Board of Trustees v. Citigroup Global Markets ( 2010 )

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 09-13451 OCTOBER 8, 2010
________________________ JOHN LEY
CLERK
D. C. Docket No. 08-81474-CV-KLR
BOARD OF TRUSTEES OF THE CITY
OF DELRAY BEACH POLICE AND
FIREFIGHTERS’ RETIREMENT SYSTEM,
Plaintiff-Appellee,
versus
CITIGROUP GLOBAL MARKETS INC.,
f.k.a. Salomon Smith Barney,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Southern District of Florida
_________________________
(October 8, 2010)
Before DUBINA, Chief Judge, PRYOR and MARTIN, Circuit Judges.
PRYOR, Circuit Judge:
This appeal from the denial of a motion to compel arbitration presents the
question whether the Board of Trustees of the City of Delray Beach Police and
Firefighters’ Retirement System agreed to arbitrate a dispute arising under its
consulting contract with Citigroup Global Markets, which helped the Board
evaluate the performance of several investment managers of pension funds the
Board oversees. The Board complained that Citigroup abused its position as
pension consultant when it provided erroneous reports about the performance of
the investment managers of the fund, recommended investment managers who
would agree to place trades through Citigroup, and engaged in self-dealing
transactions with assets of the fund. Citigroup moved to compel arbitration on the
ground that William Adams, the chairman of the Board, had bound the Board to
arbitrate any dispute with Citigroup when he signed several account agreements
through which one of the investment managers of the fund could buy and sell
securities. Those account agreements required arbitration of disputes under those
and “any other agreement between” Citigroup and the Board. The Board argued
that Adams had no authority to bind the Board to arbitrate disputes under the
consulting contract, and Citigroup responded that Adams had both implied actual
authority and apparent authority to bind the Board. The district court agreed with
the Board, held that Adams had no authority to bind the Board to arbitrate, and
denied the motion to compel arbitration. Because we conclude that Adams had
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implied actual authority to bind the Board to arbitrate disputes arising under the
consulting contract, we reverse and remand with instructions.
I. BACKGROUND
We divide our discussion of the background of this appeal into three parts.
First, we describe the decisions of the Board to hire Citigroup as its pension
consultant and to delegate to Adams the authority to execute the account
agreements. Second, we describe the lawsuit that the Board filed against
Citigroup. Third, we describe the motion of Citigroup to compel arbitration and
the decision of the district court to deny that motion.
A. The Hiring of Citigroup and Execution of the Account Agreements
The Board manages a pension trust fund for the benefit of the firefighters
and police officers of Delray Beach, Florida. See Fla. Stat. §§ 175.071, 185.06;
Delray Beach, Fla., Code of Ordinances ch. 33, § 33.66. As the manager of the
fund, the Board hires professional investment managers to select investments for
the fund. By law, the Board must “retain a professionally qualified independent
consultant who shall evaluate the performance of any existing professional money
manager and shall make recommendations to the board of trustees regarding the
selection of money managers for the next investment term.” Fla. Stat.
§§ 175.071(6)(a), 185.06(5)(a).
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In October 1995, the Board hired Citigroup (formerly Salomon Smith
Barney) as its pension consultant. The parties signed a pension consultant contract,
which required Citigroup to report each quarter about the performance of the
professional investment managers who made investments on behalf of the fund.
The consulting contract required Citigroup to compute quarterly and annually the
performance of the total fund and individual managers on no less than a quarterly
basis; attend quarterly meetings; attend special meetings; and provide additional
services agreed upon. The parties signed a materially similar contract in December
2000. When that contract expired in 2004, the parties, according to the complaint,
“continued their relationship without a written contract, orally agreeing to operate
on the same terms previously agreed upon.”
The Board approved the consulting contract after consideration by the full
Board. The Board discussed key provisions of the consulting contract, submitted
the consulting contract to outside counsel Stephen Cypen for review and approval,
and approved the consulting contract by a vote of the majority of the Board. The
Board contends that, during negotiations of the consulting contract, the Board
expressly refused to agree to arbitrate disputes under the consulting contract, but
Citigroup denies that allegation. Even so, the final consulting contract did not
contain an arbitration clause. The consulting contract provided, “Any changes to
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this Agreement requested either by the Consultant or the Board may only be
effected if mutually agreed upon in writing by duly authorized representatives of
the parties hereto.” It continued, “This Agreement shall not be modified or
amended or any rights of a party to it waived except by such a writing.”
