Day on Torts Nugget: Discovery Rule May be Used to Add Vicarious Liability Defendant

Occasionally, a plaintiff does not learn until after more than one-year after an event that the person who caused plaintiff’s injuries and losses was working in the course and scope of employment at the time of the incident.  How can a plaintiff add the employer as a party defendant and avoid a statute of limitations defense?

First, persuade the lawyer for the individual defendant to allege the fault of the nonparty employer.  The decision in Browder v. Morris, 975 S.W.2d 308 (Tenn. 1998) held that Tenn.Code Ann. Sec. 20-1-119 applied to such an allegation and thus a plaintiff could take advantage of the statute’s 90-day window to add the employer as a party defendant and avoid a statute of limitations defense.

Second, move to amend the complaint to add the employer to the case and argue that suit was timely filed because of application of the discovery rule.  The rule does not just apply to health care liability actions – -the Tennessee Supreme Court extended the discovery rule to “all tort actions predicated on negligence, strict liability, or misrepresentation.” Doe v. Coffee County Bd. of Educ., 852 S.W.2d 899, 904 (Tenn. Ct. App. 1992) (citation omitted).

The court of appeals has held that the rule may be applied to the discovery of vicariously liable defendants. Grindstaff v. Bowman, No. E2007–00135–COA–R3–CV, 2008 WL 2219274, at *6 (Tenn. Ct. App. May 29, 2008) (no perm. app. filed). Noting the supreme court’s statement in Foster v. Harris that the limitations period does not run until the plaintiff “discovered, or reasonably should have discovered … the identity of the defendant who breached the duty[,]” the Grindstaff court opined that “[t]his broad language would include a defendant who is vicariously liable.” Id. at *6 (citing Foster v. Harris, 633 S.W.2d 304, 305 (Tenn. 1982)).

This issue was recently addressed in Smith v. Hauck, 469 S.W.3d 564  (Tenn. Ct. App. 2015).  The court explained that

It is well-settled that the discovery rule “does not … toll the statute of limitations until the plaintiff actually knows that he or she has a cause of action. The plaintiff is deemed to have discovered the right of action when the plaintiff becomes aware of facts sufficient to put a reasonable person on notice that he or she has suffered an injury as a result of the defendant’s wrongful conduct.” Pero’s, 90 S.W.3d at 621 (quoting Teeters v. Currey,518 S.W.2d 512, 515 (Tenn. 1974)) Inquiry notice and constructive notice “charge[ ] a plaintiff with knowledge of those facts that a reasonable investigation would have disclosed.” Redwing v. Catholic Bishop for Diocese of Memphis, 363 S.W.3d 436, 459 (Tenn. 2012) (quoting Sherrill v. Souder, 325 S.W.3d 584, 593 n. 7 (Tenn. 2010)(quoting Rathje v. Mercy Hosp., 745 N.W.2d 443, 461 (Iowa 2008))). The statutory limitations period begins to run when “a plaintiff gains information sufficient to alert a reasonable person of the need to investigate the injury[.]” Id. (quoting id. (quoting id.)) (internal quotation marks omitted).

Id. at 571.

The court of appeals went through a multitude of cases and then the facts, ultimately concluding there was a jury issue on when the plaintiff was first on “inquiry notice.” Id. at 576.

A plaintiff seeking to take advantage of this rule must be prepared to plead and prove the facts that support application of the discovery rule.  Permission to amend should be liberally granted, and the decision “will not be reversed  [on appeal] unless abuse of discretion has been shown.” Welch v. Thuan, 882 S.W.2d 792, 793 (Tenn.Ct.App.1994). Factors the trial court should consider when deciding whether to allow amendments include “[u]ndue delay in filing; lack of notice to the opposing party; bad faith by the moving party, repeated failure to cure deficiencies by previous amendments, undue prejudice to the opposing party, and futility of amendment.”  Cumulus Broadcasting, Inc. v. Shim, 226 S.W.3d 366, 374 (Tenn. 2007).   The last phrase – futility of amendment – warns counsel for the plaintiff to include sufficient (truthful) detail in the complaint to avoid denial of leave to amend.

For a case where it was held that plaintiff did not exercise due diligence to identify the existence of a defendant’s employer, see Grindstaff v. Bowman, 2008 WL 2219274 (Tenn. Ct. App. 2008).  The court said as follows:

The record before us, viewed in the light most favorable to the plaintiffs, demonstrates a lack of due diligence by the plaintiffs in investigating their case during the 28 months between the car accident with [employee]Bowman and the discovery that Bowman was allegedly acting within the scope and course of his employment with Hardee’s. The plaintiffs’ affidavits indicate that Bowman’s employment status was not immediately apparent from the circumstances of the accident, and that Bowman did not volunteer any information about this issue while conversing with the plaintiffs after the crash. However, there is no indication that the plaintiffs ever asked him whether he was “on the job,” either in the accident’s immediate aftermath or at any subsequent time. In fact, the facts in this record show no effort by the plaintiffs to ask Bowman or his counsel any pertinent questions during the nearly 2 1/2 years between the accident and the receipt of the letter [from defense counsel] implicating Hardee’s.

For a federal court decision interpreting the discovery rule and finding that the plaintiff could not rely on it, see Wagner v. International Automotive Components Group North America, Inc., 131 F.Supp.3d 736, 753-56 (U.S.D.C. M.D.Tenn. 2015).

As of August 11, 2013, Wagner was aware—i.e., was on “constructive” or “inquiry” notice—that he had been injured, could have had a cause  of action against the parties involved in any way with the mold press, and should have sought to investigate and discover the identity of those parties within the limitations period. However, Wagner waited almost exactly one year from the date of his injury to file his lawsuit, using up nearly twelve months of time during which this case could have advanced before even filing the action. Had he pursued his litigation more diligently from the outset, discovery would have come sooner. See, e.g., Schultz, 495 F.3d at 293 (finding discovery rule did not apply to toll statute of limitations where plaintiffs were injured by stacked sheetrock and were on notice that they could have had a cause of action against the party who delivered and stacked the sheetrock, but did not timely discover the identity of that party and file an amended complaint); Gibson v. Lockwood Prods. Div. of J.L. Underwood, 724 S.W.2d 756, 758–59 (Tenn.1986) (in machine injury case, finding plaintiff did not exercise due diligence to discover identity of installer where the only step taken was to propound interrogatories ten months after the accident). Moreover, if Wagner was concerned about the timing of discovery, he was free to move the court to allow limited out-of-time discovery from the defendants as to the identities of the mover and installer of the mold press; he chose not to do so.