¶¶ 56-67. Defendants Fink and Cummings contend, however, that these
fraud claims are not timely. See Fink Mem. at Ex. A; Cummings Mem. at 7.
"While a statute-of-limitations defense may be raised in a motion to
dismiss under Fed.R.Civ.P. 12(b)(6), such a motion should not be granted
unless it appears beyond doubt that the plaintiff can prove no set of
facts in support of his claim that would entitle him to relief."
Abdul-Alim Amin v. Universal Life Ins. Co., 706 F.2d 638, 640 (5th Cir.
1983) (citation omitted) (cited by Ortiz v. Cornetta, 867 F.2d 146, 148
(2d Cir. 1989)). Thus, if a factual question exists, a court should deny
the motion to dismiss based on statute of limitations grounds.
Additionally, it is well-settled that state statutes of limitations
govern state law claims in federal diversity cases. See Morse v. Elmira
Country Club, 752 F.2d 35, 37 (2d Cir. 1984) (citing Guaranty Trust Co.
v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945)). State law
also determines when: a diversity action commences for the purpose of
tolling a state statute of limitations. See Walker v. Armco Steel Corp.,
446 U.S. 740, 750-52, 100 S.Ct. 1978, 64 L.Ed.2d 659 (1980).
1. Statute of Limitations for Breach of Fiduciary Duty
New York law does not provide a specific limitations period for breach
of fiduciary duty claims. "A claim for breach of fiduciary duty is
governed by the underlying concomitant claim. . . ." Vasile v. Dean
Witter Reynolds Inc., 20 F. Supp.2d 465, 485 (E.D.N.Y. 1998). A court
should look to the "reality and essence of the action." In re Argo
Communications Corp., 134 B.R. 776, 787 (S.D.N.Y. 1991). Here, the
underlying claim upon which ORIC bases it allegations for breach of
fiduciary duty is fraud.
ORIC contends that Defendant Fink, as ORIC's agent with respect to the
custody and issuance of the bonds, breached the fiduciary duty he owed to
ORIC by: (1) failing to obtain sufficient collateral before issuing
ORIC's bonds, contrary to ORIC's guidelines; (2) failing to disclose that
Hansa neither owned the imported steel nor had sufficient interest in the
imports to act as importer of record; (3) failing to inform ORIC that
Hansa neither posted nor intended to post adequate collateral to pay any
assessed duties; (4) negotiating and then failing to disclose the details
of the Hansa/Duferco contract; and (5) failing to disclose that Hansa had
no financial ability to reimburse ORIC for any assessed duties that ORIC
might pay under the bonds. See Am.Compl. at ¶ 59. It appears as
though the gravamen of the claim is constructive fraud. ORIC alleges no
intent to deceive, and instead sets forth what seems to be a
straightforward constructive fraud claim — that Fink breached his
fiduciary duty when he failed to secure the bonds and when he did not
disclose certain information to ORIC. It is however, possible that ORIC
could establish a claim for breach of fiduciary duty that lies in actual
fraud. "Where there is a fiduciary relationship . . . the mere failure to
disclose facts which one is required to disclose may constitute actual
fraud, provided the fiduciary possesses the requisite intent to deceive."
Whitney Holdings, Ltd. v. Givotovsky, 988 F. Supp. 732, 748 (S.D.N Y
1997). Accordingly, this Court will analyze the statute of limitations
issue under both a constructive fraud and an actual fraud theory.
New York's statute of limitations for constructive fraud is six years,
calculated from the time of the commission of the alleged fraud. See
N.Y.Civ.Prac.L. & R. ("CPLR") § 213(1) (McKinney 1990); see also Orr
v. Kinderhill Corp., 991 F.2d 31, 35 (2d Cir. 1993); Wall Street Assocs.
v. Brodsky, 684 N.Y.S.2d 244, 248 (N.Y.A.D.1st Dep't 1999). The alleged
fraud at issue here occurred in approximately 1983, when Fink began
posting ORIC's bonds without adequate collateral and when Hansa and
Duferco USA entered into their contract. See Am.Compl. at ¶¶ 27, 34.
