Opinion ID: 755613
Heading Depth: 2
Heading Rank: 1

Heading: Proper Test for Agency

Text: 15 Chemtool argues first that the district court applied the wrong test to determine whether, under Illinois law, Lube Tech was Chemtool's agent. Whether the district court applied the correct test is a question of law to be reviewed de novo. See id. 16 The district court used the following test to evaluate the relationship between Chemtool and Lube Tech: 17 The test to determine whether a principal-agent relationship exists is whether the alleged principal has the right to control the agent, and whether the alleged agent can affect the legal relationships of the principal. Moy v. County of Cook, 244 Ill.App.3d 1034, 185 Ill.Dec. 131, 614 N.E.2d 265, 267 (1993). Therefore, in order for Chemtool to establish a principal-agent relationship between itself and Lube Tech, it must show that (1) Chemtool had the right to control the conduct of Lube Tech and Schultz; and (2) Lube Tech had the power to effect [sic] the legal relations of Chemtool. 18 Bench Opinion at 9. 19 Chemtool, on the other hand, argues that the proper test for agency is whether, by contract or by conduct, the parties agreed to an agency relationship. This is not a test; it begs the question. It is certainly true that [u]nder Illinois law, agency is a consensual, fiduciary relationship, Israel v. National Canada Corp., 276 Ill.App.3d 454, 213 Ill.Dec. 163, 658 N.E.2d 1184, 1189 (1995). That is, parties must consent to a principal-agent relationship. But Chemtool's proposed test does not tell us to what, precisely, the parties must consent. While an agency relationship can be created by contract or by conduct, not all contracts create agency relationships and not all conduct creates agency relationships. 20 A legion of Illinois cases assures us that the district court applied the correct test. The test of agency is whether the alleged principal has the right to control the manner and method in which work is carried out by the alleged agent and whether the alleged agent can affect the legal relationships of the principal. Anderson v. Boy Scouts of Am., Inc., 226 Ill.App.3d 440, 168 Ill.Dec. 492, 589 N.E.2d 892, 894 (1992); see also, e.g., Taylor v. Kohli, 162 Ill.2d 91, 204 Ill.Dec. 766, 642 N.E.2d 467, 468-69 (1994); Rollins v. Ellwood, 141 Ill.2d 244, 152 Ill.Dec. 384, 565 N.E.2d 1302, 1310 (1990); Israel, 213 Ill.Dec. 163, 658 N.E.2d at 1189; Moy v. County of Cook, 244 Ill.App.3d 1034, 185 Ill.Dec. 131, 614 N.E.2d 265, 267 (1993); cf. Valenti v. Qualex, Inc., 970 F.2d 363, 367-68 (7th Cir.1992) (applying Illinois law). Principal among these considerations is the right to control the manner that the work is done. Taylor, 642 N.E.2d at 468-69 (citing Lewis v. Mount Greenwood Bank, 91 Ill.App.3d 481, 46 Ill.Dec. 926, 414 N.E.2d 1079, 1084 (1980)). 21 The cases cited in Chemtool's brief do not undermine this test. Lang v. Consumers Ins. Serv., Inc. involved a consumer claiming that someone was an apparent agent. 222 Ill.App.3d 226, 164 Ill.Dec. 825, 583 N.E.2d 1147, 1152 (1991). The Illinois Appellate Court said [a]n agent is one who, acting under authority from another, transacts business for him, and a true agency requires that the agent's function be the carrying out of the principal's affairs. Id. Chemtool relies on Lang for the proposition that the agency relationship does not depend on whether the principal exercises control over the agent. We do not read Lang to stand for that proposition. The Lang court focused on only part of the agency calculus because the consumer pled an apparent agency relationship. An apparent agent is one who, whether authorized or not, reasonably appears to third persons to be authorized to act as the agent for another person, as a result of the acts of that other person. Id. at 1152. A discussion of control was not necessary. 22 Chemtool likewise relies on Clapp v. JMK/Skewer, Inc. for the proposition that the agency relationship does not depend on control. 137 Ill.App.3d 469, 92 Ill.Dec. 187, 484 N.E.2d 918, 921 (1985). Clapp involved a patron trying to demonstrate that an inn on shopping mall premises was an agent of the shopping mall. The Clapp court found that while the shopping mall may have had some control over the inn, the inn was not in the business of carrying out the mall's affairs. That is, the inn had no authority to bind the shopping mall. Clapp does not contradict the well-established Illinois test spelled out above. Clapp simply reminds us that the test for agency consists of two prongs, both of which must be satisfied. The district court correctly stated the test for agency relationships under Illinois law. 23 Chemtool also complains that the district court placed undue emphasis on non-binding precedent, Manufacturers Tech., Inc. v. Cams, Inc., 706 F.Supp. 984, 10 U.S.P.Q.2d 1321 (D.Conn.1989). Cams applied Connecticut common law of agency, which is not materially different from the Illinois law on agency. Cams recites that under Connecticut common law, a plaintiff must show that the principal consented to have the agent act on its behalf, that the agents accepted the undertaking, that the parties understood that the principal would be in control of the undertaking, and that the agents acted  'at the behest and for the benefit of the principal'. Id. at 1005 (quoting Beckenstein v. Potter & Carrier, Inc., 191 Conn. 120, 464 A.2d 6, 14 (1983)). Nothing in Cams contravenes the Illinois test the district court found and used to evaluate the relationship between Chemtool and Lube Tech. Connecticut apparently uses the same test as Illinois does (control over the agent plus authority to bind the principal) plus two elements of consent to the relationship, one from each party. The test is not materially different. We see no error on the part of the district court in using Cams as persuasive authority.