Howard et al v. Forest River, Inc. et al

Filing 103

MEMORANDUM ORDER ADOPTING REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE. The defendants' objections 91 are OVERRRULED. This Court therefore ORDERS that Defendants' Motions for Summary Judgment 44 and 45 are GRANTED IN PART AND DENIED IN PART. Signed by District Judge Ron Clark on 12/4/17. (ljw, )

** NOT FOR PRINTED PUBLICATION **
UNITED STATES DISTRICT OURT
EASTERN DISTRICT OF TEXAS
LUFKIN DIVISION
JOSEPH HOWARD
and DIANE HOWARD,

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§ Civil Action No. 9:15-CV-162
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Plaintiffs,
v.
FOREST RIVER, INC.,
PRIME TIME MANUFACTURING
DIVISION, and
MYERS RV CENTER, INC.,

Defendants.

MEMORANDUM ORDER ADOPTING REPORT AND
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Pursuant to 28 U.S.C. § 636, this matter was referred to United States Magistrate Judge
Keith F. Giblin for pretrial matters. On November 14, 2017, Judge Giblin entered his Report and
Recommendation (Dkt. # 83) recommending that the District Court grant in part and deny in part
Defendants’ motions for summary judgment.
Defendants filed objections to the Report and Recommendation (Dkt. # 91). Defendants
object to a number of Judge Giblin’s findings regarding choice of law and his application of agency
principles. More specifically, Defendants contend that Texas law should apply to the agency
determination and the magistrate judge erroneously applied New Mexico law. They further
contend that the evidence does not support the magistrate judge’s finding of a genuine issue of
material fact on the existence of an agency relationship between the manufacturer Defendant,
Forest River, and the retailer Defendant, Myers RV. Defendants argue that the magistrate judge

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erred in considering Myers RV’s conduct as the purported agent in making this determination, as
opposed to the conduct of Forest River, the purported principal.
The Court is unconvinced that the magistrate judge erred in his choice of law analysis or
that he should have applied New Mexico law to the causes of action themselves but not to the
agency principles as part of that analysis. Judge Giblin engaged in the choice-of-law analysis on
the causes of action which are the subject of Defendants’ objections – constructive fraud and
fraudulent inducement and concluded that New Mexico law applied See Report, at pp. 4-6.
Defendants’ argument suggests the magistrate judge erred in applying New Mexico law to the
issue of agency, which was within his analysis of the constructive fraud and fraudulent inducement
claims. See Objections; see also Report, at pp. 9-14. Defendants have not presented persuasive
authority for the proposition that New Mexico law should not apply to the agency analysis as well
as to the fraud-related causes of action.
Under either Texas or New Mexico law, there was sufficient evidence of an agency
relationship to raise an issue of material fact.
Under Texas law, which Defendants contend should be applied, the elements of liability
under the agency theory of actual authority are that the defendant (1) intentionally confers authority
upon the agent, (2) intentionally allows the agent to believe he possesses authority, or (3) by want
of due care allows the agent to believe he possesses authority. Protect Envtl. Svcs., Inc. v. Norco
Corp., 403 S.W. 3d 532, 539 (Tex. App. – El Paso 2013, pet. denied) (citing 2616 S. Loop LLC v.
Health Source Home Care, Inc., 201 S.W. 3d 349, 356 (Tex. App. – Houston [14th Dist.] 2006,
no pet.)); see also O’CONNOR’S TEXAS CAUSES OF ACTION (2017), at 1231. Actual authority may
be express or implied. Protect Envt’l, 403 S.W. 3d at 540. Under implied actual authority, an
agency relationship is created through the conduct of either of the parties or from the facts and