It was at that point that as
an agent and fiduciary of ORIC, Fink did not comply with ORIC's
underwriting guidelines and did not disclose information that he
possessed regarding (1) his failure to collateralize the bonds, (2) the
increased risk that ORIC may have to make payments to Customs on assessed
duties, and (3) the increased risk that Hansa may not reimburse ORIC for
any payments made. Therefore, a six-year statute of limitations bars the
claim based on a constructive fraud theory if not commenced before some
time in 1989. Here, because ORIC did not file until January 1992, a
breach of fiduciary duty claim based upon constructive fraud is time
For a claim of breach of fiduciary duty that lies in actual fraud, a
party must commence an action within either six years of the commission of
the fraud or two years from the time that the party discovered or should
have discovered the fraud with reasonable, diligence,*fn12 whichever is
longer. See CPLR §§ 203(g), 213(8); see also Asbeka Indus. v.
Travelers Indemnity Co., 831 F. Supp. 74, 80 (E.D.N.Y. 1993); Brodsky,
684 N.Y.S.2d at 248; Jefferson v. Flax, 241 A.D.2d 482, 482,
661 N.Y.S.2d 524 (2d Dep't 1997); Hoffman v. Cannone, 206 A.D.2d 740,
740-41, 614 N.Y.S.2d 799 (3d Dep't 1994); Arrathoon v. East New York
Savings Bank, 169 A.D.2d 804, 805, 565 N.Y.S.2d 172 (2d Dep't 1991).
While on the face of CPLR § 213(8) it seems as though New York's
statute of limitations for actual fraud is six years from the time the
party knew or should have known of the fraud with reasonable diligence,
that was not the intention of the New York legislature. See Joseph M.
McLaughlin, Practice Commentaries, C213:8, in McKinney's Consolidated
Laws of New York Annotated, Book 7B (West 1990). CPLR § 213(8) must
be read in conjunction with § 208(g), which provides:
where the time within which an action must be
commenced is computed from the time when facts were
discovered or from the time when facts could with
reasonable diligence have been discovered, or from
either of such times, the action must be commenced
within two years of the actual or imputed discovery or
within the period otherwise provided, computed from
the time the cause of action accrued, whichever is
CPLR § 203(g). Thus, while the "period otherwise provided" by the
CPLR for actual fraud, six years, must be calculated from the time of
accrual of the fraud, a party may receive a longer period of time to
begin an action if two years after the party discovered or should have
discovered the fraud with reasonable diligence is greater than the
original six-year statute of limitations.
As indicated, the alleged fraud here took place in approximately 1983.
The action, therefore, should have commenced by 1989. Under New York law
however, the discovery rule would afford ORIC two years from the time
ORIC discovered the fraud or should have discovered the fraud with some
Here, ORIC should have known of the fraud, at the latest, by 1989. In
February 1988, the United States Department of Commerce began assessing
Customs duties. See Am.Compl. at ¶ 41. While Customs may have billed
Hansa almost immediately for Hansa's default in 1988, it is possible that
Customs billed Hansa, waited for payment, and only then billed ORIC.
Thus, it is possible that ORIC was unaware of Hansa's default, and
thereby Fink's breach of fiduciary duty, until 1989. This, in turn, would
permit ORIC to file suit by 1991. Nevertheless, because ORIC first brought
suit in January 1992, ORIC's breach of fiduciary duty claim is still
barred even if the underlying bases is actual fraud.
To support that it filed suit within the statute of limitations, ORIC
maintains that it first learned of the contract in 1992. See id. at
¶ 33. Even if this allegation is true, it does hot counteract that
ORIC should have discovered the fraud by 1989. In 1989, there was ample
evidence available to ORIC to indicate to them that they had been
defrauded. The contract is merely evidence of that already existing
fraud, not the actual fraud itself.
