Opinion
CV-02-0038-ST
July 24, 2002
OPINION AND ORDER
INTRODUCTION
Plaintiff, Pacific Northwest Painting Company, Inc. ("PNWP"), alleges that it submitted bids for four painting projects on schools operated by Portland Public Schools ("PPS") in Multnomah County, but ultimately was not awarded those bids because defendant, Mid-Century Insurance Company ("Mid-Century"), failed to issue bid bonds. As a result, PNWP lost profits it would have realized on those projects of nearly $200,000.00. PNWP originally filed a complaint against Mid-Century in Multnomah County Circuit Court, Pacific Northwest Painting Company v. Mid-Century Insurance Company, Multnomah County Case No. 0112-12507. Mid-Century removed the action to this court on January 9, 2002, alleging jurisdiction based upon diversity of citizenship.
PNWP is an Oregon corporation with its principal place of business in Oregon. Mid-Century is a California Corporation with its principal place of business in California. The amount in controversy exceeds $75,000.00, exclusive of interest and costs. This court has diversity jurisdiction under 28 U.S.C. § 1332. All parties have consented to allow a Magistrate Judge to enter final orders and judgment in this case in accordance with FRCP 73 and 28 U.S.C. § 636(c).
PNWP has filed a motion for partial summary judgment (docket #11). For the reasons that follow, the motion is granted.
STANDARDS
FRCP 56(c) authorizes summary judgment if no genuine issue exists regarding any material fact and the moving party is entitled to judgment as a matter of law. The moving party must show an absence of an issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party does so, the non-moving party must go beyond the pleadings and designate specific facts showing a genuine issue for trial. Id at 324. The court must "not weigh the evidence or determine the truth of the matter, but only determines whether there is a genuine issue for trial." Balint v. Carson City, 180 F.3d 1047, 1054 (9th Cir. 1999). A "`scintilla of evidence,' or evidence that is `merely colorable' or `not significantly probative,'" does not present a genuine issue of material fact. United Steelworkers of Am. v. Phelps Dodge Corp., 865 F.2d 1539, 1542 (9th Cir.), cert denied, 493 U.S. 809 (1989) (emphasis in original) (citation omitted).
The substantive law governing a claim or defense determines whether a fact is material. T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 631-32 (9th Cir. 1987). The court must view the inferences drawn from the facts "in the light most favorable to the nonmoving party." Id at 631 (citation omitted). Thus, reasonable doubts about the existence of a factual issue should be resolved against the moving party. Id at 630-31. However, when the non-moving party's claims are factually "implausible, that party must come forward with more persuasive evidence than would otherwise be [required]. . . ." California Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987), cert denied, 484 U.S. 1006 (1988) (emphasis in original) (citation omitted). The Ninth Circuit has found, "No longer can it be argued that any disagreement about a material issue of fact precludes the use of summary judgment." Id.
ANALYSIS
PNWP seeks an order from this court that, upon trial of this action, paragraph 2 of the Amended Complaint will be deemed established. That paragraph alleges that at all material times, Kasey Whitaker ("Whitaker") was an agent of Mid-Century, acting within the actual or apparent scope of his agency.
The thrust of Mid-Century's arguments against summary judgment are that the motion is premature until it is determined what Whitaker did and whether he was acting to benefit Mid-Century or to protect himself. The first part of this argument is resolved by Local Rule 56.1, which provides the procedures for establishing the factual record for summary judgment issues. As discussed below, there are few factual disputes, and all disputes are construed in favor of the non-movant, Mid-Century. In addition, as discussed below, Whitaker's state of mind has little impact on the agency analysis. However, out of an abundance of caution, this court assumes that Whitaker was acting primarily to protect himself in his dealings with PNWP. Nevertheless, under the applicable statutory and common law standards, the record does not support Mid-Century's bid to wash its hands of Whitaker's actions.
