New Millennium Consulting, et al v. United Healthcare Service

Filing

OPINION FILED - THE COURT: James B. Loken, C. Arlen Beam and Catherine D. Perry AUTHORING JUDGE:Catherine D. Perry (PUBLISHED) [3955659] [11-2541]

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 11-2541
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New Millennium Consulting, Inc., a Minnesota corporation;
Pacific Management Systems, Inc., a California corporation, for themselves and on
behalf of all others similarly situated
lllllllllllllllllllll Plaintiffs - Appellants
v.
United HealthCare Services, Inc., a Minnesota corporation
lllllllllllllllllllll Defendant - Appellee
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Appeal from United States District Court
for the District of Minnesota - Minneapolis
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Submitted: May 17, 2012
Filed: September 21, 2012
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Before LOKEN and BEAM, Circuit Judges, and PERRY,1 District Judge.
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PERRY, District Judge.

1

The Honorable Catherine D. Perry, Chief Judge, United States District Court
for the Eastern District of Missouri, sitting by designation.

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New Millennium Consulting, Inc. and Pacific Management Systems, Inc.
supply contingent labor in the information technology field. United HealthCare
Services, Inc. (UHS) hired Consolidated Hiring Information Management Efficiency
System (Chimes), a centralized vendor management company, to assist it with the
procurement and management of contingent workers. Chimes entered into supplier
contracts with New Millennium and Pacific Management, among others, to provide
contingent labor to UHS. Chimes went bankrupt in early 2008 after failing to pay its
suppliers. New Millennium and Pacific Management brought this putative class
action against UHS, alleging that UHS was liable to them and the other suppliers for
the unpaid bills as the principal of Chimes. The district court2 denied class
certification and granted summary judgment to UHS. New Millennium and Pacific
Management appeal these decisions. Because Chimes is not an agent of UHS, we
affirm.
I.
Chimes developed and managed a network of over 1,800 suppliers, which it
used to provide contingent labor to a number of customers, including UHS. Chimes
entered into standardized agreements for Centralized Vendor Management (CVM)
with UHS and its other customers. The CVM between UHS and Chimes is dated
January 1, 2007 and contains a disclaimer of agency provision:
The parties intend to create an independent contractor relationship and
nothing contained in this Agreement shall be construed to make either
Customer or Chimes partners, joint venturers, principals, agents, or
employees of the other; provided, however, that the foregoing shall not
be construed as preventing Chimes from performing any of its
obligations under this Agreement.

2

The Honorable Paul A. Magnuson, United States District Judge for the District
of Minnesota.
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The CVM also provides that “neither party shall have any right, power, or authority,
express or implied, to bind the other.” The payment provision states as follows:
Chimes will be solely responsible for all compensation or other
payments due to any Consultant or Subcontract Supplier recruited by
Chimes to provide consulting services to customer . . . provided
however, Chimes shall not be obligated to make any payment to any
Vendor unless and until Customer shall have made prior payment to
Chimes.
The CVM contemplated that Chimes would enter into a Subcontractor Supplier
Agreement (SSA) with each supplier of contingent labor. The customer, such as
UHS, was not a party to the SSA. Chimes entered into SSAs with approximately 250
suppliers, including New Millennium and Pacific Management, to provide contingent
labor to UHS. Several forms of SSAs are attached to the CVM. The SSAs state that
“the parties understand and acknowledge that UHS is not a party to this Agreement,
however, UHS is an intended third party beneficiary under this Agreement.” The
SSAs obligated Chimes to pay the suppliers “on a monthly schedule following receipt
by Chimes from Subcontract Supplier of its Consultants’ billing information . . . and
following full funds availability by Chimes of payment from UHS.”
Also attached to the CVM is a form titled “Participating Vendor Agreement”
(PVA), which was to be used with “vendors who do not execute a Subcontract
Supplier Agreement with Chimes.” The CVM states that, in those cases, “Chimes
will not establish a contractual relationship with these vendors except . . . Chimes
will, upon Customer’s request, perform as billing and paying agent for consulting
services provided by each participating vendor designated by customer.” Neither
New Millennium nor Pacific Management signed a PVA.3