2. Statute of Limitations for Intentional Misrepresentation
Intentional misrepresentation claims are governed by the six-year
statute of limitations for actual frauds. See Asbeka, 831 F. Supp. at
80. As noted a party must commence an action for actual fraud within
either six years of the commission of the fraud or two years from the
time that the party discovered or should have discovered the fraud with
reasonable diligence, whichever is longer. See CPLR §§ 203(g) 213(8);
see also Asbeka, 831 F. Supp. at 80; Brodsky, 684 N.Y.S.2d at 248; Flax
241 A.D, 2d at 482, 661 N.Y.S.2d 524; Cannone, 206 A.D.2d at 740-41,
614 N.Y.S.2d 799; Arrathoon, 169 A.D.2d at 805, 565 N.Y.S.2d 172.
ORIC alleges that by posting the bonds that listed Hansa as the
importer of record, the Hansa Defendants represented to ORIC that Hansa
intended to pay and was capable of paying any assessed duties. See
Am.Compl. at ¶ 63. Plaintiff also states that Defendant Cummings
specifically told ORIC that Hansa and its clients had ample funds to pay
for any Custom's duties. See id. at ¶ 64. ORIC maintains that both
these representations were false and that the Hansa Defendants knowingly
made these representations with an intent to defraud ORIC See id. at
These alleged intentional misrepresentations occurred in approximately
1983, when Fink, Hansa's alleged co-founder, began posting ORIC bonds,
listing Hansa as importer of record. By that point, the Hansa Defendants
allegedly knew (1) that Hansa lacked sufficient resources to pay any
assessed duties and that it had no intention of paying anyway, and (2)
that Hansa had already expressly renounced any right to seek assistance
to pay for or reimbursement for payment of any assessed duties from
Duferco USA pursuant to the Hansa/Duferco contract.
Under a six-year statute of limitations, computed from the commission
of the fraudulent misrepresentation, ORIC had to have brought suit by
1989. Because the latest that ORIC knew or should have known of these
alleged misrepresentations is 1989, however, the discovery rule affords
ORIC two more years, until 1991, to bring the claim. Here, ORIC did not
file its original complaint until January 1992, and therefore, its claim
for intentional misrepresentation is time barred under either the
six-year statute of limitations or the discovery rule.
In ORIC's claims for reimbursement and indemnity, ORIC seeks recovery
not only from Hansa but also from Duferco USA as Hansa's principal. See
id. at ¶¶ 37, 48, 50, 54-55. ORIC asserts that Duferco USA acted as
Hansa's undisclosed principal with regard to the posting of ORIC's
bonds, "exercis[ing] complete control over the importation process."
Duferco Mem. at 7. Duferco USA maintains, however, that ORIC cannot
articulate an agency theory based on actual authority that would support
ORIC's allegations. See id. at 15-23. Duferco USA emphatically states
the Amended complaint is devoid of a single allegation
that Duferco expressly granted any authority to, or
exercised any control over, defendant Hansa . . .
which would have empowered Hansa . . . to act as
Duferco's agent with respect to
the posting of the customs surety bonds that are the
subject of this action.
Duferco Mem. at 2.
