Summary
recognizing that “ ‘Michigan has never recognized a claim for negligent hiring by holding an employer liable for an employee's acts resulting in economic injury’ ”
Summary of this case from Travis v. ADT Security Services, Inc.Opinion
Case No. 07-13327.
August 12, 2011
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT'S JUNE 13, 2011 MOTION FOR SUMMARY JUDGMENT
This matter came before the court on defendant H R Block Tax Services, Inc.'s June 13, 2011 motion for summary judgment. Plaintiff Jerry Stacy filed a response brief July 8, 2011; and Defendant filed a reply July 25, 2011. The court heard oral argument on the motion August 3, 2011. For the reasons set forth below, the court will grant Defendant's motion.
BACKGROUND FACTS
In July 2007, plaintiffs Angel Merrow and Jennifer Tomaszewski ("Tomaszewski") joined five other plaintiffs in bringing a single-count complaint against H R Block Tax Services, Inc. ("Block"), alleging that it had been negligent in failing to adequately protect Plaintiffs' personal information from interference or use by unauthorized third persons. Although the complaint states only a single count of negligence/and or gross negligence, this single count contains three discrete causes of action. The first is a claim for negligent hiring/supervision, the second is a claim of negligence for failing to adequately protect Plaintiffs' confidential information, and the third is a claim of gross negligence for allowing the identity theft to occur and failing to correct the problem.
In fall 2006, Block hired Sophia Quill ("Quill") upon successful completion of Block's 11-week tax preparation course. Quill began her seasonal employment with Block in December 2006. At no time during her 17-weeks of instruction, interviews, and training did anyone at Block know or suspect that Quill had any criminal history. In mid-January 2007, Quill began preparing client tax returns at Block's office located in Southgate, Michigan.
Between January 16 and January 25, 2007, Quill filed six fraudulent tax returns with the IRS, all for her own personal gain. Block maintained a computer information system that allowed its employees to access clients' information at each Block location. Quill abused her privilege as an employee of Block and accessed the clients' personal information through this computer system in order to file the fraudulent returns.
On January 24, 2007, Block first learned of a problem with a tax return that Quill had recently prepared. Block immediately advised plaintiff Tomaszewski that someone may have fraudulently filed her 2006 tax return and instructed her to immediately notify the IRS. The next day, Block discovered that another client's return had been improperly filed. Block initiated an internal investigation to determine whether there were other questionable filings by Quill. On January 30, 2007, Block formally terminated Quill's employment.
On February 2, 2007, Block met with the Southgate Police Department regarding Quill's suspect tax returns. Block was fully cooperative with the police investigation. Indeed, the investigating sergeant testified, "H R Block's prompt and thorough cooperation and assistance with my police investigation was instrumental in our ability to arrest and recommend that criminal charges be brought against Quill based on her unauthorized filing with the IRS." Def. mot. br. at 8.
LAW ANALYSIS
The Michigan case law is clear that negligent hiring/supervision claims are recognized only in situations where some physical act is committed (or threatened) and the plaintiff suffers a physical injury. See, e.g., Bean v. Directions Unlimited, Inc., 462 Mich. 24, 32 (2000). This court has stated that "Michigan has never recognized a claim for negligent hiring by holding an employer liable for an employee's acts resulting in economic injury." Vennittilli v. Primerica, Inc., 943 F.Supp. 793, 797 (E.D. Mich. 1996). While Michigan courts have recognized a cause of action for negligent hiring where an employee commits a foreseeable act of physical violence, Michigan courts do not extend negligent hiring to include economic injuries. Id. Likewise, Michigan courts do not recognize a claim for negligent supervision absent a physical injury to the plaintiff. This court explained, "[t]he tort of negligent supervision applies to the liability of an employer for a threat of physical injury by an employee to a third person." Dudley v. Thomas, 2009 WL 1620413 (E.D. Mich. 2009) (emphasis added).
In this case Plaintiffs have not alleged a cognizable claim. Plaintiffs' complaint alleges that Block's conduct caused emotional damage and economic damage; however, Plaintiffs have not alleged the requisite physical act and resulting physical injury needed to support a viable negligent hiring/supervision claim. Moreover, Plaintiffs have not incurred any tangible loss or injury from these events. Since no genuine issues of material fact exist, Block is entitled to summary judgment on the negligent hiring/supervision claim.
Plaintiffs' second claim is that Block was negligent in safeguarding client information. Plaintiffs support this claim by alleging that Block hired tax preparers without performing a background check, failed to adequately supervise these tax preparers, and maintained a computer information system that allowed any tax preparer to access any client's information at any time. However, this claim is simply an additional negligent hiring/supervision claim in disguise. Plaintiffs could not prevail on this claim without a finding that Block was essentially negligent in hiring and supervising its employees. The Michigan case law is clear that negligent hiring/supervision claims are not cognizable absent a physical injury. Therefore, this court does not recognize any claim that does not involve a physical injury if it is premised on negligent hiring/supervision. Since no genuine issues of material fact exist, Block is entitled to summary judgment on the negligent safeguarding of information claim.
Plaintiffs' third claim is for gross negligence. Plaintiffs allege that Block knowingly allowed the conditions which resulted in the identity theft to exist and failed to correct these conditions once the problem was discovered. Since Plaintiffs have failed to allege a cognizable negligence claim for negligent hiring/supervision or safeguarding information, the Plaintiffs certainly do not have a tenable gross negligence claim on these issues. Moreover, it is undisputed that Block took immediate action in performing an internal investigation, terminating Quill's employment and fully cooperating with the police investigation. Therefore, Block was not grossly negligent once the problem was discovered. Since no genuine issues of material fact exist, Block is once again entitled to summary judgment on the gross negligence claim.
The court notes, however, that although Block restricted access of client information to only those tax preparers who worked in the particular office that the client hired and for only three years after the tax return was filed, Block perhaps could have implemented more comprehensive procedures to protect client information. Block's failure to have those procedures in place may have allowed Quill to access Plaintiffs' information. In any event, Plaintiffs ultimately recovered the tax refunds from the IRS to which they were entitled.
ORDER
It is hereby ORDERED that defendant H R Block's June 13, 2011 motion for summary judgment is GRANTED.
I hereby certify that a copy of the foregoing document was served upon counsel of record on this date, August 12, 2011, using the ECF system.