weekly case analysis week 5

Reference pg 414 chapter 15

Browne, N.K.K.B.A.B.M. N. (2017). The Legal Environment of Business: A Critical Thinking Approach. [VitalSource Bookshelf]. Retrieved from https://online.vitalsource.com/#/books/9781323829264/

Case 15-2 Penthouse International v. Barnes

United States Court of Appeals 792 F.2d 943 (9th Cir. 1986)

Priscilla Barnes was a hostess at a club in Hollywood, California, when she was approached by a freelance photographer (Dunas) who sold nude photographs to Penthouse magazine. Dunas was an independent contractor. He asked Barnes to pose nude. She agreed but did not want her actual name used. Dunas agreed to her terms, and Barnes signed a “Release, Authorization and Agreement Form” that gave Penthouse the right to “republish photographic pictures or portraits.” Dunas added the term AKA (also known as) on the contract to indicate that the photographs would not be published under her actual name, but under a pseudonym. Penthouse did so in 1976.

Later, Barnes became a well-known television broadcaster for a station in Los Angeles. When Penthouse informed her in 1983 that it wished to republish her nude photograph, she threatened to sue, claiming that Dunas had implied agency to write the term AKA and that Penthouse was thus bound by his actions and representations. Penthouse requested a declaratory judgment from the federal district court allowing it to republish a nude photo of the defendant. The district court found for Barnes and issued an injunction against Penthouse. Penthouse appealed.

Judge Boochever

Under California law, questions regarding the existence of agency are questions of fact that we review for clear error. California Civil Code Section 2316 defines actual authority as “such as a principal intentionally confers upon the agent, or intentionally, or by want of ordinary care, allows the agent to believe himself to possess.” At issue is whether Dunas contracted to act on behalf of Penthouse.

Penthouse instructed photographers “to get a signed model release and not to alter the release in any way, without our permission.” However, Penthouse carried Dunas’s name on its masthead, gave him blank Penthouse contracts, may have given him business cards, and had him present contracts to models. Thus, although the record conflicts as to whether Dunas was an actual agent of Penthouse, on review, we cannot find that the district court clearly erred in finding Dunas to be a Penthouse agent.

Having found that the district court did not err in characterizing Dunas as an agent, we next turn to whether Dunas was acting within the scope of his authority by modifying the contract. Barnes does not contend nor is there evidence that Dunas possessed express actual authority to modify the contract. Dunas, however, had implied actual authority. Implied actual authority requires that (1) Dunas believe that he was authorized to modify the contract based on Penthouse conduct known to him or (2) such a belief was reasonable.

Circumstantial evidence exists that Dunas placed “AKA” on other contracts with no objection from Penthouse. In June 1974, a year and a half before Barnes posed, contracts prepared by Dunas had “AKA” on them. Further, Penthouse internal memoranda reflect an understanding among Penthouse employees that “AKA” added to a contract meant that Penthouse was to associate a fictitious name with a woman’s photograph. The evidence thus indicates that Dunas reasonably believed that he was authorized to add “AKA” and modify the contract to require that only a fictitious name be used.*

* Penthouse International v. Barnes, United States Court of Appeals 792 F.2d 943 (9th Cir. 1986).

Affirmed in favor of Defendant, Barnes.

Critical Thinking About The Law

One of the primary purposes of a judge’s opinion is to explain the court’s reasoning in a particular case. A judge’s opinion is not arbitrary, in the sense that a judge must give due consideration to relevant facts and rules of law for any legal issue. From a judge’s opinion, we are, therefore, able to know not only a judge’s conclusion but also the reason the judge ruled for one party over another. These opinions provide the court’s rationale in a particular case, which may later be used as precedent for subsequent cases that contain similar fact patterns. In Case 15-2, the judge provided several reasons to support the conclusion. The next two questions relate to the judge’s reasoning in Case 15-2.

What reasons did the judge provide for ruling in favor of the defendant?

Clue: To ensure that you have found a reason, ask yourself whether what you have listed answers this question: “Why did the court rule for the defendant?”

What aspects of the court’s reasoning were particularly strong or weak? (Remember that just because reasons are given does not mean that these reasons are necessarily strong.)

Clue: Reverse the roles in this case and assume that you are the plaintiff’s lawyer. With which parts of the judge’s opinion would you still disagree based on the court’s reasoning? Would there be parts of the judge’s reasoning with which, even though you were the opposing party, you would agree?

Applying the law to the facts . .

Let’s say that Mandy and Adam would like to enter into an expressed agency or agency relationship. What document would these two need to facilitate such a relationship?

Agency through Ratification by Principal

Agency by ratification occurs when a person misrepresents himself or herself as an agent and the principal accepts (ratifies) the unauthorized act. If the principal accepts the results of the agent’s act, then the principal is bound, just as if he or she had authorized the individual to act as an agent. Two conditions are necessary for the ratification to be effective: (1) the principal must have full knowledge of the agent’s action and (2) the existence of the principal must be clear to the third party at the time of the agent’s unauthorized act. For example, Max Black tells his friend Mary Ann Jones, a realtor, that if she ever finds anyone who is ready, willing, and able to sell a certain kind of computer franchise store, he will buy it. Jones finds such a store, cannot reach Black, and has never been his agent, but she enters into the agreement with the franchisor anyway and signs the contract “Mary Ann Jones, agent for Max Black.” Jones is not Black’s agent. If Black, however, decides to honor the contract, he will have ratified an agency relationship, and Jones will most likely be due a commission.

agency by ratification

Agency relationship in which an unauthorized agent commits the principal to an agreement and the principal later accepts the unauthorized agreement, thus ratifying the agency relationship.

Agency By Estoppel or Apparent Authority

If a third person is led by a principal to believe that a certain individual is the principal’s agent, then there appears to be authority for the agent to act and the principal is estopped from denying that the individual is an agent. It is the writing, words, or acts, or some combination thereof, of the principal that create the agency by estoppel, or apparent authority, for the agent to act; the third party relies on the principal’s conduct. Apparent authority is illustrated in the case below.

estoppel

A legal bar to either alleging or denying a fact because of one’s previous words or actions to the contrary.

agency by estoppel (apparent authority)

An agency relationship in which the principal is estopped from denying that someone is the principal’s agent after leading a third party to believe that the person is an agent.