Does an E-Mail Ending in a Company’s Domain Name Cloak the Sender with Apparent Authority?

Is it reasonable to believe that a person who sends an e-mailfrom an address ending in a company’s domain name has authority to act on behalfof that company? The District Court ofMassachusetts recently held that, as a matter of law, it was not reasonable forthe recipient of an e-mail sent from a company’s domain name to believe thatthe sender had authority to act on behalf of the company.

Albert Arillotta, representing to be both from Interstate Demolitionand Recovery Express (“IDEC” and “Recovery”) sent an e-mail to Len Whitehead ofCSX, a business that sells out-of-service railcars and parts. The e-mail (typos and all) proposed thefollowing:

From: Albert Arillotta [albert@recoveryexpress.com]
Sent: Friday, August 22, 2003 4:57 PM
To: Whitehead, Len Jr.
Subject: purchase of out service railcars

lynn

this isalbert arillotta from interstate demolition and recovery express we areinterested in buying rail cars for scrap paying you a percentage of what theamm maket indicator is there are several locations i suggest to work at theexsisting location of the rail cars. we will send you a brocheure andfinancials per your request our addressis the following:
interstate demolition/recoveryexpress
180 canal street 5th floor boston mass 02114
phone number617-523-7740
fax number 617-367-3627
email address albert @recoveryexpress .com
thank you for your time

After some telephone conversations, Arillotta and Whitehead apparentlyproceeded with this proposed deal, and the railcars were delivered byCSX to a location specified by Arillotta. After delivery, CSX sent invoices toIDEC for the scrap railcars totaling $115,757.36. When IDEC and Recovery apparently refused topay, CSX brought an action alleging, among other things, breach of contract andunjust enrichment.

Whitehead alleged that, at all times during his dealings withArillotta, he believed that Arillotta was representing, and authorized to acton behalf of, Recovery and IDEC. Whitehead apparentlybased this belief on the e-mail’s domain name (recoveryexpress.com) and the representations of Arillotta to him both inthe e-mail and in subsequent telephone conversations. However, Recovery claimed that Arrillottanever worked for it, and was not authorized to represent or transact businesson behalf of Recovery or IDEC.

Apparently, Arillotta obtained a Recovery e-mail address by becominginvolved in the separate IDEC venture with Recovery’s president and treasurer.IDEC and Recovery shared offices and some resources, including e-mail services. Other than physical resources, there was noevidence that Recovery ever shared anything with IDEC -assets, funds, books ofbusiness, bank accounts, or insurance coverage.

The court noted that “CSX genuflects to the possibility thatArillotta was granted actual authority by Recovery,” but quickly dismissed anyargument that Arillotta had actual authority to act on behalf of Recovery. Thus, the issue was whether Arillotta hadapparent authority to act on behalf of Recovery. The court defined the issue narrowly as “whethera domain name, by itself, cloaks a purported agent with authority sufficient asmatter of law to be called ‘apparent.’”

The court wrote:

Because apparent authority depends on that knowledge held byWhitehead and CSX of Arillotta’s authority, which knowledge was derived fromactions of Recovery, the only relevant conduct by Recovery is that it issuedArillotta an e-mail address with its domain name. Such associations as Recoveryhaving the same offices, mailing address, phone number, or fax number are redherrings

The only act taken by Recovery known to Whitehead and CSX prior toentering the contract and upon which Whitehead could rely, was its issuance toArillotta of an e-mail address sporting Recovery’s domain name(@recoveryexpress.com). The Court holds that Whitehead and CSX were unreasonable,as matter of law, in their reliance solely on an e-mail domain name. Such amanifestation by Recovery cannot be sufficient to sustain a claim of apparentauthority. Granting an e-mail domain name, by itself, does not cloak therecipient with carte blanche authority to act on behalf the grantee. Were thisso, every subordinate employee with a company e-mail address-down to the nightwatchman-could bind a company to the same contracts as the president. This isnot the law.

Though e-mail communication may be relatively new to staid legalinstitutions, the results in analogous low-tech situations confirm thisconclusion. The Court could find no cases where, for example, giving someone abusiness card with the company name or logo, access to a company car, orcompany stationery, by themselves, created sufficient indicia of apparentauthority … An e-mail domain name issufficiently analogous to business cards, company vehicles, and letterhead forthese cases to be persuasive. Those indicia of apparent authority all conveysome degree of association between the purported principal and agent. Bythemselves, however, no reasonable person could conclude that apparentauthority was present. The same is true with e-mail domain names.

The court chided Whitehead for his “gullibility,” and stated that

CSX and Whitehead should have been more suspicious of an unsolicited,poorly written e-mail that arrived late one Friday afternoon. There are meansby which CSX could have protected itself (e.g., requiring a purchase order formfrom IDEC or Recovery). Beforedelivering goods worth over $115,000 to a stranger, one reasonably should beexpected to inquire as to the authority of that person to have made such adeal. Given the anonymity of the Internet, this case illustrates the potentialconsequences of operating-even in today’s fast-paced business world-as did CSX.

CSX Transp., Inc. v. Recovery Express, Inc. (D. Mass. Feb 1, 2006).

[Meredith R. Miller]