Cases: Company not bound where signing manager lacked authority

A company sales manager who signed and returned an agreement containing a forum selection clause did not have authority to do so, and his employer was not bound by it, according to a federal district court in Texas.

In the case, Mid-American entered into factoring agreements with United Container, under which United sold receivables allegedly owed by Alcoa. It sent a request to Alcoa to confirm that the invoices were valid by signing a a “receivables agreement,” which was signed and faxed back by Alcoa’s sales manager, Greene.  In the agreement was a forum selection clause specifying that all litigation be brought in state court in Dallas County, Texas.

Turns out that Greene and United were involved in a scam, and that the invoices were fraudulent. Mid-America sued in state court, and when Alcoa removed to federal court, Mid-America moved to remand, based on the forum selection clause.

Alcoa proffered evidence that Greene had no actual authority to enter into this kind of transaction. Mid-America relied on his apparent authority, but Judge Jane Boyle,applying Texas law, didn’t buy it, noting that hose who deal with agents do so “at their peril.”

Mid-American Capital Res. Group v. Alcoa Inc., 2005 U.S. Dist. LEXIS 5642 (N.D. Tex. April 1, 2005).