At a meeting in November 2003, the Board decided to hire NWQ
Investments as an investment manager. As the minutes from that meeting reflect,
the Board agreed “that once Cypen has approved the NWQ contract, Chief Adams,
Chairman, be given the authority to execute the contract on behalf of the
Board/Fund.” Cypen approved the NWQ contract and Adams signed an agreement
with NWQ. According to Citigroup, the Board needed to open an investment
account through which NWQ could invest assets of the fund on behalf of the Board
and, although the Board could have opened this account with any institution, the
Board chose to open it with Citigroup. On December 19, 2003, Adams executed
several documents to open this account. In October 2004, Adams signed several
similar documents to open a similar account, also with Citigroup, for another
investment manager of the Board.
The account agreements contain a broad arbitration clause. Above the
signature block, the account agreements state, “I acknowledge that I have received
the Client Agreement which contains a pre-dispute arbitration clause.” The client
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agreement, in turn, contains a clause that requires arbitration of “all claims or
controversies, whether such claims or controversies arose prior, on or subsequent
to the date hereof, between me and [Citigroup].” The client agreement requires
arbitration of disputes “concerning or arising from . . . the construction,
performance or breach of this or any other agreement between us.”
B. Lawsuit Against Citigroup
In November 2008, the Board sued Citigroup in a Florida court. The
complaint stated four claims. Each claim alleged misconduct by Citigroup as
pension consultant to the Board.
Count one alleged that Citigroup breached the consulting contract “by
failing to provide the services for which it was paid.” Citigroup “computed the
performance of the Fund and the investment managers gross of fees, rather than net
of fees, and repeatedly submitted false and misleading information to the Board
concerning matters relevant to evaluating the Fund’s investment performance.”
The complaint alleged, “These matters included, without limitation, the actual rate
of return on the Fund’s investments as compared with a purportedly appropriate
benchmark rate of return, and the amount of appreciation in the Fund’s securities
portfolio.” The complaint requested compensatory damages on the ground that the
Board paid for services never performed and that if the Board had been aware of
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the real performance of the pension fund, it would have terminated Citigroup, hired
a new consultant, and achieved a better rate of return. Moreover, the complaint
alleged that Citigroup “utilized its position as pension consultant to engage in
transactions involving Fund assets through which [it] was able to obtain much
larger compensation from its relationship with the Board and the Fund than the
amount to which it was entitled under the” consulting contract.
Count two alleged breach of fiduciary duty. It alleged that a fiduciary
relationship existed between Citigroup and the Board because Citigroup “induced
the Board to place its trust and confidence in [Citigroup], and [Citigroup] assumed
a role of superiority in its relationship to the Board with respect to the areas of its
purported expertise and exerted influence over the Board.” The Board alleged that
Citigroup breached its duties as fiduciary by, among other things, repeatedly
misleading the Board about the performance of its investments and recommending
that it hire investment managers who Citigroup knew would agree to run securities
trades through it as broker so that it could earn commissions. The complaint also
alleged that Citigroup breached its fiduciary obligations by “repeatedly entering
into fixed income and equity trades with the Fund for its own account without
disclosing to the Board that it was trading as a principal, earning undisclosed
profits from those trades, and periodically failing to provide these trades to the
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Fund at current market rates.” Additionally, Citigroup “directed certain of the
Fund’s investment managers to run all their portfolio trading for the Fund through
[Citigroup] without Board approval.” The complaint again requested
compensatory damages.
Count three alleged fraud. The complaint alleged that Citigroup made false
statements to the Board concerning the performance of the pension fund by, for
example, “reporting . . . performance gross of fees and overstating the appreciation
of the Fund’s investment portfolio over a seven-year period.” It also alleged that
Citigroup produced false and misleading quarterly and annual reports on which the
Board relied in deciding to retain Citigroup as consultant and to retain various of
its investment managers as managers of the assets of the fund. It also alleged that
Citigroup fraudulently induced the Board to hire investment managers that would
run trades through Citigroup as broker. The complaint requested compensatory
damages.
