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Defense Digest

New Jersey Supreme Court Holds That in a Civil Action, the Jury, Not the Judge, Decides the Issue of Whether There Is a Special Employee Relationship

Defense Digest, Vol. 29, No. 3, September 2023

September 1, 2023

by Robert J. Fitzgerald

Key Points:

  • A negligent employee is not liable in a civil action for damages for causing an injury to a co-worker under the workers’ compensation bar.
  • In a civil action, the tests to determine whether there is a “borrowed employee/special employee” relationship include the traditional “control test” and the “business furtherance test.”
  • The question of the whether there is a “borrowed employee/special employee” status is likely to be determined by a jury.

In the recent case of Pantano v. NY Shipping Assoc., 294 A.3d 1148 (N.J. 2023), the New Jersey Supreme Court addressed the legal test to be considered in determining whether an individual is a “borrowed employee” and, thus, protected from liability in a third-party civil action. More specifically, in this case, the court addressed whether an employer’s vicarious liability under the borrowed employee doctrine is a question of law to be decided by the court or, conversely, a question of fact reserved for the jury. The court held that the application of the multi-factor test—which can involve matters of disputed fact and witness credibility—is presumptively for a jury to determine. Moreover, a court should not resolve the borrowed employee issue unless the evidence concerning the factors is so one-sided that it warrants judgment in a moving party’s favor as a matter of law.

On November 19, 2013, the plaintiff, Philip Pantano, a mechanic employed by Container Services of New Jersey, was injured at work while attempting to move a heavy piece of equipment he had knocked on its side. Lawrence Giamella, who was also working on the site that day, tried to help Pantano move the equipment back into position with a forklift. As Giamella operated the forklift, a chain slipped, causing the equipment to crush Patano’s left foot, which was ultimately amputated. Pantano collected workers’ compensation benefits from Container Services. He and his wife also brought a personal injury action against multiple defendants, including Marine Transport, Inc. The main dispute concerned which entity or entities employed Giamella, Marine Transport, and/or Container Services. 

Both are related companies owned by Robert Castelo. The companies jointly lease and occupy a large shipping yard. Container Services is in the business of repairing shipping equipment. Marine Transport is in the trucking business, transporting containers from the shipyard to their destinations. Marine Transport’s employees regularly perform mechanical work for Container Services’ customers. The revenues from that mechanical work go to Container Services, and Container Services does not reimburse Marine Transport. Container Services is a union shop that requires it to pay its unionized workers time-and-a-half overtime wages on weekends and holidays. Marine Transport is not a union shop. Sometimes, Container Services’ unionized employees worked on Marine Transport’s payroll, on the weekends, at their regular weekday wages. All workers at the shared workplace were supervised by a manager paid exclusively by Container Services.

Pantano claimed that Marine Transport helped operate the yard and should have known about Container Services’ negligence. Following discovery, the remaining defendants moved for summary judgment. Marine Transport argued that it was not Giamella’s employer. Specifically, although Giamella was on Marine Transport’s payroll, Marine Transport raised the affirmative defense that he was a “borrowed servant/special employee” working for Container Services at the time of the accident. After deferring the motion until after the jury verdict, the judge granted Marine Transport’s motion to dismiss, concluding that Giamella was a borrowed employee working for Container Services when the accident occurred. The court stated: “(1) in every practical sense Giamella was a functional employee of Container Services due to Container Services’ control over his work, and (2) there was no evidence that Marine Transport derived an economic benefit by providing the services of Giamella to Container Services.” 

