CNE Direct, Inc. v. Blackberry Corporation , 821 F.3d 146 ( 2016 )

United States Court of Appeals
For the First Circuit
No. 15-1954
CNE DIRECT, INC.,
Plaintiff, Appellant,
v.
BLACKBERRY CORPORATION, f/k/a RESEARCH IN MOTION CORPORATION,
Defendant, Appellee,
ASSET RECOVERY ASSOCIATES WORLDWIDE, LTD.
Defendant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. F. Dennis Saylor, IV, U.S. District Judge]
Before
Thompson and Kayatta, Circuit Judges,
and Mastroianni,* District Judge.
Jack Irving Siegal, with whom William C. Nystrom, Dana A.
Zakarian, and Nystrom Beckman & Paris LLP, were on brief, for
appellant.
Sanford F. Remz, with whom Noemi A. Kawamoto, Donald K. Stern,
and Yurko, Salvesen & Remz P.C., were on brief, for appellee.
* Of the District of Massachusetts, sitting by designation.
May 2, 2016
KAYATTA, Circuit Judge. CNE Direct, Inc. ("CNE") is a
Massachusetts corporation in the business of buying and reselling
bulk technological components. In November 2013, CNE reached an
agreement with Asset Recovery Associates Worldwide, Ltd. ("Asset")
to purchase phone parts manufactured by BlackBerry Corporation
("BlackBerry"). Asset thereafter failed to make the parts
available at the agreed-upon price, causing CNE to suffer a
substantial loss in connection with its own commitment to resell
the parts to other parties. In addition to suing Asset, CNE seeks
to hold BlackBerry itself liable, contending that Asset was acting
as BlackBerry's actual or apparent agent in the November 2013
transaction. After each party marshalled its best evidence
following full discovery, and after entering default judgment
against the now-defunct Asset, the district court entered summary
judgment in favor of BlackBerry. CNE Direct, Inc. v. BlackBerry
Corp., No. 14-cv-10149-FDS, 2015 WL 4750847, at *6, *11 (D. Mass.
Aug. 10, 2015). After considering CNE's appeal, we affirm.
I. Background
As this is an appeal from a grant of summary judgment,
we recite the facts in the light most favorable to CNE, the non-
movant, and draw all reasonable inferences in its favor. See
Martinez v. Petrenko, 792 F.3d 173, 175 (1st Cir. 2015).
On October 25, 2013, Asset received an email from
BlackBerry stating that it was "looking to move" excess memory
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parts and listing its excess units. Asset forwarded the email to
CNE. CNE thereafter entered into discussions with Asset on the
terms pursuant to which Asset would supply the BlackBerry parts to
CNE. According to CNE, CNE and Asset eventually reached agreement
on the terms of a sale. CNE then sent Asset a purchase order to
confirm the agreed-upon deal. The purchase order identified Asset
as the "supplier" of the parts and stated the agreed-upon price.
Asset then backtracked, first demanding a price increase of
approximately 2%, then an increase of approximately 28%. CNE
claims that Asset's back-tracking was an orchestrated attempt by
BlackBerry to take advantage of CNE's "position of weakness." CNE
complained to Asset, and also sought intercession by BlackBerry,
which declined.
As we will discuss, there was nothing about the foregoing
transaction and dealings in October and November 2013 that would
support an argument that Asset acted as an actual or apparent agent
of BlackBerry. As CNE points out, though, it had prior dealings
with Asset for the purchase and sale of BlackBerry parts. Those
prior dealings, CNE argues, provide a course of conduct, or at
least context, sufficient to cast the aborted November 2013
transaction in a different light. So we turn to consider those
prior dealings.
In May 2011, Christopher Tejeda, then a trader at CNE,
first called BlackBerry to inquire about purchasing excess
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inventory. He reached Chris Efstathiou, the individual
responsible for managing BlackBerry's excess inventory. During
their initial phone conversation, Efstathiou told Tejeda that if
he wanted to purchase BlackBerry's excess inventory, he should
speak to Stephen Miele, the individual in control of Asset. At
the time, Asset was one of many third-party resellers to which
BlackBerry sold its excess inventory. CNE suspected this was the
case by October 2012 and knew it to be true by October 2013,
notwithstanding Miele's best efforts to hold himself out as the
"exclusive" source of BlackBerry parts or as BlackBerry's "agent"
and BlackBerry's apparent lack of interest in helping to connect
CNE with a different inventory reseller.