3

None of the other putative class members signed a PVA, either.
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UHS made its regular monthly payment to Chimes for the November 2007
billing period, but Chimes declared bankruptcy before it paid its suppliers for
November. Chimes’ secured creditors seized Chimes’ assets, including the funds
paid by UHS for the November 2007 billing period. As a result of Chimes’ failure
to pay its suppliers, New Millennium was owed $34,258.60 for work performed at
UHS and Pacific was owed $26,352. In addition to New Millennium and Pacific
Management, there were over 200 other suppliers that never received their November
2007 payments from Chimes for work performed for UHS.
New Millennium and Pacific Management originally brought this putative class
action against UHS in Minnesota state court. UHS removed the case to federal court
under the Class Action Fairness Act, 28 U.S.C. § 1332(d). The putative class alleged
in the amended complaint consists of Chimes’ subcontractors who provided services
to UHS during the November 2007 billing period and were not paid. The district
court denied the motion for class certification following a hearing, finding that New
Millennium and Pacific Management had failed to demonstrate predominance as
required by Fed. R. Civ. P. 23(b)(3). The district court also denied their motion for
reconsideration on the same ground. Following the denial of class certification, the
parties stipulated to the dismissal of all counts of the amended complaint except for
the breach of contract-agency claim. UHS then moved for summary judgment on that
claim.
Applying Minnesota law,4 the district court granted UHS’s motion for summary
judgment. The district court found that Chimes was not the agent of UHS because
both parties expressly disclaimed any agency relationship under the terms of the
CVM. The district court also examined the relationship between UHS and Chimes
and determined that UHS did not exercise control over Chimes sufficient to create the
existence of an agency relationship. Finally, the district court held that even if
4

The parties agree that Minnesota law applies.
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Chimes were UHS’s agent, the breach of contract claim would still fail because § 149
of the Restatement (Second) of Agency (1958) excludes a principal’s liability for an
agent’s contract if “the principal is excluded as a party by the terms of the instrument
or by the agreement of the parties.”
II.
“We review the district court’s grant of summary judgment de novo, applying
the same standards as the district court and viewing the evidence in the light most
favorable to the nonmoving party.” Zike v. Advance Am., Cash Advance Ctrs. of
Mo., Inc., 646 F.3d 504, 509 (8th Cir. 2011) (quoting Travelers Prop. Cas. Co. of Am.
v. Gen. Cas. Ins. Co., 465 F.3d 900, 903 (8th Cir. 2006)). “The court shall grant
summary judgment if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ.
P. 56(a).
III.
“An agent can bind a principal through actual authority, either express or
implied, and through apparent authority.” Trustees of the Graphic Commc’ns Int’l
Union Upper Midwest Local 1M Health & Welfare Plan v. Bjorkedal, 516 F.3d 719,
727 (8th Cir. 2008) (applying Minnesota law). “Actual authority is that authority
given by the principal to the agent to act on its behalf, and it requires that the
principal manifest its consent to the agent’s ability to bind the principal.” Id. (citing
Restatement (Third) of Agency § 3.01 (2006)). “Actual authority must be traced to
the principal’s dealings with the agent; it cannot be inferred from the agent’s dealings
with third parties.” Bjorkedal, 516 F.3d at 727 (quoting Tullis v. Federated Mut. Ins.
Co., 570 N.W.2d 309, 313 (Minn. 1997)). “Implied authority is actual authority,
circumstantially proved, and . . . includes only such powers directly connected with