"Agency is the fiduciary relationship which results from the
manifestation of consent by one person to another that the other shall
act on his behalf and subject to his control, and consent by the other so
to act." Restatement (Second) of Agency § 1(1) (1958); In re Shulman
Transp. Enters., 744 F.2d 293, 295 (2d.Cir. 1984). Generally, parties
establish an agency relationship through "written or spoken words or
other conduct of the principal which, reasonably interpreted, causes the
agent to believe that the principal desires him so to act on the
principal's account." Nationwide Life Ins. Co. v. Hearst/ABC-Viacom
Entertainment Servs., 93 Civ. 2680, 1996 WL 263008, at *7 (S.D.N.Y. May
17, 1996) (quoting Restatement (Second) of Agency § 26 (1958)). If
two parties effectuate an agency relationship between themselves, the
agent's knowledge is imputed to the principal and the principal becomes
responsible for the agent's acts within the scope of the bestowed
authority. See Citibank, N.A. v. Nyland (CF8) Ltd., 878 F.2d 620, 623 (2d
Cir. 1989) (citation omitted); Marine Midland Bank v. John E. Russo
Produce Co., 50 N.Y.2d 31, 43, 427 N.Y.S.2d 961, 968, 405 N.E.2d 205
(1980); City of New York v. Lead Indus. Assoc., 190 A.D.2d 173, 178,
597 N.Y.S.2d 698, 700 (1st Dep't 1993).
Furthermore, a principal can be disclosed or undisclosed. An
undisclosed principal is a principal whose existence and identity is not
revealed to a third party that is transacting business with the
undisclosed principal's agent. See Cohen v. Standard Bank Inv. Corp.
(Jersey) Ltd., 97 Civ. 3802, 1998 WL 782024, at *6 (S.D.N.Y. Nov. 6,
1998) (citing 2A N Y Jurisprudence 2d, Agency and Independent Contractors
§ 348 (1998)). It is settled doctrine that an agent's actions within
his prescribed authority binds an undisclosed principal. See Restatement
(Second) of Agency § 186 (1958). Where a third party has notice that
an agent is or may be acting for a principal but does not know the
identity of the principal, the principal is "partially disclosed." See
Restatement (Second) of Agency § 4 (1958). A partially disclosed
principal is also responsible for the actions of his agent taken within
the agent's authority. See Restatement (Second) of Agency §§ 147, 149
ORIC alleges that Duferco USA was Hansa's undisclosed principal. See
Am. Compl. at ¶ 37. ORIC, however, also contends that Defendant
Cummings represented that Hansa's unnamed clients had adequate funds to
provide for any attached duties. See id. at ¶ 64. Duferco USA,
therefore, may have been Hansa's partially disclosed principal.
New York courts have recognized that the question of the existence and
scope of an agency relationship is a factual issue that a court cannot
properly adjudicate on a motion to dismiss. See Heredia v. United States,
887 F. Supp. 77, 80 (S.D.N.Y. 1995); Maurillo v. Park Slope U-Haul,
194 A.D.2d 142, 147, 606 N.Y.S.2d 243, 247 (2d Dep't 1993); Fogel v.
Hertz Int'l, Ltd., 141 A.D.2d 375, 376, 529 N.Y.S.2d 484, 485 (1st Dep't
1988). Under New York law, an agent's authority may be actual, implied,
or apparent. See Graffman v. Delecea, 96 Civ. 7270, 1997 WL 620833, at *3
(S.D.N.Y. Oct. 8 1997); 99 Commercial Street, Inc. v. Goldberg,
811 F. Supp. 900, 906 (S.D.N.Y. 1993).
Here, ORIC claims that Hansa acted as Duferco USA's agent pursuant to
actual authority. In its memorandum of law submitted to Magistrate Judge
Bernikow, ORIC stated that it was "not relying on any theory of apparent
authority." See Duferco Mem. at Ex. A. (citing Plaintiff's Mem. of Law in
Opp'n to Motion by Duferco Defendants for Reconsideration or Reargument of
Their Prior Motion to Dismiss Am.Compl.). Additionally, in Magistrate
Judge Bernikow's November 2, 1998 order addressing the Duferco
motion for reconsideration of portions of the 9/23/98 Report, Magistrate
Judge Bernikow stated that although he did "mention apparent authority
while discussing agency relationships in [his 9/23/98 Report, he] in no
way relied on apparent authority." See Order of November 2, 1998 at 2-3.
This Court, however, will analyze ORIC's allegations under all three
theories of agency.