I. Material Facts
Several of the facts submitted by Mid-Century are disputed by PNWP. Because Mid-Century is the non-movant, this court is required at the summary judgment stage to construe the facts in Mid-Century's favor. Thus, Mid-Century's version of all disputed facts set forth below are accepted as true for purposes of this motion.
PNWP is a corporation engaged in the painting of commercial and residential buildings, and Mid-Century is a corporation engaged in the issuance of bonds and insurance policies. Stephen and Karen Strahm are co-owners of PNWP and active participants in its business.
Whitaker first applied to the Farmers Insurance Group of Companies ("Farmers Insurance") for the position of a reserve agent on August 19, 1999. Ledwidge Aff, Ex 4. Whitaker was issued an insurance license by the Oregon Department of Consumer and Business Services, Insurance Division, on September 27, 1999, which was renewed on September 30, 2000, and due to expire on September 30, 2002. Id, Ex 6.
Farmers Insurance, including Mid-Century, appointed Whitaker as their agent with the Department of Consumer and Business Services, Insurance Division for the State of Oregon, on August 20, 1999. Id, Ex 5. On February 21, 2000, Whitaker signed a Farmers Insurance "Agent Appointment Agreement." The agreement specifically names Mid-Century as one company within Farmers Insurance and provides in pertinent part:
Agent is hereby made an agent of the Companies for the purpose of furthering the business of the Companies as described in this Agreement, except when specifically reserved.
Agent agrees to solicit, offer, sell and service those products and services offered by the Companies under this agreement exclusively for the Companies, and to submit to the Companies, or their assignees, every request or application for all such products or services.
Id, Ex 9; Whitaker Depo, p. 41.
Whitaker continued in this capacity under this agreement until his resignation dated January 20, 2002, effective April 30, 2002. Ledwidge Aff, Ex 26; Whitaker Depo, p. 43.
By May 2000, Whitaker was known to Mr. and Mrs. Strahm as an agent for Farmers Insurance, placing auto, home and life insurance with Farmers Insurance for them individually and worker's compensation insurance for PNWP. Whitaker Depo, pp. 62-63; S. Strahm Aff, ¶ 3. Prior to the events set forth in the Amended Complaint, Whitaker also solicited PNWP's bond business.
On or about June 7, 2001, Mr. Strahm called Whitaker and stated that he needed bonds for four painting projects with PPS. Mr. Strahm did not specifically request "bid bonds" and there was no mention of bid bonds during the conversation. Instead, Mr. Strahm provided specific dollar amounts for the bonds he sought, indicating that PNWP needed a $5,000 bond, two $10,000 bonds and a $15,000 bond. Based on this conversation, Whitaker believed that PNWP was seeking "contractor bonds" in specified amounts, as opposed to bid bonds. No mention was made as to when the bonds would be needed. During the June 7, 2001 conversation, Whitaker informed Mr. Strahm that he had never before processed a bond application and would need to get more information.
PNWP denies that Whitaker did not specifically know it was seeking bid bonds. Because this court must accept disputed facts in Mid-Century's favor, it assumes that Whitaker did not know that PNWP was specifically seeking bid bonds.
Following the June 7, 2001 conversation with Mr. Strahm, Whitaker contacted several colleagues and inquired as to the difficulty of obtaining contractor bonds. Whitaker was told that obtaining contractor bonds was not difficult, that "anything under 20 grand was easy to do" and that it would take one or two days to get the bonds. Whitaker then obtained an application form for a contractor bond.
On June 11, 2001, Whitaker and Mr. Strahm spoke again about bonds. Whitaker still had no idea that PNWP was seeking bid bonds as opposed to contractor bonds and told Mr. Strahm it would not be difficult to obtain contractor bonds.
PNWP maintains that at all times, Whitaker knew that it was seeking bid bonds, not contractor bonds.