The Appellate Division reversed and reinstated the jury verdict. The appeals court expressed a reticence to resolve Giamella’s status as a matter of law, “…the facts central to the question, if not the very question itself, could have been determined by the jury.” The Appellate Division found the trial judge erred by performing a complete analysis of the factors and reaching a conclusion on the merits of the borrowed-employee question after weighing the evidence. The Appellate Division discerned that there was substantial evidence to support both main prongs of the borrowed servant analysis (control and business furtherance) in Patano’s favor. Specifically, the appeals court ruled there was “enough evidence for a jury to have found Marine Transport retained sufficient control of Giamella, especially because Marine Transport paid for Giamella’s forklift training after the accident.” The Appellate Division also disagreed with the trial judge that Marine Transport received no financial benefit, “…Marine Transport obviously received financial benefit from the arrangement, or it would not have participated in it.” The court found the idea that Marine Transport would simply donate Giamella’s labor to Container Services “not only inconceivable . . . but incongruent with the indulgent standard afforded the plaintiff when considering the evidence of record on a motion.”

Marine Transport then filed a petition for certification to the Supreme Court, raising several points. As its primary argument in its petition, Marine Transport contended that the borrowed-employee question “is purely a legal issue” that should not be decided by a jury. The court granted certification and noted that the case involved the application of the multi-factor test announced in Galvao v. G.R. Robert Construction Co., 846 A.2d 1215 (N.J. 2004), for evaluating whether a worker who negligently caused a plaintiff’s jobsite injury was a so-called “borrowed employee” of the plaintiff’s own employer. The grant of certification was confined to whether an employer’s vicarious liability under the borrowed-employee doctrine is a question of law to be decided by the court or, conversely, a question of fact reserved for the jury.

In affirming the Appellate Division’s reversal of the dismissal of Marine Transport, the Supreme Court historically noted that the case law before Galvao, plainly signified that a jury, not a judge, must evaluate whether a negligent worker was a “borrowed employee” of the special employer. In many instances, the general employer’s witnesses and proofs will clash with those presented and relied upon by the opposing side. Factual disputes about control and business advantage can readily turn on the assessment of the credibility of competing witnesses. Juries are well-suited to making those assessments, as they are for a host of other factual disputes entrusted to them at trial. 

Based on this historical analysis, the Supreme Court determined that nothing should change the traditional allocation of the jury’s role in borrowed employee disputes in most cases. However, if, under the well-established summary judgment standard, a court were to find that the evidence, viewed in the light most favorable to the non-moving party with all reasonable inferences, is so one-sided that there are no genuine issues of disputed material fact, the court could decide the issue without a jury. 

It is important to note that this case was not decided in the context of a workers’ compensation case but, rather, a civil action. The tests and case law in the New Jersey workers’ compensation forum for determining a general/special employee relationship are similar, but not the same. However, this case is illustrative of the fact that a claim involving issues of employment are some of the most complex and require extensive factual analysis. Many times, these issues are or can be resolved in the workers’ compensation forum first and will have a great impact, not only on your workers’ compensation benefit exposure, but also on your general liability exposure as well. If you have questions regarding your employment status, possible third-party liability exposure, or possible subrogation issues, you should contact your preferred counsel as soon as possible, regardless of where you are in the litigation process. 

*Bob is a shareholder in our Mount Laurel, New Jersey, office. He can be reached at 856.414.6009 or rjfitzgerald@mdwcg.com.

 

 

Defense Digest, Vol. 29, No. 3, September 2023, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2023 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.

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Thought Leadership

Two Tracks, No Preclusion: Ohio Supreme Court Preserves Separate Damages Claims After Chapter 2506 Appeals