Finally, count four alleged negligent misrepresentation. The Board alleged
that Citigroup negligently submitted inaccurate reports about the performance of
the pension fund by reporting returns gross of fees, not net of fees as required by
Florida law; misrepresenting the actual performance of the pension fund; and
misrepresenting the appreciation of the assets of the fund. The complaint again
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sought compensatory damages on the ground that the negligence of Citigroup
caused the Board to retain an ineffective pension consultant and investment
managers that were underperforming the market.
C. Motion to Compel Arbitration
In December 2008, Citigroup removed the action to federal court, 28 U.S.C.
§§ 1332, 1441, 1446, and promptly moved to compel arbitration. It relied on the
arbitration clause contained in the account agreements that Adams signed in
connection with the hiring of NWQ as an investment manager. The motion to
compel arbitration recounted the facts that we have described and stated that “[i]n
connection with its relationship with [Citigroup], the Board opened investment
accounts with [Citigroup] in which the fixed income and equity securities
transactions the Board now complains about were executed on behalf of the Fund.”
Citigroup also stated that, when opening these accounts, “the Board entered into
client agreements which contain broadly worded arbitration provisions that clearly
encompass the claims asserted by the Board in this action.” Citigroup argued that
the broad arbitration clause covered the claims of the Board “because they concern
or arise from accounts the Board maintained with [Citigroup], transactions
involving [Citigroup], the performance or breach of the Board’s agreements with
[Citigroup,] and alleged duties arising from the business of [Citigroup].”
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The Board argued that it never agreed to arbitrate disputes under the
consulting contract. The Board argued that Adams lacked “actual authority” to
agree to arbitrate claims arising under the Board-approved consulting contract
because the Board had never voted to give him that authority. It argued that
Florida law requires “all acts and decisions [of the Board to] be effectuated by vote
of a majority of the members of the board,” Fla. Stat. §§ 175.071(2), 185.06(2),
and it observed that the Board “never voted to modify or amend the Pension
Consultant Contracts by adding an arbitration clause to them” and that the
consulting contract stated that it could not be modified except in writing by “duly
authorized representatives of the parties.” The Board also argued that Adams did
not have “apparent authority” to subject claims under the consulting contract to
arbitration because the Board did nothing at all to suggest to Citigroup that Adams
had any authority to modify the consulting contract. The Board argued, “Rather
than causing [Citigroup] to believe that Mr. Adams was authorized to amend the
Pension Consultant Agreements, [the Board] included [Citigroup] in the very
meetings that confirmed that Mr. Adams was not so authorized.” According to the
Board, because Citigroup representatives attended the meetings at which the full
Board debated the substance of the consulting contract, agreed to submit a draft of
the consulting contract to outside counsel for approval, and then approved the final
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consulting contract by majority vote, Citigroup knew that the Board would not
have given Adams the authority to alter the consulting contract by executing the
separate NWQ contract. The Board further argued that the “customary practice” of
Citigroup of alerting Adams to the need for Board or outside counsel review of
substantive documents that required Adams’s signature supported a ruling that
Citigroup could not have reasonably thought that Adams could amend the
consulting contract without involving the Board.
The district court denied the motion to compel arbitration. The district court
considered whether Adams had actual authority to execute the account agreements
that contained the arbitration clause instead of whether he had actual authority to
bind the Board to arbitrate disputes under the consulting contract. The district
court stated that it had located no “Florida case in which a member of the board of
a police or firefighter pension trust fund was able to bind the Board via unilateral
action.” It concluded, “Absent any authority that would allow this Court to
overlook application of the previously cited Florida statutes [stating that the Board
acts through majority vote], the Court concludes that Adams lacked actual
authority to execute the Account Agreements.” The district court also held that
Adams lacked apparent authority to execute the account agreements. The court
held that “[g]iven [Citigroup’s] presence at the previously mentioned Board
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meetings, [Citigroup] knew that Adams could not sign the Account Agreements
without approval of the Board and its counsel.” Alternatively, the district court
held that, even if Adams had apparent authority to sign the account agreements
because the Board held him out as having that authority, the Florida laws that
provide that the Board manages the pension fund by majority vote prevent the
operation of ordinary principles of agency.
