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A Louisiana appellate court has considered whether a broker can be liable for the alleged failure of its independent contractor-salesperson to fully disclose all of the documents related to the property's flooding history.
Darrell and Judy Goodreau ("Sellers") sold their home to Catherine and Frank Hughes ("Buyers"). The Sellers had listed their home for sale with Roberta Broussard ("Salesperson") of Prudential Louisiana Properties d/b/a Property Plus ("Brokerage"), and the Buyers were represented by another salesperson associated with the Brokerage, Sharon Haber ("Buyer's Representative"). Shortly after the Buyers moved into their new home, the basement flooded. The Buyers filed a lawsuit against the Sellers seeking to undue, or rescind, their purchase of the home. The Sellers brought a third-party action against the Brokerage. Prior to trial, the Sellers settled with the Buyers, leaving only the Sellers' claims against the Brokerage. The trial court awarded the Sellers $57,279.79 in damages, and the Brokerage appealed.
The State of Louisiana, Court of Appeal, First Circuit, partially amended the decision of the trial court and then affirmed the amended decision. The Brokerage challenged the trial court's ruling on the grounds that the Brokerage could not be liable for the alleged negligence of the Salesperson because she was an independent contractor, not an employee. Under Louisiana law, an employer is vicariously liable for torts committed by its employees against third parties during the scope of their employment. The court stated that simply because the agreement between the Salesperson and the Brokerage categorized the Salesperson as an independent contractor was not determinative of the Salesperson's status. Rather, the court needed to examine the actual relationship between the Salesperson and the Brokerage, examining the amount of control that the Brokerage exercised over the Salesperson.
Focusing on the Brokerage's right to control the Salesperson's actions and examining prior decisions, the court found that the Salesperson was more like an employee than an independent contractor. Supporting the Brokerage's independent contractor argument was the fact that the Brokerage did not dictate that its salespeople work a certain number of hours or the types of properties its salespeople could list for sale.
Supporting the Sellers' argument that the Salesperson was an employee was the agreement between the Salesperson and the Brokerage, which mandated that the Salesperson perform its sales duties in compliance with the Brokerage's "Policy and Procedures Manual." Salespeople of the Brokerage were also required to attend an introductory orientation class, and referrals made by its salespeople were considered property of the Brokerage. The Brokerage also had the immediate right to terminate Salespeople for breach of the agreement between the parties. Based on these factors, the court found that the Salesperson was more like an employee and thus the Brokerage could be vicariously liable for the tortious actions of the Salesperson towards third parties.
Next, the Brokerage argued that the Sellers recovery was limited to seeking contractual indemnity from it for the Sellers' settlement with the Buyers, which would limit the Sellers' recoverable damages from the Brokerage to the settlement amount. The dispute between the Sellers and the Brokerage centered on the property condition disclosure form that the Sellers had completed. On the form, one of the Sellers indicated that the home had experienced prior flooding problems and gave the Salesperson six letters related to the flooding problem. The Salesperson wrote on the disclosure form "See attached documents" next to the questions involving past flooding on the property. However, the Buyers testified that they only saw two of the six letters, and those two letters had given them the impression that flooding on the property was a rare occurrence. The four letters that the Buyers were not given contained correspondence with local government officials concerning efforts to alleviate flooding problems in the area, which the Buyers testified they would not have purchased the property if they had seen these letters prior to closing. The Salesperson testified that she had made available all six letters on the home's kitchen table during property showings and had also placed them into the Brokerage's main file. The Buyer's Representative testified that she had given all available documents related to the Sellers' home to the Buyers, but she wasn't sure whether she had given the Buyers all six letters or not.
The trial court had found that the Brokerage did not fully disclose all information received from the Sellers to the Buyers, and the court ruled that the evidence could support such a conclusion. However, the court did disagree with the trial court's imposition of liability on the Brokerage for negligent misrepresentation, a tort which requires that the Sellers show the Brokerage had a legal duty to supply the Sellers information, a breach of that duty by the Brokerage, and damage to the Sellers. The court found that the Brokerage did not have a duty to make disclosures to the Sellers, and thus the court determined that the Sellers could not bring allegations of negligent misrepresentation against the Brokerage. Instead, the court found that the evidence supported a breach of fiduciary duty by the Brokerage for failing to properly disclose all of the information that it received from the Sellers, which was also a tort. Thus, the court ruled that the Brokerage was liable to the Sellers for breach of fiduciary and not negligent misrepresentation, as the trial court had determined. The trial court's decision was therefore amended to reflect this, but since breach of fiduciary duty is a tort, it did not change the damage amount awarded to the Sellers. Therefore, the trial court's decision was otherwise affirmed as amended.
Hughes v. Goodreau, 836 So.2d 649 (La. Ct. App. 2002).