CSX Transp., Inc. v. Recovery Express, Inc. - 415 F. Supp. 2d 6 (D. Mass. 2006)

Rule:

Apparent authority is the power held by an agent or other actor to affect a principal's legal relations with third parties when a third party reasonably believes the actor has authority to act on behalf of the principal and that belief is traceable to the principal's manifestations. It is not established by the putative agent's words or conduct, but by those of the principal. Apparent authority may exist only when a plaintiff reasonably may believe as a result of the principal's words or conduct that the agent is authorized to act on its behalf. Apparent authority does not come into being until a third party learns facts from which he reasonably infers that the agent is authorized.

Facts:

Plaintiff, CSX Transportation, Inc., received an e-mail message from a person who expressed interest in buying railcars as scrap. The message carried the domain name assigned to defendant, Recovery Express, Inc. The person who wrote the message did not work for the defendant but was allowed to use the defendant’s offices and e-mail because he had been involved in another venture with the corporation. Plaintiff transferred railcars to a location specified by the person who wrote the e-mail message, and the person who wrote the message removed the cars from that location. However, a check he sent to the plaintiff was returned for insufficient funds. After that check was returned, the plaintiff sued the defendant for breach of contract, account stated, unjust enrichment, and quantum meruit. The defendant filed a motion for summary judgment. 

Issue:

By allowing the person to use its offices and e-mail, did the defendant cloak the person with apparent authority to bind it to the transactions entered into by such person? 

Answer:

No.

Conclusion:

The court found that the person who wrote the e-mail message did not work for the defendant and there was no reason for the plaintiff to conclude that he had actual or apparent authority to act as its agent. The fact that he had access to the defendant’s e-mail account and sent a message using the defendant’s domain name did not create apparent authority. The court granted the defendant’s motion for summary judgment.