The Puzzling Role of Apparent Authority in Vicarious Liability

An annoying agency law problem

Although this newsletter is focused on corporate law and governance, we¹ do dabble from time to time in adjacent subjects such as agency and partnership law.

Indeed, along with my friends Jim Park (UCLA) and Usha Rodrigues (Georgia), I have a casebook on Agency, Partnerships, and Limited Liability Entities: Cases and Materials on Unincorporated Business Associations. The new sixth edition added a case, Williams v. Dimensions Health Corporation, to the section on principal’s liability in contract. We offer it as an example of how courts use apparent authority in the tort context.

I also have a paperback treatise on agency, partnership, and limited liability company law, which is designed for law students but also as a reference for lawyers and judges: Agency, Partnerships & LLCs (Concepts and Insights) 4th Edition.

Plaintiff Williams alleged injury due to the negligence of a surgeon working an ER, and sued the hospital. The hospital was a Level II trauma center, and because of that status required that it have on call an attending board-certified or board-eligible orthopedic surgeon. The hospital’s defense was that the surgeon was not its agent, and therefore it was not liable. Williams did not consciously choose the hospital, but knew it had a trauma center. A release was presented at intake, which acknowledged that the doctors providing care were not agents of the hospital, but Williams did not initial or sign it.

One of our adopters questioned our choice, asking why we “chose to include Williams v. Dimensions Health Corporation in the section on ‘Liability of Principals to Third Parties in Contract’ instead of ‘Liability to Third Parties in Tort.’ I understand that the case addresses apparent agency, but the underlying claim is negligence, specifically medical malpractice, so I’m curious why it is in the contract liability section.”

I agree that it is conceptually strange to see courts apply the doctrine of apparent authority, which is fundamentally rooted in contract law, in cases about tort liability—particularly vicarious liability. But there's a historical and doctrinal story behind this, and unpacking it reveals both why courts do it and why it continues to trouble legal theorists.