Opinion ID: 545490
Heading Depth: 3
Heading Rank: 2

Heading: The Agency Theories

Text: 15 Plaintiffs also contend that SCL should have been held liable on the leases as a principal for which AES Ltd. was the agent. Though they assert that there was an express agency relationship, their argument appears to rely to a greater extent on the proposition that there was an implied agency. They further contend that the district court applied the wrong standard for determining whether an agency relationship existed, namely whether there was abuse of control. Though the district court does appear to have stated the wrong standard, on this record it nonetheless reached the correct result. 16 In concluding that [t]he standard required to establish an agency relationship between SCL and AES [Ltd.] is the same as that required to pierce the corporate veil--abuse of control, 725 F.Supp. at 1310, the district court relied on the holding of another district court in Kashfi v. Phibro-Salomon, Inc., 628 F.Supp. 727, 735 (S.D.N.Y.1986). The Kashfi court, however, enunciated that standard for determining agency relationships as they might exist between related corporations, i.e., those with overlapping shareholders, officers, or directors, stating that to impose any other standard would undermine the presumption that corporations are separate entities whose form is to be respected. 17 Whether or not that view is correct is a question we need not reach here, for we are dealing with corporations that are not formally related. SCL and AES Ltd. were not parent and subsidiary; nor did they have any shareholders, officers, or directors in common. Accordingly, we look to the traditional tests of actual and implied agency. 18 An express agency is created by written or spoken words or other conduct of the principal which, reasonably interpreted, causes the agent to believe that the principal desires him so to act on the principal's account. Restatement (Second) of Agency Sec. 26 (1958) (Restatement ). Whether such an agency is formed depends on the actual interaction between the putative principal and agent, not on any perception a third party may have of the relationship. 19 Plaintiffs point to various activities of SCL that might perhaps have been thought by others to establish an agency relationship in some respect. There was no evidence, however, that SCL actually authorized AES Ltd. to act as its agent or that it in any way led AES Ltd. to believe AES Ltd. was so authorized. SCL made clear from the start its intention to utilize the corporate form for AES Ltd. so as to limit SCL's liability. SCL did provide financing to AES Ltd., but AES Ltd. was meant to, and did, operate independently. SCL chose not to be a shareholder, and no SCL employee sat on AES Ltd.'s Board of Directors. The record simply would not have supported a finding that SCL authorized AES Ltd. to act on its behalf. 20 Implied agency, in contrast, depends not on the actual relationship between principal and agent but on the reasonable conclusion of a third party, derived from actions of the principal, that the person acting has authority to do so from the principal. [A]pparent authority to do an act is created as to a third person by written or spoken words or any other conduct of the principal which, reasonably interpreted, causes the third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him. Restatement Sec. 27. Thus, in order to determine whether there was implied authority, the court must focus on the acts of the principal in relation to the third party. See Ford v. Unity Hospital, 32 N.Y.2d 464, 473, 346 N.Y.S.2d 238, 244, 299 N.E.2d 659 (1973); General Overseas Films, Ltd. v. Robin Int'l, Inc., 542 F.Supp. 684, 698 (S.D.N.Y.1982), aff'd without opinion, 718 F.2d 1085 (2d Cir.1983). 21 Though plaintiffs argue that the actions of SCL reasonably led them to believe that SCL was AES Ltd.'s principal, the record refutes their claims. Under New York law, [o]ne who deals with an agent does so at his peril, and must make the necessary effort to discover the actual scope of authority. Ford v. Unity Hospital, 32 N.Y.2d at 472, 346 N.Y.S.2d at 244. Whatever the possibility that some of SCL's actions may have given outsiders the impression that AES Ltd. was running the AES line on behalf of SCL, the scope of any such implied authority plainly could not be deemed to have extended to the one set of AES Ltd. actions that is pertinent here, i.e., the execution of the container leases. Both Itel and Flexi-Van, in the course of negotiating the leases with AES Ltd., communicated directly with SCL in an attempt to get SCL to take responsibility for the leases. SCL flatly refused to do so. Neither these plaintiffs nor Textainer (which does not appear to have communicated with SCL when negotiating its leases) point to any action by SCL that they could reasonably have interpreted as authorizing AES Ltd. to enter into the leases on behalf of SCL. 22 We conclude that the record belies plaintiffs' contentions that SCL actually or impliedly authorized AES Ltd. to enter into the container leases as agent for SCL.