CNE thereafter dealt with Miele. An initial phone call
between Tejeda and Miele in May 2011 led to additional
conversations regarding the available BlackBerry parts and
negotiations over CNE's bid for the parts. Once CNE and Asset
reached an agreement, CNE prepared a "purchase order" to confirm
the purchase price, listing a company affiliated with Asset as the
supplier. When Asset passed this documentation along to
BlackBerry, BlackBerry objected and asked that it instead be listed
as the supplier. CNE changed the purchase order form to
accommodate this request, received an invoice from BlackBerry in
return, and wired the funds directly to BlackBerry. BlackBerry,
in turn, paid Asset a five percent commission on the sale.
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The next relevant transaction, in August 2011, followed
a slightly different course. Viewing the record most favorably to
CNE, it appears that BlackBerry first passed along a list of its
on-hand excess inventory to Asset. Asset disseminated the lists
to its customers, including CNE, seeking per-unit bids. Asset
then collated the bids it received and shared the amounts of bids
and identities of the bidders with BlackBerry, profiting by
reserving for itself a markup on the products that varied between
approximately 10% and 50% of the bid.1 No written agreement
governed the terms of Asset's relationship with BlackBerry, though
the parties operated under an understanding that BlackBerry
retained the right to refuse to sell to Asset based on the amount
it was willing to pay for the parts or the identity of the intended
downstream purchaser.2
Once CNE placed its bid with Asset and BlackBerry had
informed Asset that the bid was acceptable, CNE confirmed the
transaction by issuing to Asset a purchase order memorializing the
agreed-upon price. Asset then remitted a "pro forma" invoice to
confirm the exact quantity of goods that would be sold. As with
the original transaction, CNE's purchase order identified
BlackBerry as the supplier. Unlike the first transaction, CNE did
1CNE knew that this was how Asset profited.
2For obvious reasons, BlackBerry preferred to avoid selling
excess parts to its competitors.
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not pay BlackBerry but instead wired funds to Asset or its
affiliates.
Between August 2011 and August 2012, the parties
conducted seven transactions for BlackBerry parts that followed
this pattern and amounted to approximately $836,000. At no point
in the parties' dealings did Asset take physical possession of the
goods. Rather, CNE retrieved the parts at BlackBerry's warehouse.
Over time, CNE grew frustrated with Miele's conduct. On
August 30, 2012, CNE emailed BlackBerry and expressed frustration
with Miele. On October 23, 2012, CNE emailed BlackBerry to
complain about Miele's lack of professionalism. CNE at that point
had determined that Miele was untrustworthy and had lied to CNE
repeatedly. BlackBerry's response, from a new manager who had
taken over BlackBerry's dealings with Asset, characterized CNE's
acquisition of the parts as involving two transactions, one between
BlackBerry and Asset, and a second between Asset and CNE.
Consistent with this characterization, the emailed response
concluded as follows:
As for professional business standards, the
purchase of the LCD's was between you and
Stephen and that is the forum that should be
maintained is it not? Sorry, but I don't wish
to get in the middle between yourself and
Stephen as relationships are important to
myself and RIM as a whole. I suggest you need
to deal on this with Stephen. I am not sure
how else I can help you in this situation.
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When CNE thereafter emailed BlackBerry to try to address Miele's
dealings with CNE, BlackBerry called and turned down CNE flatly,
telling CNE that it "ha[d] to discuss it with Mr. Miele."
After this conversation, CNE and Asset entered into one
additional transaction in 2012. Then, in August 2013, Miele told
CNE to change the supplier listed on future purchase orders to
Asset, rather than BlackBerry. CNE did so, and entered into at
least six additional transactions totaling approximately $730,000
following this new practice prior to the aborted November 2013
transaction. During this time, BlackBerry and Asset appear to
have had no further communication, save, perhaps, brief exchanges
relating to the logistics of picking up inventory at BlackBerry's
warehouse. Asset occasionally interfaced with BlackBerry to
facilitate pickup on CNE's behalf. In one October 2013 email sent
by Catherine Miele--Stephen Miele's wife and apparently an Asset
employee--to BlackBerry, she explained that "[Asset] ordered the
parts . . . . I sold the parts to CN Direct [sic] and they are
sending their trucker to pick up the parts."
