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LMC Lmg.u. of Minnesota Citiu Citill8 promoting -n-CfI League of Minnesota Cities Insurance Trust .145 University Avenue West, St. Paul, MN 55.103-2044 (65.1) 28.1-.1200 · (800) 925-.1.122 Fax: (651) 28.1-.1298 . TOO: (651) 28.1-.1290 www.lmnc.org September 27, 2005 To: LMCIT members, attorneys, and agents llECElvmp ~t.r 3 0 Z004 From: Pete Tritz Re: Court decision -liability under joint powers agreements The federal Eighth Circuit Court of Appeals recently issued a very problematic decision affecting liability and liability limits in joint powers arrangements. In Reimer v. City of Crookston, No. 04-3233 (8th Cir., Aug. 30, 2005) the court ruled that in at least some joint powers situations, a participating political subdivision can be held vicariously liable for the actions of another subdivision; and that in these situations, a claimant can stack the statutory tort limits of the participating political subdivisions. This memo outlines some problems this decision creates, and possible strategies to address them. Background The case arose from a boiler explosion in a swimming pool that the city of Crookston and the school district operated cooperatively. The claimant, a boiler inspector and a North Dakota resident, was very severely injured by the explosion. (This case was brought in federal court rather than state court because it involved a citizen of another state.) The jury awarded damages of over $12 million. The trial court ruled that under the joint powers agreement, the school district was responsible for maintaining and operating the boiler, and that the city was therefore not liable. The court then applied the statutory liability limit to the school district's liability and reduced the award to $300,000. On appeal, the Court of Appeals ruled that the pool operations were a "joint venture" of the city and the school district; that the city was therefore vicariously liable for the damages, even though the city was not "negligent or in any manner directly responsible" for the injuries; and that the claimant therefore was entitled to recover $300,000 from the city in addition to the $300,000 to be paid by the school district. Problems this ruling creates The Court has enunciated a new and troublesome principle in this decision: If the combined efforts of governmental entities constitute a 'joint venture", then each political subdivision that's part of that joint venture can be held liable up to its statutory tort limit for the actions of the joint venture itself; or for the actions of any other political subdivision that's a member ofthe joint venture that are in furtherance of the joint venture's purpose. This creates several problems: AN EQUAL OPPORTUNITY/AFFIRMATIVE ACTION EMPLOYER