II. STANDARD OF REVIEW
We review the denial of a motion to compel arbitration de novo. Becker v.
Davis, 491 F.3d 1292, 1297 (11th Cir. 2007).
III. DISCUSSION
We divide our discussion into two parts. First, we explain that Florida law
permitted the Board to delegate to Adams authority to bind it to arbitrate disputes
under the consulting contract. Second, we explain that Adams possessed implied
actual authority to bind the Board to arbitrate disputes under the consulting
contract.
A. Florida Law Permitted the Board to Delegate to Adams the Authority to Bind
the Board to Arbitration Under the Consulting Contract.
Citigroup contends that ordinary principles of administrative law permit the
Board to delegate to Adams, its agent, the authority to bind the Board to arbitrate
disputes under the consulting contract. The Board disagrees, and advances a
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related argument that the Florida Sunshine Law, Fla. Stat. § 286.011(1), prevented
the Board from delegating authority because, under that law, all decisions affecting
the Board must be made at a public meeting. We agree with the argument of
Citigroup that Florida law permitted the Board to delegate to Adams the authority
to agree to arbitrate disputes under the consulting contract.
Citigroup argues persuasively that general principles of administrative law
govern the Board, which is a municipal agency; those general principles of
administrative law permit delegation; and because no Florida law prohibits the sort
of delegation at issue, the Board could delegate its authority. The Board has
offered no reason to doubt this argument about Florida law. Cf. W.M. Schlosser
Co. v. Sch. Bd. of Fairfax Cnty., Va., 980 F.2d 253, 258 (4th Cir. 1992) (holding
that agent could not bind board to arbitrate because state law affirmatively
prohibited arbitration); Morgan v. S. Bend Cmty. Sch. Corp., 797 F.2d 471, 479
(7th Cir. 1986) (holding that state law affirmatively required full board to approve
employment contracts so superintendent modification was invalid). Delray Beach
municipal law does not prohibit delegation. It instead permits the Board to “hire
and appoint those persons, agents or entities . . . as in its discretion may be required
or advisable to enable it to perform custodial and investment duties.” Delray
Beach, Fla., Code of Ordinances ch. 33, § 33.66(C). Florida municipal law also
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permits the Board to carry out several enumerated investment powers “through
duly authorized agents, provided that the Board at all times maintains continuous
supervision over the acts of any agent.” Id. § 33.66(F).
Killearn Properties, Inc. v. City of Tallahassee forecloses the related
argument of the Board that its alleged violation of the Florida Sunshine Law could
excuse it from complying with the terms of any contracts that it might have given
Adams the authority to execute, including the account agreements. 366 So. 2d
172, 181 (Fla. Dist. Ct. App. 1979). That decision makes clear as follows that a
government agency cannot benefit from its own violation of the Sunshine Law:
“It is one thing for an aggrieved citizen to seek to have set aside an agreement
between a government and another party because of Sunshine Law violations; but
quite another for the government entity itself to seek to escape its obligation based
upon its own alleged wrongdoing.” Id. The Board does not explain why this
decision is mistaken or identify any other Florida precedent that is inconsistent
with it. Consequently, the question before us is not whether the Board could have
delegated to Adams the authority to bind it to arbitrate disputes under the
consulting contract, but whether it did.
B. Adams Possessed Implied Actual Authority to Bind the Board to Arbitrate
Disputes Under the Consulting Contract.
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We have explained that, as a matter of federal law, “arbitration is a matter of
consent, not coercion.” World Rentals & Sales, LLC v. Volvo Constr. Equip.
Rents, Inc., 517 F.3d 1240, 1244 (11th Cir. 2008) (internal quotation marks
omitted). “Accordingly, a party ordinarily will not be compelled to arbitrate unless
that party has entered into an agreement to do so.” Id. (internal quotation marks
omitted). “[C]ommon law principles of contract and agency law allow a signatory
. . . to bind a non-signatory . . . to an arbitration agreement . . . .” Id. (internal
quotation marks omitted). This rule means that the Board, which has not signed an
arbitration clause, may be compelled to arbitrate if a signatory executed the
arbitration agreement as its agent. Id. at 1247.
