Opinion ID: 777651
Heading Depth: 4
Heading Rank: 1

Heading: he intentionally or carelessly caused such belief, or

Text: 65 (b) knowing of such belief and that others might change their positions because of it, he did not take reasonable steps to notify them of the facts. 66 Restatement (Second) of Agency § 8B (1958); accord H.G. Reuschlein & W.A. Gregory, The Law of Agency and Partnership § 25, at 65-66 (2d ed.1990) (noting that [c]onduct which leads a third party to believe that the agent has authority and thus creates apparent authority to those persons who act upon it, frequently causes the principal to be liable to those who have changed their position in reliance to their detriment); L. Lakin & M. Schiff, The Law of Agency 38 (1984) (stating an equitable principle of agency by estoppel similar to that of the Restatement (Second)). 67 Even if the defendants' relationship were to fall slightly outside of the confines of these specific doctrines, the question before us is whether a sufficient relationship exists under the Due Process Clause to permit the exercise of jurisdiction, not whether a partnership, joint venture, or other particular agency relationship between the two defendants exists. We think it consistent with the Due Process Clause to attribute to the Scruggs defendants the Motley defendants' retention of, and certain interactions with, Daynard where, as Daynard alleges, they have led Daynard and the public to believe they were joint venturers. That is a different issue from whether, in a dispute between the two firms, a joint venture agreement could be enforced. 68 We take the facts alleged and produced by Daynard in the light most favorable to his jurisdictional assertion. Even if the parties were not joint venturers, they held themselves out to Daynard to be part of a joint venture or other agency relationship and are subject, for personal jurisdiction purposes, to the doctrine of estoppel. Daynard, throughout his dealings with the defendants, understood them to be joint venturers. He says the parties consistently purported to be joint venturers and that he reasonably relied on this understanding. The question is whether he had a basis for this belief grounded in the Scruggs defendants' own conduct or conduct undertaken with their consent. 69 In support of his understanding, Daynard states that he believed the firms to be in a joint venture based on their statements and conduct. Daynard states that Patrick was acting for both firms when Patrick retained him and that Patrick retained him to advance the objectives of the joint venture. He says that during this first meeting, Patrick described the tobacco litigation as stemming from a meeting between Scruggs and the Mississippi attorney general, which then resulted in Scruggs br[inging] the Motley firm into their plans. 70 Daynard supports his claim with documentary evidence of a joint venture that he unearthed through jurisdictional discovery. Around October 1994, the Scruggs defendants entered into a Joint Venture Agreement with several firms to pursue tobacco litigation on behalf of the state of Mississippi. The Motley defendants claim to have abided by this agreement and their firm's name was listed on the agreement, although they never signed the agreement. In a letter from Joseph Rice of Ness Motley to Richard Scruggs, Rice stated: As we have discussed several times, we have not signed the Mississippi Joint Venture Agreement solely because we don't want to be governed by Mississippi Tax Law. We are agreeable to all terms in the agreement and, as you know, we have acted under the agreement from the beginning. In the agreement, Ness Motley firm members, including Mr. Motley, were listed as members of several of the teams and committees forming the Litigation Management Structure outlined in the agreement. Mr. Motley was a co-chairman of the Public Relations Team, which also included Steve Bozeman from Scruggs Millette. Indeed, Ness Motley was counsel of record in the Mississippi case. In addition, Daynard notes that the two defendant firms were parties to a `Resolution' which recited that they had both `made and entered into that certain Joint Venture Agreement' concerning the Mississippi litigation. 71 Scruggs says that Ness Motley did not sign the joint venture agreement, that Ness Motley did not perform under the agreement's terms, and that the litigation team did not function as outlined in the agreement. He says Ness Motley did not make the capital contributions specified in the agreement, that there was a distinction between being counsel of record and being a party to the joint venture agreement, and that Ness Motley's failure to sign the agreement caused great concern. Scruggs says that, upon receiving the letter from Rice, stating that Ness Motley had acted under the agreement from the beginning, he called Rice and told him that this wasn't good enough and that nobody else considered Ness Motley to have performed under the agreement. 72 Scruggs concedes, however, that the profits from the Mississippi litigation, outlined in this agreement, were eventually divided with Ness Motley, but he says that the division was under the terms of a 1999 agreement. Scruggs states that his understanding with Ness Motley was always that at the end of the day, we would attempt to negotiate a fee and expense sharing arrangement, each trusting the goodwill of the other to reach a successful negotiation, but without any guarantee that we would. In addition, Scruggs admits that [t]here was a general cooperative effort between [Scruggs Millette and Ness Motley] to advance litigation against the tobacco industry. 73 Daynard then says that after Motley hired him, he began a course of dealing with the defendants in which he provided both firms with legal advice, including advice to members of the Scruggs firm physically present in Boston, as well as assistance provided from Boston by phone and fax. Daynard also cites several conversations with both Scruggs and Motley in which they agreed to pay him a share of the fees obtained by both firms, Scruggs's statement that Scruggs had at least apparent authority to promise the 5%, and Motley's statement that he would be compensated as part of the team. 74 Daynard cites a popular book about the tobacco litigation, which he says describes Ness Motley and Scruggs Millette as joint venturers beginning in 1993, as evidence that the firms were engaged in a well publicized joint venture or at least held themselves out to be so engaged. See M. Orey, Assuming the Risk: The Mavericks, the Lawyers, and the Whistle-Blowers Who Beat Big Tobacco 265 (1999) (stating that Scruggs, Motley, and two others, were the nucleus of a tobacco litigation team, which drafted a joint-venture agreement that spelled out in elaborate detail the duties each of the lawyers would perform). He notes, as additional evidence of public perception, that in the Texas tobacco litigation, other lawyers sent the firms checks made payable to Ness Motley/Scruggs. At least four such checks appear in the record. 