This is a guest article from Professor Daniel Kleinberger. Prof. Kleinberger is the director of the Mitchell Fellows Program at the William Mitchell College of Law. He was the reporter for the MSBA Business Law Section Task Force that developed the Professional Firms Act and the principal drafter of the act.
One of the most important functions of agency law is to impute to the principal information possessed by an agent.1 In most circumstances a person is free to delegate tasks to an agent,2 but delegation carries a risk. The delegating principal is responsible, within bounds set by agency law, for the agent’s conduct, including the agent’s handling of information pertaining to the delegated task. Agency law imposes this responsibility by attributing to the principal the agent’s acts, omissions and knowledge.3 In some circumstances, the attribution occurs even though the act or omission is unauthorized and even though the agent fails to communicate information to the principal or respond to information on the principal’s behalf.4
Agency law’s attribution rules impose most of the risk of agent misconduct on the party who selects the agent and benefits from the agent’s endeavors, i.e., the principal.5 The rules thus help establish and maintain a proper balance of risk between principals and third parties. Unfortunately, a recent unpublished decision of the Minnesota Court of Appeals, Engen v. Mitch’s Bar & Grill,6 threatens to upset that balance and release principals from responsibility for an important type of information possessed by their agents. Although unpublished decisions are not precedent, they do routinely influence both lawyers and judges.7 Indeed, the Minnesota Court of Appeals sometimes cites its own unpublished decisions,8 and even the Minnesota Supreme Court occasionally discusses unreported cases.9
Engen is therefore dangerous, despite its unpublished status. This Case Note seeks to eliminate any influence the case might have by demonstrating that the decision: (i) misuses the precedent it cites; (ii) ignores precedent more closely on point; (iii) is oblivious to the rationales underlying agency law’s rules for attributing information, to the Restatement (Second) of Agency and to sensible precedent from other jurisdictions; and (iv) articulates a rule that will produce absurd results.10
II. The Facts of Engen
As recounted by the Minnesota Court of Appeals, the facts in Engen presented a simple, albeit violent, scenario involving two patrons of a bar. “On November 27, 1992, Jeffrey Preston assaulted . . . John Engen at . . . Mitch’s Bar & Grill” (Bar).11 Engen sued the Bar, contending that the Bar “knew Preston was violent and dangerous,”12 and therefore could “foresee that Preston would be a danger to . . . other patrons and had a duty to protect the other patrons from Preston.”13
The Bar itself did not directly “know” anything.14 Although the decision does not disclose the Bar’s precise legal character, the Bar was certainly some sort of legal or commercial entity. Having no brain to possess information on its own, the Bar could know only the information possessed by its agents and attributed to the Bar through agency law principles.15
Engen sought to invoke those agency law principles. He contended that two of the Bar’s bartenders knew of Preston’s violent propensities and he sought to attribute this knowledge to the Bar. Both bartenders had acquired their knowledge off the job. One bartender was dating Preston;16 the other was Preston’s mother.17
III. The Law of Engen
To succeed with his duty-to-protect claim, Engen had to attribute the knowledge of at least one bartender to the Bar. He could not succeed merely by showing that the bartender who served Preston was negligent, that the bartender was acting within the scope of her employment, and that the negligence proximately caused his injuries.18 This standard form of vicarious liability, known as respondeat superior, was unavailable to Engen because: “A tavern will not be liable for injuries resulting from one patron’s assault upon another unless the attack was foreseeable. In order for an injury to be foreseeable, the bar must have ‘knowledge of the dangerous propensities of the person inflicting the injury.”’19 Attributing a completed tort, therefore, was impossible.20 Thus, it was essential to attribute a bartender’s knowledge of Preston’s violent and dangerous propensities.
At the trial court, the Bar did not dispute attribution. To the contrary, the Bar moved for summary judgment and “admitted, for the purposes of the summary judgment motion, that it was aware of Preston’s past abusive behavior.”21 The dispute centered instead on whether the Bar’s constructive knowledge sufficed to make foreseeable the violent attack on Engen.22 The trial court ruled against Engen on that issue and granted the Bar’s summary judgment motion.23 The appellate briefs from both parties accordingly focussed on the foreseeability question.24
The Minnesota Court of Appeals affirmed the summary judgment, but ignored the issue as framed by the parties and the trial court.25 Instead the court of appeals held that the Bar lacked any knowledge of Preston’s violent tendencies.26 To the extent the bartenders possessed that knowledge, ruled the court, they had acquired it outside the scope of their employment. The court held that “[b]ecause both [bartenders] did not learn of Preston’s violent nature through their positions as [the Bar’s] bartenders, their knowledge cannot be imputed to [the Bar].”27 No one had raised this issue in oral argument; the court’s rationale came as a complete surprise to counsel for each party.28
IV. Precedent Misused
The Minnesota Court of Appeals essentially held that a party seeking to attribute an agent’s information to the principal must satisfy a two-prong test. The party must show not only that the information relates to “facts within the scope of the agency, or of or concerning business engaged in by the agent by the authority of the principal”29 (the relevant subject prong), but also that the information was “received by the agent while acting within the course and scope of his employment”30 (the acquired within prong). The first prong is unremarkable and reflected throughout agency case law.31 The second prong is problematic and without basis either in precedent or policy.
In support of its two-part rule the court of appeals cited three cases:32 (i) St. Paul Fire & Marine Insurance Co. v Parsons;33 (ii) Jackson v. Mutual Benefit Life Insurance Co.;34 and (iii) Anderson v. Walthal.35 The first two are hundred-year-old Minnesota Supreme Court cases, and the court of appeals misused them. The third is a modern Florida appeals court case, and the Minnesota Court of Appeals committed a logical fallacy in applying it.
Engen quotes St. Paul Fire & Marine as stating that “[a] principal is not legally chargeable with notice of facts learned by an agent in the course of an employment in no way connected with his agency.”36 Considered in isolation the quoted language seems to support the acquired within prong of the Engen test. The language must be read in context, however, and taken as a whole St. Paul Fire & Marine stands for a significantly different proposition.
St. Paul Fire & Marine concerned the asserted forfeiture of a fire insurance policy due to breach of one of the policy’s conditions–namely, that the insured property not be transferred without the insurance company’s consent being indorsed on the policy.37 The insured property had been mortgaged, the mortgage had been foreclosed and the mortgagee had sold its interest to Parsons. The mortgagor, Caine, had also sold his interest to Parsons. An attorney, Peterson, acted for Parsons in the Caine-Parsons transaction and thereby learned of the two sales. Peterson was also an agent of the insurance company, and Parsons later applied to Peterson, in Peterson’s capacity as an insurance company agent, to do whatever was necessary to keep the fire insurance in effect. Peterson responded that “nothing was necessary to be done to make it good to [Parsons].”38 Although the policy had not been properly indorsed, the trial court held that “notice to Peterson of the transfer of title and foreclosure was notice to the plaintiff [insurance company], and the plaintiff is held to have waived the breaches of the policy by the statements of Peterson . . . .”39
The Minnesota Supreme Court reversed, holding that “[t]he facts found by the court did not justify this conclusion.”40 The court noted two problems. First, to be attributable to the principal, the agent’s knowledge had to exist. That is, at the relevant moment the actual knowledge had to be present in the agent’s mind. There was no evidence that, at the time Peterson acted for the insurance company, he recalled the information about the sales.41 The court refused to infer that such knowledge was then present “merely because the agent had previously acquired knowledge of such facts in the course of an employment in no way relating to the agency, and with which the principal was not connected.”42
Second, even if the agent had then present knowledge, it was also necessary for the agent to have known another crucial fact–namely, that the insurance company had not consented to the transfers. According to the court:
Before the defendant can claim that the statement of the agent constituted a waiver of the forfeiture, not having been so intended, or that the principal is estopped to deny the waiver, it must appear that the agent knew or was notified of the fact [that the company had not consented].43
The insured had made no such showing: “For aught that appears, the answer of the agent to the defendant’s request may have been based on the assumption that the company had consented to what had been done.”44
Thus, St. Paul Fire & Marine does not support Engen’s asserted acquired within prong. Indeed, as part of its analysis St. Paul Fire & Marine relies on another early case, Trentor v. Pothen, which had expressly rejected just that proposition.45 St. Paul Fire & Marine, therefore, stands only for the unremarkable notion that before an agent’s knowledge can be attributed to the principal, the agent must actually have the knowledge.