Between June 12 and 14, 2001, Whitaker spoke with Mrs. Strahm and told her he was "in the process of getting contractor bonds in line." As of the date of Whitaker's conversation with Mrs. Strahm, PNWP had not indicated when the bonds would be needed. Whitaker instructed Mr. and Mrs. Strahm that when they needed the bond, to let him know and they could prepare the form. Whitaker Depo, p. 76.
On June 18, 2001, Whitaker and Mr. Strahm spoke about bonds again. During this conversation, Mr. Strahm stated for the first time that PNWP was seeking a bid bond rather than a contractor bond and stated that PNWP needed the bid bond by June 19, 2001. During this conversation, Mr. Strahm also first informed Whitaker as to the actual amounts of the bids. Following this conversation, Whitaker contacted Mid-Century and requested application forms for a bid bond. Mid-Century faxed an application form to Whitaker late on June 18, 2001, and Whitaker made arrangements with Mr. Strahm to complete and sign the application the following day.
PNWP denies that June 18, 2001 was the first time that it informed Whitaker that PNWP needed the bid bonds by June 19, 2001. This disputed fact must again be construed in Mid-Century's favor.
Mr. Strahm wanted something from the insurance company to submit with PNWP's bids. As a result, on June 18, 2001, Whitaker faxed four separate letters to PPS's bid department on Farmers Insurance stationery. Each letter was sent referencing one of the four bids to be submitted on June 19, and each stated:
PNWP denies that the letter to PPS was sent at its request.
The Bid bond for Pacific Northwest Painting is in submission and is waiting to issue. The Bond department is behind by 2 weeks on issuing bonds. Therefore, The [sic] Bid Bond for Pacific Northwest Painting has not issued. At this time there is no reason why the bond would not issue. The Financials are all in good standing and therefore it is just a matter of issuing the bid bond, furthermore there should be no foreseen [sic] problem with the performance bond. Please accept my apologies, and allow the bid to be considered, for the bond should issue in 2 to 3 days. At that time it will be sent directly to you. This is not the Fault of Steve Strahm, DBA Pacific Northwest Painting. For Pacific Northwest Painting has been timely in getting the information to Farmers Insurance.
Ledwidge Aff, Ex 22 (emphasis added).
Whitaker admits that the underlined portions of the above excerpt were known to him to be false when he wrote the letter. Whitaker Depo, pp. 125-33.
PNWP submitted bids to PPS on June 19, 2001, on four projects: Grant High School Interior Painting; Ockley Green Middle School Interior Painting; Lane Middle School Interior Painting; and Ockley Green Middle School Exterior Painting. PNWP submitted the four bids without bid bonds. PPS accepted the bids and gave PNWP additional time to obtain the proper bonds. S. Strahm Depo, p. 104.
Also on June 19, 2001, the same day the bids were submitted, Mr. Strahm and Whitaker met and completed the bid bond application.
Mr. Strahm denies that this took place and asserts that he signed a blank application form on June 15, 2001.
On June 20, 2001, Whitaker requested certain financial records from PNWP to be considered by Mid-Century for the issuance of a performance bond to accompany the bid bonds. Whitaker Depo, pp. 145-148. That same day, he faxed PNWP's bid bond application to Mid-Century for issuance of the four bid bonds. Ledwidge Aff, Ex 21. The application was rejected by Mid-Century the same day. Whitaker Depo, pp. 143-44.
The financial records required by Mid-Century for issuance of bid and performance bonds required financial statements prepared by an independent Certified Public Accountant. Ledgwidge Aff, Ex 18. However, Whitaker did not inform PNWP that the financial records would have to be prepared by a Certified Public Accountant. S. Strahm Aff, ¶ 11.
Although Whitaker claims to have faxed the records to Mid-Century on June 22, 2001 (Whitaker Depo, pp. 146-47), the records were not received by Mid-Century. Wickersham Depo, pp. 60-61.
