Cartinez v. Reliable Amusement Co., Inc.
746 So.2d 246, 1999 WL 994120 (1999)
Sections
Rule of Law:
Apparent authority is created only when a principal makes a manifestation to a third party that an agent is authorized to act; a third party cannot establish an agency relationship solely by relying on the representations of the alleged agent.
Facts:
- In 1991, Louisiana legalized video poker, leading distributors like Reliable Amusement Company (Reliable) to compete for locations to place their machines.
- Reliable contracted with Gorman Avery (d/b/a G & G Enterprises) to act as a router/operator to install machines and collect revenue, agreeing to pay him 30% of profits from locations he serviced.
- In May 1992, Avery approached Pam Cartinez to help secure video poker locations in Sabine Parish, falsely telling her he had authority to negotiate contracts for Reliable.
- Avery and Cartinez signed a written contract stating it was between Cartinez and 'G & G Enterprises... operator/router for Reliable Amusement Co., Inc.,' promising Cartinez 30% of the net operator revenue.
- Cartinez successfully secured 18 location contracts for Reliable, signing them as a representative of Reliable.
- Reliable accepted the revenue from these locations and paid Avery his share under their separate agreement.
- Avery failed to pay Cartinez the compensation promised in their contract.
- Reliable management denied knowing about Avery's contract with Cartinez and never paid her directly.
Procedural Posture:
- Cartinez filed suit against Reliable Amusement Co. and Gorman Avery in the trial court seeking specific performance and unpaid compensation.
- The matter proceeded to trial against Reliable only, as issue was never joined regarding Avery.
- The trial court rendered judgment in favor of Cartinez, awarding her $308,404.00 plus a percentage of future revenues.
- Reliable appealed the judgment to the Court of Appeal of Louisiana, Third Circuit.
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Issue:
Is a corporation liable for an employment contract executed by an independent contractor who falsely represented himself as the corporation's agent, when the corporation made no direct representations to the employee regarding the contractor's authority?
Opinions:
Majority - Judge Peters
No, the court held that the corporation is not liable because the independent contractor lacked both express and apparent authority to bind the corporation. The court reasoned that an agency relationship is never presumed and must be clearly established. There was no evidence of express authority because Reliable's internal records classified Avery as an independent contractor with no hiring power. Regarding apparent authority, the court emphasized that such authority exists only when the principal (Reliable) acts in a way that gives a third party (Cartinez) a reasonable belief that the agent has authority. Here, Reliable made no manifestations to Cartinez; she relied entirely on Avery's own claims. The court cited the principle that 'a third party may not blindly rely on the assertions of an agent.' Furthermore, the court rejected the argument of ratification, noting that Reliable could not have ratified the contract without full knowledge of its material facts, and the contract itself stated Cartinez was to be paid from funds forwarded to G & G (Avery), not directly by Reliable.
Analysis:
This decision reinforces the protective boundaries of agency law for corporations utilizing independent contractors. It places a significant burden of due diligence on third parties entering into contracts, establishing that they cannot rely solely on the word of a purported agent. The ruling clarifies that a company does not automatically ratify an unauthorized contract simply by benefiting from the work performed; ratification requires specific knowledge of the unauthorized obligations. This prevents corporations from being held liable for side deals made by lower-level associates or contractors that violate internal corporate policies.
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