Jackson v. Mutual Benefit Life Insurance Co.,46 the second case cited by Engen, provides no greater support than does St. Paul Fire & Marine. The language which Engen quotes from Jackson can support only the relevant subject prong of the Engen test: “[N]otice to an agent, to be binding on, and constitute constructive or implied notice to, the principal, must be of facts within the scope of the agency, or of or concerning business engaged in by the agent by the authority of the principal.”47 This language is true to the essence of Jackson; the case turned on whether the would-be attributed information was sufficiently related to the agent’s assigned responsibility.48 According to the Jackson court, “[t]he taking of promissory notes in payment of premiums was not within the . . . agent’s authority,” and thus the agent’s knowledge concerning that conduct was not attributable to the principal.49
In denying a motion for rehearing, the Jackson court emphasized that the key question was how the would-be attributed information related to the scope of the agent’s authority. First, the court quoted Pomeroy’s treatise on equity:
Also, in pursuance of the fundamental doctrine of agency concerning the powers of agents, the notice given to or information acquired by the agent, in order to be operative upon the principal, must be within the scope of the agent’s authority to bind the principal. If an agent cannot bind his principal by acts beyond the limits of his authority, a notice beyond those limits is equally nugatory.50
Then the court discussed a case which applied that “fundamental doctrine.”51 An agent had authority to sell land but not to allow any permanent structures to be erected on it. Accordingly, “notice to [the agent] that a building was being erected thereon was not notice to his principal.”52 Thus, both the original opinion and the opinion denying rehearing address the relevant subject prong of the Engen test. Neither Jackson opinion supports Engen’s acquired within element.
Engen’s Florida case, Anderson v. Walthal,53 initially seems more supportive, appearing on casual reading to care when an agent acquires the would-be attributed information. The case holds that: “knowledge of, or notice to, an agent is imputed to the principal when it is received by the agent while acting within the course and scope of his employment, and when it is in reference to matters over which the agent’s authority extends.”54
A more careful reading, however, reveals that the acquired within prong was never at issue in Anderson. The case considered whether a manager’s knowledge of a dog’s vicious propensities would be attributed to the landlord; there was no question as to whether the manager had obtained the knowledge “off the job.”55 To the contrary, the court framed the issue as follows: “Should a jury conclude that [the manager] had actual knowledge of the dog’s presence and of her vicious propensities, and that [ the manager’s] authority as manager included keeping the premises safe for business invitees, then that knowledge may be imputed to [the landlord] . . . .”56
Although the opinion does state that attribution will occur if the would-be attributed information is acquired during the agency and relates to the agent’s responsibilities, the opinion does not hold that attribution depends on an acquired within showing. That is, in logical terms the opinion asserts:
If A (acquired within) and B (relevant subject),
then C (attribution). That proposition does not necessarily mean:
If and only if A (acquired within) and B (relevant subject), then C (attribution). The Minnesota Court of Appeals ignored this logical distinction and therefore overread Anderson.
A few courts in other jurisdictions have made the same error. For example, a California case involving a Hollywood movie director contains language that reads very much like Anderson: “A principal is chargeable with and is bound by the knowledge of, or notice to, his agent received while the agent is acting within the scope of his authority and which is with reference to a matter over which his authority extends.”57 Later, however, the case rejected any acquired within element and held the movie director accountable for information acquired by the director’s agent before the agency relationship began.58
An Arizona case, Smith v. American Express Travel Related Services Co.,59 provides another example, and one in which, as in Engen, careless articulation and overreading produced the wrong result. A sexual harassment plaintiff sought to attribute a co-employee’s knowledge of the harassment to the employer.60 On the way to rejecting that attribution the court first quoted an earlier case, Fridena v. Evans: “A corporation is bound by the knowledge acquired by, or notice given to, its agents or officers which is within the scope of their authority and which is in reference to a matter to which their authority extends.”61 This language, containing only a relevant subject requirement, properly states the law and accurately reflects the holding in Fridena. Unfortunately, however, the Smith court extrapolated from Fridena to construct an acquired within requirement: “No evidence exists in the record that [the co-employee] acquired any knowledge of [[[the perpetrator’s] sexual misconduct while acting within the scope of his authority as an occasional supervisor.”62
Fridena does not support that extrapolation. Its language made no reference to an acquired within requirement, and the facts in Fridena did not put the matter in issue. Fridena imputed to a hospital information possessed by a doctor who served as “chief surgeon, medical director and chairman of the board of trustees . . . .”63 The case did not discuss the capacity in which the doctor acquired the imputed information, but instead focussed on how the information related to the scope of the doctor’s responsibilities “in his various agency positions.”64
In 1988, the Seventh Circuit examined this problem of careless expression and illogical extrapolation in a case under Indiana law. In Shenandoah Valley Poultry Co. v. Armour & Co.,65 concerning an agent’s knowledge of contract terms, the other party sought to attribute that information to the principal. The agent had acquired the information prior to the agency, and the principal argued that under an Indiana case, City of Indianapolis v. Bates,66 “knowledge of an agent-employee will be imputed to his/her principal/employer only if the agent obtained that knowledge while employed by that principal.”67 The Seventh Circuit disagreed:
It is true that the knowledge imputed to the principal in Winans [another Indiana case] was acquired by the agent in the course of his employment with the principal. The same was true in Bates . . . . [and] Bates . . . does make reference to the “[k]nowledge of material facts acquired by an agent in the course of employment” being imputed to the agent’s principal. . . . [ [ [ [However, that] language of Bates . . . followed the Indiana Appellate Court’s statement of the . . . broad general rule of imputation of an agent’s knowledge to the principal. Given that fact, we believe the subsequent language in Bates to be only an adaptation of the general, controlling rule to the specific facts present in that case and not a rearticulation or narrowing of the rule itself.68
The Seventh Circuit had it right. The logical flaw in cases like Engen arises from an overstatement of the governing legal principle. The information at issue relates to the scope of the agency and happens to have been acquired within the agency. The latter fact is not necessary to the decision and should not be articulated as part of the legal principle. A court which does so transmutes happenstance into a requirement of law.69
V. Precedent Ignored
The Minnesota Court of Appeals might have avoided its logical error if, while contemplating hundred-year-old agency law cases, it had extended its examination to a few other cases from the same era. For instance, an 1895 case, Jefferson v. Leithauser,70 discussed the problem of careless articulation and undue extrapolation, albeit in a slightly different context. An earlier case had contained language appearing to hold that information possessed by an agent could be attributed to the principal only if the agent had authority to bind the principal in responding to the information.71 That apparent holding overly restricted the relevant subject aspect of the attribution rule, so the Jefferson court explained away the problematic language: “[T]hat phrase was written with reference to the particular facts of the case . . . and not as a general rule of law.”72
More fundamentally, the Engen court missed a whole line of venerable Minnesota Supreme Court cases that directly address the acquired within issue. In 1882, Lebanon Savings Bank v. Hallenbeck73 considered whether to attribute to a client knowledge possessed by the client’s attorney but acquired before the attorney-client relationship began. The Minnesota Supreme Court found that:
Knowledge of an agent acquired previous to the agency, but appearing to be actually present in his mind during the agency and while acting for his principal in the particular transaction or matter, will, as respects such transactions or matter, be deemed notice to his principal, and will bind him as fully as if originally acquired by him . . . . This rule, . . . if carefully applied is deemed a salutary one, and calculated to promote justice and fair dealing.74
Four years later, in 1886, Wilson v. Minnesota Farmers’ Mutual Fire Insurance Ass’n75 reiterated this principle. An insurance company’s agent knew that a policy holder was in breach of one of the policy’s conditions. The court held that the insurance company had waived the condition because the agent’s knowledge was attributable to the company. The company apparently objected to the attribution on the ground that the agent had not acquired the information while acting as the company’s agent. This objection, wrote the court, “cannot be sustained,”76 for it ignored the settled rule of attribution: “If the agent, although not acting as such when the information was communicated to him, retained a recollection of the fact, and had it in mind when effecting this insurance, such knowledge would affect the principal.”77
Five years later, in 1891, the supreme court decided Trentor v. Pothen,78 which was subsequently relied on in St. Paul Fire & Marine, one of the cases misused by Engen.79 Trentor considered whether a purchaser of land, an intervenor in the case, had notice of another party’s claim. The only possible notice would have been through attribution–“the attorney who examined the title to the property for the intervenor before he purchased was also the attorney for [one of the parties in an ongoing unrecorded dispute concerning the land] . . . .”80
The Trentor court considered and rejected the acquired within notion holding that:
In accordance with a clear preponderance of authority, we have held that knowledge of an agent acquired previous to the agency, but appearing to be actually present in his mind during the agency, and while acting for his principal in the particular transaction or matter, will, as respects such transaction or matter, be deemed notice to the principal.81
The court did recognize a limiting factor, but that factor was the relevant subject requirement, not an acquired during requirement. The court noted:
The rule which imputes to the principal the knowledge possessed by the agent applies only to cases where the knowledge is possessed by an agent within the scope of whose authority the subject-matter lies; in other words, the knowledge or notice must come to an agent who has authority to deal in reference to those matters which the knowledge or notice affects.82
Ten years later, in 1901, Haines v. Starkey83 used the settled rule to hold that principals could benefit from knowledge possessed by their agent, even though the agent had acquired the knowledge prior to becoming the principals’ agent.84 The case involved the sale of goods and the sellers’ attempt to hold the buyers individually liable on the purchase. Prior to the transaction the buyers had converted their company from a partnership to a corporation. The sellers had no direct knowledge of the prior partnership, but they entered into the sales contract through an agent who had previously dealt with the company as a partnership. At the time of the sale that agent still believed the company to be a partnership.85 Haines held that the sellers could benefit from the agent’s belief, even though that belief rested on information acquired before the agent began acting for the sellers.86
Eighteen years later, in 1919, the court revisited the acquired within issue, considering whether a bank officer’s knowledge, acquired in his individual capacity, was attributable to the bank.87 Noting “such general statements in the books as that it is necessary that the knowledge should have come to the officer in his official capacity,”88 the court stated:
But the fact is it is impossible to distinguish between the knowledge which a bank president possesses as an officer and as an individual, and the very tangible and workable rule has been established in this state that a bank is chargeable with knowledge possessed by its active officer pertaining to transactions within the scope of the bank’s business, even though such knowledge is acquired in another transaction, if it appears that the knowledge is actually present in his mind while he is acting for the bank.89
Thus, the holding of Engen ignores a clear and unbroken line of Minnesota Supreme Court precedent.90 Why the Minnesota Court of Appeals missed this precedent is difficult to fathom, especially since the court relied on two cases of comparable vintage.