The determination whether a signatory like Adams had the authority to bind
a non-signatory like the Board to arbitrate “turns on the specific facts of each
case.” Id. at 1248. This issue is for us, not an arbitrator, to resolve, id., unless the
parties have clearly delegated to the arbitrator responsibility for this determination,
AT&T Techs., Inc. v. Commc’ns Workers, 475 U.S. 643, 649, 106 S. Ct. 1415,
1418 (1986). Contrary to the suggestion of Citigroup, we resolve this issue
without a thumb on the scale in favor of arbitration because the “federal policy
favoring arbitration does not apply to the determination of whether there is a valid
agreement to arbitrate between the parties.” Fleetwood Enters., Inc. v. Gaskamp,
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280 F.3d 1069, 1073 (5th Cir. 2002).
Citigroup contends that, under general principles of agency law, Adams had
authority to execute the account agreements that contained a broad arbitration
clause. It argues that, although the Board did not expressly authorize Adams to
execute the account agreements, that power was implied in the express grant of
authority to execute the NWQ contract. Citigroup maintains that the authority to
execute the account agreements implied the authority to execute the arbitration
clause contained in those agreements, which by its plain terms requires arbitration
of the dispute at issue here.
The Board does not argue that the account agreements are invalid or that the
arbitration clause is ineffective as to any dispute arising under those account
agreements, but the Board does argue that the arbitration clause is invalid “with
respect to the claims arising under the Pension Consultant Contract.” The Board
contends that it never provided Adams the authority “to amend the Pension
Consultant Contracts by subjecting them to arbitration.” We disagree with the
Board.
Adams had implied authority to execute the account agreements. The Board
expressly authorized Adams to execute the NWQ contract, and that grant of
express authority implied “the authority to do acts that are incidental to it, usually
16
accompany it, or are reasonably necessary to accomplish it.” 2 Fla. Jur. 2d Agency
& Employment § 47 (2005) (citing Restatement (Second) of Agency § 35 (1958)).
In Florida, “[i]t is well-established that an agent’s authority may be inferred
from acts, conduct and other circumstances.” Bradley v. Waldrop, 611 So. 2d 31,
32 (Fla. Dist. Ct. App. 1992). Under Florida law, an agent charged with selling
property in “any way he could” possesses the implied authority to buy surveying
services on behalf of his principal, id. at 32–33, and a real estate agent possesses
the implied authority “to make representations concerning the description and
characteristics of the property to be sold,” Outlaw v. McMichael, 397 So. 2d 1009,
1010 (Fla. Dist. Ct. App. 1981). For similar reasons, the express authority to hire a
named investment manager implies the authority to open an account through which
that manager can perform the only job that it was hired to perform. See Eassa
Props. v. Shearson Lehman Bros., Inc., 851 F.2d 1301, 1304 (11th Cir. 1988).
Adams’s authority to execute the account agreements also implied the
authority to execute an arbitration clause that requires arbitration of disputes
arising under those and all other agreements. We have held that the “express
authority to select and purchase bonds and to trade commodities on margin”
implies the authority to execute account agreements through which those trades
may be executed, which implies the authority to execute an arbitration clause
17
contained in those account agreements that will bind the principal. Id. Public
entities like the Board are subject to the same rule. E.g., City of Vista v. Sutro &
Co., 52 Cal. App. 4th 401, 409-10, 60 Cal. Rptr. 2d 488, 492–93 (1997); see also
City of Hartford v. Am. Arbitration Ass’n, 174 Conn. 472, 479, 391 A.2d 137,
140–41 (1978). Nothing suggests “that a customer agreement containing an
arbitration clause with a clearing house is unusual or out of the ordinary course of
business for the securities investment world.” 99 Commercial St., Inc. v.