The Supreme Court of Ohio has clarified that an administrative appeal under Ohio Revised Code Chapter 2506 does not bar a separate action for damages and declaratory relief that could not have been pursued in the administrative appeal. The Ohio Supreme Court considered Sheetz, Inc. v. Centerville (2026-Ohio-3531) as a result of a certified question from the Southern District of Ohio. The question was whether Sheetz, the gas station/convenience store brand, was barred from seeking damages in a separate action since damages were not sought in their administrative appeal. Ultimately, the Ohio Supreme Court ruled that res judicata does not bar a separate action for damages after ruling on an administrative appeal because R.C. Chapter 2506 is limited to judicial review and cannot grant affirmative relief. The case arose after Centerville’s city council rejected a site plan proposed by Sheetz, Inc. that had received unanimous approval from the City’s planning commission. Sheetz filed an administrative appeal pursuant to R.C. 2506 in the Montgomery County Court of Common Pleas, and two months later filed a complaint for damages and declaratory relief under 42 USC § 1983 as a takings action with the city, city council, and other objectors as improper takings and a violation of due process, as well as interference with business and contractual relationship. The city and city council removed the § 1983 action for damages to federal court. Montgomery County Court of Common Pleas reversed the city council’s denial, and allowed the Sheetz project to move forward. Upon that ruling, the federal court issued a show-cause order questioning whether the § 1983 action was barred by the doctrine of res judicata via claim preclusion (which includes all theories of recovery).  Sheetz argued that Ohio courts of common pleas do not have authority to award damages or declaratory relief as party of the R.C. Ch. 2506 appeal, therefore res judicata could not be triggered to apply to the § 1983 action. Additionally, Sheetz moved to certify the issue to the Ohio Supreme Court, citing differing results between the second and sixth districts on this same issue. Centerville approached the question, not from a claim preclusion standpoint, but from the holding in Grava v. Parkman, Twp which states that a final judgment rendered on the merits bars all subsequent action based on the same transaction or occurrence.  In yet another approach, an objector argued that claim preclusion was satisfied because Sheetz could have raised its damages claims in the administrative appeal – Sheetz disagrees. In their analysis, the Supreme Court of Ohio broke down the elements of a claim preclusion analysis: 1) a prior final, valid decision on the merits by a court of competent jurisdiction; (2) a second action involving the same parties, or their privies, as the first; (3) a second action raising claims that were or could have been litigated in the first action; and (4) a second action arising out of the transaction or occurrence that was the subject matter of the previous action. The Court held that R.C. Ch. 2506 does not permit a party to argue damages as R.C. Ch. 2506 limits the common pleas jurisdiction as if it were sitting on appeal, and therefore can only affirm, reverse, vacate, or modify the appealed order, or can remand the case to the administrative body. Further, the Court held that Grava’s conclusion that a final judgment precludes additional litigation for different relief is inapplicable under this fact pattern because it was meant only to apply to those matters in which the plaintiff brings the exact same case twice, but for new relief. The Court found Grava was inapplicable because Sheetz could have requested damages or declaratory relief in the R.C. 2506 appeal. Therefore, Grava would be nothing more than dicta if it even did apply. Going further, the Ohio Supreme Court disavowed Sixth Circuit precedent which, in reliance on Grava and other district court decisions, permitted an owner to seeking relief under 42 U.S.C. § 1983 alongside an administrative appeal. See Moore v Hiram Twp., 988 F.3d 353 (6th Cir.2021). The Ohio Supreme Court found that the Sixth Circuit had disregarded a critical decision in Community Concerned Citizens, Inc. v. Union Twp. Bd. of Zoning Appeals, 1993-Ohio-115, which clearly held that a R.C. Ch. 2506 appeal cannot be combined with a complaint seeking other claims for relief. Id. at ¶ 11. To that end, the Ohio Supreme Court has determined that the decisions Moore relied on (outside of Grava) are no longer good law, and that Moore was wrongly decided. The decision draws a clear procedural boundary: Chapter 2506 provides judicial review of an administrative decision, not a forum for independent claims seeking affirmative relief. Although Grava may place claims arising from a single transaction within the potential scope of claim preclusion, those claims are not barred unless the complete claim-preclusion test is satisfied. Because Sheetz could not have pursued damages or declaratory relief in its Chapter 2506 appeal, the separate action was not precluded. The remaining question for practitioners looking to apply or defend against this exception is when does the statute of limitations begin to run on damages and declaratory relief claims related to an administrative decision on appeal? A takings action in federal court has a 2-year statute of limitations, or as a state claim, 4 years (like the other tortious claims raised therein). Correlating this case with others, an administrative appeal will not likely toll the statute of limitations on claims based on a final decision by a municipal authority. Therefore, practitioners should look for these cases to be brought simultaneously.