75 Finally, in support of his claim that the defendants held themselves out to be joint venturers, Daynard presents a 1998 letter to Hawaii's attorney general, from Joseph Rice of Ness Motley, stating that Ness, Motley has an arrangement with Richard Scruggs to work jointly on all of the state cases against the Tobacco Industry. Noting that [w]e have no formal, written agreement, he said Ness, Motley and Dick Scruggs have been doing business together for almost ten years and have never had any differences. We fully anticipate sitting down in hindsight and determining what the division of any recoveries would be between the two law firms. 76 Scruggs said that he considered Rice's statement that Ness, Motley has an arrangement with Richard Scruggs to work jointly on all of the state cases against the Tobacco Industry to be a bit of an overstatement. On the other hand, Rice's letter to Hawaii's attorney general said I am sending a copy of this letter to Dick so he may respond likewise, if he has any questions or any additions. Scruggs did not write anything to contradict Rice's characterization and stated, in his deposition, that [t]here was no reason to contradict it. Scruggs conceded that [t]here was a general cooperative effort between [Scruggs Millette and Ness Motley] to advance litigation against the tobacco industry. Although this letter may not go to Daynard's understanding of the firms' relationship, and although it was written by Rice of Ness Motley, not by any of the Scruggs defendants, Scruggs's silence carries at least some weight. 77 The facts as alleged by Daynard are sufficient to make the jurisdictional showing that, in Boston, Patrick of Ness Motley hired Daynard, that Daynard reasonably understood Patrick to be acting on behalf of a joint venture or other agency relationship between Ness Motley and Scruggs Millette, and that Daynard relied on this understanding by providing his services to both defendants. 78 Many of these same facts support the conclusion that the Scruggs defendants subsequently ratified the Motley defendants' conduct. Even if Patrick, when he hired Daynard, was acting without actual authority from the Scruggs defendants, Daynard says Patrick purported to act as an agent for both firms when Patrick retained Daynard, and that Scruggs effectively ratified that representation. 79 A person may ratify a prior act done by another without actual or apparent authority.... by ... conduct that is justifiable only on the assumption that the person so consents. Restatement (Third) of Agency § 4.01 (Tentative Draft No. 2, 2001). 9 The sole requirement for ratification is a manifestation of assent or other conduct indicative of consent by the principal. Restatement (Third) of Agency, supra, § 4.01, cmt. b; see also Inn Foods, Inc. v. Equitable Coop. Bank, 45 F.3d 594, 597 (1st Cir.1995) (stating that [u]nder Massachusetts law, ratification of an agent's acts may be express or implied). The Scruggs defendants, on the facts alleged, engaged in such conduct. 80 After Ness Motley retained Daynard, and as a result of this employment, Daynard asserts that he began providing information directly to the Scruggs defendants. Daynard says that he communicated regularly with the Scruggs defendants, that they came to Boston to receive his advice, and that he had many conversations, meetings and written communications in Boston with members of the defendant firms, in which [he] provided advice and undertook specific projects for their use in the tobacco litigation. Even if the Scruggs defendants did not come to Boston, we think there is adequate other evidence of ratification, accepting Daynard's allegations. 81 Daynard says that he had several conversations with both Mr. Motley and Mr. Scruggs in which they stated that they would appropriately compensate [Daynard]... and that the final form of compensation would be in the form of a share of the fees the firms obtained from handling the state tobacco litigation. Daynard says Ronald Motley advised him that he would be compensated for his assistance as a member of the Ness Motley team. Further evidence of ratification comes from Daynard's version of the Chicago meeting, where Scruggs said he acted with at least apparent authority for both firms and reached an agreement. Daynard says that Scruggs shook hands on a deal to pay him 5% of these fees. These assurances and reassurances that Daynard would be paid a portion of the recovered fees were an integral part of the ongoing relationship existing between Daynard, the Motley defendants, and the Scruggs defendants. 82 Finally, Daynard asserts that in reliance on his arrangements with the Scruggs defendants and at their request, he had to commit out-of-pocket expenses of $15,000 to retain someone to meet his teaching obligations. Again, there is no evidence that Scruggs disavowed any contractual relationship as he accepted Daynard's assistance. To be sure, Scruggs says Daynard was a volunteer, but reasonable inferences support Daynard's version. 83 The Scruggs defendants had many opportunities to disavow a relationship with Daynard or to clarify the relationship. For example, they could have rejected his assistance or accepted it only on certain conditions. Instead, according to Daynard, they repeatedly encouraged and accepted his assistance and during several conversations agreed to pay him in the form of a share of the fees generated. When Daynard wrote his first letter to Scruggs in July 1997 confirming the fee arrangement, Scruggs remained silent. 10 84 By knowingly accepting the benefits of the transaction initiated in Massachusetts, the Scruggs defendants ratified Patrick's act of hiring and retaining Daynard on behalf of both firms, which ultimately gave rise to this law suit. See Inn Foods, 45 F.3d at 597 n. 7 (noting that benefits received are certainly strong evidence that the principal acquiesced in the agent's transaction); Restatement (Third) of Agency, supra, § 4.01, cmt. d. In addition, by repeatedly agreeing to compensate Daynard for ongoing work conducted in Massachusetts, agreeing to pay Daynard a share of the fees and later shaking hands on the 5% figure, and accepting his coming from Boston to Mississippi to assist at trial, Scruggs, acting on behalf of his firm and, according to Daynard, the Ness Motley firm as well, ratified the arrangement in which the Motley defendants agreed to pay Daynard for his ongoing services as a member of the team.