Goldberg, 811 F. Supp. 900, 907 (S.D.N.Y. 1993) (Sotomayor, J.). There also is
nothing unusual about an arbitration clause, especially in an account agreement,
that requires arbitration of all disputes between the parties to the agreement. We
have enforced such a clause before because it “evince[d] a clear intent to cover
more than just those matters set forth in the contract.” Belke v. Merrill Lynch,
Pierce, Fenner & Smith, 693 F.2d 1023, 1028 (11th Cir. 1982), overruled on other
grounds by Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 217 & n.3, 105 S.
Ct. 1238, 1240–41 & n.3 (1985); see also Coffey v. Dean Witter Reynolds, Inc.,
891 F.2d 261, 262–63 (10th Cir. 1989). The Board cannot avoid the same result
because it acted through its agent.
Adams acted for the Board, and the Board is bound by “the plain meaning of
the agreement” that he signed. 99 Commercial St., 811 F. Supp. at 907 (binding
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principal to arbitrate disputes under a customer agreement that it signed because a
customer agreement that its agent later signed with the same party included an
arbitration clause covering “all of a customer’s accounts ‘whether entered prior to,
on or subject to the date hereof’”). Moreover, that the Board and Adams deny that
Adams possessed the authority to agree to arbitrate disputes under the consulting
contract does not determine the issue because “an agency relationship may be
found even though the principal and the agent deny the existence of such a
relationship.” Bradley, 611 So. 2d at 33. The Board has offered no persuasive
reason to conclude that it can avoid arbitration.
The dissent erroneously contends that Adams lacked implied authority to
bind the Board to an arbitration clause because it was “clear that in the context of
the consulting agreement to these parties such a clause was highly unusual.” This
argument overlooks a critical fact: the Board admits that Adams had the authority
to execute the arbitration agreements and bind the Board to them. That is, the
Board admits that it is contractually bound to resolve by arbitration any dispute
arising out of the account agreements. The only argument of the Board is that we
should ignore that half of the plain language of the arbitration agreements that also
binds the Board to arbitrate disputes arising out of the earlier consulting agreement.
What the dissent calls a “highly unusual” clause is instead nothing of the kind. We
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refuse to rewrite the terms of the agreements exexuted by Adams so as to allow the
Board to escape its obligation to submit its entire dispute to arbitration.
IV. CONCLUSION
Because the Board agreed to arbitrate its claims against Citigroup, the
judgment of the district court is REVERSED and this appeal is REMANDED
with instructions that the district court grant the motion of Citigroup to compel
arbitration.
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MARTIN, dissenting:
I agree with the Majority that this case turns on the existence and scope of
the principal–agent relationship between the Board and Chairman Adams. I also
agree that the Board intended to create an agency relationship and that in
delegating to Chairman Adams the authority to execute the NWQ Investments
contract, the Board empowered Chairman Adams to take incidental actions
necessary to achieve that end. However, I cannot agree with the Majority’s
conclusion that this delegation empowered Chairman Adams to fundamentally
amend unrelated and preexisting contractual relationships. Because such a result is
neither consistent with the established doctrine of implied actual authority nor
supported by the record before us, I respectfully dissent.
In short, I believe the Board delegated far less authority to Chairman Adams
than does the Majority. Under the doctrine of implied actual authority, the scope
of an agent’s authority is limited to only that expressly conferred in the delegation
itself, together with that which is incidental to, usually accompanies, or reasonably
necessary to effect the principal’s desired outcome. 2 Fla. Jur. 2d Agency &
Employment § 47 (2010); Restatement (Third) of Agency § 2.02 cmt. d (2006) (“If
a principal’s manifestation to an agent expresses the principal’s wish that
something be done, it is natural to assume that the principal wishes, as an
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incidental matter, that the agent take the steps necessary and that the agent proceed
in the usual and ordinary way . . . .”); Union Camp Corp. v. Dyal, 460 F.2d 678,
687 (5th Cir. 1972) (invalidating sale of property by agent where sale was not
incidental to the delegation and there was “no evidence that [the land owners]
desired [the sales].”).1
Based on these principles, the Majority’s opinion is correct only if
renegotiation of the unrelated Citigroup agreement was incidental to or necessary
to effecting the NWQ Investments contract. The problem for the Majority is that
the record does not support this conclusion. The Majority is thus left to argue that
the decision of the district court should not stand because “there . . . is nothing
unusual about an arbitration clause . . . that requires arbitration of all disputes
between the parties to an agreement.” Majority Op. 18. Never mind that the
Majority’s precedent for this point is readily distinguishable,2 the record before us
1
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc) we
adopted as binding precedent all decisions of the former Fifth Circuit handed down before
October 1, 1981.