The omission is even more puzzling given the existence of two far more recent cases, each of which should have clued the court to what it was missing. A Minnesota Supreme Court case provided one clue. Distillers Distributing Co. v. Young91 arose when a liquor licensee sold its bar and then denied responsibility for subsequent liquor sales made to the bar.92 The case held for the old owner because he had informed the vendors’ salesmen of the sale and because that information bound the vendors. In a somewhat cryptic footnote the court stated: “The information given to the salesmen would be ‘notification’ under Restatement (Second) of Agency, section 9(2)(a). Even if the salesmen had informally learned of the sale to [the new owner], this knowledge would be imputed to plaintiffs if within the scope of the salesmen’s authority.”93 Although the case does not explain what “informally” means, at minimum the footnote suggests that for attribution purposes the manner of acquisition is unimportant and the key is the relationship of the information to the scope of the agent’s authority. Moreover, the case cites Trentor v. Pothen!94
The second clue was in a court of appeals’ decision directly on point. In Weaver Bros. v. Ohio Farmers Insurance Co.,95 an insurance company opposed reforming a property damage contract to cover replacement cost.96 The customer had obtained several previous policies through the same agent when the agent worked for another insurance company. Each of those policies had included replacement coverage. The acquired within issue was crucial to the case. As the court explained, “Ohio argues [the insurance agent’s] knowledge that [the policyholder] desired replacement-cost coverage was obtained prior to the establishment of the agency relationship between itself and [the agent]. Therefore, Ohio argues, such knowledge may not be imputed to it, nor may it serve as the basis of a reformation.”97 The panel rejected this argument, citing and quoting a South Carolina decision that accords perfectly with the venerable Minnesota precedent missed by Engen:
[K]nowledge of an agent acquired prior to the existence of the agency may be chargeable to the principal if it is clearly shown that the agent, while acting for the principal in a transaction to which the information is material, has the information present in his mind . . . at the time of the transaction in question . . . .98
Weaver Bros. was unreported, but as noted above the Minnesota Court of Appeals occasionally uses its own unreported decisions.99 It therefore seems fair to expect the Engen court to have taken cognizance of an unreported decision directly at odds with Engen.
VI. Policy Overlooked
Besides misusing the precedent it cited and missing the precedent that should have controlled, Engen ignored the policy that underpins agency law’s rules for attributing information. Those rules rest “on the legal principle that it is the duty of the agent to disclose to his principal all material facts coming to his knowledge, and, upon the presumption that he has discharged that duty.”100
The exceptions to the attribution rule prove the rule’s link to the duty. Where the agent is not under a duty to communicate, there is no attribution. For example, “ ‘where an agent’s duties to others prevent him from disclosing facts to the principal, the latter is not bound because of the agent’s knowledge.”’101 Likewise “it is well settled law that an agent’s knowledge will not be imputed to his principal when [the agent] is engaged in an independent fraud. In such circumstances it cannot be supposed that he will inform his principal of it.”102
Linking the attribution rule to the duty is a form of enterprise liability.103 The principal has chosen whether and to whom to delegate and intends to benefit from the delegation. Inherent and essential to the delegation is the expectation that the agent will communicate to the principal any information the principal might reasonably wish to know.104 Therefore, if something goes awry–if the principal has chosen poorly or for whatever reason the agent fails to perform the essential function of communication–the harm should befall the principal, not some third party.105
With these principles in view, an acquired within requirement makes no sense. The agent’s duty to communicate is not limited by the “time, place or manner of acquisition of [the] agent’s knowledge.”106 To the contrary, an agent is obliged to communicate any information “which is relevant to affairs entrusted to [the agent] which, as the agent has notice, the principal would desire to have . . . .”107
VII. Authority from Elsewhere
Besides all its other failings, Engen also is at odds with the overwhelming weight of authority from other jurisdictions. The Restatement (Second) of Agency, for example, flatly rejects the acquired within notion:
Except for knowledge required confidentially, the time, place, or manner in which knowledge is acquired by a servant or other agent is immaterial in determining the liability of his principal because of it.108
. . . .
Since the mind of the agent cannot be divided into compartments, the principal should be bound by whatever knowledge the agent has, irrespective of its source or time of acquisition . . . .109
A multitude of cases support this position,110 some of them quite old.111 A few examples will suffice here. In Hanley v. Westchester Fire Insurance Co.,112 a defendant insurance company alleged that the policyholder had fraudulently concealed information concerning the insured property.113 The insurance company’s own agent had known of the allegedly concealed facts through prior dealings with the insured.114 However, those dealings had occurred while the agent was acting on behalf of another insurance company. The defendant company objected to attribution, asserting the acquired within notion. Its argument, as described by the court, is strikingly parallel to the holding in Engen:
Apparently the defendant is of the opinion that an agent may have a great deal of information about a certain subject obtained prior to the time or in another connection than while dealing with the policyholder at the time of the issuance of the policy, and defendant thereafter takes the position that such information and knowledge should be ignored and that the defendant company is chargeable only with the information given to its agent during the time when there are negotiations for the issuance of the policy.115
The court flatly rejected the defendant’s claim, invoking and quoting Restatement (Second) of Agency section 276.
Capron v. State116 likewise shows the majority doctrine working. Landowners claimed that the state had committed fraud in condemnation proceedings. The alleged fraud concerned a change in the state’s purpose for the land. The claim failed because: (i) the landowners had asked a state legislator to intercede on their behalf in their dealings with the state; and (ii) that state legislator had sponsored legislation effecting the change of purpose. Although the state legislator did not acquire his knowledge about the change of purpose in his capacity as the landowners’ agent, the court refused to divide the legislator’s mind into compartments. The court held that “knowledge, arising either before or during the agency, concerned the subject matter of the agency and was within its scope . . . . [H]ence the [[[ landowners] are chargeable with their agent’s knowledge.”117
Vincent v. Berestitzky118 illustrates the doctrine in relation to torts that cause physical injury. Mr. Berestitzky owned a building and rented some of its space to his wholly-owned corporation. Acting as manager of the corporation and perhaps as landlord as well, Mr. Berestitzky hired someone to trim trees and clean gutters. This individual, Mr. Vincent, fell through the roof and sued. Mr. Berestitzky, as landlord, was strictly liable for premises defects. The key question on appeal was whether the lessee corporation was liable in negligence.119 The only possible theory for so holding was that the corporation was vicariously liable for any negligence of its employee, i.e., Mr. Berestitzky, acting as the corporation’s manager. The question of Mr. Berestitzky’s negligence turned on what, if anything, he actually knew about the defect in the roof.
The appeals court found no evidence in the record to support a finding or inference of knowledge and determined, therefore, that a claim of negligence could not survive.120 On the way to that determination, however, the court disposed of the notion that the corporation might not be accountable for knowledge Mr. Berestitzky possessed merely in his capacity as landlord. The court stated:
Any actual knowledge of the defect that Berestitzky had as owner of the premises is also possessed by Berestitzky in his employment capacity at [the wholly-owned corporation for whom Mr. Berestitzky worked]. An employee is hired with all of his knowledge which includes not only his educational background and prior job experiences, but also all of his life experiences whether on the job or off. An employer may not insulate himself from the negligent actions of an employee who has acted in the course and scope of his employment by arguing that the knowledge that should have deterred the employee from the negligent act was acquired by the employee when he was not at work.121
To be sure, there are contrary cases,122 but they are comparatively few in number and flawed in quality. There are, for example, occasional references to a seemingly special acquired within rule for attributing information to corporations.123 No good reason is given for the special rule, and the better reasoned cases eschew it.124
There are also a few jurisdictions which appear to espouse generally the acquired within element. Often, however, their decisions turn on the relevant subject element rather than on the acquired within element.125 Moreover, their case law is at best confused and inconsistent. For example, a Washington appeals court case, Peck v. Siau, states: “In order for [imputation] to occur . . . the knowledge must relate to the subject matter of the agency, and the agent must have acquired it while acting within the scope of his or her authority.”126 Peck cited as authority inter alia a Washington Supreme Court case, American Fidelity & Casualty Co. v. Backstrom.127 That case quoted an even earlier state supreme court decision, which in turn had quoted a respected treatise on agency rejecting the acquired within requirement.128
Texas case law is even messier on this subject. The seminal Texas case seems to be the 1895 case of Taylor v. Taylor.129 The case is repeatedly cited as establishing an acquired within requirement,130 even though the Texas Supreme Court seems to have first substantially undercut the requirement and then qualified it out of existence. In 1941, the court stated that if an agent is “representing his principal in the transaction to which his knowledge relates, the principal will not be permitted to avail himself of the benefits of his agent’s services without being charged with his knowledge.”131 This holding effectively eliminated the acquired within element for a large category of cases.
