Vanderbilt Law Review


Carol M. Lynch

First Page



This Note demonstrates that the scope of employer liability for employees' rule 10b-5 violations is no broader under a proper application of respondeat superior than under section 20(a). This Note does not address the question whether respondeat superior applies under rule 10b-5, but rather how courts should apply it.

Part II examines the majority, minority, and Third Circuit decisions on employer liability. Part III discusses the traditional analysis under both respondeat superior and section 20(a) and compares the scope of liability under each one. Part III concludes that except for an employer's liability for acts that are within an employee's apparent authority yet outside the scope of employment,the results are identical in all cases under either respondeat superior or section 20(a). Thus, courts place too much emphasis on the good faith defense of section 20(a).

Part IV analyzes the effect of the Supreme Court's decision in Ernst & Ernst v. Hochfelder" on the respondeat superior cause of action. Because Hochfelder firmly establishes scienter as a requirement in a rule 10b-5 cause of action, courts now must use respondeat superior to impute to the employer not only the employee's conduct but also his intent. In criminal cases respondeat superior often serves to impute both an employee's conduct and intent to a corporation or partnership for crimes that require specific intent.

Part V of this Note examines the limitations of respondeat superior in imputing conduct and intent to an entity in criminal case law, the Model Penal Code, and proposed federal criminal code provisions. Ultimately, this Note concludes that in view of the scienter requirement, those restrictions should apply to rule 10b-5 actions to limit employer liability to those cases in which an employee acts within the scope of employment with the intent to benefit the employer. Under this approach the distinction vanishes between the scope of secondary liability under respondeat superior and under section 20(a).