Arizona Court of Appeals Division One Holds that Settlement of Tort Claim Against Principal Does Not Exonerate Agent.

A plaintiff slipped and fell in a Walgreen drugstore.  She sued the janitor (the agent) and Walgreen (the principal).  Walgreen settled with the plaintiff and the Superior Court entered a stipulated order dismissing Walgreen with prejudice.  The janitor then claimed that the dismissal with prejudice barred the plaintiff’s claims against him. 

In Arizona, judgment in favor of the agent bars vicarious liability claims against the principal, because the claim against the principal is derivative of the dismissed claim in favor of the agent.  As a matter of first impression, the Court of Appeals held that the converse is not true.  Judgment in favor of the principal does not bar vicarious liability because the judgment says nothing about whether there is a valid claim about the agent.

A dictum from an Arizona case from more than fifty years ago and statements in old entries in American Jurisprudence and American Law Reports suggest the opposite result (i.e., that judgment against either the principal or the agent bars claims against both).  But after that case and those legal encyclopedia entries were published, Arizona passed a statute, A.R.S. § 12-2504, setting forth the principle that a release to one party reduces the amount of the claims against the other parties who are liable, but does not release them.  Although that statute does not apply when parties are severally liable, it does apply when the parties are jointly liable, such as in the tort claim against Walgreen and the janitor.  In light of A.R.S. § 12-2504 and the rationales for vicarious liability, releasing Walgreen (the principal) does not bar the claim against the janitor (the agent).

Judge Johnson authored the opinion; Judges Thumma and Orozco concurred.