If PNWP's bids had included bid bonds, PNWP would have been awarded the Grant High School Interior Painting — 2001 and Ockley Green Middle School Interior Painting — 2001 contracts on June 19, 2001. However, because PNWP's bids did not include bid bonds, on July 5, 2001, PPS awarded those projects to the next bidder, Siegner and Company. Ledwidge Aff, Ex 37.
II. Issue
The sole issue before this court is whether PNWP is entitled to a ruling that Whitaker was acting within the scope of his agency for Mid-Century at all times material to the allegations of PNWP's complaint. PNWP argues that it is entitled to that ruling both under an Oregon statute and Oregon common law. This court agrees and therefore grants PNWP's motion for partial summary judgment.
A. Statutory Agency
Oregon law expressly provides that:
[A]ny person who solicits or procures an application for insurance shall in all matters relating to the application for insurance and the policy issued in consequence of the application be regarded as the agent of the insurer issuing the policy and not the agent of the insured. Any provision in the application and policy to the contrary is invalid and of no effect.
ORS 744.078(4) (formerly numbered ORS 744.165(1)).
This statute "independently of common law tests of agency . . . sets the policy of this state toward the position of intermediaries in the sale of insurance." Paulson v. Western Life Ins. Co., 292 Or. 38, 60, 636 P.2d 935, 948 (1981). A decade ago, the Oregon Court of Appeals reviewed the text and legislative history of this provision and determined that it "does not determine the scope of an agent's authority." J-P Int'l, Ltd. v. Thompson, 115 Or. App. 309, 312, 838 P.2d 616, 618, rev denied, 315 Or. 271, 844 P.2d 206 (1992). Instead, a plaintiff would not be entitled to a ruling that an agent was acting within the scope of his authority as a matter of law, "unless reasonable minds would necessarily conclude that he was." Id at 312-13, 844 P.2d at 618, citing Jones v. Oberg, 52 Or. App. 601, 608, 628 P.2d 773, 777, rev denied, 291 Or. 662, 639 P.2d 1280 (1981) (emphasis added). Thus, the issue in this case is whether "reasonable minds would necessarily conclude" that Whitaker was acting within the scope of his authority as an agent for Mid-Century in his dealings with Mr. and Mrs. Strahm (on behalf of PNWP) between May and July of 2001. This court concludes that reasonable minds could reach no other conclusion.
The language of ORS 744.078(4) is extremely broad and makes Whitaker Mid-Century's agent for all matters "relating to" an application for insurance if he "solicit[ed] or procure[d]" such an application. The cases interpreting this statute reflect the statute's broad reach. See, e.g., Kabban v. Mackin, 104 Or. App. 422, 431-32, 801 P.2d 883, 889 (1990) (upholding a jury instruction that an agent relationship should be found under ORS 744.165 (now ORS 744.078(4)) if the putative agent and the insured "discussed matters related to the policy").
Mid-Century does not argue that ORS 744.078 is inapplicable for any reason. Moreover, while Mid-Century disputes what may have motivated Whitaker's actions, it has failed to identify any action taken by Whitaker that was not in some way "related to" PNWP's request for bid bonds. Every action identified by Mid-Century as taken by Whitaker falls within the broad language of ORS 744.078(4), which deems any person who solicits or procures an application for insurance to be the agent of the insurer in all matters relating to the application. This language "plainly makes [Whitaker] the representative of [Mid-Century] in connection with all those matters when, in the usual course of effecting insurance, are identified to the application and delivery of the policy." Stipich v. Metropolitan Life Ins. Co., 277 U.S. 311, 320-21 (1928).
Neither party has discussed the issue of whether bid bonds constitute "insurance" for purposes of ORS 744.078(4) and this court thus need not resolve that issue. In any event, whether or not Whitaker was an agent under that statute, this court finds that he would independently be deemed an agent under Oregon case law.
