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Assignment4_Complete - 30.1 Case Details Francis Pusateri...

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30.1 Case Details: - Francis Pusateri contacted Gilbert J. Johnson, a stockbroker with E.F. Hutton & Co., to invest in tax-free bonds and money market. - Pusateri opened an investment account with E.F. Hutton & Co. with primary interest in ‘tax-free income and moderate growth’. - During the course of a year, Johnson squeezed the account for commissions and invested funds in volatile markets and options. - Johnson kept telling Pusateri that his account was making money but the fact revealed when Pusateri received statement which showed loss of approximately $100,000. - The manager E.F. Hutton was aware of the malicious acts performed by Johnson on the mentioned account. - Pusateri sued E.F. Hutton & Co. for the damages. Jonson was an agent of the E.F. Hutton & Co. He was contacted by Pusateri to open tax free bonds and money market. Pusateri opened an investment account with E.F. Hutton & Co. So, the agency is classified as the fully disclosed agency. The third party was aware that Johnson is the agent for the E.F. Hutton & Co. The agent – Johnson had to be loyal to his principal E.F. Hutton & Co. under the duty of loyalty. Even though the manager was aware of the activities and ideally the agent has to be loyal to the principal as the agent-principal relationship is based on loyalty and good faith as a principal E.F. Hutton & Co. is liable and responsible to provide quality service to the customers. When the third party sues for the damages, he sues the principal as the account was opened under the care of E.F. Hutton & Co. The principal holds liability for the misuse of the account and the damages. The court will hold E.F. Hutton &
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