II. Analysis
We review a district court's grant of summary judgment
de novo. Martinez, 792 F.3d at 179. The moving party is entitled
to summary judgment if it "shows that there is no genuine dispute
as to any material fact and [it] is entitled to judgment as a
matter of law." Fed. R. Civ. P. 56(a).
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The parties agree that Massachusetts law governs.
"[T]he question of agency," the Massachusetts Supreme Judicial
Court has held, "is usually an issue for the fact finder," but
summary judgment can be appropriate if the party asserting the
existence of an agency relationship "fail[s] to advance specific
facts sufficient to establish the existence of a genuine issue of
material fact as to [the putative agent's] actual or apparent
authority to act on behalf of [the principal]." Theos & Sons,
Inc. v. Mack Trucks, Inc., 729 N.E.2d 1113, 1119 (Mass. 2000).
Massachusetts follows the Second Restatement view of
principal-agent relationships, "the essential ingredients" of
which are:
1) the agent's power to alter the legal
relationships between the principal and third
parties; 2) a fiduciary relationship toward
the principal regarding matters within the
scope of the agency; and 3) the principal's
right to control the agent's conduct in
matters within the scope of the agency.
Sorenson v. H & R Block, Inc., 107 F. App'x 227, 231 (1st Cir.
2004) (unpublished) (citing, inter alia, Restatement (Second) of
Agency §§ 12–14 (1958)). According to Massachusetts courts,
particularly salient among these criteria is the principal's right
to control. See Spencer v. Doyle, 733 N.E.2d 1082, 1086 (Mass.
App. Ct. 2000) (an "essential characteristic of agency is the right
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of the principal to control what the agent shall or shall not do
before the agent acts" (internal quotation omitted)).3
CNE argues that, as an agent, Asset was cloaked with
both actual and apparent authority to bind BlackBerry, its
principal, in contract. We address each argument in turn.
A. Actual Authority
Actual authority is a product of "mutual consent,
express or implied, that the agent is to act on behalf and for the
benefit of the principal, and subject to the principal's control."
Theos & Sons, 729 N.E.2d at 1119. CNE points to no evidence of
any express consent manifested by both Asset and BlackBerry.
Rather, it argues that there was an implied agreement pursuant to
which BlackBerry authorized Asset to act on behalf of BlackBerry
in agreeing to sell parts to CNE. See id. at 1120 n.13 ("Implied
authority is actual authority that evolves by implication from the
conduct of the parties." (citing T. D. Downing Co. v. Shawmut
Corp., 139 N.E. 525, 526 (Mass. 1923))).
In support of this argument, CNE points only to
representations by Miele that he had secured an agreement with
BlackBerry that Asset would find buyers and that BlackBerry would
3
Under Massachusetts law, "the principal need not in fact
exercise that control" over an agent. DiMaria v. Concorde Entm't,
Inc., No. 12-cv-11139-FDS, 2014 WL 991567, at *4 (D. Mass. Mar.
12, 2014). Rather, "the crucial inquiry is whether [it] has a
right to control." Id.
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simply pay Asset a 5% finder's fee. After June 2011, however,
there is zero evidence that BlackBerry ever entered into such an
agreement, impliedly or otherwise. To the contrary, the
transaction at issue in November 2013 (and at all points other
than in June of 2011) involved no finder's fee, leaving Asset with
the upside or downside of any spread between what it agreed to pay
BlackBerry and what CNE agreed to pay it. In this respect, the
fact that Miele unsuccessfully sought to proceed on a fixed
commission basis rebuts rather than supports any claim that there
was an implied agreement that Asset act as BlackBerry's agent.
See T. D. Downing Co., 139 N.E. at 526 (declining to find an
implied principal-agent relationship when "[t]he risks of . . . the
contracts between the two were wholly with the [putative agent] to
whom alone the profits would accrue").