A 1961 decision went even further. Fireman’s Fund Indemnity Co. v. Boyle General Tire Co.132 first characterized Taylor as holding that “a principal is unaffected by the knowledge of an agent unless such knowledge came to the agent while he was transacting the business of his principal”133 and then adopted Restatement (Second) of Agency section 276 as an exception to Taylor’s general principle.134 Fireman’s Fund purports merely to build on Taylor, but, as discussed above, section 276 expressly rejects the acquired within requirement.135 In support of creating an exception that swallows the Taylor rule, Fireman’s Fund cites a string of other Texas cases.136
There is a clear majority rule on the issue decided by Engen, and the majority rejects the acquired within requirement. The minority cases are few and poorly reasoned. Had the Engen court considered the weight of authority from other jurisdictions, Engen would have been differently decided.
VIII. The Right Role for Acquired Within–The Then Present Requirement
Although Engen is fundamentally wrong and the acquired within notion is not properly a prerequisite to attribution, the notion does have a role to play in attribution analysis. If an agent acquires relevant subject information while acting as agent, the duty to communicate attaches immediately and attribution occurs at the moment the information is acquired.137 If, in contrast, an agent acquires information “off the job,” attribution is proper only if the agent still knows the information when the information becomes relevant to the agency.138 Only then does the duty to communicate attach; only then can attribution occur. In other words, information acquired by an agent outside the course of the agency can bind the principal only if, at the relevant moment, the information is then present to the agent’s mind.139
Cases in Georgia140 and South Carolina141 illustrate this then present point.142 The Georgia case arose after an attorney, acting as executor to an estate, took an interest in land as security for a loan.143 Sixteen years earlier the attorney, acting in a different capacity, had allegedly drawn an unrecorded deed involving the same land.144 The case turned on whether that unrecorded deed was binding against the estate, and that issue turned on the attribution vel non of the information the lawyer had possessed sixteen years earlier.145 Although the court acknowledged that information acquired outside an agency relationship could bind a principal,146 it ruled against attribution:
[S]ince it is clear that any knowledge as to the existence of the original deed was not acquired in his capacity as executor, and since it certainly cannot be said that this previous knowledge of any alleged previous deed had been acquired so recently ‘as would reasonably warrant the assumption that he still retained it,’ and since there is no fact or circumstance tending to show any actual present recollection on his part of the alleged 16-year-old previous deed at the time the loan deed was taken–this court is of the opinion that the evidence demanded a finding in favor of the defendant executor on that question.147
The South Carolina case holds likewise in a similar situation. Pee Dee State Bank v. Prosser148 had to determine whether Universal Mortgage Corporation had notice of Pee Dee Bank’s mortgage. The court explained:
Pee Dee argues the same attorney who handled the closing of the Universal loan had previously prepared title searches on this property for Pee Dee. Pee Dee asserts the attorney was acting as the agent of Universal in the closing of the loan and his prior knowledge of the Pee Dee mortgage is imputed to Universal.149
As did the Fowler court, the Pee Dee court recognized that an agent’s “off the job” knowledge could bind the principal, but held that Universal failed to make the necessary then present showing.150 The Pee Dee court observed: “No testimony was offered to establish the state of mind of the attorney. The title searches performed by the attorney took place over a year before the transaction between Prosser and Universal. Under this record, we decline to find actual notice.”151
Minnesota cases have also noted the then present factor and have acknowledged that “[i]t may not always be easy to determine what knowledge, acquired elsewhere, a[n agent] may have in mind while he is transacting the [principal’s] business . . . .”152 In St. Paul Fire & Marine, for instance, the Minnesota Supreme Court saw no evidence that an insurance company’s agent recalled the crucial information during the time he was acting for the insurance company.153 The fact that the agent had obtained the information prior to and “off the job” was not categorically fatal, but the court refused to infer the then present factor “merely because the agent had previously acquired knowledge of such facts in the course of an employment in no way relating to the agency, and with which the principal was not connected.”154
This then is the proper, more limited role for the acquired within notion. Information acquired within the agent’s function is automatically attributed, provided it meets the relevant subject prong. Information acquired “off the job” is attributed only if it concerns a relevant subject and was present in the agent’s mind during some relevant moment of the agency.155 Had Engen used the acquired within notion in this way, the case would have conformed with Minnesota law.156
Suppose a bartender on her way to work overhears a man say, “I’ll just get a little liquid courage and then I’ll shoot the first son of a _____ I see.” The bartender believes the man to be in deadly earnest. If later, as the bartender is tending bar, the man enters the bar and orders a double scotch, is the bartender’s memory of the man’s threatening comment attributable to the bar?157
Suppose instead that a bartender refuses to serve a customer, who then sues the bar for discrimination. To prove that it acted on the basis of a legitimate nondiscriminatory reason, the bar wishes to assert that it knew what the bartender knew–namely, that the customer had violent propensities when intoxicated. The agent’s knowledge came exclusively from “off the job” contacts. May the bar nonetheless benefit from the agent’s knowledge?158
To each of these questions, Engen would say no, but then Engen is wrong. That is the first moral of this story. Minnesota’s rule for attributing an agent’s information contains no acquired within prerequisite. The second moral pertains not to Engen’s substance, but rather to the process that produced the decision. Notwithstanding the ninety-day “production deadline,”159 the Minnesota Court of Appeals should be more mindful of precedent, even when rendering an unpublished decision, and should take special care when choosing to decide a case without guidance from the trial court, the parties’ briefs and the oral argument.160
1. Daniel S. Kleinberger, Agency and Partnership: Examples and Explanations ss 1.4.2, 2.2.4, 2.3.8 (1995). The Restatement (Second) of Agency devotes an entire chapter to the subject. Restatement (Second) of Agency ss 268-83 (1958).
2. See Kleinberger, supra note 1, s 4.4.2 (explaining that the term “nondelegable duties” is usually a misnomer); see also John D. Calamari & Joseph M. Perillo, Contracts ss 18-28 (3rd ed. 1987) (discussing the very limited category of situations in which a contract obligor may not assign its obligations).
3. Kleinberger, supra note 1, s 2.1.1 (stating that “[t]he concept of agency power is essentially a concept of attribution”). In certain circumstances, agency law will even attribute to the principal information the agent should have known but did not. Id. s 2.2.4; see also Restatement (Second) of Agency s 277 (1958) (stating that attribution will occur if the principal “has a duty to others that care be exercised in obtaining information”).
4. The doctrines of apparent authority and inherent agency power affect attribution despite an agent’s lack of authority. See Restatement (Second) of Agency s 8 cmt. e (1958) (discussing the difference between apparent and implied authority); see generally Kleinberger, supra note 1, s 2.3 (defining apparent authority as power deriving from “the appearance of legitimate authority”); id. s 2.5 (stating that inherent agency power “holds a principal responsible for (1) certain unauthorized acts of an agent whom the principal has entrusted with ongoing responsibilities, and for (2) certain false representations of an agent or apparent agent.”); id. ss 3.1-3.5 (discussing binding the principal in tort).
5. See Kleinberger, supra note 1, s 2.5.1 (quoting the Restatement (Second) of Agency section 8A, comment a: “It would be unfair for an enterprise to have the benefit of the work of its agents without making it responsible to some extent for their excesses and failures to act carefully”).
6. No. C7-95-78, 1995 WL 387738 (Minn. Ct. App. July 3, 1995), petition for review denied, (Minn. Aug. 30, 1995).
7. See, e.g., In re Johnson, 481 N.W.2d 882, 883 (Minn. Ct. App.), review granted in part, 484 N.W.2d 255, 255 (Minn. 1992) (noting that both parties had cited the same unpublished opinion); Sawyer v. Curt & Co., No. C7-90-2040, 1991 WL 160333, at *1 (Minn. Aug. 2, 1991) (vacating on account of divested jurisdiction a Minnesota Court of Appeals’ order that had provided for publication of the court of appeals’ decision; noting that “[a]pparently during the time the petition for review was pending in this court, the court of appeals received an informal request to reconsider its original determination that its opinion not be published.”); see also Stephen B. Presser, Piercing the Corporate Veil s 2.24 (1995) (using Northwestern Bell Tel. Co. v. Olson, No. C1-89-2223, 1990 Minn. App. LEXIS 583, an unpublished opinion, to help explain Minnesota’s approach to piercing the corporate veil). Contra Ballin v. Metropolitan Transit Comm’n, 525 N.W.2d 11, 13 n.3 (Minn. Ct. App. 1994) (noting that a party had cited an unpublished decision to support his argument and that the decision had no precedential value).
Although under Minnesota Statutes s 480A.08, subdivision 3(b) unreported decisions lack precedential value, they exert influence nonetheless. They “may be cited only for their persuasive value.” Manderfeld v. Krovitz, 539 N.W.2d 802, 807 n.3 (Minn. Ct. App. 1995), petition for review denied, (Minn. Jan. 25, 1996). Furthermore, thanks to computer databases any lawyer or law clerk researching an issue has as much ready access to unreported decisions as to reported ones. The advent of computer-based legal research has removed what was formerly the greatest impediment to the influence of unreported decisions–lack of general availability.
