Jurimex Kommerz v. Case Corp

• Court: Court of Appeals for the Third Circuit
• Decided: July 27, 2007
• Docket: 06-3523
• Status: Unpublished

Opinion

Opinions of the United 2007 Decisions States Court of Appeals for the Third Circuit

7-27-2007

Jurimex Kommerz v. Case Corp Precedential or Non-Precedential: Non-Precedential

Docket No. 06-3523

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UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

No. 06-3523

JURIMEX KOMMERZ TRANSIT G.M.B.H.; JURIMEX KOMMERZ TRANSIT AGRAR CONSULTING PROJEKT KAS G.M.B.H.; ARGE IPC-JURIMEX,

Appellants

v.

CASE CORPORATION

Appeal from the United States District Court for the District of Delaware (D.C. Civil Action No. 00-cv-00083) District Judge: Honorable Joseph J. Farnan, Jr.

Submitted Under Third Circuit LAR 34.1(a) July 9, 2007

Before: RENDELL and AMBRO, Circuit Judges, SHAPIRO,* District Judge

(Opinion filed July 27, 2007)

OPINION

* Honorable Norma L. Shapiro, Senior District Judge for the Eastern District of Pennsylvania, sitting by designation. AMBRO, Circuit Judge

Plaintiffs below (Jurimex Kommerz Transit G.M.B.H.; Jurimex Kommerz Transit

Agrar Consulting Projekt Kas, G.M.B.H; and Agre IPC-Jurimex (collectively “Jurimex”))

challenge the District Court’s grant of summary judgment in favor of Case Corporation

(“Case”) on the issue of whether Case can be held liable for the actions of its subsidiaries

based on agency principles. We agree with the District Court that Jurimex failed to come

forward with evidence sufficient to create a genuine issue of material fact, and therefore

we affirm.

I.

As we write for the parties, only a brief recitation of the relevant background is

necessary. This case involves alleged liability stemming from an international business

transaction. Jurimex is an Austrian company that facilitates commodity and machinery

deals between businesses in Eastern Europe and the former Soviet Union and their

counterparts in Western Europe and the United States. It alleges that it entered into an

agreement with representatives from Case’s European subsidiaries to be part of the sale of

combines from Case, a manufacturer of agricultural equipment, to Golden Grain, a buyer

in Kazakhstan. Jurimex then alleges that it was cut out of the Golden Grain transaction

and that Case should be held liable based on a variety of legal theories.

Jurimex brought suit against Case, the U.S. parent corporation, in the United States

District Court for the District of Delaware. Upon a motion to dismiss by Case, the

2 District Court dismissed Jurimex’s complaint because Case’s European subsidiaries were

indispensable parties but adding them would destroy diversity jurisdiction. The District

Court also denied a motion by Jurimex for leave to amend its complaint to allege that

Case was liable, independently from its subsidiaries, based on agency principles. Jurimex

appealed; we affirmed the District Court’s dismissal but reversed its denial of Jurimex’s

motion for leave to amend. Jurimex Kommerz Transit G.M.B.H. v. Case Corp., 65 Fed.

Appx. 803 (3d Cir. 2003). We instructed the District Court to allow Jurimex to amend its

complaint to allege that an agency relationship between Case and its subsidiaries gave rise

to Case’s liability. Id. at 808.

Jurimex amended its complaint and the parties conducted discovery. Following

discovery, Case moved for summary judgment on a variety of grounds, including that

Jurimex could not sustain its claims based on agency principles. Jurimex countered that

there was evidence in the record supporting its agency theory of liability through either

actual or apparent authority. The District Court, reaching only the agency issue, granted

summary judgment to Case, concluding that Jurimex had failed to come forward with

evidence to create a genuine issue of material fact. Jurimex once again appeals.1

II.

“We review the District Court’s grant of summary judgment de novo.” Justofin v.

1 The District Court had jurisdiction under 28 U.S.C. § 1332. We have jurisdiction under 28 U.S.C. § 1291.

3 Metro. Life Ins. Co., 372 F.3d 517, 521 (3d Cir. 2004) (quoting Fakete v. Aetna, Inc., 308

F.3d 335, 337 (3d Cir. 2002)). Accordingly, we apply the same standard employed by the

District Court. We will affirm its grant of summary judgment if “there is no genuine

issue as to any material fact and . . . the moving party is entitled to a judgment as a matter

of law.” Fed. R. Civ. P. 56(c). “A fact is material when its resolution ‘might affect the

outcome of the suit under the governing law,’ and a dispute about a material fact is

genuine ‘if the evidence is such that a reasonable jury could return a verdict for the

nonmoving party.’” Justofin, 372 F.3d at 521 (quoting Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 248 (1986)). To defeat a motion for summary judgment, the non-moving

party must “do more than simply show that there is some metaphysical doubt as to the

material facts. In the language of the Rule, the non-moving party must come forward

with ‘specific facts showing that there is a genuine issue for trial.’” Matsushita Elec.

Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87 (1986) (citations omitted).

While a parent corporation ordinarily is not liable for the acts of its subsidiary, “a

parent may be held liable for the activities of its subsidiary” based on “an application of

general agency principles.” Phoenix Can. Oil Co. v. Texaco, Inc., 842 F.2d 1466, 1477

(3d Cir. 1988). Furthermore, “[n]ot only must an arrangement exist between the two

corporations so that one acts on behalf of the other and within usual agency principles,

but the arrangement must be relevant to the plaintiff’s claim of wrongdoing.” Id. In other

words, the relevant inquiry for determining whether Case’s European subsidiaries were

4 acting as its agents necessarily must focus on the “specific transaction” that gave rise to

the alleged liability—in this case, the Golden Grain transaction. Id. at 1478 (“In

conducting this review, the focus must be directed to the pertinent cause of action. . . .

The evidence of relationship between the parents and subsidiaries as it bears on that

breach of contract is the proper subject of our inquiry.”).

A.

Jurimex alleges liability under both actual and apparent authority. “Actual

authority is that authority which a principal expressly or implicitly grants to an agent.”

Billops v. Magness Constr. Co., 391 A.2d 196, 197 (Del. 1978).2 Actual authority “to do

an act can be 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 § 26 (1958); see also

Restatement (Third) of Agency § 3.01 (2006). Regardless what form the authorization

takes, an essential requirement for establishing actual authority is that it stem from a

manifestation by the principal. See Restatement (Second) of Agency § 15; Restatement

(Third) of Agency § 3.01 cmt. b.

After examining the evidence presented by Jurimex, the District Court concluded

that Jurimex could point to no evidence by which Case authorized its European

2 Both parties operate under the assumption that Delaware law governs the agency relationship. As in the prior appeal, “we will proceed on that assumption” as well. Jurimex Kommerz Transit G.M.B.H, 65 Fed. Appx. at 807 n.3.

5 subsidiaries to negotiate on its behalf in the Golden Grain transaction. See App. at 7–8.

We agree.

Jurimex contends that Case’s own Rule 30(b)(6) witness, Brian Cahill, testified

that employees of Case’s European subsidiaries were authorized to transact business on

behalf of Case. Jurimex misconstrues Cahill’s testimony. Although he testified that any

of the employees of Case’s subsidiaries “with sufficient authority under the delegation”

could theoretically act on Case’s behalf, App. at 209, he further testified that the

employees of subsidiaries only received such authorization on a “one-off basis” “[f]or a

particular transaction,” App. at 216. Additionally, he testified that the only situation he

knew in which such a delegation to a European subsidiary had taken place was in a

transaction unrelated to the Golden Grain transaction. See App. at 209, 219. Because

evidence of the agency relationship must be specific to the transaction from which the

alleged liability arises, Cahill’s testimony does nothing to show that Case authorized its

European subsidiaries to act on its behalf in the Golden Grain transaction.

The other evidence to which Jurimex points in support of actual authority is also

deficient. Vague second-hand statements allegedly from employees of the European

subsidiaries about Case’s general interest in the deal, see, e.g., App. at 828, and oblique

references to “Case Corporation” in correspondence from third parties, see App. at

623–30, even if admissible, are not evidence of actual authority. That type of evidence

does not show a manifestation by Case, the principal, that its European subsidiaries were

6 authorized to negotiate on its behalf with Jurimex in the Golden Grain transaction. See

Restatement (Second) of Agency § 15; Restatement (Third) of Agency § 3.01 cmt. b.

Furthermore, evidence of Case’s subsequent involvement in the Golden Grain transaction,

in the limited role of a guarantor for a loan that helped finance the transaction and after

Jurimex was no longer involved, see, e.g., App. at 645, 740, in no way shows that Case

had authorized its European subsidiaries to act on its behalf in the earlier negotiations

with Jurimex. See Don Kemper Co. v. Beneficial Standard Life Ins. Co., 404 F.2d 752,

756 (3d Cir. 1968) (“Alleged subsequent agency authority, real or apparent[,] is of no

help to plaintiff here. . . . [E]vidence of something occurring on a later date to show that

type of authority is irrelevant to [plaintiff’s] claim.”).

In sum, we agree with the District Court that, based on the evidence offered by

Jurimex, “no jury could reasonably find that [Case’s] subsidiaries had actual authority to

act on [Case’s] behalf.” App. at 8.

B.

Jurimex’s claim of apparent authority fares no better. “[I]t is well settled that

apparent authority (1) results from a manifestation by a person that another is his agent

and (2) exists only to the extent that it is reasonable for the third person dealing with the

agent to believe that the agent is authorized.” Taylor v. Peoples Natural Gas Co., 49 F.3d

982, 989 (3d Cir.1995) (internal quotations omitted); see also Restatement (Second) of

Agency § 27; Restatement (Third) of Agency § 3.03. As with actual authority, apparent

7 authority is only established through manifestations by the principal, and a third party’s

belief that the agent is authorized must be “traceable to the manifestation.” Restatement

(Third) of Agency § 3.03.