CNE further argues that BlackBerry's control over Asset
was such that Asset acted as a "mere conduit for the passing of
prices [and] terms between Blackberry and CNE." BlackBerry's
"control" over Asset's operations extended to, at most, the ability
to decline to sell Asset its excess inventory if the price Asset
named was not high enough or if Asset stated that it planned to
resell the parts to one of BlackBerry's competitors or to a
customer in a foreign country controlled by a loathsome regime.
These basic commercial ground rules, "merely reflective of the
ordinary desire of manufacturers to set sufficient minimum
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performance and quality standards to protect the good name of their
trademark," simply do not approach the "kind of close control" a
principal would be expected to assert over an agent's operations.
Theos & Sons, 729 N.E.2d at 1120; see also Brown-Forman Corp. v.
Alcoholic Beverages Control Comm'n, 841 N.E.2d 1263, 1269–71
(Mass. App. Ct. 2006) (finding that an alcohol distributor was not
the agent of a wholesaler even though the wholesaler had veto power
over the distributor's marketing plan and pricing structures).
B. Apparent Authority
We turn, therefore, to CNE's primary argument: That
Asset acted with apparent authority on behalf of BlackBerry.
Unlike actual authority, apparent authority need not find its
provenance in an agreement between the agent and the principal.
Rather, apparent authority arises when the principal, here
BlackBerry, says or does something that, "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." Theos & Sons, 729 N.E.2d at 1120 (quoting Restatement
(Second) of Agency § 27).
CNE correctly notes that the parties' prior "course of
dealing" is relevant to ascertaining the existence of apparent
authority. Binkley Co. v. E. Tank, Inc., 831 F.2d 333, 337 (1st
Cir. 1987); see generally Mass. Gen. Laws ch. 106, § 1-303(b) ("A
'course of dealing' is a sequence of conduct concerning previous
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transactions between the parties to a particular transaction that
is fairly to be regarded as establishing a common basis of
understanding for interpreting the parties' expressions and other
conduct."). Pointing to the parties' prior transactions here, CNE
fairly argues that a factfinder could reasonably conclude that,
given the origin of the transactions in 2011, and given
BlackBerry's request that the purchase orders list BlackBerry as
the supplier, CNE could have reasonably formed a belief that
BlackBerry was its counterparty, with Asset acting only as
BlackBerry's selling agent.
The problem for CNE, though, is that the subsequent
emails and phone conversation in October 2012 constituted an
obvious and express clarification that should have disabused CNE
of relying on any such view of the respective relationships. Cf.
Hudson v. Mass. Prop. Ins. Underwriting Ass'n, 436 N.E.2d 155, 159
(Mass. 1982) (apparent authority conferred by "conduct by the
principal [that] causes a third person reasonably to believe that
a particular person has . . . [such] authority" (citation
omitted)); see generally Restatement (Second) of Agency, § 8 cmt. c
("Apparent authority exists only to the extent that it is
reasonable for the third person . . . to believe that the agent is
authorized."). In light of the October 2012 communications, the
reasonableness of any belief that BlackBerry held out Asset as its
agent would have been tenuous at best. See, e.g., Moreau v. James
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River-Otis, Inc., 767 F.2d 6, 10 (1st Cir. 1985) (applying Second
Restatement view, inference of apparent authority unreasonable
where only manifestation by international union that it could be
bound by its local representatives was its signature on a master
collective bargaining agreement); Theos & Sons, 729 N.E.2d at 1121–
22 (inference of apparent authority unreasonable where third party
relied on presence of would-be principal's logo and name displayed
on putative agent's invoices and in its place of business, in
addition to statements by made by putative agent). Our dissenting
colleague nevertheless posits that perhaps CNE interpreted
BlackBerry's October 2012 you-deal-with-Asset directives as simply
indicating that BlackBerry, as supplier, had in-house and outside
agents, and CNE need deal with the latter. While we find it
difficult to read the communications in context in this manner,
the simpler point is that CNE thereafter changed the order forms
to list Asset as its supplier. There is simply no reasonable basis
to claim that CNE thereafter viewed BlackBerry as its supplier.4
CNE, lastly, points out that Asset never took physical
possession of the goods in question and was a "one-man operation"
run from Miele's offices, lacking warehouses of its own. It was
4 We need not weigh conflicting evidence on an ambiguous
record to reach this conclusion. Rather, we are simply recognizing
that, whatever ambiguity may have existed prior to 2013, the logic
of chronology and subsequent events rendered any earlier ambiguity
irrelevant to ascertaining the identity of CNE's putative
counterparty in that aborted 2013 deal.