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and essential to carrying out the duties expressly delegated to the agent.” Tullis, 570
N.W.2d at 313 (citations omitted).
Although “the existence of an agency relationship is generally a question of
fact, summary judgment may be appropriate if the evidence is conclusive.”
Children’s Broadcasting Corp. v. Walt Disney Co., 245 F.3d 1008, 1021 (8th Cir.
2001) (applying Minnesota law). “Before a court will impose a legal obligation on
a person to act like an agent, the plaintiff must first introduce factual evidence that
he sought this arrangement and that the alleged agent consented to it.” Id. (quoting
PMH Props. v. Nichols, 263 N.W.2d 799, 803 (Minn. 1978)). “No one can become
the agent of another without the consent, either express or implied, of the principal.”
Children’s Broadcasting, 245 F.3d at 1021-22 (quoting Nerlund v. Schiavone, 84
N.W.2d 61, 65 (1957)). In Children’s Broadcasting, this Court affirmed the district
court’s determination that ABC Radio was not the agent of Children’s Broadcasting
as a matter of law because the parties expressly disclaimed a principal-agent
relationship in their contract. 245 F.3d at 1022. “This disclaimer binds Children’s
and precludes its claim for breach of fiduciary duties.” Id.
New Millennium and Pacific Management contend that Chimes had actual
authority to act as UHS’s agent under the terms of the CVM, which they insist
includes the PVA and the SSAs because forms of those contracts are attached as
exhibits to the CVM. Under Minnesota law, “instruments executed at the same time,
by the same parties, relating to the same transaction will be considered and construed
together, since they are, in the eyes of the law, one contract or instrument.” Farrell
v. Johnson, 442 N.W.2d 805, 806 (Minn. Ct. App. 1989) (citations omitted).
However, “[w]hether separate documents executed simultaneously should be treated
as a single contract is governed by the intent of the parties manifested at the time of
contracting and viewed in light of the surrounding circumstances.” Id. (citation
omitted). Here the attachments are not even signed by the same parties as the CVM,
and there is no evidence that the CVM was executed by UHS and Chimes at the same
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time that Chimes entered into SSAs with its suppliers. The district court properly
rejected this argument.5
The agency disclaimer in the CVM – “nothing contained in this agreement shall
be construed to make either UHS or Chimes partners, joint venturers, principals,
agents, or employees of the other . . . ” – is similar to the language of the disclaimer
in Children’s Broadcasting, which we found precluded an agency relationship as a
matter of law. See 245 F.3d at 1022. New Millennium and Pacific Management,
however, contend it has no effect on a claim brought by a third party, relying on
Board of Trade v. Hammond Elevator Co., 198 U.S. 424 (1905). That case, however,
is not analogous to this one, and, most importantly, was not based on Minnesota law.
In Hammond the Court held that service of process on a Delaware corporation was
proper on an agent in Illinois even though the agent and principal had an agreement
disclaiming agency and had “taken great pains” to “artfully disguise” their real
relationship. Id. at 439-440. The Court looked at the relationship of the principal and
agent and the relationship of the agent to the customers to reach its decision, and
considered such things as the fact that Hammond leased telegraph wires in its own
name and designated the agent’s office as its own office in the leases. The agents
were “compensated as if they were agents,” the customers knew they were buying
from Hammond and would be liable to Hammond if they owed money, and “the real
trading is done between the customer and the elevator company.” Id. at 441.
But Minnesota law focuses on the will of the principal in determining agency,
and Minnesota courts consider disclaimers even in cases involving third parties. In
Mikulay v. Home Indemn. Co., 449 N.W.2d 464, 467 (Minn. Ct. App. 1989), the
5