1. Actual Authority
Actual authority "is created by direct manifestations from the
principal to the agent, and the extent of the agent's actual authority is
interpreted in light of all circumstances attending these
manifestations, including the customs of business, the subject matter,
any formal agreement between the parties, and the facts of which both
parties are aware." Peltz v. SHB Commodities, Inc., 115 F.3d 1082, 1088
(2d Cir. 1997) (citation omitted); see also 2A N Y Jurisprudence 2d,
Agency and Independent Contractors § 81 (1998); In re Artha
Management, Inc., 91 F.3d 326, 329 (2d Cir. 1996) (stating that actual
authority may be inferred from words or conduct which the principal has
reason to know indicates to the agent that he is to do the act)
(citations and quotations omitted). Interpreting the facts in a manner
most favorable to ORIC, ORIC may be able to support a claim of actual
authority against Duferco USA. It is standard for a commercial importer,
such as Duferco USA, to employ the assistance of a customhouse broker for
the purpose of importing goods on its behalf. See E.C. McAfee v. United
States, 650 F. Supp. 1026, 1028 (Ct. Int'l Trade 1986), aff'd, 832 F.2d 152
(Fed.Cir. 1987); I.C. Herman & Co. v. Taub, Hummel & Schnall, Inc.,
497 F.2d 1301, 1304 n. 3 (2d Cir.) (noting that importing requires the
special services of a customhouse broker); cert. denied, 419 U.S. 885, 95
S.Ct. 153, 42 L.Ed.2d 125 (1974). Moreover, an individual's "character as
a customhouse broker implies that he is acting for another." McAfee, 650
F. Supp. at 1028.
Here, Duferco USA authorized Hansa as importer of record and Fink as
customhouse broker to serve as its agents for the arrival and delivery of
Brazilian steel into the United States. See Am.Compl. at ¶¶ 13,
27-31. "The broker prepares the entry and assembles all the supporting
documents, files the entry package, and follows the transaction through
its intermediate stages, which may include the filing of additional
documents or bonds, to the release of the merchandise, final liquidation
and payment of duties." McAfee, 650 F. Supp. at 1028. Thus, because
posting security is usually necessary when a party imports goods, Duferco
USA knew that Hansa would post Customs surety bonds on its behalf.
Furthermore, the Hansa/Duferco contract recognizes that Hansa would
post bonds in connection with the steel that Hansa was importing for
Duferco USA. The Hansa/Duferco contract, which altered the already
existing business relationship between Hansa and Duferco USA, notes that
when acting as importer for Duferco USA in the past, Hansa had "post[ed]
the required bonds." See Am.Compl. at Ex. C. More specifically, with
regard to the goods presently at issue, the Hansa/Duferco contract states
that Hansa, "as importer of record, will post any security required."
Am.Compl. at Ex. C. at ¶ 1.
It is definitely a legitimate argument, therefore, that Hansa had
actual authority to post bonds for Duferco USA based on direct
manifestations from Duferco USA to Hansa. Duefrco USA argues that even if
Hansa was Duferco USA's agent for the arrival and delivery of the steel,
Duferco USA did not authorize Hansa to post bonds. See In re Shulman, 744
F.2d at 295 (reasoning that acting as an agent for one purpose' does not
provide the agent with authority to also act in other capacities). It
appears, however, that responsibility for arrival and delivery of goods
encompasses the posting of surety bonds. Considering the custom of the
importing business of posting bonds, the past relationship
between Hansa and Duefrco USA, and the present Hansa/Duferco contract
alluding to Hansa's posting of bonds on Duferco USA's behalf, ORIC may be
able to establish a claim of agency on a theory of actual authority
against Duferco USA.
