In Jackson Hewitt, Inc., v. Kaman, Case No. 2D10-1801 (Fla. 2nd DCA Sept. 9, 2011), Jackson Hewitt, asked the court to determine whether it could be held liable to investors that were defrauded by an affiliate of one of its franchisees. The Florida Second District Court of Appeal concluded that Jackson Hewitt could not be held liable to the investors based on the facts presented in the case.
The investors lost a substantial sum of money in a fraudulent real estate investment scheme promoted by an affiliate of a Jackson Hewitt Tax Service franchisee. The affiliate company shared office space with the Jackson Hewitt franchisee and one of the officers of the affiliate was also an officer of the franchisee. The investors alleged that Jackson Hewitt was liable based on the theories of negligence and apparent agency. However, on the claim for negligence, the court held that the investors failed to establish that Jackson Hewitt owed a duty to the investors to prevent the actions of the officer and the affiliate which caused the investors’ financial losses. The court stated that the investors’ position was at odds with the general common law rule “that there is no duty to prevent the misconduct of third parties.” Michael & Philip, Inc. v. Sierra, 776 So.2d 294, 297 (Fla. 4th DCA 2000). The court reasoned that Jackson Hewitt had no special relationship with the investors or others to protect them from the misconduct of third parties and no special relationship with the third parties which would have required it to control their conduct.
With regard to the apparent agency claim, the court stated that “[i]n order to establish a claim based on apparent agency, three elements must be proven: (a) a representation by the purported principal, (b) a reliance on that representation by a third party, and (c) a change in position by the third party in reliance on the representation. Mobil Oil Corp. v. Bransford, 648 So.2d 119, 121 (Fla. 1995). The court held that the investors failed to prove either a representation by Jackson Hewitt concerning the affiliate’s status as its agent or that the investors had relied on any such representation. Thus, the court concluded that the investors failed to prove that the affiliate was the agent of Jackson Hewitt.