Thought Leadership

Pennsylvania Supreme Court to Review Whether Legal Malpractice Claims May Be Recast as Breach of Contract Claims

The Pennsylvania Supreme Court recently granted allowance of appeal to consider whether a plaintiff may pursue a breach of contract claim against an attorney based on allegations that the attorney failed to provide competent legal services. The issue is significant in professional liability litigation because it concerns whether a plaintiff may avoid the statute of limitations applicable to professional negligence claims by characterizing the alleged misconduct as a breach of contract. Antoine Poteat retained attorneys Gary Asteak and Nino V. Tinari to represent him in a criminal matter. After his conviction was subsequently overturned through a Post Conviction Relief Act proceeding, Poteat filed suit against his former attorneys alleging that they breached their retainer agreements by failing to provide competent legal services. The attorneys argued that the claims sounded in professional negligence, rather than breach of contract, and were therefore time-barred. The trial court dismissed Poteat’s complaint, but the Superior Court, sitting en banc, reversed. The Superior Court held that the gist-of-the-action doctrine did not bar Poteat’s breach of contract claim because the alleged failure to provide competent legal services could constitute a breach of the parties’ agreement. The Court further held that a legal-services agreement contains an implied duty requiring an attorney to provide competent legal services, even where the agreement does not contain an express provision requiring such services. The Pennsylvania Supreme Court granted review in July 2026 and will consider whether the Superior Court’s decision conflicts with Pennsylvania precedent distinguishing contract and tort claims, including Bruno v. Erie Insurance Co. The Supreme Court will also address whether a plaintiff may maintain a breach of contract claim based on an implied duty to provide competent legal services without identifying a specific contractual provision that was breached. The Supreme Court’s decision could have significant implications for professional liability litigation in Pennsylvania, particularly where plaintiffs seek to characterize claims arising from alleged professional negligence as contractual claims.

Thought Leadership

The Search-Incident-to-Arrest Doctrine Does Not License Strip Searches

In Beatty v. Gardner, No. 25-2860 (3d Cir. Sept. 16, 2026), Kyle Beatty sued police officers Clinton Gardner and Calvin Irvin under 42 U.S.C. § 1983 after they stopped, arrested, and searched him three times during a drug investigation in Williamsport, Pennsylvania. The officers initially smelled marijuana coming from the car in which Beatty was sitting and observed marijuana residue, giving them probable cause to arrest him. Beatty consented to the first pat-down, and the second search was conducted incident to his lawful arrest; neither search uncovered weapons or contraband. The officers then transported Beatty to the police station solely to strip-search him, but the strip search also revealed nothing. The District Court granted the officers summary judgment, concluding that the initial stop, arrest, and first two searches were reasonable and that qualified immunity protected the officers from liability for the strip search. The Third Circuit affirmed, but held that the strip search itself violated the Fourth Amendment. The court concluded that the search-incident-to-arrest doctrine does not automatically permit officers to strip-search an arrestee outside the jail or prison setting. Because strip searches are highly intrusive and the traditional justifications for searches incident to arrest (officer safety and preservation of evidence) did not justify the search of Beatty, the officers generally needed either the arrestee’s consent, exigent circumstances, or a warrant supported by probable cause to believe that a search beneath the clothing would reveal weapons, contraband, or evidence. Here, the officers had none of those justifications. Nevertheless, the court held that qualified immunity barred damages liability because, at the time of the search, the right against a warrantless strip search of an arrestee outside the institutional setting was not clearly established by Supreme Court or Third Circuit precedent. The court likewise upheld qualified immunity on Beatty’s First Amendment retaliation claim and affirmed summary judgment for the officers.