Opinion ID: 195790
Heading Depth: 2
Heading Rank: 1

Heading: The Court's Judgment as a Matter of Law

Text: 14 In granting Shearson's motion for judgment as a matter of law, the court found that Shearson's liability hinged upon whether Nykaza acted as an agent of Shearson. After concluding that there was no evidence that there was an actual agency, the court determined that the issue was whether Nykaza had apparent authority from Shearson. The court stated: 15 That essentially there are two prongs to a determination as to whether or not a principal is liable for the acts of its agents or employees in these circumstances, that is, that there must be some kind of manifestation to the third party from the principal that the agent or employee is acting in the scope or in the course of employment or agency. Certainly there must be some basis which one might believe that indeed this was so. So that there are two prongs here, (1) a manifestation by the principal, and (2) a reliance to some extent by the third party dealing with the agent or employee. 16 I must consider the evidence at this point in the point of view most favorable to the Plaintiff. However, having said that the evidence it seems to me is totally lacking of any manifestation by Shearson Lehman to the putative investor that Mr. Mykaza [sic] was acting as its agent or employee in receiving funds. Furthermore, there is no evidence at all, even from the point of view of viewing the evidence most favorable to the Plaintiff, of any basis, reasonable or otherwise, for a belief that this was indeed what was happening. 17 The checks were drawn to Rhode Island Hospital Trust Company. We might have a different situation if they had been drawn to Shearson Lehman but any dealings that were had here were with Mr. Mykaza [sic] and Hospital Trust and the third party. It seems to me given those circumstances I have no choice but to grant the Defendant's motion for judgment as a matter of law and it is granted. 18 Bates took exception to this ruling. On appeal, she now claims that the court erred, and that the evidence was sufficient to permit the jury to reasonably conclude that Nykaza did have apparent authority to act as an agent of Shearson. 1 19 As a preliminary matter, we set forth the appropriate standard of review. Appellate review of a motion for a judgment as a matter of law is de novo. Jordan-Milton Machinery, 978 F.2d at 34. When a motion for a judgment as a matter of law has been granted, we review the evidence and the inferences reasonably drawn therefrom, in the light most favorable to the nonmoving party. Id; Fashion House, Inc. v. K Mart Corp., 892 F.2d 1076, 1088 (1st Cir.1989). To affirm, we must find that the evidence led to only one reasonable conclusion. Jordan-Milton Machinery, 978 F.2d at 34; Fashion House, Inc., 892 F.2d at 1088; see Commercial Assocs. v. Tilcon Gammino, Inc., 998 F.2d 1092, 1099 (1st Cir.1993). In performing this analysis, we will not make credibility determinations or evaluate the weight of the evidence. Jordan-Milton Machinery, 978 F.2d at 34; Fashion House, Inc., 892 F.2d at 1088. Nevertheless, the evidence to which the nonmovant points must comprise more than fragmentary tendrils: a mere scintilla of evidence is not enough to forestall [judgment as a matter of law], especially on a claim or issue as to which the burden of proof belongs to the objecting party. Fashion House, Inc., 892 F.2d at 1088 (citations omitted). 20 Under Rhode Island law, agency may be based upon apparent authority. 2 Commercial Assocs., 998 F.2d at 1099. 21 To establish the apparent authority of an agent to do a certain act, facts must be shown that the principal has manifestly consented to the exercise of such authority or has knowingly permitted the agent to assume the exercise of such authority; that a third person knew of the fact and, acting in good faith had reason to believe and did actually believe that the agent possessed such authority; and that the third person, relying on such appearance of authority, has changed his position and will be injured or suffer loss if the act done or transaction executed by the agent does not bind the principal. 22 American Title Ins. Co. v. East West Financial Corp., 16 F.3d 449, 454 (1st Cir.1994) (quoting Calenda v. Allstate Ins. Co., 518 A.2d 624, 628 (R.I.1986)) (other citations omitted). Apparent authority arises from the principal's manifestation of such authority to the party with whom the agent contracts. Commercial Assocs., 998 F.2d at 1099 (citing Menard & Co. Masonry Bldg. Contractors v. Marshall Bldg. Systems Inc., 539 A.2d 523, 526 (R.I.1988)). The focus is therefore on the conduct of the principal, and not on the putative agent. Commercial Assocs., 998 F.2d at 1099. Additionally, a third party's belief in the agent's authority to act on behalf of the principal must be a reasonable one. Id. (citing Rodrigues v. Miriam Hospital, 623 A.2d 456 (R.I.1993)). 23 In the present case, there is simply no evidence of any representation or conduct by Shearson that would suggest to Bates that Nykaza had authority to act for it. When Nykaza commenced working at Shearson, Nykaza never opened up an account for Bates at Shearson. Thereafter, when Nykaza would go to Bates' home, and prepare checks for Bates to sign, he never had her issue them to Shearson. Rather, the checks were made out to Hospital Trust. Nykaza never deposited any of Bates' funds with Shearson. Additionally, Nykaza never expressly told or otherwise represented to Bates that her funds would be invested with Shearson. 24 Shearson did not give Nykaza any authority to solicit money from Bates in such a fashion. Shearson policy in no way countenanced Nykaza's actions. Rather, its policy required brokers to open a customer account before investing a client's money. A Shearson branch manager then had to approve any new account. Furthermore, Shearson required that all money placed into an account for investment purposes be made payable to Shearson. Moreover, Shearson had no way to know of Nykaza's dealings with Bates--Nykaza never opened an account at Shearson for Bates, and all of his dealings with her took place at her home. 25 Even if Bates in fact believed that Nykaza represented Shearson, no reasonable jury could have found that belief justifiable. A generous reading of the evidence would suggest that Bates gave Nykaza money to invest for her, and while Nykaza was working at Shearson, Bates learned, at one point, that he was working there. Based on this reading, Bates contends that by virtue of Shearson hiring Nykaza to work as a broker for it, she assumed that the money she gave Nykaza would be invested at Shearson. See Restatement (Second) of Agency, Sec. 261. A third party's belief in an agent's authority to act on behalf of a principal, however, must be reasonable. Commercial Assocs., 998 F.2d at 1099; see American Soc. of Mechanical Engineers, Inc. v. Hydrolevel Corp., 456 U.S. 556, 566, 102 S.Ct. 1935, 1942, 72 L.Ed.2d 330 (1982) (citing Restatement (Second) of Agency Sec. 261 and explaining that under an apparent authority theory, liability can be based upon the fact that the agent's position facilitates the consummation of the fraud, where from the point of view of the third person, the transaction seems regular on its face and the agent appears to be acting in the ordinary course of the business confided to him). Here, the reasonableness of Bates' contention is undermined by the fact that the alleged investments with Shearson did not appear regular on their face--Nykaza never told her that he was investing her money at Shearson, Bates never filled out an application to open an account at Shearson, and the checks she gave Nykaza were not made out to Shearson. See Veranda Beach Club Ltd. Partnership v. Western Surety Co., 936 F.2d 1364, 1378 (1st Cir.1991) (when applying analogous Massachusetts law, court found that plaintiff's knowledge that employee was officer of company did not create a reasonable belief that employee had apparent authority to act for employer). There is simply no evidentiary basis from which to reasonably conclude that Nykaza had apparent authority to act as an agent of Shearson in his dealings with Bates.