8. E.g., Manderfeld, 539 N.W.2d at 807 n.3 (citing Carmody v. Noon, No. C3-94-1041, 1994 WL 694974 (Minn. Ct. App. Dec. 13, 1994)); Davis v. American Family Mut. Ins. Co., 521 N.W.2d 366, 371 n.2 (Minn. Ct. App. 1994) (disagreeing with and limiting to its facts Petree v. American Standard Ins. Co., No. C0-94-8, 1994 WL 273426 (Minn. Ct. App. June 21, 1994)); Roseville Properties Management Co. v. DeMed Corp., No. C8-93-2501, 1994 WL 396350, at *3 n.1 (Minn. Ct. App. Aug. 2, 1994), petition for review denied, (Minn. Sept. 28, 1994) (including Soltis v. Hovey, No. C3-93-1515, 1994 WL 71368 (Minn. Ct. App. May 8, 1994) in a discussion of Minnesota’s approach to the covenant of quiet enjoyment); Campbell v. Commissioner of Pub. Safety, 489 N.W.2d 269, 271 (Minn. Ct. App.), rev’d, 494 N.W.2d 268 (Minn. 1992) (citing and disagreeing with State v. Ella, No. C3-92-161, 1992 WL 122660 (Minn. Ct. App. June 9, 1992), petition for review denied, (Minn. Aug. 4, 1992)); In re Johnson, 481 N.W.2d 882, 883 (Minn. Ct. App.), review granted in part, 484 N.W.2d 255 (Minn. 1992) (citing and discussing Volz v. Independent Sch. Dist. No. 858, No. C9-89-1479, 1990 WL 45 (Minn. Ct. App. Jan. 2, 1990)); Zum Berge v. Northern States Power Co., 481 N.W.2d 103, 106 n.1 (Minn. Ct. App. Apr. 10, 1990), petition for review denied, (Minn. 1992) (citing Computer Tool & Eng’g, Inc. v. Northern States Power Co., No. C9-89-1027, 1990 WL 39963 (Minn. Ct. App. April 10, 1990), petition for review denied, (Minn. May 17, 1990)).
9. E.g., State v. Shepard, 481 N.W.2d 560, 563 (Minn. 1992) (discussing the Minnesota Court of Appeals’ position on an issue and noting that the court of appeals had expressed that position “most often in unpublished decisions”); cf. DeHaan v. Farmers Union Mktg. & Processing Ass’n, 225 N.W.2d 21, 23 (Minn. 1975) (referring to an unpublished decision of the Workmens’ Compensation Commission).
10. This essay vigorously criticizes the decision and reasoning in Engen. I intend no personal criticism of the panel that decided the case or of any law clerks or other court personnel who assisted the panel in reaching its decision. Minnesota law requires the court of appeals to issue decisions “within ninety days after oral argument or after the final submission of briefs or memoranda by the parties, whichever is later.” Minn. Stat. s 480A.08, subd. 3(a) (1994). Proper judicial decision-making requires an opportunity to research and reflect. A system that imposes deadlines without regard to resources and caseload makes inevitable decisions such as Engen.
11. Engen v. Mitch’s Bar & Grill, No. C7-95-78, 1995 WL 387738, at *1 (Minn. Ct. App. July 3, 1995), petition for review denied, (Minn. Aug. 30, 1995).
14. See Kleinberger, supra note 1, ss 1.4.2, 2.2.4, 2.3.8 (discussing imputation of agent’s knowledge to his or her principal).
16. Engen, 1995 WL 387738 at *1. The Respondent’s brief characterizes this bartender as “Mr. Preston’s ex-girlfriend.” Respondent’s Brief at 3, Engen v. Mitch’s Bar & Grill, No. C7-95-78, 1995 WL 387738 (Minn. Ct. App. July 3, 1995), petition for review denied, (Minn. Aug. 30, 1995).
17. Engen, 1995 WL 387738 at *1. The court of appeals apparently questioned whether Engen had submitted any competent evidence of the mother’s knowledge. Id.; see also Respondent’s Brief at 13, Engen (No. C7-95-78) (raising the same concern).
18. See Kleinberger, supra note 1, ss 3.2.1 to 3.2.6 (discussing the doctrine of respondeat superior).
19. Engen, 1995 WL 387738 at *1 (citing and quoting Devine v. McLain, 306 N.W.2d 827, 831 (Minn. 1981) (emphasis added)). Respondeat superior would have applied if the assault had been committed by an employee or other servant of the bar, acting within his or her scope of employment. Schwingler v. Doebel, 309 N.W.2d 760, 762 (Minn. 1981).
20. Attributing a completed tort is precisely what respondeat superior does. Porter v. Grennan Bakeries, Inc., 219 Minn. 14, 21, 16 N.W.2d 906, 910 (1944). Cf. Kleinberger, supra note 1, s 3.4.2 and fig. 3-1 at 102 (discussing the difference between attributing a tort and attributing information in the context of fraud claims).
21. Appellant’s Brief at 9-10, 14, Engen v. Mitch’s Bar & Grill, No. C7-95-78, 1995 WL 387738 (Minn. Ct. App. July 3, 1995), petition for review denied, (Minn. Aug, 30, 1995).
22. Appellant’s Brief at 11-20, Engen (No. C7-95-78); Respondent’s Brief at 16-25, Engen (No. C7-95-78).
23. Appellant’s Brief at iii, Engen (No. C7-95-78); Respondent’s Brief at 1, Engen (No. C7-95-78).
24. Appellant’s Brief at 11-20, Engen (No. C7-95-78); Respondent’s Brief at 16-25, Engen (No. C7-95-78).
25. Engen, 1995 WL 387738 at *1-2.
26. Id. at *2. The court recognized that Preston had previously been involved in another fight outside the Bar’s premises and accepted that the Bar knew of that fight. Consistent with Minnesota Supreme Court precedent, the court of appeals held that “Preston’s previous fight was insufficient to place [[[[the Bar] on notice that ‘violence was foreseeable’ whenever [the offending patron] was on the premises.” Id. (quoting Quinn v. Winkel’s, Inc., 279 N.W.2d 65, 68 (Minn. 1979) (second alteration in original)). The court of appeals ignored another foreseeability issue which the parties had hotly contested–namely, whether Preston’s alleged propensity to be violent toward the women he dated made foreseeable his violence toward Engen, a man. Compare Appellant’s Brief at 16-18, Engen (No. C7-95-78) (“With apologies to Gertrude Stein, a rogue is a rogue is a rogue. Preston is a rogue.”) with Respondent’s Brief at 21-23, Engen (No. C7-95-78) (objecting that under Appellant’s theory “a tavern patron with a history of off-premises domestic abuse must be barred from patronizing the tavern, even though the patron has no history of misbehavior in the tavern itself.”).
27. Engen, 1995 WL 387738 at *2. In making this ruling the court ignored assertions by Engen that at least one bartender had on-the-job information, acquired the very night of the assault, concerning Preston’s violent tendencies. Appellant’s Brief at 6-8, Engen (No. C7-95-78). The Bar argued vehemently that this information did not suffice to make Preston’s assault foreseeable. Respondent’s Brief at 24, Engen (No. C7-95-78). The Bar may have been right in that argument, but the court of appeals did not decide the case on that basis. Engen, 1995 WL 387738 at *2.
28. Telephone conversation with Joseph J. Rody, Jr., counsel for Respondent (the Bar) (Mar. 15, 1996); Telephone conversation with Sean M. Quinn, counsel for Appellant (Engen) (Mar. 15, 1996); Petition for Further Review at 2, Engen v. Mitch’s Bar & Grill, No. C7-95-78, 1995 WL 387738 (Minn. Ct. App. July 3, 1995), petition for review denied, (Minn. Aug. 30, 1995). Appellant subsequently sought further review in part on the grounds that “the Court of Appeals, sua sponte created a new issue so that it could avoid addressing the difficult legal issue presented to it.” Petition for Further Review at 2, Engen (No. C7-95-78). The Minnesota Supreme Court denied further review. Engen, 1995 WL 387738. An appellate court may affirm a lower court decision on a basis other than that adduced by the lower court or argued by the parties. E.g., Brecht v. Schramm, 266 N.W.2d 514, 520 (Minn. 1978); Schoeb v. Cowles, 279 Minn. 331, 336, 156 N.W.2d 895, 898 (1968); see also Cochrane v. Tudor Oaks Condominium Project, 529 N.W.2d 429, 432 (Minn. Ct. App. 1995) (“Even though an appellate court may disagree with the trial court’s analysis, summary judgment will be affirmed if it can be sustained on any grounds.”); Myers v. Price, 463 N.W.2d 773, 775 (Minn. Ct. App. 1991) (stating that the trial court’s judgment will be affirmed “if it can be sustained on any grounds.”). However, a court intending to do so should be sure of its grounds. See infra text accompanying note 160.
