minneapolis, for appellant.

Daniel A. Haws, Thomas A. Gilligan, Murnane, Conlin, White & Brandt, St. Paul, William M. Hart, Jenneane, L. Jansen, Melissa Dosick Riethof, Meagher & Geer, P.L.L.P., Minneapolis, Donald H. Walser, Judge Advocate, Dept. of MN, Kraft, Walser, Hettig, & Honsey, Hutchinson, for respondent.

Mike hatch, Atty. Gen., St. Paul, for amicus.

Heard, considered, and decided by the court en banc.

OPINION

ANDERSON, G. BARRY, Justice.

The tragedy that gives rise to this litigation occurred on August 10, 2000, when a drunk driver struck the Urban family car, leaving wife and mother Barbara Urban dead and children Marcus and Brett Urban with serious and lifelong injuries. The Urbans sued American Legion Post 184 under the Civil Damages Act, Minn.Stat. §§ 340A.801-.802 (2004) ("CDA"), alleging that Post 184 illegally served the drunk driver alcohol on the night he struck the Urbans. Later, the Urbans additionally sued the American Legion Department of Minnesota (the Department) and the American Legion National (National) under several theories, including alter ego, joint venture, and respondeat superior. The district court granted summary judgment for the Department and National on all grounds, and the court of appeals affirmed. We granted the Urbans' petition for review on only the question of whether the Department and National can be held liable under the CDA via respondeat superior. We now affirm the court of appeals, but on other grounds.

On August 10, 2000, appellant Todd Urban, his wife, Barbara Urban, and their three sons, appellants Marcus, Michael, and Brett Urban, were driving south on Highway 52 in Goodhue County. Orvin Rolland was driving north in the southbound lane and hit the Urban vehicle head-on. As a result of the collision, Barbara Urban died, Marcus Urban was rendered a paraplegic, and Brett Urban suffered serious brain damage.

The Urbans brought an action against Post 184 and the Pine Island Municipal Liquor Store under the CDA for the illegal sale of alcohol to Rolland. The Urbans additionally brought suit under the CDA against National and the Department, alleging vicarious liability under several theories, including respondeat superior. Both National and the Department moved for summary judgment, the district court granted both motions for summary judgment, and the Urbans appealed. The court of appeals affirmed the summary judgment. Urban v. American Legion Post 184, 695 N.W.2d 153 (Minn.App.2005). We granted review on the issue of whether the Department and National could be held vicariously liable on a respondeat superior theory for Post 184's allegedly tortuous liquor sale.

In order to understand the arguments of the parties, it is first necessary to understand the organizational structure of the American Legion. The American Legion is a mutual aid and community service organization for veterans, and was created by the federal government in 1919. 36 U.S.C. §§ 21701-21708 (2002) (initially enacted as Act of Sept. 16, 1919, ch. 59, 41 Stat. 284). Membership eligibility is defined by the statute. 36 U.S.C. § 21703 (2002). Additionally, the statute grants certain powers to National, including the authority to:

(1) adopt a constitution, bylaws, and regulations to carry out the purposes of the corporation;

(2) adopt and alter a corporate seal;

(3) establish and maintain offices to conduct its activities;

(4) establish state and territorial organizations and local chapter or post organizations;

(5) acquire, own, lease, encumber, and transfer property as necessary to carry out the purposes of the corporation;

(6) publish a magazine and other publications;

(7) sue and be sued; and

(8) do any other act necessary and proper to carry out the purposes of the corporation.

36 U.S.C. § 21704 (2002). Pursuant to this grant of power, National has adopted its own constitution and bylaws and has created state chapters (the departments) in each state and in various other locations (55 departments altogether). Within each state, groups of Legion members may create "posts," which are local chapters of the American Legion. Currently, there are approximately 15,000 Legion posts, and about 2.8 million Legion members.