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clear to CNE, nevertheless, that in reselling BlackBerry's excess
inventory, Miele "act[ed] in his own name and receive[d] the title
to the property which he thereafter [was] to transfer."
Restatement (Second) of Agency § 14K cmt. a. Nor is there any
reason why title to the inventory could not pass from BlackBerry
to Asset, and then from Asset to CNE, while the inventory remained
at BlackBerry’s warehouses. See Circuit City Stores, Inc. v.
Comm’r of Revenue, 790 N.E.2d 636, 641 (Mass. 2003) (title to goods
may pass even though goods remain in physical possession of
vendor). The fact that Miele did not take on the risk of damage
or loss under U.C.C. § 2-509 sheds no relevant light in this
context on the question of agency. In short, nothing about the
size or manner of his operation belied the fact that BlackBerry
did not hold him out as its agent in negotiating the aborted deal.
These findings have particular force given that CNE is
a commercially sophisticated "third party of reasonable prudence
in the [same] business" as Asset. Binkley, 831 F.2d at 337. This
is not to say that CNE must have assumed Asset's relationship with
BlackBerry to parallel CNE's with its customers. Rather, it is to
point out that sophisticated commercial parties operate in a world
in which the terms of commercial forms exchanged with one another
are customarily controlling. See U.C.C. § 2-207(2). The
controlling forms here made clear that CNE and Asset shared a
nearly identical business model: buy products in bulk from
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manufacturers and re-sell them to other customers in other markets
"downstream." Just as CNE, not Asset, supplied CNE's customers;
Asset, not BlackBerry, supplied CNE.
III. Conclusion
The arrangement between these sophisticated parties
during the relevant time period was that CNE dealt only with Asset,
that CNE listed Asset and not BlackBerry as the supplier, and that
CNE paid only Asset, all in accord with BlackBerry's express
rejection of CNE's request that it exercise some control over
Asset. On such a record, no fact finder could rationally conclude
that BlackBerry gave CNE reason to think that Asset was acting as
BlackBerry's agent in negotiating the price of the aborted November
2013 deal. The district court's ruling is affirmed.
-Dissenting Opinion Follows-
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THOMPSON, Circuit Judge, dissenting in part. While I
agree with the majority's conclusion on the actual authority
question, I dissent from its holding as to apparent authority.
On our de novo review of a summary judgment motion, the
court is to view the record in the light most favorable to the
non-moving party, in this case CNE, and draw all inferences in its
favor. Maldonado-Denis v. Castillo-Rodriguez, 23 F.3d 576, 581
(1st Cir. 1994). In other words, "at the summary judgment stage
the judge's function is not himself to weigh the evidence and
determine the truth of the matter." Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 249 (1986). But this is exactly what the
majority has done. The majority opinion has laid out the facts
that, on one hand, would establish apparent authority, and those
that, on the other, would suggest there was none. The majority
has then concluded that the second set of facts outweighs the
first, and that CNE could not have believed Asset Recovery was
BlackBerry's agent. But I think a reasonable jury could come out
the other way, and summary judgment is therefore not proper here.
An agency relationship exists by way of apparent
authority where the putative principal's conduct led a "third party
of reasonable prudence in the business to rely on the agent's
authority." Binkley Co. v. E. Tank, Inc., 831 F.2d 333, 337 (1st
Cir. 1987); see also Theos & Sons, Inc. v. Mack Trucks, Inc., 729
N.E.2d 1113, 1121–22 (Mass. 2000). Viewing the record before us,
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I think a jury could conclude that CNE believed, based on a
reasonable interpretation of BlackBerry's conduct, that Asset
Recovery was BlackBerry's agent.