29. Engen, 1995 WL 387738 at *2 (quoting Jackson v. Mutual Benefit Life Ins., 79 Minn. 43, 47, 81 N.W. 545, 546 (1900)).
30. Id. (quoting Anderson v. Walthal, 468 So. 2d 291, 294 (Fla. Dist. Ct. App. 1985)).
31. See infra text accompanying notes 137-56.
32. Engen, 1995 WL 387738 at *2.
33. 47 Minn. 352, 50 N.W. 240 (1891).
34. 79 Minn. 43, 81 N.W. 545 (1900).
35. 468 So. 2d 291 (Fla. Dist. Ct. App. 1985).
36. Engen, 1995 WL 387738 at *2 (quoting St. Paul Fire & Marine v. Parsons, 47 Minn. 352, 352, 50 N.W. 240, 240 (1891)).
37. St. Paul Fire & Marine, 47 Minn. at 353, 50 N.W. at 240.
38. Id. at 354, 50 N.W. at 240-41.
39. Id. at 355, 50 N.W. at 241.
43. Id. at 356, 50 N.W. at 241.
45. Id. at 355, 50 N.W. at 241 (citing Trentor v. Pothen, 46 Minn. 298, 49 N.W. 129, (1891)). Trentor is discussed infra text accompanying notes 78-82.
46. 79 Minn. 43, 81 N.W. 545 (1900).
47. Engen v. Mitch’s Bar & Grill, No. C7-95-78, 1995 WL 387738, at *2 (Minn. Ct. App. July 3, 1995), petition for review denied, (Minn. Aug. 30, 1995) (quoting Jackson v. Mutual Benefit Life Ins. Co. 79 Minn. 43, 47, 81 N.W. 545, 546 (1900)).
48. Jackson, 79 Minn. at 47, 81 N.W. at 546.
50. Id. at 51, 81 N.W. at 546 (denying motion for rehearing and quoting 2 John Norton Pomeroy, Pomeroy’s Equity Jurisprudence s 668 (5th ed. 1941)) (emphasis added).
52. Id. (citing Sandberg v. Palm, 53 Minn. 252, 252, 54 N.W. 1109, 1109 (1893)). Contra Jefferson v. Leithauser, 60 Minn. 251, 62 N.W. 277 (1895) (holding that, where agent had the authority to make leases, collect rents and look after the property generally, notice to agent of improvement being made on the land was notice to landlord).
53. 468 So. 2d 291 (Fla. Dist. Ct. App. 1985).
54. Id. t 294.
56. Id. (emphasis added).
57. Columbia Pictures Corp. v. De Toth, 197 P.2d 580, 586 (Cal. Dist. Ct. App. 1948) (emphasis added).
58. Id. at 587.
59. 876 P.2d 1166 (Ariz. Ct. App.), petition for review denied, 885 P.2d 99 (Ariz. 1994).
60. Id. at 1173.
61. Id. at 1172-73 (quoting Fridena v. Evans, 622 P.2d 463, 466 (Ariz. 1980)).
62. Id. at 1173.
63. Fridena, 622 P.2d at 466.
65. 854 F.2d 1013 (7th Cir. 1988).
66. 205 N.E.2d 839 (Ind. Ct. App. 1965).
67. Shenandoah Valley Poultry, 854 F.2d at 1018 n.3 (applying Indiana law and citing City of Indianapolis v. Bates, 205 N.E.2d 839, 847 (Ind. Ct. App. 1965) and citing Prudential Ins. Co. of Am. v. Winans, 325 N.E.2d 204, 206 (Ind. 1975)).
68. Id. (quoting and citing City of Indianapolis v. Bates, 205 N.E.2d 839, 847 (Ind. Ct. App. 1965) and citing Prudential Ins. Co. of Am. v. Winans, 325 N.E.2d 204 (Ind. 1975)).
69. The same problem exists in some legal encyclopedias. For example, 3 American Jurisprudence (Second), Agency s 281 begins: “The general rule…is that the principal is chargeable with, and bound by, the knowledge of or notice to his agent received while the agent is acting as such within the scope of his authority and in reference to a matter over which his authority extends.” 3 Am. Jur. 2d Agency s 281 (1986). Section 286 begins: “Generally, a principal is not affected by notice which comes to the agent outside the course of the transaction in which the agent is employed.” Id. s 286. However, s 286 immediately follows that observation with this statement:
[T]his is not an absolute rule to be applied without reference to the circumstances of the particular case, and the knowledge of an agent will be charged to his principal, although not acquired in the course of the same transaction from which the principal’s rights and liabilities arise, where it is clear that the information obtained by the agent in a former transaction was so precise and definite that it must have been present to his mind while engaged in the second transaction….The important consideration is whether the agent has the knowledge at the time it becomes relevant in his work for the principal; if he has it at that time, the principal is bound whether the agent’s knowledge was acquired as a result of the agency or not.
Id. (citations omitted); see also 3 C.J.S. Agency s 432 (1973) (stating rule as including an acquired within element); id. s 436 nn.71-72 (1973) (acknowledging authority that rejects the acquired within notion); 3 William Meade Fletcher, Fletcher Cyclopedia of the Law of Private Corporations s 793 n.12 (Beth A. Buday & Gail A. O’Gradney eds. 1994) (stating rule as including an acquired within element, but acknowledging authority that rejects the acquired within notion).
70. 60 Minn. 251, 62 N.W. 277 (1895).
71. Id. at 256, 62 N.W. at 279 (citing Sundberg v. Palm, 53 Minn. 252, 54 N.W. 1109 (1893)).
73. 29 Minn. 322, 13 N.W. 145 (1882).
74. Id. at 326, 13 N.W. at 147 (citations omitted).
75. 36 Minn. 112, 30 N.W. 401 (1886).
76. Id. at 113, 30 N.W. at 402.
78. 46 Minn. 298, 49 N.W. 129 (1891).
79. See supra text accompanying notes 33, 36-45.
80. Trentor, 46 Minn. at 300, 49 N.W. at 129.
82. Id. The court used this element to deny attribution, holding that “in view of the special and limited purpose for which the intervenor employed this attorney, his knowledge of the pendency of this action cannot be imputed to his principal.” Id.
83. 82 Minn. 230, 84 N.W. 910 (1901).
84. Id. at 234, 84 N.W. at 911.
85. Id. at 232, 84 N.W. at 910.
86. Id. at 234, 84 N.W. at 911.
87. State Bank of Morton v. Adams, 142 Minn. 63, 170 N.W. 925 (1919).
88. Id. at 68, 170 N.W. at 927.
89. Id. (citation omitted).
90. The reader may have noticed that most of the cases discussed so far concern contract-related matters rather than tort claims against a principal. Why the paucity of cases seeking to attribute knowledge in order to hold a principal directly liable in tort? Probably because in most tort situations the plaintiff recovers by attributing the agent’s negligence to the principal via respondeat superior. For example, “where a servant knowingly drives a defective car, the master is liable for harm resulting from the use of the car, and the language of imputed knowledge is seldom employed.” Restatement (Second) of Agency s 276 cmt. a (1958). Nonetheless the Restatement treats tort liability as one of the “[s]ituations in which [imputed] knowledge is important,” id. s 272 cmt. c (citation to caption), and makes reference to situations involving a principal’s direct liability:
In determining tort liability, the knowledge which the actor has or should have is usually of great importance. This is particularly true in cases of negligence and in torts which, like deceit or malicious prosecution, are based upon the fact that the defendant has acted improperly in view of the knowledge which he has.
Id. See also id., illus. 6 (landlord liable for defective stairway because agent knew of defect). See generally Kleinberger, supra note 1, s 3.2 (explaining respondeat superior); supra text accompanying note 19 (explaining why the plaintiff in Engen could not invoke the doctrine and had to establish direct liability).
91. 261 Minn. 549, 113 N.W.2d 175 (Minn. 1962).
92. Id. at 550-51, 113 N.W.2d at 176.
93. Id. at 552 n.1, 113 N.W.2d at 177 n.1 (emphasis added).
94. Id. (citing Trentor v. Pothen, 46 Minn. 298, 49 N.W. 129 (Minn. 1891)). It is uncertain whether discovering Distillers Distributing and its cite to Trentor would have lead the Engen court to the line of precedent discussed above. After all, Engen purports to rely on St. Paul Fire & Marine and that case also cites Trentor. St. Paul Fire & Marine v. Parsons, 47 Minn. 352, 355, 50 N.W. 240, 241 (1891).
95. No. C5-87-1765, 1988 WL 24835 (Minn. Ct. App. Mar. 22, 1988).
96. Id. at *1.
97. Id. at *2.
98. Id. at *2 (quoting Aiken Petroleum Co. v. National Petroleum Underwriters, 36 S.E.2d 380, 385 (S.C. 1945)).
99. See supra note 8.
100. City of Indianapolis v. Bates, 205 N.E.2d 839, 848 (Ind. 1965), quoted in Shenandoah Valley Poultry Co. v. Armour & Co., 854 F.2d 1013, 1017 (7th Cir. 1978); see also Juarez v. Ameritech Mobile Communications, Inc., 957 F.2d 317, 321 (7th Cir. 1992) (citing Restatement (Second) of Agency s 275 cmt. c (1958)); Fridena v. Evans, 622 P.2d 463, 466 (Ariz. 1980) (stating that “[t]his rule [of attribution] is based on a conclusive presumption that the agent will communicate to the corporation whatever knowledge or notice he receives in relation to his agency which is necessary for the protection of the interests of the corporation.”); Peck v. Siau, 827 P.2d 1108, 1111 (Wash. Ct. App.), petition for review denied, 838 P.2d 1142 (Wash. 1992). The Peck court stated that:
The purpose of these limitations [on attribution] is to prevent knowledge from being imputed when the agent “would not likely pass such knowledge along.” These limitations are satisfied if the agent, by virtue of his employment, has a duty to report his know-ledge to the principal or to another agent of the principal.