Duferco USA contends that several arguments belie any allegation of
actual authority. First, Duferco USA asserts that the Hansa/Duferco
contract negates any claim of actual authority that ORIC may assert. See
Duferco Mem. Duferco USA concedes that its prime motivation for entering
the contract was to avoid payment for any Customs duties. Despite that
the contract contains language that attempts to protect Duferco USA from
any liability, the contract also includes language indicating that Hansa
will post bonds for Duferco USA. Merely because the contract attempts to
limit Duferco USA's liability for imposed duties does not mean that the
contract also restricts Hansa's power to post bonds in connection with
the imported steel. But see Sixth Avenue West Assocs. v. Local 32B-32J,
Serv. Employees Int'l, 95 Civ. 5123, 1995 U.S.Dist. Lexis 10382, at *11,
1995 WL 442157, at *5 (S.D.N.Y. 1995) (holding that actual authority did
not exist because contract specifically limited power of agent); Property
Advisory Group, Inc. v. Bevona, 718 F. Supp. 209, 211 (S.D.N Y 1989)
(same). Thus, while the Hansa/Duferco contract may ultimately be of
import with respect to Duferco USA's insulation from liability on the
assessed duties, affording Duferco USA the benefit of its bargain, the
contract does not bar ORIC from asserting a valid agency claim.
Second, Duferco USA argues that as importer, Hansa was primarily
responsible for the payment of all imposed duties. See Duferco Mem. at
18-19. Duferco USA cites 19 C.F.R. § 141.1, which states that "[t]he
liability for duties, both regular and additional, attaching on
importation, constitutes a personal debt due from the importer to the
United States." Although Hansa did act as importer here, Hansa
technically was "importer of record" acting on behalf of the actual
importer, Duferco USA. The statute does pot refer to the "importer of
record," but rather to the "importer." Further, Duferco USA cites
19 U.S.C. § 1483(1) in support of the contention that the importer
[of record is considered the owner of the imported goods for the purposes
of attached duties. See Duferco Mem. at 18.*fn13 Congress, however,
repealed 19 U.S.C. § 1483(1) on January 12, 1983.
Third, citing 19 U.S.C. § 1485(d), Duferco USA suggests that the
only basis upon which it would assume responsibility for the imposed
duties would be if Hansa had filed an owner's declaration and superseding
bond: 19 U.S.C. § 1485(d) provides:
Liability of importer or record for increased duties.
An importer of record shall not be liable for any
additional or increased duties if (1) he declares at
the time of entry that he is not the actual owner of
the merchandise, (2) he furnishes the name and address
of such owner, and (3) within ninety days from the
date of entry he produces a declaration of such owner
conditioned that he will pay all additional and
increased duties, under such regulations as the
Secretary of the Treasury may prescribe.
19 U.S.C. § 1485(d). Interpreting the statute to mean that the
importer of record is exclusively liable for all attached duties unless
the actual owner, through declaration and bond, assumes responsibility is
a misread of the statute. Nowhere does the statute suggest that absent
the filing of a declaration and superseding bond is the actual owner free
from liability on Customs duties. Section 1485(d) only addresses how the
importer of record may insulate himself from liability. See William G.
Young & Co. v. Dyer, 112 F. Supp.
1, 2, n. 1 (S.D.N.Y. 1953) (recognizing only that an importer of record
may avoid liability by filing an owner's declaration); United States v.
Daniel F. Young, Inc., 46 F. Supp. 373, 374-75 (S.D.N.Y. 1942) (same).
Thus, because Hansa did not file a declaration or bond within ninety'
days from the date of entry of the steel, Hansa remained liable for
assessed duties. Such a failure to file a declaration and bond did not,
however, also absolve Duferco USA from any obligation for payment of the
imposed duties. More significantly, § 1485(d) addresses who may be
liable to the government for Customs duties. Here, this Court is
concerned with Duferco USA's liability to ORIC, not the government, for
posted bonds, not assessed duties. Accordingly, despite the arguments that
Duferco USA sets forth, a liberal construction of the facts ORIC alleges
in the amended complaint reveals evidence that Duferco USA may have
conferred actual authority upon Hansa to act on its behalf.