Even if Whitaker's two faxes to PPS and to Mid-Century's bonding department (PNWP's Exs 21 22) may have been motivated by his desire to "protect himself," they clearly were "matters relating to" PNWP's application for bonds. Thus, a finding that Whitaker was Mid-Century's agent for purposes of his actions related to PNWP's application for bid bonds is appropriate under ORS 744.078(4).
B. Common Law Agency
As just noted, Mid-Century does not contest the applicability of ORS 744.078(4) and a finding that Whitaker was Mid-Century's agent is appropriate under that statute. However, even if ORS 744.078(4) does not apply, PNWP is nonetheless entitled to summary judgment on the basis that Whitaker was acting as Mid-Century's agent under Oregon common law.
1. Actual and Apparent Authority to Act
A principal may be held liable for the acts of its agent if those act were within the scope of the agent's real or apparent authority. Roby's Enters., Inc. v. Hanover Dev. Corp., 67 Or. App. 594, 599, 679 P.2d 871, 874 (1984), citing Beeson v. Hegstad, 199 Or. 325, 261 P.2d 381 (1953) (en banc). Actual authority is explained in Wiggins v. Barrett Assocs., Inc., 295 Or. 679, 686-87, 669 P.2d 1132, 1138-39 (1983):
Actual authority to act for another may be either express or implied. Express authority, of course, is just what it says. It is that authority which the principal confers upon the agent in express terms. The express authority given to an agent to do a certain thing carries with it the implied authority to do such other things as are reasonably necessary for carrying out the given task.
If implied authority exists, "[t]he principal will be bound to a third person by the act of the agent within his implied authority even if the third person was unaware at the time of the act that the agent's authority was only implied." Id.
Apparent authority is created by conduct of a principal that causes a third party to reasonably believe that the principal consents to the agent acting for the principal on that matter. Jones v. Nunley, 274 Or. 591, 595, 547 P.2d 616, 618 (1976). The principal may be liable to the third party if it either (1) intended to create the third party's belief or (2) should have known that its conduct would create the third party's belief. Badger v. Paulson Inv. Co., 311 Or. 14, 24 n9, 803 P.2d 1178, 1184 n9 (1991) (citation omitted). A third party may not rely upon an agent's apparent authority when it knows that the agent does not have actual authority or has knowledge of facts that would put it on inquiry as to the actual authority of the agent. Minniti v. Cascade Employers Ass'n, Inc., 280 Or. 319, 329, 570 P.2d 1171, 1176 (1977).
2. Whitaker's Authority
Mid-Century agrees that Whitaker was an agent of Mid-Century and that he had actual authority to solicit and service customers on its behalf. However, Mid-Century disputes that the forgery allegedly committed by Whitaker (which both Mid-Century and Whitaker deny took place) can be summarily declared to be within the scope of Whitaker's agency. Mid-Century also insists that there is a factual dispute over when PNWP first inquired about bonding and what type of bond was discussed which prevents summary judgment.
It is undisputed that Mid-Century appointed Whitaker as its agent in 1999 through Oregon's Department of Consumer and Business Services and that its relationship with Whitaker was governed by the terms of an Agent Relationship Agreement which required Whitaker to exclusively sell its products. Whitaker's express agency necessarily carried with it the implied authority to do such other things necessary to perform his duties under the Agent Relationship Agreement. While Whitaker may have been acting "to protect himself" when he faxed PPS and Mid-Century, those acts were part and parcel of Whitaker's unsuccessful efforts to process PNWP's application for bid bonds. Such actions clearly were encompassed within Whitaker's implied authority. Although Mid-Century argues that Whitaker's acts were forbidden and did not benefit Mid-Century as a principal, it may be subjected to liability where another party reasonably believes that the agent is authorized to take those actions:
"A general agent for a disclosed or partially disclosed principal subjects his principal to liability for acts done on his account which usually accompany or are incidental to transactions which the agent is authorized to conduct if, although they are forbidden by the principal, the other party reasonably believes that the agent is authorized to do them and has no notice that he is not so authorized."
