As for Moriarity's exercise of apparent authority, the court
concludes that the Pension Fund's acts of continually cashing all
fifteen settlement checks while failing to repudiate Moriarity's
unauthorized actions after receiving notice of at least seven
settlement agreements created the appearance of authority that
Steven Scott reasonably relied on. See Doxsee Sea Clam Co. v.
Brown, 13 F.3d 550, 553 (2d Cir. 1994) ("An agent has apparent
authority when conduct by the principal leads a third party to
believe that the agent has authorization to act on behalf of the
principal."). A principal is estopped from denying the apparent
authority of its agent when it remains "silent when he had the
opportunity of speaking and when he knew or ought to have known
that his silence would be relied upon, and that action would be
taken or omitted which his statement of truth would prevent. . .
." Scientific Holding Co. v. Plessey Inc., 510 F.2d 15, (2d
Cir. 1974) (citations omitted).
Thus, the Pension Fund's silence may be construed as an
affirmation of Moriarity's exercise of apparent authority. See
id. (estopping corporation from denying apparent authority of
corporate president where corporation failed to repudiate
president's unauthorized acts for several months); cf. In re
In-Store Advertising Sec. Litig., 840 F. Supp. 285, 289 (S.D.N Y
1993) (holding plaintiff in securities fraud case who had notice
of documents indicating the probability of fraud but who failed
to exercise reasonable diligence in discharging the duty to
inquire was imputed with constructive knowledge of the fraud and
summary judgment was entered for defendants). However, as noted
supra, Steven Scott's reliance on Moriarity's exercise of
apparent authority was no longer reasonable after June 1995, the
date in which it received notice of the actual scope of
Moriarity's agency as outlined in the Pension Fund's Trust
Thus, any reasonable fact-finder would conclude that Moriarity
was acting with apparent authority when he negotiated the first
thirteen settlement agreements that are binding on the Pension
C. Ratification and Accord and Satisfaction
Steven Scott relies on the alternative grounds of ratification
and accord and satisfaction to further support its motion for
summary judgment. It argues that regardless of Moriarity's
ability to bind the Pension Fund to the terms of the settlement
agreements, the Pension Fund has nevertheless ratified the
agreements by cashing all fifteen settlement checks and by
failing to inform Steven Scott that Moriarity was acting outside
the scope of his authority. Moreover, Steven Scott also alleges
that the agreements represent a valid accord and satisfaction
between the parties.
"Ratification of the acts of an agent only occurs where the
principal has full knowledge of all material facts and takes some
action to affirm the agent's actions." Prisco v. State of New
York, 804 F. Supp. 518, 523 (S.D.N.Y. 1992). Affirmance of the
intent to ratify may be inferred from "knowledge of the principal
coupled with a failure to timely repudiate, where the party
seeking a finding of ratification has in some way relied upon the
principal's silence. . . ." Monarch Ins. Co. of Ohio v. Ins.
Corp. of Ireland. Ltd., et al., 835 F.2d 32, 36 (2d Cir. 1987)
(citations omitted); see also Chemical Bank v. Affiliated FM
Ins. Co., 169 F.3d 121, 128 (2d Cir. 1999) (citing Restat. 2d
of Agency § 94 and other authorities for proposition that
affirmance may be inferred from failure to timely repudiate
actions of unauthorized agent).
Plaintiffs attempt to deny knowledge of the terms of the
settlement agreements by arguing that: (1) the agreements were
never presented to the Board of Trustees, the principal, (2) the
clerical workers who processed the settlement checks did not, and
were not authorized to, knowingly accept the agreements by
negotiating the checks in the normal course of ordinary
business, and (3) Moriarity's knowledge of the agreements cannot
be imputed to the Board because he was acting outside the scope
of his agency.