The record shows that CNE originally reached out to
BlackBerry in order to buy its bulk technological parts, and that
it was BlackBerry that referred CNE to Asset Recovery. During
CNE's first transaction for the purchase of the parts, CNE's
purchase order listed a company affiliated with Asset Recovery as
the supplier, but BlackBerry explicitly directed CNE to change its
purchase order to list BlackBerry as the supplier. CNE also wired
payment for the parts directly to BlackBerry, and then picked up
the parts directly from a BlackBerry warehouse. After this first
payment, CNE began to make payments to Asset Recovery, but for at
least seven subsequent transactions it remained the practice that
BlackBerry was listed as the supplier on the purchase orders, and
that CNE always picked up the products from BlackBerry.
Up until this point, it appears the majority and I are
in agreement that it would be fair to argue that a factfinder could
find that CNE reasonably believed, based on this course of dealing,
that Asset Recovery was BlackBerry's agent. According to the
majority, however, the conversations between CNE and BlackBerry in
October 2012 change everything.
The October 2012 communications to which the majority
refers consist of an email and subsequent phone call, in which
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BlackBerry refused CNE's request that it get involved in CNE and
Asset Recovery's souring relationship. Specifically, in late
August 2012, CNE wrote to BlackBerry to complain that it could not
"do business through this channel anymore" -- the "channel" being
Stephen Miele of Asset Recovery. As disagreements between CNE and
Asset Recovery continued, CNE wrote to BlackBerry again in October
2012, and in response, a BlackBerry representative told CNE:
"Sorry, but I don't wish to get in the middle between yourself and
Stephen as relationships are important to myself and RIM as a
whole. I suggest you need to deal on this with Stephen. I am not
sure how else I can help you in this situation . . . ." The
BlackBerry representative then reiterated in a subsequent phone
call that BlackBerry would not get involved.
It is the majority's position that these communications
made it irrefutably clear that Asset Recovery was not BlackBerry's
agent, and that no jury could conclude otherwise. I beg to differ.
At the summary judgment stage, we are to view the facts in the
light most favorable to CNE, and draw all inferences in its favor.
It is certainly true that one way to interpret those emails would
be to conclude that BlackBerry refused to get embroiled in the
spat between CNE and Asset Recovery because Asset Recovery was an
independent actor and not BlackBerry's agent. It would be equally
reasonable, however, to conclude that BlackBerry refused to get
involved simply because it did not want to undermine the decisions
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that one of its agents had made in handling customer business that
fell within the scope of that agent's authority. Both
interpretations are plausible.
The majority may be right that the first of these
interpretations is more convincing, and that it was made more
convincing when a year later, in August 2013, Stephen Miele
directed CNE to change the purchase orders once again, this time
to list Asset Recovery as the supplier. But when there is this
kind of toss-up at the summary judgment stage as to how the
evidence should be weighed, or which interpretation of the evidence
is more plausible, the question must go to a jury. In this case,
the question of whether the later October 2012 communications
disabused CNE of any notion that Asset Recovery was BlackBerry's
agent is a question that requires such weighing and interpreting
of evidence. To decide it ourselves would be to engage in an
exercise that we are not permitted at the summary judgment phase,
and would preclude CNE from exercising its constitutional right to
a trial by jury.
Finally, I briefly address the majority's point that CNE
is a "commercially sophisticated" party whose business model
(i.e., buying and reselling bulk parts) was nearly identical to
that of Asset Recovery. The majority seems to suggest that because
CNE conducted its own business autonomously, and not on behalf of
any principal, CNE should have known that Asset Recovery was also
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an independent actor and not an agent of BlackBerry. I am not
certain I agree. Why could it not be the case that one company
conducted its business independently and another conducted the
same business as an agent of a principal? Regardless, to the
extent that it is relevant that CNE and Asset Recovery were engaged
in the same business, this is, again, something for the jury to
weigh, along with the rest of the evidence, in determining whether
it was reasonable for CNE to believe that Asset Recovery was
BlackBerry's agent.
For these reasons, I respectfully dissent from the
majority's holding as to the question of apparent authority.
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