September 20, 2012
Employer Sues Employee for Monetary Losses - And Wins
I am occasionally asked by an employer client whether it can sue an employee who has caused monetary losses through carelessness, inadvertence, just plain stupidity, etc. While some legal arguments might be crafted to permit such a lawsuit (breach of fiduciary duty, breach of contract, etc.), typically there is little point to an employer pursuing a claim against an employee. Sometimes emloyee dishonesty, theft or embezzlement warrants a civil lawsuit to recover the stolen money.
In a case with a bit of a "twist," the Tennessee Court of Appeals has upheld a judgment in favor of an employer against a management employee. The case is Club Chalet Homeowners' Association, Inc. v. Matthews, decided by the Court of Appeals, Eastern Section on September 19, 2012.
In this case, the employee was a property manager. The property manager either permitted, or possibly participated in, the actions of a subordinate employee who ran up more than $100,000 in false credit card charges on the employer's credit card. The employee who used the credit card was charged with a felony, and she testified that the property manager knew what she had been doing, and that some of the charges were actually for the benefit of the property manager. The employer sued the property manager for intentional misrepresentation (fraud), breach of contract, and breach of a duty to disclose the activities (which sounds like a breach of fiduciary duties).
The jury awarded the employer a judgment for $50,000 in compensatory damages, although it declined to award punitive damages.
The appeal involved whether the statute of limitations had expired before the lawsuit was filed, but the Court of Appeals held it had not.
Once again, this is a case with a bit of a twist - interesting.