Drago Mihajlovski v. Birach Broadcasting Corporation
331284
| Mich. Ct. App. | Jun 20, 2017Background
- Plaintiffs (Drago and Jadranka Mihajlovski; Zive has an employment claim) invested $950,000 after dealing with Sima Birach, Jr. (Birach Jr.), believing they were buying a 25% interest tied to WCAR 1090 AM/ESPN Detroit. The deal was memorialized in a Memorandum of Understanding signed by Birach Jr. as trustee of the Sima Birach, Jr. Trust and included employment contracts on WCAR/ESPN letterhead.
- WCAR 1090 AM is owned by Birach Broadcasting Corporation (BBC), controlled by Sima Birach (Birach Sr.). BBC leased airtime to Birach Jr. and Birach Holdings Corporation (BHC); Birach Sr. granted broad operational authority to Birach Jr. under the lease.
- Plaintiffs sued Birach Jr., the Trust, BHC, Birach Sr., and BBC for fraud, breach of contract, misrepresentation, and sought vicarious liability/estoppel against Birach Sr. and BBC for Birach Jr.’s conduct.
- The trial court granted summary disposition for Birach Sr. and BBC, finding no agency relationship supporting vicarious liability; plaintiffs appealed. The trial court had previously entered default judgment against Birach Jr. and the Trust, but not against Birach Sr. and BBC after summary disposition.
- Evidence included prior federal injunction obtained by Birach Sr. to stop Birach Jr. from using BBC’s name, filings by Birach Jr. representing BHC/WCAR, employment agreements on WCAR letterhead, publicity and operational control exercised by Birach Jr., and testimony about plaintiffs’ reliance (including reliance on counsel).
- The Court of Appeals found genuine factual disputes on ostensible agency, estoppel, and plaintiffs’ own negligence in relying, and reversed and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Birach Jr. was an ostensible agent of Birach Sr./BBC | Birach Sr./BBC negligently allowed Birach Jr. to hold himself out as owner/operator of WCAR, creating reasonable belief of authority | Birach Jr. acted only for himself/BHC; no principal manifestation of authority by Birach Sr./BBC | Reversed: factual issues exist whether ostensible agency was created by Birach Sr./BBC |
| Whether Birach Sr./BBC can be estopped from denying agency | Prior conduct and lack of oversight (and filings by Birach Jr.) justify estoppel | No conduct by Birach Sr./BBC created plaintiff’s belief; Birach Sr. actually sought injunction earlier | Reversed: factual dispute whether estoppel applies given notice and later conduct |
| Whether plaintiffs were negligent in relying on Birach Jr.’s representations | Plaintiffs reasonably relied (including relying on counsel to vet the deal) | Drago should have confirmed station ownership; failure to do elementary due diligence was negligent | Reversed: triable factual issue whether Drago was negligent in relying on retained counsel and representations |
| Proper application of respondeat superior vs. ostensible agency | Plaintiffs rely on ostensible-agency doctrine, not respondeat superior | Defendants argue employee-benefit/scope rules (respondeat superior) bar liability for acts done for personal benefit | Affirmed distinction: ostensible agency differs from respondeat superior; factual questions remain on ostensible agency |
Key Cases Cited
- Grewe v Mount Clemens General Hospital, 404 Mich. 240 (Mich. 1978) (sets elements and test for ostensible agency)
- VanStelle v Macaskill, 255 Mich. App. 1 (Mich. Ct. App. 2003) (applies ostensible-agency principles)
- Hamed v Wayne County, 490 Mich. 1 (Mich. 2011) (discusses respondeat superior scope limits)
- Beaudrie v Henderson, 465 Mich. 124 (Mich. 2001) (standard of review for summary disposition)
- McCoig Materials, LLC v Galui Construction, Inc., 295 Mich. App. 684 (Mich. Ct. App. 2012) (moving party’s burden in MCR 2.116(C)(10))