law-agency theory | nonsignatories | actual authority and apparent authority | alter ego | respondeat superior
In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 762 (Tex. 2006) (per curiam)(“corporations must act through
human agents.”)
AGENCY (LEGAL CONCEPT)
The law does not presume agency. Lifshutz v. Lifshutz, 199 S.W.3d 9, 22 (Tex.App.-
San Antonio 2006, pets. denied); Suarez v. Jordan, 35 S.W.3d 268, 272 (Tex.App.-
Houston [14th Dist.] 2000, no pet.); Disney Enters., Inc. v. Esprit Fin., Inc., 981 S.W.
2d 25, 30 (Tex.App.-San Antonio 1998, pet. dism'd w.o.j.). The party alleging agency
has the burden to prove its existence. Lifshutz, 199 S.W.3d at 22; Disney Enters.,
981 S.W.2d at 30. Absent actual or apparent authority, an agent cannot bind a
principal. Lifshutz, 199 S.W.3d at 22.
Actual authority includes both express and implied authority and usually denotes the
authority a principal (1) intentionally confers upon an agent, (2) intentionally allows
the agent to believe he possesses, or (3) by want of due care allows the agent to
believe he possesses. 2616 S. Loop L.L.C. v. Health Source Home Care, Inc., 201 S.
W.3d 349, 356 (Tex.App.-Houston [14th Dist.] 2006, no pet.); Lifshutz, 199 S.W.3d at
22. Actual authority is created through conduct of the principal communicated to the
agent. Lifshutz, 199 S.W.3d at 22; Huynh v. Nguyen, 180 S.W.3d 608, 622-23 (Tex.
App.-Houston [14th Dist.] 2005, no pet.).
AGENCY CASELAW FROM HOUSTON
In re Credit Suisse First Boston Mortgage Capital LLC (Tex.App- Houston [1st Dist.] Dec. 18, 2008)(Hedges)
(arbitration, nonsignatories, jury waiver, nonsignatories, agency theory, choice of law preemption, forum
preemption)
MOTION OR WRIT DENIED: Opinion by Chief Justice Hedges
Before Chief Justice Hedges, Justices Hudson and Boyce
14-08-00819-CV In Re: Credit Suisse First Boston Mortgage Capital, L.L.C. and Credit Suisse First Boston,
L.L.C.--Appeal from 165th District Court of Harris County
EXTENSION THROUGH AGENCY PRINCIPLES
We are asked to decide, as a matter of first impression, whether a valid contractual jury waiver applies to
nonsignatories seeking to invoke the waiver as agents of the signatory corporation. We conclude that a
valid waiver provision may be invoked by a nonsignatory agent when it acts on behalf of the signatory
corporation.
In 2007, the Texas Supreme Court adopted a similar rule in the context of arbitration provisions. In re
Kaplan Higher Educ. Corp., 235 S.W.3d 206, 209 (Tex. 2007) (orig. proceeding). Kaplan involved a
fraudulent-inducement lawsuit brought by forty-five students against a college, its corporate parent, its
president, and its admissions director. See id. at 208. The students' enrollment agreement, which was
signed by the students, the college, and the president, required the arbitration of any disputes arising
therefrom. See id. However, the corporate parent and the admissions director were not signatories to the
agreement. See id. After the defendants pressed for arbitration, the students - hoping to avoid arbitration-
dismissed their claims against the two signatories, leaving only their claims against the two nonsignatories.
See id. Nevertheless, the Supreme Court permitted the two nonsignatories to invoke the arbitration
agreement, as agents of the signatories. See id. at 209. The court reasoned that most contract claims
against a corporation could be recast as fraudulent-inducement or tortious-interference claims against the
agents or employees who took part in negotiating the contract. See id. However, it would be impractical to
require all of the corporation's agents to sign, or be listed in, every contract executed by the corporation.
See id. To prevent parties (e.g., the students) from avoiding unfavorable clauses (e.g., mandatory
arbitration) by suing only the other party's agents, the Supreme Court held that "the agents of a signatory
may sometimes invoke an arbitration clause even if they themselves are nonsignatories and a claimant is
not suing on the contract." Id. However, the rule applies only to agents acting on behalf of the signatory
corporation:
We emphasize again today that arbitration clauses do not automatically cover all corporate agents or
affiliates. Like other contracts, arbitration agreements "are enforced according to their terms and according
to the intentions of the parties." Thus, for example, owners may not be able to invoke a subsidiary's
arbitration clause when they act on their own behalf rather than for their subsidiary. But when an
agreement between two parties clearly provides for the substance of a dispute to be arbitrated, one cannot
avoid it by simply pleading that a nonsignatory agent or affiliate was pulling the strings.