New Millennium and Pacific Management argued to the district court that
these documents constituted an “integrated CVM.” They say that they abandoned
that theory, but their arguments remain essentially the same: they continue to argue
that the blank form PVA changed the terms of the CVM. Abandoning the term
“integrated” does not rescue the argument.
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Minnesota Court of Appeals specifically relied on an agency disclaimer in an action
brought by a third party because the disclaimer showed that there was no consent by
the purported principal to establish an agency. See also Sipe v. Fleetwood Motor
Homes, 574 F. Supp. 2d 1019 (D. Minn. 2008); Cardiac Pacemakers, Inc. v. Aspen
Holding Co., 413 F. Supp. 2d 1016, 1025 (D. Minn. 2006). As in those cases, the
disclaimer here demonstrates UHS’s and Chimes’ refusal to consent to an agency
relationship. Without that consent, Chimes cannot be considered the agent of UHS
as a matter of law. See Jurek v. Thompson, 241 N.W.2d 788, 791(Minn. 1976)
(agency requires consent of principal and agent). Additionally, New Millennium and
Pacific Management have expressly stated that they are not raising any claim of
apparent authority – such a claim would fail, of course, because they acknowledged
in their own contracts that UHS was not a party to their agreements with Chimes.6
Unlike the Hammond case, UHS and Chimes never disguised anything about their
relationship, and the suppliers, including New Millennium and Pacific Management,
knew exactly who they were contracting with.
New Millennium and Pacific Management point to the “provided however”
clause of the agency disclaimer as evidence that UHS and Chimes agreed that Chimes
was UHS’s agent. The clause states: “provided, however, that the foregoing [agency
disclaimer] shall not be construed as preventing Chimes from performing any of its
obligations under this Agreement.” The district court concluded that the reasonable
6

The district court also held that, even if Chimes were the agent of UHS, the
breach of contract-agency claim would still fail as a matter of law. The court pointed
out that § 149 of the Restatement (Second) of Agency provides that a principal “is
subject to liability upon an authorized contract in writing . . . although it purports to
be the contract of the agent, unless the principal is excluded as a party by the terms
of the instrument of by the agreement of the parties.” The SSAs signed by New
Millennium and Pacific Management specifically excluded UHS as a party. The
district court did not err in its application of § 149 to these facts, but because we find
no agency, it is not necessary for us to determine whether the Minnesota courts have
adopted this provision of the Restatement.
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meaning of this clause is that “Chimes is not excused from its duties under the
parties’ agreement because it is not an agent.” We find no error in this interpretation
of the agreement, which properly gives effect to all terms of the agreement and is
consistent with the standard rules of contract construction. See Brookfield Trade
Center, Inc. v. County of Ramsey, 584 N.W.2d 390, 394 (Minn. 1998) (contract
language is to be given “plain and ordinary meaning,” construed in context, and
interpreted in “such a way as to give meaning to all of its provisions.”) (internal
citations omitted).
New Millennium and Pacific Management urge us to ignore the disclaimer and
look instead at the alleged control UHS exercised over Chimes. As evidence of
control, they point to various provisions in the CVM which permit UHS, for example,
to screen workers, assign them, and supervise their work. But Chimes ran its own
business and financial affairs, had numerous customers other than UHS, and Chimes
was the party who engaged, evaluated, assigned, and removed the suppliers in its
network. New Millennium and Pacific Management’s reliance on A. Gay Jenson
Farms Co. v. Cargill, Inc., 309 N.W.2d 285 (Minn. 1981), is misplaced. In Cargill,
the Supreme Court of Minnesota found that Warren Grain & Seed had actual
authority to act as the agent for Cargill in its dealings with grain farmers because
Cargill, Warren’s sole creditor, exerted de facto control over the grain elevator. Id.
at 290-91. Cargill directed Warren’s internal and financial affairs on a day-to-day
basis. Id. In support of its decision, the Minnesota Supreme Court relied upon the
Restatement (Second) of Agency § 14 O (1958), which provides that “a creditor who
assumes control of his debtor’s business may become liable as principal for the acts
of the debtor in connection with the business.” Id. at 291. Here, UHS was not
Chimes’ creditor and exerted no control over Chimes’ internal affairs.
In light of the express disclaimer of agency and the lack of any evidence that
UHS consented to Chimes acting as its agent, Chimes was not UHS’s agent under

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prevailing Minnesota law. Chimes’ suppliers have no basis for suing UHS for the
amounts Chimes owed them when it went bankrupt.
IV.
For these reasons, we affirm summary judgment in favor of UHS and do not
reach the issue of whether the district court properly denied class certification.
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