Opinion ID: 751364
Heading Depth: 3
Heading Rank: 2

Heading: konica's agents had apparent authority to bind konica

Text: 36 Konica appeals the District Court's denial of its Motion for Judgment as a Matter of Law on the apparent authority of Konica's agents to bind it to a contract with OGI. Konica contends that OGI's claim to a contract relies exclusively on communications between OGI and Konica employees who lacked the authority to bind Konica to the alleged nationwide contract. OGI counters that Hunter, Weaver, and/or Dunn were capable of binding Konica pursuant to: (1) express or implied actual authority or (2) apparent authority. 37 When deciding a diversity case, a federal court must apply the substantive law of the state's highest court. Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Here, it is undisputed that the law of Ohio applies. 38 With respect to the issue of express or implied actual authority, the Ohio Supreme Court has stated: 39 If a party by his words or conduct, reasonably interpreted, has caused one, assuming to act as agent for such party in the making of a contract, to believe that such one had the necessary authority to make the contract, such party will be bound by the contract ... In such instances, the terms implied authority or actual implied authority are often used to describe or label what is so treated as the equivalent of authority. 40 Miller v. Wick Building Co., 154 Ohio St. 93, 98, 93 N.E.2d 467, 471 (1950) (citations omitted). Thus, an agent has actual implied authority to do 'what is reasonable for him to infer that the principal desires him to do in light of the principal's manifestations and the facts as he knows or should know them at the time he acts.'  Master Consolidated Corp. v. BancOhio National Bank, 61 Ohio St.3d 570, 575, 575 N.E.2d 817, 822 (1991) (citations omitted). 41 In Master Consolidated, supra, the Ohio Supreme Court also articulated what the evidence must show to bind the principal based on the agent's apparent authority. To bind a principal on this basis, it must be shown that: 42 1) the principal held the agent out to the public as possessing sufficient authority to embrace the particular act in question, or knowingly permitted him to act as having such authority, and 43 2) the person dealing with the agent knew of the facts and acting in good faith had reason to believe and did believe that the agent possessed the necessary authority. The apparent power of an agent is to be determined by the act of the principal and not by the acts of the agent: a principal is responsible for the acts of an agent within his apparent authority only where the principal himself by his acts of conduct has clothed the agent with the appearance of the authority and not where the agent's own conduct has created the apparent authority. 44 575 N.E.2d at 822. 45 Relying on the rule set out by the Ohio Supreme Court in Master Consolidated, in General Electric Company v. G Siempelkamp GmbH & Company, 29 F.3d 1095 (6th Cir.1994), this Court concluded that a manager had apparent authority to bind GE to a contract with a German manufacturer. In that case, GE made an offer in a purchase order to Siempelkamp, a German manufacturer, to buy an industrial laminate press. Siempelkamp then submitted a counter-offer in the form of an order confirmation containing different terms than the purchase order. Carbone, the Manager of Manufacturing Engineering and Facilities at GE, signed the counter-offer on the accepted blank. This same procedure had been followed when GE purchased a press from Siempelkamp one year earlier. Carbone had conducted the earlier deal, as well. Based upon this evidence, the court concluded that GE certainly held out Carbone as possessing the authority to act as its agent. Id. at 1098. The court found particular support for its conclusion in the fact that Carbone led GE's negotiations with Siempelkamp over several years, and GE never expressly informed Siempelkamp that Carbone lacked authority to bind GE. A letter from Siempelkamp to GE pointing out that the terms of the order confirmation constituted the only contract between that parties was also considered persuasive evidence. The court also noted that Carbone continued to act as GE's agent throughout the performance of the contract by continually signing modifications to the contract. 46 In this case, the jury here necessarily determined that Konica was bound to the April 13, 1992 letter, although there is no basis for determining whether the jury found actual, implied authority or apparent authority. 1 It is clear from the record and from this Court's decision in General Electric, supra, however, that the most obvious conclusion is that Konica's agents had apparent authority. 47 The facts in General Electric are analogous to the present case in several aspects, the most prominent of which is the fact that Barbara Hunter, Konica's Territory Manager for the Cleveland area, had previously concluded similar deals with Kim Bernatz, before Bernatz came to OGI, when he worked for his former company. In the entire history of Hunter's dealings with Bernatz, Konica never indicated that Hunter did not have authority to bind Konica. Similar to the letter sent by Siempelkamp to GE pointing to the confirmation letter as the contract, Bernatz asked Hunter if there was anything he needed to sign to conclude the deal with Konica, and Hunter answered in the negative, indicating that oral acceptance of Konica's proposal letter was enough. It was Konica's procedure that its customers' only source for confirmation of a deal was through Konica representatives such as Hunter. Finally, Hunter sending the April 13 letter changing the 40% discount from the earlier proposal to 45% after Bernatz had negotiated this with Robert Weaver, Konica's Regional Manager, is analogous to the facts in General Electric where Carbone continually signed modifications to the contract GE had with Siempelkamp. 48 Nevertheless, we should note that in a similar case years ago, this Court found that a salesman for a flour company lacked apparent authority to bind the principal to a contract with a bread company. Dayton Bread Co. v. Montana Flour Mills Co., 126 F.2d 257 (6th Cir.1942). In that case, a salesman from Montana Flour solicited the President and General Manager of Dayton to buy more flour from Montana than it had already purchased. After some hesitation by the President of Dayton, the salesmen finally convinced him to purchase 5,000 more barrels of flour. As persuasion, the salesman assured the President that the price of wheat was on the rise, and Montana would not require Dayton to take the 5,000 barrels, but they would resell it later to smaller bakers at a higher price and split the profits. The President agreed and signed a standard contract for the purchase of the barrels. Montana acquired the flour ordered by Dayton and upon attempting to deliver the flour to Dayton, the President refused to take it, explaining the oral agreement he had made with the salesman. This was the first notice the officers of Montana had that the flour had not been purchased in good faith, and that their salesman had made such an oral agreement with Dayton. The Court ruled that the salesman had not acted within the scope of his authority, and did not have apparent authority to bind Montana to the agreement. 49 The reasoning for the decision distinguishes Dayton Bread from the case at bar. The court's decision in Dayton Bread was influenced by an Ohio law forbidding the sale of commodities with intent to merely speculate on the rise or fall of prices, without intending delivery. Id. at 259. Applying the law on apparent authority, the court ruled there can be little doubt that the Montana Company's agent transgressed his instructions and that his apparent authority did not extend to the making of a conditional sale, or one in violation of the statutory laws of Ohio. Id. (Emphasis added.) 50 For obvious reasons, the current case can be distinguished from Dayton Bread. The representatives of Konica were in no way executing an agreement forbidden by state law. In Dayton Bread it should have been clear to the President of Dayton that a salesman would not be given authority to bind Montana Flour to an agreement for which the officers of the company could be fined and or imprisoned. In the instant action, it was not so irresponsible for Bernatz to have believed Hunter had the authority to bind Konica particularly since he also had negotiated directly with Robert Weaver, a Regional Manager, and the contract he received from Hunter mirrored his agreement with Weaver. 51 Applying Ohio law to the current case, it is clear to us that Hunter had the apparent authority to bind Konica to a contract with OGI for the sale of film. Hunter's prior dealings with Bernatz in concluding contracts without any further approval is evidence that Konica held Hunter out as having such authority. Konica knew about Hunter's business practices, and at no time gave Bernatz any indication that Hunter did not have the authority to bind Konica. Moreover, combining Bernatz's previous dealings with Hunter's sending him a proposal and later modifying its terms after further negotiations also gave Bernatz good reason to believe that Hunter had the authority to negotiate and bind Konica to such agreements. 52