2
In particular, the Majority’s reliance on 99 Commercial St., Inc. v. Goldberg, 811 F.
Supp. 900, 907 (S.D.N.Y. 1993), is misplaced. See Majority Op. 18. In that case, then-Judge
Sotomayor held that in agreeing to a broadly worded arbitration clause in a new account
agreement, an agent subjected a previously opened account with the same brokerage company to
arbitration. 811 F. Supp. at 907. Unlike in this case, however, the accounts at issue in 99
Commercial St. all related to a single mortgage transaction. Id. at 903. Further, it strikes me that
the opinion does nothing to grapple with defining the scope of the agent’s implied authority,
suggesting that this issue was not even before the court. See id. at 907. Therefore, 99
Commercial St. does not speak to the crucial issue before us in this case, which is whether
Chairman Adams possessed the requisite implied actual authority in the first place.
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is clear that in the context of the consulting agreement to these parties such a
clause was highly unusual. As a result, under the appropriate fact specific inquiry
as to the scope of an agent’s implied authority, see Gadsden County Tobacco Co.
v. Corry, 137 So. 255, 257–58 (Fla. 1931); Bradley v. Waldrop, 611 So. 2d 31, 32
(Fla. 1st DCA 1992), I conclude that the Board did not delegate to Chairman
Adams the authority to amend the preexisting consulting agreement.
The record is also clear that Chairman Adams lacked any apparent authority
to amend the consulting contract. For apparent authority to have existed, the Board
must have held Adams out as having the authority to amend the consulting contract
and Citigroup must have reasonably relied on that appearance. See Cambridge
Credit Counseling Corp. v. 7100 Fairway, LLC, 993 So. 2d 86, 90 (Fla. 4th DCA
2008). To the extent that the Board held Chairman Adams out as having such
authority, however, Citigroup’s reliance, if any, was not reasonable. It was
intimately involved in the Board’s deliberations over the previously existing
consulting contract and thus knew or should have known that Adams alone could
not effectuate a material change to the contract by inserting an arbitration clause.
See Palafrugell Holdings, Inc. v. Cassel, 940 So. 2d 492, 494 (Fla. 3d DCA 2006)
(party seeking to rely upon the representations of an agent has duty to inquire
further where representations are “facially contrary to the interests” of principal).
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I am thus persuaded that Chairman Adams lacked the authority to insert the
disputed arbitration provision into the preexisting consulting agreement. This
being the case, the Board is not bound to arbitrate this or any other disputes arising
from the underlying consulting agreement.3
For these reasons, I respectfully dissent from the Majority’s opinion. Rather
than overturn the well-reasoned conclusions of the district court, I would affirm
that court’s order and permit this action to proceed in district court. This result is
not only consistent with the settled expectations of both parties, but more
importantly is in accord with long settled principles of agency law that clearly limit
the scope of the implied actual authority at issue here.
3
By resolving this appeal on the issue of the scope of Chairman Adams’s authority, I
would not reach the question of whether Florida Sunshine Law or state and local administrative
law deprived Adams of legal authority to amend the consulting contracts. See Majority Op. 14.
However, to the extent this issue bears on the resolution of this case, I must express my
reservations regarding the majority’s reliance, id., on Killearn Properties, Inc. v. City of
Tallahassee, 366 So. 2d 172, 181 (Fla. 1st DCA 1979). Both legally and factually, Killearn is
distinguishable from the case before this Court. First, Killearn is actually a case about estoppel,
not implied authority, see 266 So. 2d at 177–82, and therefore its guidance regarding Florida
Sunshine Laws is limited at best. Second, the record in Killearn evinced substantial and
detrimental reliance on the part of the plaintiff that is not found in the present case. Id. at 174.
Thus, I do not agree that Killearn forecloses any arguments regarding the significance of the
Florida Sunshine Law. See Majority Op. 14.
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