Croisant v. Watrud, 248 Or. 234, 239, 432 P.2d 799, 801 (1967), quoting RESTATEMENT (SECOND), AGENCY § 161 (1958).
Mid-Century has offered no evidence that Mr. or Mrs. Strahm were unreasonable in their belief that Whitaker was Mid-Century's agent and had authority to take the actions he took. Moreover, Mid-Century has failed to identify any action taken by Whitaker that would not "usually accompany" or be "incidental" to the processing of an application for bid bonds.
While Mid-Century is correct that some of Whitaker's actions may have been motivated by his desire to protect himself, Mid-Century has identified no actions taken by Whitaker which would fall outside the broad language of the Agent Relationship Agreement. Under that agreement, Whitaker agreed to "solicit, offer, sell and service" Mid-Century's products and services exclusively for Mid-Century. PNWP's Ex 9.
Mid-Century also argues that the failed efforts to obtain bid bonds was the result of a lack of information or misinformation being provided by Mr. and Mrs. Strahm. Specifically, Mid-Century asserts that Mr. Strahm contacted Whitaker regarding bonds without identifying the type of bonds he needed, failed to specifically mention that he needed bid bonds, and thereby caused Whitaker to believe that PNWP simply needed contractor bonds. Mid-Century also asserts that Whitaker specifically informed Mr. Strahm that he had never processed a bond application before. Mid-Century further contends that no bid bonds were required to be submitted to have the bid accepted and that Whitaker wrote the letter to PPS because Mr. Strahm wanted something to submit with the bids. Finally, Mid-Century asserts that Whitaker attempted to obtain contractor bonds for PNWP from June 7, 2001 until June 18, 2001, when he learned for the first time that PNWP needed bid bonds rather than contractor bonds.
Even assuming Mid-Century's version of these events is correct does not result in a viable argument that Whitaker was at some point acting in a capacity other than as an agent of Mid-Century. Every action identified by Mid-Century taken by Whitaker falls within the broad language of the Agent Relationship Agreement between Mid-Century and Whitaker which encompasses acts of soliciting, offering, selling or servicing Mid-Century's products and services. Even if Whitaker's actions can, to some degree, be characterized as self-serving, it is also beyond dispute that the actions were taken in a botched effort to obtain bonds for PNWP with Mid-Century and to assure that PNWP did not lose the opportunity to be awarded the painting contracts because it did not have a bid bond in place. There is simply no evidence to support the inference that Whitaker's dealings with Mr. and Mrs. Strahm between May and July 2001 involved anything other than Whitaker attempting to obtain bonds with Mid-Century for PNWP. The fact that Mid-Century may have some viable defense that it (through its agent, Whitaker) was not at fault for not obtaining the bonds because it (through its agent, Whitaker) was misled into thinking that PNWP needed contractor bonds rather than bid bonds, or that Whitaker falsely told PPS that the bonds were in submission and were forthcoming, has no bearing on the existence of the agency. There is a "basic distinction between an agent's authority to act [and] an agent's responsibility to produce certain consequences. If an agent is authorized to perform a certain act on behalf of his principal, the principal cannot escape liability that arises from that act because the principal does not like the consequences." Hiransomboom v. Unigard Mut. Ins. Co., 46 Or. App. 493, 499, 612 P.2d 306, 309 (1980). In this case, Mid-Century cannot escape liability for Whitaker's actions simply because it does not like the consequences of those actions, namely potential liability for the claims asserted by PNWP.
In short, nothing in the record indicates that Whitaker was acting outside the scope of his authority as an agent for Mid-Century. Thus, PNWP is entitled to summary judgment that Whitaker was PNWP's agent.
ORDER
For the reasons stated above, plaintiff Pacific Northwest Painting Company's Motion for Partial Summary Judgment (docket #11) is GRANTED and the allegation of paragraph 2 of the First Amended Complaint is deemed established for all purposes.