2. Implied Authority
Even if ORIC ultimately fails to establish a claim of agency pursuant
to actual authority, it may be able to support a claim under a theory of
implied authority. "Implied authority may be viewed as `actual authority
given implicitly by a principal to his agent' or as a kind of authority
arising solely from the designation by the principal of a `kind of agent
who ordinarily possesses certain powers.'" Marfia v. T.C. Ziraat
Bankasi, New York Branch, 100 F.3d 243, 251 (2d Cir. 1996) (citation
omitted); accord Graffman, 1997 WL 620833, at *4 The New York Court of
Appeals stated that "[a]n agent enjoys implied authority to enter into a
transaction when verbal or other acts by a principal reasonably give the
appearance of authority to the agent." Greene v. Hellman, 51 N.Y.2d 197,
204, 433 N.Y.S.2d 75, 80, 412 N.E.2d 1301 (1980). Further, "[r]eliance on
implied . . . authority is acceptable so long as it is reasonable from
the circumstances surrounding the transaction." Id. (citation omitted);
accord Graffman, 1997 WL 620833, at *4.
Here, by virtue of certain excerpts in the Hansa/Duferco contract, it
is certainly arguable that Duferco USA implicitly gave Hansa the
authority to post bonds on Duferco USA's behalf. Stating in the contract
that Hansa, "as importer of record, will post any security required," can
be understood as an implicit grant of authority, if not express.
Am.Compl. at Ex. C. at ¶ 1. Additionally, Duferco USA effectively
designated Defendant Fink, a customhouse broker possessing "certain
powers", including the requisite skill and experience to enter goods, to
import the steel. See McAfee, 650 F. Supp. at 1028; Taub, 497 F.2d at
1302 n. 3. Duferco USA specifically entered into a contract with Hansa.
Defendant Fink, however, as alleged organizer, corporate officer, and
owner of Hansa, controlled Hansa. See Am.Compl. at ¶ 13. Finally,
because it is traditional to post surety bonds when importing goods into
the United States, it would be reasonable for Hansa to assume that
Duferco USA implicitly appointed Hansa as its agent for the purpose of
3. Apparent Authority
ORIC may also be able to set forth a competent claim of agency based
upon apparent authority.
Apparent authority is based on the principle of
estoppel. It arises when a principal places an agent
in a position where it appears that the agent has
certain powers which he may or may not possess. If a
third person holds the reasonable belief that the
agent was acting within the scope of his authority and
changes his position in reliance on the agent's act,
the principal is estopped to deny that the agent's act
was not authorized.
Marfia, 100 F.3d at 251 (quoting Masuda v. Kawasaki Dockyard Co.,
328 F.2d 662, 665 (2d Cir. 1964). The New York Court of Appeals held:
Essential to the creation of apparent authority are
words or conduct of the principal, communicated to a
third party, that give rise to the appearance and
belief that the agent possesses authority to enter
into a transaction. The agent cannot by his own acts
imbue himself with apparent authority.
Hallock v. State, 64 N.Y.2d 224, 231, 485 N.Y.S.2d 510, 513 (1984).
Therefore, contact between the principal and the third party is a
necessary element of any theory of apparent authority. In fact, arguing
that any alleged representation from Defendant Cummings to ORIC regarding
unnamed clients is irrelevant, Duferco USA mentioned in its memorandum to
this Court that a theory of apparent authority "can only be based on the
acts of the principal, not the agent." Duferco Mem. at 9 (citation
omitted). Duferco USA implicitly suggested that because Duferco USA was
an alleged undisclosed principal and had no contact with ORIC, any claim
of apparent authority must fail. Nevertheless,
[a]n undisclosed principal may, in certain
circumstances, create apparent authority in his agent
even without any contact between the principal and the
third party. Where the principal has voluntarily
placed the agent in such a situation that a person of
ordinary prudence conversant with business usages and
the nature of the particular business may be justified
in assuming that such agent has authority to perform a
particular act there is apparent authority.
Graffman, 1997 WL 620833, at *5. Thus, because it is conceivable that
ORIC is familiar with the customs and trade usages of importing,
including that an importer may employ the services of another company and
a customhouse broker to import the goods and post surety bonds as a
necessary consequence thereof, ORIC may have been justified in assuming
that Hansa had authority to act on behalf of a principal. Accordingly, a
claim that Hansa acted pursuant to Duferco USA's apparent authority is