Daily Development for
Tuesday, November 26, 1996

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

LANDLORD TENANT; LANDLORD'S LIABILITY FOR INJURY TO TENANT'S INVITEES; THIRD PARTY CRIMINAL ATTACKS; FRANCHISORS: Generally, a service station lessor/franchisor who leases the station to a franchisee is not liable for injuries to the franchisee's business invitees; but liability may arise if the franchise agreement gives the franchisor sufficient control over (or right to control) the franchisee's conduct.

J. M. v. Shell Oil Co., 922 S.W.2d 759 (Mo. 1996).

Shell leased land from a third party and constructed a service station, later redesigning the station to relocate the attendant from a mid-pump kiosk to the inside of the food mart. Later, Shell leased the property to a franchisee; in the franchising agreement, Shell imposed (and inspected for compliance with) numerous restrictions upon the operation of the service station, including relating to security. However, the lease expressly provided that Shell did not reserve any right to exercise control over or direct the conduct or management of the franchisee's business or operations. Subsequently, the plaintiff was abducted from the premises, sexually assaulted and shot. There had been robberies and other less serious crimes and disturbances in the area and on the station premises. Plaintiff's lawsuit against Shell was dismissed on summary judgment.

On appeal, held: reversed. The trier of fact should be presented with the question of whether the franchisor retained such control over the overall business operations of the franchisee as to be treated as a "master" liable on respondeat superior theory. Although the lease had self-serving language providing that Shell did not operate control over the franchisee's business operations, it did have extensive approval rights over any change in the physical structure, and had contractual requirements for lighting, prevention of loitering, staffing and employee training. It reserved the right to inspect the premises regularly to insure compliance. In addition, Shell provided to the franchisee a "Robbery Deterence and Safety Training Manual," and even issued a directive requiring that all employees be trained as to how to respond to a robbery because service stations had been the subject of robberies in increasing rates in recent years. All of this tended to contradict Shell's disclaimer of control, particularly in the area of crime prevention.

The case, however, is perhaps as signficant for those theories of liability that it disregarded as it is for the single theory that it embraced. For instance, the court discussed the "public use" exception to the general rule that a lessor is not liable for injuries to the business invitees of its lessee for defects on the premises, concluding that a service station does not implicate the "public use" exception.

The court also approved the lower court's summary judgment conclusion that Shell was not the "possessor" of the service station because the franchisee was the occupant.

The court further dismissed the plaintiff's three additional bases for liability:

(i) negligence in the redesign (no special relationship found between Shell and its franchisee's business invitees)

(ii) failure to assure safety after undertaking to train the franchisee's employees (no assurance given that business invitees would be secure); and

(iii) a public policy argument seeking to render franchisors liable for the security of their franchisee's business invitees (general rules of agency and tort are sufficient).

Comment: Sorting out the single basis for liability from the bases which the court found wanting, we have a very narrow holding that appears to require rather extensive reservation of control on the part of the franchisor of the specific areas of franchisee conduct that might have been implicated in the criminal attack in this case. Missouri generally is viewed as a "pro-plaintiff" jurisdiction, and perhaps the trial on the single theory will in fact lead to a recovery for plaintiff in this case. But the court appears to offer franchisors a "safe haven" for criminal attack liability if the franchisor delegates all decision making and control over these areas to the franchisee.

The only problem with this approach is that it has the potential to lead to less secure premises for customers. It is unfortunate that the law should drive parties to decisions that create a greater risk of harm. It is unclear whether the best way to avoid that result here would be to impose even greater liability or to avoid imposing liability on franchisors in the first place.

If this is all about insurance, then perhaps it doesn't really matter how broad the liability is, since it is likely that everyone in the chain will have insurance. But, to the editor's "untortified" brain, it does seem silly to have a system that nominally associates liability decisions with fault and control but actually is distributing cost based upon entirely separate factors.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last five years, these Reports annually have been collated, updated, indexed and bound into the Annual Survey of Developments in Real Estate Law, volumes 1-6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Stacy Walter at the ABA. (312) 988 5260 or stacywalter@staff.abanet.org

Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.