Taking employment law into uncharted waters, a $645 million lawsuit alleges the operator of the Hard Rock resort in Las Vegas is liable for the death of its former CEO's girlfriend because it consented to his “hedonistic lifestyle.”

Michelle Hatchel	Ed Scheetz

Michelle Hatchel, 23, died of a drug overdose Aug. 29, 2007 while staying at a Las Vegas condominium with Ed Scheetz, who was then the chief executive officer of Morgans Hotel Group (NASDAQ: MHG). Members of Hatchel's family filed a wrongful-death suit last week that names both Scheetz and Morgans as defendants.

According to the complaint, Scheetz flew Hatchel to Las Vegas from New York on Morgans' private jet for a weekend of cocaine and sex. She was killed, it says, “as a proximate result of the Defendants' ... wrongful and/or negligent acts or omissions” in the three-bedroom penthouse suite leased by Morgans.

An autopsy report attributed Hatchel's death to “acute, multiple drug intoxication (oxycodone, cocaine).” Police allegedly found more than seven grams of cocaine and a prescription bottle in Scheetz's name for oxycodone, an opiate painkiller, in the condo.

Under the doctrine of respondeat superior, an employer is vicariously liable for an employee’s torts committed within the scope of employment. The plaintiffs suing Morgans have given a novel twist to that theory by arguing that Scheetz's behavior mirrored the raunchy “image” of the Hard Rock Hotel & Casino.

The complaint is not exactly a model of clarity. In attempting to explain Morgans' vicarious liability, it says:

Plaintiffs are informed and believe that a part of the “Hardrock” marketing’s strategy its target demographic patrons included hedonistic sexually permissive and promiscuous lifestyle which also included use of illegal and/or illegally obtained, provided, given, and/or supplied controlled substances including but not limited to cocaine and oxycodone ...

Scheetz's lifestyle, the suit says, involved “multiple sexual partners,” the “voluminous use and abuse” of cocaine, and the providing to others of oxycodone, and since his hedonism was a “living example of [the] 'Hardrock' image ... all of his actions, inactions, and/or omissions [at the time of Hatchel's death] were within the course and scope of his employment.”

The case goes far beyond any precedent in Nevada, which, under a statute enacted in 1997, has limited employer liability for the intentional conduct of an employee.

An employer is not liable for harm or injury, NRS 41.745 says, if the employee's conduct:

(a) Was a truly independent venture of the employee;
(b) Was not committed in the course of the very task assigned to the employee; and
(c) Was not reasonably foreseeable under the facts and circumstances of the case considering the nature and scope of his employment.

In Prell Hotel Corp. v. Antonacci, 469 P.2d 399 (1970), the Nevada Supreme Court found a casino operator liable for a blackjack dealer's assault on a customer because the assault occurred “within the scope of the very task assigned to [the dealer], that of dealing '21.'”

There is no such connection between Hatchel's death and Scheetz's duties as a CEO. Even if Morgans sanctioned his “hedonistic proclivities” and he was using its plane and condo, it surely did not assign him the “very task” of providing illegal drugs to Hatchel.

Moreover, “considering the nature and scope of his employment,” it was hardly foreseeable to Morgans that Scheetz's behavior would result in Hatchel's death.

According to police, Scheetz returned home to the condo about 8 p.m. on Aug. 29, 2007 and called 911 to report that a woman, whom he described as his girlfriend, was not breathing. Hatchel's family say in their suit that he lied to police when he told them she was still alive when he left the condo for work at 9 a.m.

Late on Aug. 28, Hatchel sent a friend a text message from a closet in the condo. “Things are really bad. Ed has been so mean to me,” it said.

Scheetz resigned as CEO of Morgans three weeks after Hatchel's death. He settled an earlier wrongful-death suit filed by her father and the new case may well be an attempt to leverage a settlement out of Morgans, which operates luxury hotels in such cities as New York, Miami and London.

By Matthew Heller
On Point