Despite the Pension Fund's assertions, knowledge of the
settlement agreements is inferred from the undisputed fact that
seven settlement agreements were found within plaintiffs'
possession. In fact, the Pension Fund admitted to having received
copies of all fifteen settlement agreements during oral argument:
COURT: Were [the settlement checks] accompanied by an
agreement when they came in?
MS. CLARK: They are accompanied by an agreement and
if you look at all the pages — I think the easiest
place when you look at this is the declaration of
Lourdes [Saltares], which is in our materials, and
she attached a complete package, including a check. .
COURT: The whole package? What do you mean by "the
MS. CLARK: It has about ten to fifteen pages of a
listing of employee names and amounts of money. It
then has the settlement agreement and at the back it
has a check.
COURT: As to each check there is such a document?
MS. CLARK: Each check came in such a package. . . .
See Tr. at 23.
As previously stated, the principal in this case is the Pension
Fund itself, and not the Board of Trustees. Therefore, the
Pension Fund was on constructive notice of all settlement
agreements within its possession. See In re In-Store Adver. Sec.
Litig., 840 F. Supp. at 289 (holding possession of documents
established constructive knowledge). Once the Pension Fund had
knowledge of the settlement agreements, its failure to repudiate
Moriarity's actions constituted ratification of the agreements.
See Monarch, 835 F.2d at 36; see also Chemical Bank, at 128.
Furthermore, the Pension Fund cannot deny knowledge of the
agreements simply because its clerical workers failed to read the
settlement agreements prior to cashing the checks. A three-page
settlement agreement accompanied each of the fifteen settlement
checks. The ratification clause was explicit. The Pension Fund
cannot now complain that it failed to read or inquire into the
meaning of this clause simply because its clerical workers did
not notice the settlement agreements or chose not to read the
agreements. See Doctor's Assoc. Inc. v. Stuart, 85 F.3d 975,
980 (2d Cir. 1996) (finding party's failure to read contract
provisions was unreasonable); see also In re Drexel Burnham
Lambert Group, Inc., 157 B.R. 539 (Bankr.S.D.N.Y. 1993) (holding
former investor had affirmative duty to read confirmation slips
and report any disputes or inaccuracies in action against
bankrupt securities broker who allegedly engaged in unauthorized
trading on investor's account). Perhaps the clerical workers
should have routed the settlement agreements and checks to a
supervisor or someone in a position to properly handle them.
Regardless, the Pension Fund acted unreasonably when it failed in
its duty to inquire into the authorization for the settlement
agreements after receiving knowledge of said agreements. Thus, a
reasonable fact finder could only conclude that the Pension Fund
had full knowledge of all material terms of the settlement
agreements and ratified the agreements by cashing the checks
according to provisions of the ratification clause that was
readily apparent in each settlement agreement.
Lastly, Steven Scott argues that it entered into a valid accord
and satisfaction with the Pension Fund. An accord and
satisfaction is reached when "a good faith dispute existed over
the existence of a debt or an amount owed, and that the debtor
and the creditor negotiated a contract of accord to settle the
claim." Lamb v. Emhart Corp., 47 F.3d 551, 561 (2d Cir. 1995).
The contract of accord
must be tendered in full satisfaction of the debt and payment
must be knowingly accepted. See id. at 561-62. However, the
court declines to address defendant's arguments regarding accord
and satisfaction since the court has found the Pension Fund is
bound by all fifteen agreements under alternative principles of
estoppel, apparent authority, and ratification.
Steven Scott's motion for summary judgment is granted because a
reasonable fact-finder could only conclude that: (1) the Pension
Fund is equitably estopped from denying that it is bound by the
first thirteen settlement agreements; (2) that Moriarity acted
with apparent authority when he negotiated those thirteen
agreements; and (3) the Pension Fund ratified all fifteen
settlement agreements by continually cashing the checks
accompanying the settlement agreements and by failing to inform
Steven Scott that Moriarity was not acting within the scope of
his authority. Therefore, summary judgment is granted to
defendant and plaintiffs' complaint is dismissed.