Jurimex’s apparent authority argument focuses mainly on the fact that Case had

been involved in earlier transactions with Jurimex entities for sales in Volgograd, Russia.

There is some evidence that Case’s European subsidiaries were acting on behalf of Case

in transactions related to Volgograd, but these prior dealings do not give rise to the

alleged liability that Jurimex is ascribing to Case in this lawsuit. “To bind a principal by

its agent’s acts, the plaintiff must demonstrate that the agent was acting on behalf of the

principal and that the cause of action arises out of that relationship.” E.I. DuPont de

Nemours and Co. v. Rhone Poulenc Fiber and Resin Intermediates, S.A.S., 269 F.3d 187,

198 (3d Cir. 2001) (emphasis added). As previously stated, the relevant inquiry for

agency liability is whether the agency relationship existed with regard to the specific

transaction or transactions that gave rise to the claim. Thus, whether Case had previously

authorized its European subsidiaries to act on its behalf is not relevant to whether an

agency relationship existed with regard to the Golden Grain transaction.

Jurimex insists that, based on the Volgograd transactions, it reasonably believed

that Case was the principal in the Golden Grain transaction. Merely because an agent has

been authorized to act on behalf of a principal in the past does not mean that the agent is

later “cloaked with apparent authority.” Nat’l Mortgage Warehouse, LLC v. Bankers

8 First Mortgage Co., 190 F. Supp. 2d 774, 781 (D. Md. 2002). This is particularly true in

this case, given the undisputed evidence that it was Case’s practice to authorize its

subsidiaries to act on its behalf only on a transaction-by-transaction basis. See App. at.

216; Restatement (Second) of Agency § 34(b) (“An authorization is interpreted in light of

. . . the business methods of the principal.”); see also id. § 37(2) (“The specific

authorization of particular acts tends to show that a more general authority is not

intended.”). The Fourth Circuit’s admonition in an earlier case is applicable to Jurimex

here: “[T]he mere fact that one is dealing with an agent, whether the agency be general or

special, should be a danger signal, and, like a railroad crossing, suggests the duty to ‘stop,

look, and listen,’ and he who would bind the principal is bound to ascertain, not only the

fact of agency, but the nature and extent of the authority.” Standard Acc. Ins. Co. v.

Simpson, 64 F.2d 583, 589 (4th Cir. 1933).3

Jurimex also contends that Case somehow ratified authority granted to its

European subsidiaries in the Volgograd transactions through its silence or inaction in the

Golden Grain transaction and through the alleged retention of benefits from that

transaction. Because Jurimex failed to raise this argument in the District Court, it is

waived. Even if the argument were not waived, it would be unavailing. Indeed, the

3 Furthermore, as discussed previously, any involvement of Case in the Golden Grain transaction after Jurimex was allegedly ousted from the deal cannot as a matter of law serve as a basis for Jurimex to believe that Case had authorized its European subsidiaries to act on its behalf when negotiating with Jurimex. See Don Kemper Co., 404 F.2d at 756.

9 argument that Case was silent during the Golden Grain transaction is a telling admission

that Jurimex can point to no manifestation by Case that it had authorized its subsidiaries

to act on its behalf when dealing with Jurimex in that transaction. Moreover, Jurimex’s

argument regarding the retention of benefits fails because, even if Case ultimately

received some benefit from the Golden Grain transaction (as parent corporations often do,

even from their subsidiaries’ independent dealings), this does not mean that the European

subsidiaries were acting on Case’s behalf when negotiating with Jurimex. The alleged

retention of benefits is not a ratification here because it is not “conduct justifiable only on

the assumption that [Case] consent[ed] to be bound” as principal in the negotiations with

Jurimex. Restatement (Third) of Agency § 4.01 cmt. d.

In sum, Jurimex has not sustained its burden on summary judgment of coming

forward with evidence to create a genuine issue of material fact with regard to apparent

authority.4

III.

Finally, we discern no abuse of discretion in the District Court’s decision to deny

discovery of matters unrelated to the Golden Grain transaction. As indicated above,

Jurimex had to show that the European subsidiaries of Case had the authority to act on its

behalf in the Golden Grain transaction negotiations with Jurimex. The District Court’s

4 As we agree with the District Court that summary judgment was appropriate on the agency issue, we need not reach the alternate bases for summary judgment argued by Case.

10 conclusion that documents unrelated to the Golden Grain transaction were irrelevant was

no abuse of discretion.

We also reject Jurimex’s argument that it was entitled to an adverse inference

because of an alleged failure of Case to produce documents. Case represents that it has

produced all documents in its possession and control concerning the Golden Grain

transaction, and there is no evidence of destruction or withholding to warrant an adverse

inference.

****

For all of the above reasons, we affirm the judgment of the District Court.