Id. (citations omitted); Hendricks v. Lake, 528 P.2d 491, 496 (Wash. Ct. App. 1974), petition for review denied, (Wash. Feb. 26, 1975) (holding that “[t]he general rule of agency that a principal is chargeable with notice of facts known to his agent is based on an underlying duty of the agent to communicate his knowledge of [sic] his principal.”); Restatement (Second) of Agency s 275 (1958) (stating that “the principal is affected by the knowledge which an agent has a duty to disclose to the principal…to the same extent as if the principal had the information”); Annotation, Notice to Salesman as Chargeable to Principle, 43 A.L.R. 745-46 (1926) (discussing notice to salesman as chargeable to principal).
For a critique of the duty rationale and an alternative justification, see Irvine v. Grady, 19 S.W. 1028, 1030 (Tex. 1892). That case stated:
Another reason that is sometimes given for the doctrine that notice to the agent is notice to the principal is that it is the duty of the agent to communicate his knowledge to the principal, and he is therefore ‘irresistibly presumed’ to have so communicated it. This would seem rather a deduction from the doctrine that it is inequi-table for the principal to avail himself of the agent’s acts without being held to know what the agent knows, rather than an independent foundation for the rule of constructive notice.
Irvine, 19 S.W. at 1030 (citation omitted).
Three years later another Texas case, Taylor v. Taylor, 29 S.W. 1057, 1058 (Tex. 1895), returned to the same theme and used that theme to confine attribution to situations meeting the acquired within requirement. The Taylor court held:
Since the principal, if he had conducted the transaction for himself, would in all probability have ascertained the facts which came to the knowledge of the agent in making the transaction, he should not be allowed to avail himself of the circumstance that he acted through an agent, and to say that, although his agent was affected with notice, he acted in good faith. This principle only applies where the agent acquires his knowledge in the transaction of his principal’s business, and we therefore think that the doctrine of imputed notice should be limited to cases of that character.
Taylor, 29 S.W. at 1058.
For a discussion of Texas’ confused jurisprudence on the acquired within question, see infra text accompanying notes 129-36.
101. Imperial Fin. Corp. v. Finance Factors, Ltd., 490 P.2d 662, 664 (Haw. 1971) (third party cannot invoke attribution when third party requested that agent keep the information confidential) (quoting Restatement (Second) of Agency s 281, reporter’s nn. at 483 (1958)); see also Restatement (Second) of Agency s 275, illus. 7 (1958) (stating that a remark overheard by a salesperson is attributable to the principal only if the agent’s duties “include that of giving information concerning” the subject matter of the overheard remark).
102. Blumberg v. Taggart, 213 Minn. 39, 44, 5 N.W.2d 388, 390 (1942).
103. Kleinberger, supra note 1, s 2.5.1 (explaining enterprise liability).
104. See, e.g., Holmes v. Cathcart, 88 Minn. 213, 216, 92 N.W. 956, 957 (1903) (holding that an agent “is bound…to keep his principal informed of facts coming to his knowledge affecting his [the principal’s] rights and interests.”). Arising from an agent’s alleged failure to provide key information concerning a land transaction arranged by the agent for the principal, the case illustrates the central importance of the duty to communicate. Id.
105. See, e.g., Jefferson v. Leithauser, 60 Minn. 251, 255, 62 N.W. 277, 279 (1895) (noting that “[a]lthough the agent failed to communicate to his principal the information which he had acquired in reference to this improvement, that would be immaterial, so far as the rights of this plaintiff are involved.”).
106. Restatement (Second) of Agency s 276 (1958) (citation to caption).
107. Id. s 381 (1958). Under Restatement s 9(1) “notice” includes both knowledge and reason to know. See id. s 9(1).
108. Id. s 276.
109. Id. s 276 cmt. a; see also sources cited supra note 69.
110. See, e.g., Phelan v. Middle States Oil Corp., 210 F.2d 360, 365-66 (2nd Cir. 1954); Cooke v. Mesmer, 128 P. 917, 920 (Cal. 1912); Restatement (Second) of Agency s 276 reporter’s nn. (1958) (citing a variety of cases that support this position).
111. Besides the Minnesota cases cited supra notes 70, 73, 75, 78, see The Distilled Spirits, 78 U.S. 356, 366 (1870) (relating to forfeiture of distilled spirits for violation of bonding requirements and stating that “if the agent, at the time of effecting a purchase, has knowledge of any prior lien, trust, or fraud, affecting the property, no matter when he acquired such knowledge, his principal is affected thereby.”).
112. 23 F.R.D. 640, 644-45 (W.D. Mich. 1959).
114. Id. at 653.
115. Id. (emphasis added).
116. 247 Cal. App. 2d 212 (1966).
117. Id. at 232.
118. 653 So. 2d 1251 (La. Ct. App.), petition for review denied, 660 So. 2d 877 (La. 1995).
119. Id. at 1253.
120. Id. at 1254.
122. See Restatement (Second) of Agency s 276 reporter’s nn. (1958) (collecting cases).
123. See, e.g., Juarez v. Ameritech Mobile Communications, Inc., 957 F.2d 317, 321 (7th Cir. 1992); Smith v. American Express Travel Related Servs. Co., 876 P.2d 1166, 1173 (Ariz. Ct. App. 1994); Hendricks v. Lake, 528 P.2d 491, 496 (Wash. Ct. App. 1974), petition for review denied, (Wash. Feb. 26, 1975). “The general rule is that knowledge acquired or possessed by an officer or agent of a corporation otherwise than in the course of employment…is not notice to the corporation.” Fletcher, supra note 69, s 793.
124. See, e.g., Fridena v. Evans, 622 P.2d 463, 466-67 (Ariz. 1980); Funk v. Tifft, 515 F.2d 23, 26 n.4 (9th Cir. 1975) (as amended on denial of rehearing); Bourns, Inc. v. Wells Fargo Bank, N.A., No. C-93-3961 MHP, 1994 WL 36998, at *2-3 (N.D. Cal. Feb. 2, 1994). Indeed, Fletcher acknowledges that:
[I]t is not in all events essential that the knowledge be acquired by the agent in the course of the very transaction with respect to which the principal is sought to be charged with [sic], since, if the matter is relevant or pertinent to the subject matter of the agency, the knowledge of the agent will be nonetheless imputed to the principal, provided only that it came to the agent so nearly before the transaction in question, or, under such circumstances, that the agent must be presumed to have remembered it and to have had it present in his or her mind while engaged in the subsequent transaction for the principal.
Fletcher, supra note 69, s 793. The special rule does make sense in a very special circumstance: When a corporation seeks to establish the innocent owner defense to a forfeiture action; the underlying crime was committed by the corporation’s agent; the crime did not benefit the corporation and was not part of its business; and the corporation is not the mere alter ego of the miscreant. See United States v. One Parcel of Land, 965 F.2d 311, 316-17 (7th Cir. 1992) (using the acquired within concept to preclude attribution of knowledge gained by agent who was not acting to benefit the corporation).
125. See, e.g., Peck v. Siau, 827 P.2d 1108, 1111-12 (Wash. Ct. App. 1992), petition for review denied, 838 P.2d 1142 (Wash. 1992) (denying attribution because the information to be attributed did not “relate to the subject matter of the agency”); Juarez, 957 F.2d at 321 (denying attribution because “even if we assume that [first employee] ‘knew’ that [second employee] had engaged in possibly harassing behavior, that knowledge did not concern a matter within the scope of [first employee’s] authority as an accounts payable supervisor.”).
126. Peck, 827 P.2d at 1111 (holding that school system lacked the necessary knowledge to be liable for negligent retention of school librarian who had sexually abused a student, even though information concerning other, past misconduct had been communicated to a teacher).
127. 287 P.2d 124 (Wash. 1955).
128. Id. at 127 (citing Miller v. United Pac. Casualty Ins. Co., 60 P.2d. 714, 718 (Wash. 1936)). Miller quoted the following passage from Mechem on Agency:
The law imputes to the principal, and charges him with, all notice or knowledge relating to the subject-matter of the agency which the agent acquires or obtains while acting as such agent and within the scope of his authority, or, according to the weight of authority, which he may previously have acquired, and which he then had in mind ….
2 Floyd R. Mechem, Mechem on Agency s 1813 (2nd ed. 1914).
129. 29 S.W. 1057 (Tex. 1895).
