Negligent Supervision & Hiring
The Case
FINRA recently fined Merrill Lynch $1 million over a Texas Ponzi scheme. The case, which involved a San Antonio broker who was sentenced to prison was covered in a recent blog post in the Stockbroker Fraud blog.
The Merrill broker persuaded investors to put money into a partnership and used at one point $1.4 million of those funds for personal spending and to support his house-flipping business.
The Cause of Action
Texas employers will always have to be aware of a potential cause of action against them for the wrongful or negligent acts of their employees. The negligent hiring/negligent supervision is a catch-all claim where the Plaintiff alleges that the employer either (1) improperly screened the potential employee during the hiring process; or (2) failed to properly supervise the actions of the employee.
The latter is very difficult to defend in terms of obtaining a summary judgment because there is always the argument that the employer could have done something a little bit more to prevent some type of damage to the plaintiff. That said, strong pre-employment screening policies and supervision policies mitigate against these type of claims.
