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Brown v. United Cerebal Palsy/Atlantic & Cape May

Decided: August 1, 1994.


Seltzer, J.s.c.


Civil Action


This motion implicates the extent to which New Jersey recognizes an employer's claim against an employee for damages resulting from the employee's job performance. It requires a resolution of what one federal court has termed the "difficult issue of determining current New Jersey law." Dome Petro, Ltd. v. Employers Mut. Lias. Co., 767 F.2d 43, 48 (3rd Cir. 1985).

The dispute between these parties was initiated by plaintiff's suit alleging that she had been wrongfully terminated from her position as Executive Director of defendant. Defendant's answer denied any wrongful termination and affirmatively advanced a claim for damages resulting from a breach of contract and negligence. Defendant moved to dismiss the counterclaim for failure to state a claim upon which relief may be granted, asserting that New Jersey does not recognize an employer's cause of action against an employee for either negligent performance of duties or for breach of an implied contractual provision to perform non-negligently.

Prior to 1961, New Jersey appeared to accept "as a fundamental rule in the law of agency that an agent or employee is generally liable to his principal or employer for loss sustained by the latter due to the former's negligence or defalcation." Male v. Acme Markets, Inc., 110 N.J. Super. 9, 12, 264 A.2d 245 (App.Div.1970). See also Manchetta v. Central R. R. Co., 9 N.J. 458, 469 (1952); Schustrin v. Globe Indem. Co., 44 N.J. Super 462, 466, 130 A.2d 897 (App.Div.1957); Marano v. Sabbio, 26 N.J. Super. 201, 97 A.2d 732 (App.Div.1953). This is the general rule which appears to be recognized universally. Restatement (Second) of Agency § 379 (1958); Annotation, Servant's Tort Liability to Master, 110 A.L.R. 831 (1937); Annotation, Liability Insurer's Subrogation Rights, 53 A.L.R. 3d. 621 (1973).

In 1961, the New Jersey Supreme Court suggested that such a rule was "anachronistic" insofar as it permitted an employer, liable to a third party for the negligence of an employee under the doctrine of respondent superior, to recoup the loss from the negligent employee. Eule v. Eule Motor Sales, 34 N.J. 537, 540, 170 A.2d 241 (1961). The Eule Court, quite clearly, if not explicitly, rejected the general rule, at least in the context of liability incurred as the result of negligence in operating a motor vehicle. It opined that the liability of the employer to third parties is derived from the doctrine of respondent superior which in turn "rests on a public policy that the employer bear the burden as an

expense of the operation he expends through the employment of others." The employee should not, therefore, be required to bear that cost by way of indemnification to the employer.*fn1

That pronouncement, although dicta, is entitled to great, if not conclusive weight. State v. Wein, 162 N.J. Super. 159, 163, 392 A.2d 607 (App.Div.1978), rev'd on other grounds, 80 N.J. 491 (1979). Where dicta appears to contravene a previously announced rule, a lower court is obligated to determine which rule would be adopted as a result of an appeal. State v. Dolton, 146 N.J. Super. 111, 115, 369 A.2d 17 (App.Div.(1977). Although the Supreme Court has not addressed this issue since Eule was decided, I have little doubt that if it were to do so it would adopt the language it used in 1961.

Such a rule is consistent with the approach that New Jersey has taken in requiring a business entity to assume the costs attendant on the conduct of that business. It is analogous to our rule prohibiting an employer from seeking indemnification from a co-employee who negligently injures an employee to whom employer is liable under our workers' compensation laws. N.J.S.A. 34:15-8. Cf. Landrigan v. Celotex Corp., 127 N.J. 404, 605 A.2d 1079 (1992) (imposing, as a cost of business, products liability responsibility on a manufacturer who produced products which were considered safe at the time but thereafter determined to be unsafe).

This rationale suggests that the Eule rejection of employee liability to an employer for indemnification of third party claims should not be limited to automobile negligence. An employer's business necessarily and foreseeably will involve acts of negligence on the part of an employee. As a matter of policy then, the employer, not the negligent employee, should ...

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