130. See, e.g., Sessums v. Citizens’ Nat’l Bank, 72 S.W. 403, 404 (Tex. Ct. App. 1934); Wilson v. Shear Co., 284 S.W. 654, 659 (Tex. Ct. App. 1926); Alexander v. Anderson, 207 S.W. 205, 208 (Tx. Ct. App. 1918); Ives v. Culton, 197 S.W. 619, 620 (Tx. Ct. App. 1917), aff’d, 229 S.W. 321 (Tx. Commission of Apps. 1921); see also Teagarden v. Godley Lumber Co., 154 S.W. 973 (Tx. 1913) (stating that knowledge of the agent is not attributed to the principal “unless such knowledge was acquired while in the transaction of the business of his principal.”).
131. Wellington Oil Co. v. Maffi, 150 S.W.2d 60, 63 (Tex. 1941), quoted in Maryland Ins. Co. v. Head Indus. Coatings & Serv., Inc., 906 S.W.2d 218, 229 (Tex. Ct. App. 1995). Wellington was probably referring to specific benefits resulting from the transaction in issue, rather than to the general benefits of being able to delegate tasks to an agent. All the cases cited by Wellington involved some sort of contractual relationship. A main case relied on by Wellington, American Sur. Co. v. Fenner, 125 S.W.2d 258 (Tex. 1939), concerned a bank teller’s investment of stolen funds. The bank’s surety sought to attribute certain information to the stockbroker with whom the teller had invested the stolen funds. The court agreed, noting that the brokerage had “retained the fruits of such dealings.” American Sur. Co., 125 S.W.2d at 261.
132. 392 S.W.2d 352 (Tex. 1965).
133. Id. at 356.
134. Id. (noting that, having articulated the acquired within requirement, “the [ Taylor] court then stated an exception which is recognized by section 276 of the Restatement of the Law of Agency and also by Texas decisions”).
135. See supra text accompanying notes 108-09.
136. Fireman’s Fund, 392 S.W.2d at 356-57; see also Duncan v. First Am. Title Ins. Co., No. C14-93-00171-CV, 1994 WL 2010 (Tex. Ct. App. Jan. 6, 1994) (attributing to a corporation a corporate officer’s knowledge of a lien he had created in his personal capacity, holding that the attributed knowledge meant that the corporation had acquiesced in the lien and ruling that the lien was therefore not covered by a title insurance policy). See generally Pan Eastern Exploration Co. v. Hufo Oils, 855 F.2d 1106, 1126-28 (5th Cir. 1988) (holding that “the exception has swallowed the rule.”).
137. For a discussion of the agent’s duty to communicate, see supra text accompanying notes 100-02.
138. See Kleinberger, supra note 1, s 2.2.4.
139. State Bank of Morton v. Adams, 142 Minn. 63, 68-69, 170 N.W. 925, 927 (1919) (holding that a practicable rule is what information the agent has “in mind while he is transacting the [principal’s] business”).
140. See, e.g., Fowler v. Latham, 38 S.E.2d 732 (Ga. 1946).
141. See, e.g., Pee Dee State Bank v. Prosser, 367 S.E.2d 708 (S.C. Ct. App. 1988), overruled on other grounds by, United Carolina Bank v. Caroprop, Ltd., 446 S.E.2d 415, 417 (S.C. 1994).
142. The point also pertains to information attributed from a partner to a general partnership. Section 12 of the Uniform Partnership Act attributes to the partnership “knowledge of the partner acting in the particular matter, acquired while a partner or then present to his mind.” See Minn. Stat. s 323.11 (1994) (this section is Minnesota’s equivalent to s 12 of the Uniform Partnership Act).
143. Fowler, 38 S.E.2d at 734.
145. Id. at 737.
148. 367 S.E.2d 708 (S.C. Ct. App. 1988), overruled on other grounds by, United Carolina Bank v. Caroprop, Ltd., 446 S.E.2d 415, 417 (S.C. 1994).
149. Id. at 713.
151. Id. at 714; see also Phelan v. Middle States Oil Corp., 210 F.2d 360, 365 (2nd Cir. 1954) (stating that “[a] principal is not charged with his agent’s knowledge obtained before he became an agent…unless the information was in the agent’s mind when he acted for the principal on the occasion under scrutiny.”); Cooke v. Mesmer, 128 P. 917, 920 (Cal. 1912) (noting the universal recognition of the then present qualification).
152. State Bank of Morton v. Adams, 142 Minn. 63, 68-69, 170 N.W. 925, 927 (1919).
153. St. Paul Fire & Marine Ins. Co. v. Parsons, 47 Minn. 352, 50 N.W. 240 (1891).
154. Id. at 355, 50 N.W. at 241; see also Restatement (Second) of Agency s 276 cmt. b (1958). The Restatement s 276 states:
Knowledge acquired casually or at a considerable period before the agent acts in the transaction is likely to be forgotten, and if the agent acquires the information before he becomes an agent or while he is not acting in his principal’s affairs, and has forgotten it, the principal is not liable because of it ….
Id. A recent Georgia case, Chicagoland Vending, Inc. v. Parkside Ctr., Ltd., 454 S.E.2d 456 (Ga. 1995), illustrates how complicated the then present factor can be when the agent at issue is an organization. The case concerned enforcement of a restrictive covenant in a shopping center lease. The original lessee sought to enforce the covenant against a new lessee, arguing that the new lessee had constructive notice of the restriction. Chicagoland Vending, 454 S.E.2d at 457. The same broker which had acted for the shopping center lessor in the original lease also negotiated the offending lease on behalf of the new lessee. Id. Attributing the broker’s knowledge to the new lessee should have made the constructive notice argument succeed, but a different employee of the broker was involved in each transaction. Ignoring the fact that under the Restatement (Second) of Agency s 275 whatever the broker’s various employees knew, the broker constructively knew, the court ruled against imputation. “As [the individual working for the broker, when the broker was working for the new lessee] had no actual knowledge of the [restrictive] provision, there is nothing which can be imputed to [the new lessee].” Id. at 458.
155. In all events, attribution presupposes acquisition. In Silvio v. Pharoah’s Palace, 517 So. 2d 185 (La. Ct. App. 1987), plaintiffs alleged that Pharoah’s Palace was responsible for the injuries they suffered in an altercation with other patrons. The Louisiana Court of Appeals sustained an involuntary dismissal, holding essentially that there was no knowledge to be attributed.
The only evidence presented that Pharoah’s had knowledge of the propensity of the Tennesseans for violence was the uncorroborated testimony of Fredric and his wife [plaintiffs] that one of the bartenders told them there had been prior incidents involving the Tennesseans that night. Terry Jack Bates, the only bartender to testify, stated that no one had complained to him about the Tennesseans and he had no reason to believe there was going to be trouble. The testimony of Stanley Neal Braud and Jim Pickering, two of the three guards on duty inside Texas that night, was that they had no knowledge of prior incidents involving the Tennesseans. Even Fredric himself, when questioned by the trial judge, admitted that he did not anticipate trouble ….
Id. at 188.
156. Even such a doctrinally correct decision, however, would have been at odds with the factual concession made by the Bar for purposes of summary judgment. See supra note 21.
157. Cf. Restatement (Second) of Agency s 272, illus. 6 (1958):
P employs A to manage rental property. A learns that a stairway used in common by a number of tenants is dangerously weak. P’s liability for harm to a tenant, hurt by the fall of the stairway, results from A’s knowledge.
Id. Suppose that (i) the rental property is extensive; (ii) A makes regular inspections of the premises; (iii) in the normal course of events, A will not inspect that stairway until next week; (iv) today A happens to learn of the danger when, while sitting in a bar, she overhears two tenants talking. A was “off the job” when in the bar. Is A’s knowledge attributable to P?
158. This second scenario reverses the usual situation, in that attribution typically is asserted to prejudice rather than benefit a principal. For a case juxtaposing potential prejudices in order to show the proper scope of attribution, see Jefferson v. Leithauser, 60 Minn. 251, 62 N.W. 277 (1895) (considering whether notice to a landowner’s agent bound the landowner for purposes of the lien law). The Jefferson court pointed out that, if the agent had responded to the notice by giving a notice purporting to protect the landowner against liens,
such a notice would be a valid and an effective one. Why, then, should not the rights and obligations of each party be mutual? If such notice to [the lien claimant], given by this agent…in behalf of his principal, would prevent the creation of a lien, then the notice to the agent of the making of these improvements would be notice to his principal that such improvements were being made.
Id. at 255, 62 N.W. at 279. For a juxtaposition and mutuality argument running in the other direction, see Haines v. Starkey, 82 Minn. 230, 234, 84 N.W. 910, 911 (1901) (holding that, since an agent’s knowledge could be used against the principal, a principal could surely claim the benefit of the agent’s knowledge).
159. See Minn. Stat. s 480A.08, subd. 3(a) (1994); see also supra note 10.
160. Cf. Horace Mann Ins. Co. v. Westenfield, 496 N.W.2d 410, 410-11 (Minn. 1993) (granting further review of and reversing an unpublished opinion, stating that “[t]he decision of the court of appeals has confused and therefore misapplied principles of No-Fault first-party coverage to this question which only involves third-party liability coverage ….” and citing Minnesota Supreme Court precedent which “is controlling and dispositive.”).