Posts are volunteer-created and usually volunteer-run. Groups wishing to create a post apply to the department that controls their state or territory for approval of a temporary charter. If the local department approves the prospective post's application for a temporary charter, National issues the temporary charter. After a probation period lasting a minimum of 90 days, the post organizers may apply to the local department for a permanent charter. The local department makes the final decision as to whether the permanent charter shall be granted.

Posts and departments are separately incorporated, as is National. National, each department, and each post all have their own leaders (commanders). National and each department have their own executive committees, and posts are encouraged (although not required) to also form such committees to help in running the post. Additionally, National, the local departments and the posts all have their own constitutions and by-laws. Post officers are generally elected from among the members of the post.

The "Officer's Guide and Manual of Ceremonies," a guidebook distributed to Legion officials by National, states that "[t]he post is a separate and distinct unit which can, and often does, function independently." The posts elect a "District Commander" who serves as a link between the posts in his or her district and the local department.¹ The Officer's Guide describes the role of the department vis-à-vis the post:

The department headquarters constitutes the link between the community post of the American legion and the National organization. * * * Routine business should be transacted through department headquarters. Department headquarters is familiar with the issues and conditions of state affairs. Questions of policy and organization should be referred by the post to department headquarters. Through department headquarters any information may be secured that is desired by the post, or the ways of securing it may be found.

The Officer's Guide also sets out the very limited relationship between the posts and national headquarters: "Practically all of your contacts with National Headquarters are rightfully carried through your department headquarters." Post commanders are also urged to attend National and department conventions.

Neither National nor the departments finance the local posts. Each post is expected to collect dues from all its members and deliver a portion thereof to the appropriate department, which in turn transmits a portion to National. The post owes the requisite portion of each member's dues to the department and National regardless of whether the member pays the dues. The post makes up any missing dues with money raised through post activities including, at some posts, operation of a bar or restaurant. Neither National nor the departments directly receive revenue from post bars or other post fundraising activities.

The issue presented by this appeal concerns the application of respondeat superior, a common law doctrine under which an employer may be vicariously liable for the torts of an employee committed within the course and scope of employment. Fahrendorff v. N. Homes, Inc., 597 N.W.2d 905, 910 (Minn.1999). "Such liability stems not from any fault of the employer, but from a public policy determination that liability for acts committed within the scope of employment should be allocated to the employer as a cost of engaging in that business." Id. Urban urges that this doctrine be extended to allow a claim against either or both the Department or National on the grounds that the departments or National exercise sufficient control over the local posts to justify imposition of liability on the Department or National or both.

We turn first to the language of the statute. The Department and National argue that the CDA was only intended to apply to direct vendors of alcoholic beverages, which they are not. They claim that by specifying licensees, and by narrowing the previous scope of the law to "licensees" from "employers," the legislature specifically limited vicarious liability under the CDA. Compare Minn.Stat. § 340.941 (1984) with Minn.Stat. § 340A.501 (2004). We agree.

The CDA reads as follows:

A spouse, child, parent, guardian, employer, or other person injured in person, property, or means of support, or who incurs other pecuniary loss by an intoxicated person or by the intoxication of another person, has a right of action in the person's own name for all damages sustained against a person who caused the intoxication of that person by illegally selling alcoholic beverages. All damages recovered by a minor under this section must be paid either to the minor or to the minor's parent, guardian, or next friend as the court directs.²

Minn.Stat. § 340A.801, subd. 1 (2004) (footnote added). Additionally, the legislature has specifically extended liability to licensees for the sales made by their employees:

Every licensee is responsible for the conduct in the licensed establishment and any sale of alcoholic beverage by any employee authorized to sell alcoholic beverages in the establishment is the act of the licensee for the purposes of all provisions of this chapter except sections 340A.701, 340A.702, and 340A.703.

Minn.Stat. § 340A.501 (2004).

The CDA created a cause of action that did not exist at common law. Beck v. Groe, 245 Minn. 28, 34, 70 N.W.2d 886, 891 (1955)...