Patterson v. Domino’s: California Supreme Court Lends Important Guidance on Franchisor Liability

by Snell & Wilmer

Taylor Patterson claimed that Domino’s, as the franchisor of thousands of pizza stores across the nation, should be held responsible for sexual harassment she experienced from a fellow employee over a two-week period when she worked at a Thousand Oaks Domino’s store owned and run by franchisee Sui Juris. The trial court granted summary judgment in favor of Domino’s Pizza LLC, Domino’s Pizza Franchising and Domino’s Pizza, Inc. (collectively, Domino’s), on the grounds that Domino’s did not have the power to control day-to-day operations at Sui Juris; rather, Sui Juris, as the franchisee, had the power to hire, fire and train employees, and therefore Domino’s could not be vicariously liable for the alleged harassment. The Court of Appeal reversed.

The California Supreme Court granted review of the case, to determine whether a franchisor can be held vicariously liable for the acts of a franchisee’s employee where the franchisor did not exercise control over the day-to-day details concerning the type of conduct giving rise to the plaintiff’s claims.

The Supreme Court, in a 4 to 3 decision, agreed that summary judgment was properly granted in favor of Domino’s, and clarified the scope and application of the “means and manner of control” test for franchisor vicarious liability.

First, the Court flatly rejected the contention that the existence of a comprehensive franchise operating system alone establishes the kind of relationship that can give rise to franchisor vicarious liability for the conduct of a franchisee’s employee. Justice Baxter, writing for the majority, stated: “we cannot conclude that franchise operating systems necessarily establish the kind of employment relationship that concerns us here. A contrary approach would turn business format franchising on its head.”

Second, the Court explained and refined the contours of the test for determining franchisor vicarious liability in California. First, the majority observed: “A franchisor enters this arena, and becomes potentially liable for actions of the franchisee‘s employees, only if it has retained or assumed a general right of control over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee‘s employees. Any other guiding principle would disrupt the franchise relationship.”

Here, Domino‘s lacked the general control of an employer or principal over relevant day-to-day aspects of the employment and workplace behavior of Sui Juris‘s employees. Domino’s did not, by contract or conduct, take control of hiring, firing, training or disciplining Sui Juris’ employees concerning sexual harassment; rather, the owner of Sui Juris exercised sole control over selecting individuals who worked in his store, training employees concerning sexual harassment, and taking unilateral disciplinary action against the alleged perpetrator in this case. While there was some testimony that a Domino’s area leader became involved with the alleged sexual harassment incident, no reasonable inference could be drawn from the evidence presented that Domino’s was in charge or that Sui Juris’ owner had no choice but to follow the leader’s suggestions.

The dissenting justices agreed with the statement of the applicable law provided by the majority; the dissenting justices simply would have found a triable issue of fact precluding summary judgment on this record.

Ms. Sungaila briefed and argued the Patterson case on behalf of Domino’s. Patterson v. Domino’s Pizza LLC, California Supreme Court Case No. S204543.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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