Id. at 210 (citations omitted).
Relators urge us to analogize jury waiver provisions to arbitration clauses, thereby extending the Kaplan
holding to the case before us. That a rule may be applied in arbitration clauses, however, does not
necessarily render it appropriate for jury waivers. See Credit Suisse, 257 S.W.3d at 491B92. Arbitration
agreements and jury waivers are subject to opposite presumptions:
Unlike arbitration agreements, which are strongly favored under Texas law, the right to a jury trial is so
strongly favored that contractual jury waivers are strictly construed and will not be lightly inferred or
extended. Before a jury waiver will be enforced, such waiver must be found to be a voluntary, knowing, and
intelligent act that was done with sufficient awareness of the relevant circumstances and likely
consequences.
Id. at 490 (citations omitted). A handful of federal courts have extended a jury waiver to a nonsignatory
through agency principles, but they based their reasoning on principles unrelated to relators' proposed
analogy between arbitration clauses and jury waivers. See Tracinda Corp. v. DaimlerChrysler AG, 502 F.3d
212, 224B25 (3d Cir. 2007); Mowbray v. Zumot, 536 F. Supp. 2d 617, 623 (D. Md. 2008). Those courts
explained that, because a corporation can act only through its agents and employees, by definition, one
who agrees to a jury-waiver clause knows - and intendsCthat the clause naturally must extend to the
corporation's nonsignatory agents, too. See Tracinda, 502 F.3d at 223B25; see also In re Merrill Lynch
Trust Co. FSB, 235 S.W.3d 185, 189 (Tex. 2007) (orig. proceeding) ("[C]ontracting parties [that] agree to
arbitrate all disputes 'under or with respect to' a contract . . . generally intend to include disputes about their
agents' actions because '[a]s a general rule, the actions of a corporate agent on behalf of the corporation
are deemed the corporation's acts.'"). Thus, extension-through-agency does not run afoul of the
requirement that jury waivers be knowingly and voluntarily made. See Brady v. United States, 397 U.S. 742,
748 (1970), quoted in Prudential Ins. Co., 148 S.W.3d at 132.
Accordingly, we hold that, when a valid contractual jury waiver applies to a signatory corporation, the waiver
also extends to nonsignatories that seek to invoke the waiver as agents of the corporation. See Tracinda,
502 F.3d at 225; Kaplan, 235 S.W.3d at 209.
ALLEGATIONS OF AGENCY
Despite Developer's prodding, relators have not elucidated the legal relationship between CSFB and
Mortgage Capital, which relators describe simply as "affiliates." See Credit Suisse, 257 S.W.3d at 493 n.7.
Despite the absence of a stipulation or proof establishing an agency relationship, relators contend CSFB
may invoke the jury waiver simply because Developer alleges that CSFB acted as the agent of signatory
Mortgage Capital. Developer responds that it has not alleged an agency relationship between CSFB and
Mortgage Capital.
In deciding whether Developer has alleged an agency relationship between CSFB and Mortgage Capital, we
subject its pleadings to a de novo review. See, e.g., In re C.S., 264 S.W.3d 864, 873 n.6 (Tex. App.- Waco
2008, no pet.) (employing de novo review to decide whether pleadings state cognizable cause of action);
Boales v. Brighton Builders, Inc., 29 S.W.3d 159, 163 (Tex. App.- Houston [14th Dist.] 2000, pet. denied)
(reviewing pleadings de novo to address dismissal upon special exceptions); see also Turner v. Zellers, 232
S.W.3d 414, 418 (Tex. App.- Dallas 2007, no pet.) (“[T]he trial court is in no better position than the
appellate court to determine the application of the law to the . . . pleadings.").
Developer's allegations, which we summarize below, are contained in its Fourth Amended Original Petition
and its disclosure responses. See Tex. R. Civ. P. 194.2(c) (requiring a party to state its legal theories and
the general factual basis for its contentions). Developer has alleged that CSFB originated commercial
mortgage loans and used Mortgage Capital as the funding entity for those loans. Accordingly, the
negotiations for the building renovation loan were handled by CSFB, through its authorized employees. In
negotiating the terms of the loan to be funded by Mortgage Capital, these CSFB employees were
“authorized to act on behalf of" Mortgage Capital. Following the building redesign, Developer negotiated
with CSFB's employees regarding additional financing on the same terms as the original loan, and the
“agreement of CSFB LLC to make the promised new loan effectively committed CSFB Mortgage Capital to
make the promised loan[.]"
