Tuesday, May 20, 2008, 4:42 PM

COA Rejects Aiding-And-Abetting Tort Liability

Today in Hinson v. Jarvis the Court of Appeals (COA) rejected plaintiff's claim that defendant could be liable for aiding and abetted her (defendant's) negligent operation of a vehicle.

Mr. Jarvis was driving with his wife, the defendant, when they struck head on a vehicle in which the Hinson family was riding. Mr. Hinson died, and members of his family were injured. Mr. Jarvis died too. They alleged that Mr. Jarvis was driving without a valid license (it hadn't been renewed), and that he may have had a seizure right before the impact. Ms. Jarvis testified that her husband had had seizures in the past and that she was not comfortable driving with her husband and had warned him not to drive.

Mr. Hinson's family brought a claim against Mrs. Jarvis on the theory she was negligent for aiding and abetting her husband's operation of the vehicle. The COA affirmed summary judgment against her.

In an effort to establish "aiding and abetting" in the context of a tort cause of action, plaintiffs relied on section 876 of the Restatement (Second) of Torts. Section 876, titled "Persons Acting in Concert," says: "For harm resulting to a third person from the tortious conduct of another, one is subject to liability if he (a) does a tortious act in concert with the other or pursuant to a common design with him, or (b) knows that the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself, or (c) gives substantial assistance to the other in accomplishing a tortious result and his own conduct, separately considered, constitutes a breach of duty to the third person."

Reminding that the Restatement "is not the law of North Carolina unless a section has specifically been adopted," the COA noted that it and the NC Supreme Court had cited Section 876 four times, but they had never explicitly adopted it; and the COA found those earlier cases readily distinguishable, as they involved the negligence of joint tortfeasors. The Court held: "we decline to extend liability under section 876 of the Restatement of Torts to a third person whose conduct did not fall below an ordinary standard of care or involve an issue as to which person was the cause of the harm alleged." In this case, the COA concluded, Mrs. Jarvis gave no substantial encouragement to breach a duty of care owed by Mr. Jarvis to plaintiffs; if anything, she was only complicit in her husband's breach of ordinary care and didn't incite him to drive.

The COA also rejected plaintiffs' reliance on Blow v. Shaughnessy, 88 N.C. App. 484, 364 S.E.2d 444 (1988), which cited federal securities cases to justify the imposition of aiding-and-abetting liability on a defendant that encouraged a third party to breach his fiduciary responsibility in the context of a securities law violation. The COA observed that this case doesn't allege a breach of fiduciary duty.

But it should be noted that Blow should be of dubious precedential value even in fiduciary-duty cases. The precedential underpinnings of Blow were stripped away when the U.S. Supreme Court decided Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994), which held that section 10(b) liability did not extend to aiders and abettors. As Judge Tennille of our Business Court has observed, including as recently as a year and a half ago (the order is unpublished, but you can find it by clicking the 11/28/06 order at this link), "The [Blow] court's basis for allowing the claim was that such a cause of action had been recognized by the federal courts in securities fraud cases based on violation of section 10(b) and the Securities Exchange Act of 1934 and Rule 10b-5. However, the United States Supreme Court has since made clear [in Central Bank of Denver] that Congress did not intend to allow for aiding and abetting liability under these provisions of the federal securities laws. . . . This decision [Central Bank] weakens the foundations of Blow, which is based upon federal recognition of the aiding and abetting claim. With federal recognition of the cause of action now absent, there is serious doubt as to the existence of an aiding and abetting claim in North Carolina in the securities context. The doubt is even more pronounced in a case such as this which falls outside the context of a securities law violation." (Citations and internal quotations marks omitted).

Judge Tennille is right. But the COA didn't have to address that issue in today's case, since today's case didn't allege a breach of fiduciary duty, much less one relating to securities law violations.


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