Business Law
Pusateri v. E. F. Hutton & Co., Inc.
Fiduciary Duty after Francis Pusateri retired; he met with Gilbert J. Johnson, a stockbroker with E. F. Hutton & Co., Inc., and informed Johnson that he wished to invest in tax-free bonds and money market accounts. Pusateri opened an investment account with E. F. Hutton and checked a box stating that his objective was “tax-free income and moderate growth.” During the course of a year, Johnson churned Pusateri’s account to make commissions and invested Pusateri’s funds in volatile securities and options. Johnson kept telling Pusateri that his account was making money, and the monthly statement from E. F. Hutton did not indicate otherwise. The manager at E. F. Hutton was aware of Johnson’s activities but did nothing to prevent them. When Johnson left E. F. Hutton, Pusateri’s account—which had been called the “laughingstock” of the office—had shrunk from $196,000 to $96,880. Pusateri sued E. F. Hutton for damages.
Issue
Was Gilbert J Johnson acting within the scope of his employment? Is E F Hutton liable for Gilbert J Johnson’s tortuous conduct?
A principal and an agent are each personally liable for their own tortuous conduct. However the courts will hold a principal liable for the actions of its agent if the agent was acting within the scope of his or her authority. The court will examine the situation to see if:-
(1) The act was one which the agent was hired to perform.
(2)Did the act occur during the agent’s employment?
(3) Was the act requested or authorized by the principal
A principal has the duty to oversee the work of it agents. The principle of negligence will hold a principal accountable although they are not the one committing the act. Our text page 474 refers to frolic and detour as a situation in which the Agents does things to benefit themselves rather than the principal. In this situation the agent becomes personally liable.
Johnson was gainfully employed by E F Hutton and was acting as an agent of
Fiduciary Duty after Francis Pusateri retired; he met with Gilbert J. Johnson, a stockbroker with E. F. Hutton & Co., Inc., and informed Johnson that he wished to invest in tax-free bonds and money market accounts. Pusateri opened an investment account with E. F. Hutton and checked a box stating that his objective was “tax-free income and moderate growth.” During the course of a year, Johnson churned Pusateri’s account to make commissions and invested Pusateri’s funds in volatile securities and options. Johnson kept telling Pusateri that his account was making money, and the monthly statement from E. F. Hutton did not indicate otherwise. The manager at E. F. Hutton was aware of Johnson’s activities but did nothing to prevent them. When Johnson left E. F. Hutton, Pusateri’s account—which had been called the “laughingstock” of the office—had shrunk from $196,000 to $96,880. Pusateri sued E. F. Hutton for damages.
Issue
Was Gilbert J Johnson acting within the scope of his employment? Is E F Hutton liable for Gilbert J Johnson’s tortuous conduct?
A principal and an agent are each personally liable for their own tortuous conduct. However the courts will hold a principal liable for the actions of its agent if the agent was acting within the scope of his or her authority. The court will examine the situation to see if:-
(1) The act was one which the agent was hired to perform.
(2)Did the act occur during the agent’s employment?
(3) Was the act requested or authorized by the principal
A principal has the duty to oversee the work of it agents. The principle of negligence will hold a principal accountable although they are not the one committing the act. Our text page 474 refers to frolic and detour as a situation in which the Agents does things to benefit themselves rather than the principal. In this situation the agent becomes personally liable.
Johnson was gainfully employed by E F Hutton and was acting as an agent of