We conclude that Developer has asserted an agency relationship between CSFB and Mortgage Capital. An
“agent" is one who is authorized to transact business, or manage some affair, for the principal entity. See
Coleman v. Klockner & Co. AG, 180 S.W.3d 577, 588 (Tex. App.- Houston [14th Dist.] 2005, no pet.).
Developer has alleged that CSFB, by and through its employees, was authorized to negotiate the terms
under which the signatory, Mortgage Capital, was to loan money.
Developer contends that its pleadings do not set forth an agency relationship between CSFB and Mortgage
Capital but, rather, between these corporate entities and the two CSFB employees charged with negotiating
the financing deals. However, we see no appreciable distinction between these two scenarios. Developer
admits that its fraud claims against both relators stem from the same factual allegations: "The agents in this
case are the two employees who uttered the fraudulent statements, and they acted on behalf of
corporations that are held vicariously liable for their torts." It is well-settled that corporations can act only
through its agents and employees. See GTE Sw., Inc. v. Bruce, 998 S.W.2d 605, 618 (Tex. 1999);
Hammerly Oaks, Inc. v. Edwards, 958 S.W.2d 387, 391 (Tex. 1997). Thus, the actions taken by certain
agents of a corporation sometimes may be deemed to be the acts of the corporation itself. See GTE Sw.,
Inc., 998 S.W.2d at 618; First United Bank v. Panhandle Packing & Gasket, Inc., 190 S.W.3d 10, 15 (Tex.
App.- Amarillo 2005, no pet.) ("[W]hat a principal does through an agent, he does himself."). In addition,
many business-related torts may be brought against either the corporation or its employees. See Merrill
Lynch, 235 S.W.3d at 188. Not surprisingly, then, the law is replete with examples of corporations that act
as agents for others. See id. at 194 n.40 (citing nonsignatory business entities acting as agents for
signatory corporations); see also Tractebel Energy Mktg., Inc. v. E.I. DuPont de Nemours & Co., 118 S.W.3d
60, 72 (Tex. App.- Houston [14th Dist.] 2003, pet. denied) ("[C]learly, a parent corporation could agree to
serve for some purposes as an agent of one of its lowly subsidiaries."). Many cases recognize that, in
acting as another's agent, the corporation must of necessity have acted through individual employees, as
CSFB is alleged to have done here. See, e.g., Merrill Lynch, 235 S.W.3d at 188-89. If the corporation truly
acts as another's agent, however, the mere recasting of its acts as those of its employees does not change
the corporation's status as agent. Therefore, we hold a plaintiff may not avoid a valid jury waiver simply by
suing the nonsignatory corporation vicariously for the acts of its agent employee, if the employee as agent
could invoke the waiver clause as an agent of the contract signatory. See Merrill Lynch, 235 S.W.3d at
188B89 ("If a plaintiff's choice between suing the corporation or suing the employees determines whether
an arbitration agreement is binding, then such agreements have been rendered illusory on one side.").
In any event, Developer asserted a direct theory of agency between the two corporations themselves: "The
agreement of CSFB LLC to make the promised loan effectively committed CSFB Mortgage Capital to make
the promised loan, if necessary." This allegation presupposes CSFB's actual or apparent authority, as an
agent, to bind the alleged principal, Mortgage Capital. See Ames v. Great S. Bank, 672 S.W.2d 447, 450
(Tex. 1984); Grace Cmty. Church v. Gonzales, 853 S.W.2d 678, 680 (Tex. App.- Houston [14th Dist.] 1993,
no writ).
We conclude that Developer has alleged that CSFB, the nonsignatory corporation, acted as the agent of
the signatory, Mortgage Capital.[3]
Greenfield Energy Inc. v. Duprey (Tex.App.- Houston [14th Dist.] Apr. 10, 2008) (Guzman)
(special appearance, foreign defendant, agency and alter ego theories rejected, minimum contacts,
jurisdictional inquiry)
AFFIRMED: Opinion by Justice Guzman
14-07-00527-CV Greenfield Energy Inc., Greenfield Energy, Inc., and Greenfield Oil Trinidad, LTD. v.
Lawrence Duprey and CL Financial, LTD.
Appeal from 295th District Court of Harris County
Trial Court Judge: Tracy Kee Christopher
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