Webinfosys's Entertainment News : Employers can be liable for employee crimes

Employers are generally held liable for the actions of their employees while the employees are performing their jobs, and, as illustrated in the case of Slesinger Inc. v. The Walt Disney Co., this liability can extend to crimes committed by employees.

Stephen Slesinger acquired the rights to license Winnie the Pooh merchandise in the United States and Canada in 1930. He assigned the rights to his corporation, SSI. In 1960, his corporation licensed certain rights to Disney.

In 1991, SSI sued Disney for breach of contract, fraud and declaratory relief, alleging that Disney was not paying all the royalties it should to SSI.

The litigation between the parties was long and bitter. In 2001, the court awarded sanctions against Disney for destroying evidence.

Two years later, Disney made a motion to terminate SSI's lawsuit because of the activities of SSI's investigator, Terry Lee Sands. A five-day evidentiary hearing revealed that Sands had engaged in inappropriate activity.

Slesinger's daughter, Pati, was the sole shareholder of SSI. Her husband, David Bentson, worked with the attorneys representing SSI. In 1992 or 1993, Bentson began working with Sands.
Sands was not a licensed private investigator, but he had experience with investigations.
He was hired to get documents from Disney. On advice of SSI's counsel, Bentson told Sands "make sure what you're doing is legal and that you do it by the book." But Bentson did not take any steps to make sure Sands was obeying.

Sands obtained all kinds of documents for Bentson over the years, and Bentson then provided those documents to SSI's legal counsel. Unfortunately, some of the methods of procurement Sands used were illegal.

In 1994, Disney security received two anonymous telephone calls warning that Sands was taking documents regarding Winnie the Pooh. The caller explained Sands was breaking into Disney Dumpsters, going through trash outside various offices, and even walking past security to take documents off Disney employee desks. The caller said he was sharing the information because Sands had not paid him for helping.

Disney was unable to determine whether any documents were taken in 1994.

SSI produced a number of documents through legal discovery in 1997 and 1999 that it had obtained through Sands' efforts. Several of these were highly confidential, and some were attorney-client communications. None of these documents were given by Disney to SSI. Disney demanded to know how SSI obtained the documents.

Finally, in 2002, SSI acknowledged it had hired Sands to obtain documents for SSI. SSI insisted that Sands only acquired the documents through legal means, but the court did not believe that after it heard the testimony of the previously anonymous caller who credibly explained the ways in which Sands had stolen the documents from Disney.

The trial court and appellate court both concluded Sands had engaged in egregious misconduct, and they agreed that Disney's motion to terminate SSI's lawsuit should be granted. SSI argued that it had instructed Sands not to break the law, but the courts held SSI accountable for Sands' actions anyway.

It is not enough simply to instruct an employee to comply with the law. Employers must take steps to ensure their employees are not breaking the law while performing their work duties.

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