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circumstances surrounding the transaction in question. Id (citing Walker, 108 S.W.3d at 550). In
other words, something the principal does leads the agent to believe he has the authority to act on
behalf of the principal.
Apparent authority arises when a principal intentionally or negligently induces parties to
believe that a person is the principal’s agent although the principal has not conferred any authority
on that person. Protect, 403 S.W. 3d at 540–41; see also see also O’CONNOR’S TEXAS CAUSES OF
ACTION (2017), at 1239. The essential elements are (1) a reasonable belief in the agent’s authority;
(2) generated by some holding out or neglect of the principal; and (3) a justifiable reliance on the
authority. Protect, 403 S.W. 3d at 541. Under apparent authority, “a court may consider only the
conduct of the principal leading a third party to believe that the agent has authority.” Id. In other
words, no actual authority has been conferred or communicated by the principal to the agent, but
third parties are given the impression that the agent has authority and third parties may rely on that
impression.
There is no substantive difference in the agency principles under New Mexico law. 1

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New Mexico law provides that “[a]n agent is a person who, by agreement with another called the
principal, represents the principal in dealings with third persons or transacts some other business,
manages some affair[,] or does some service for the principal, with or without compensation.” Barron v.
Evangelical Lutheran Good Samaritan Soc., 2011-NMCA-094, ¶ 16, 150 N.M. 669, 265 P.3d 720, 725
(citing Tercero v. Roman Catholic Diocese, 2002–NMSC–018, ¶ 12, 132 N.M. 312, 48 P.3d 50)). “The
authority of an agent may be actual or apparent.” Tercero, 2002–NMSC–018, ¶ 12, 132 N.M. 312, 48
P.3d 50. “Actual authority is given to the agent by the principal in terms that are express, or in terms that
are implied from words or conduct of the principal to the agent or from the circumstances of the
relationship.” Barron, 2011-NCMA-094, 265 P.3d at 725 (citing Comstock v. Mitchell, 110 N.M. 131,
134, 793 P.2d 261, 264 (1990) (Ransom, J., specially concurring)). “Apparent authority arises from
manifestations by the principal to the third party and can be created by appointing a person to a position
that carries with it generally recognized duties.” Id (quoting Diversified Dev. & Inv., Inc. v. Heil, 119
N.M. 290, 296, 889 P.2d 1212, 1218 (1995)) (internal quotation marks and citation omitted). “[A]
principal . . . is responsible for the acts of the agent when the principal has clothed the agent with the
appearance of authority.” Id. (quoting Romero v. Mervyn's, 109 N.M. 249, 253, 784 P.2d 992, 996
(1989)).

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Defendants have failed to show that there is no genuine issue of material fact as to whether
Myers RV was acting as Forest River’s agent, either through implied actual authority or apparent
authority, when Forest River supplied the promotional material and Myers RV made alleged
representations to the Howards about Forest River’s warranty.

Defendants argue that the

magistrate judge erred in focusing on the actions of Myers RV as the purported agent rather than
the actions of Forest River, the purported principal. But Judge Giblin properly considered the
actions of Forest River. There is some summary judgment evidence that Forest River created a
promotional brochure concerning a two-year extended warranty. Simply because Judge Giblin
recognized evidence that Myers RV also held itself out as a purported agent to third-party buyers
does not preclude his determination that there is a triable issue regarding the agency relationship.
The court is not convinced that there is no genuine issue of material fact concerning agency.
Defendants argue that Judge Giblin “misconstrued well-settled law” and that his findings
will “instantaneously transform every dealer of every product into an agent of the manufacturer
and would represent and outlier and a sea change to over sixty years of well-established
jurisprudence.” See Objections, at pp. 5, 7. The Court disagrees with this characterization. A
judge’s role at the summary judgment stage is to consider whether there is an absence of a genuine
issue of material fact on the Plaintiffs’ (as non-movants) claims, drawing all justifiable inferences
in the Plaintiffs’ favor. See FED. R. CIV. P. 56(c), Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Judge Giblin correctly
determined that the summary judgment record created at least a justifiable inference that Myers
RV was acting as Forest River’s agent based upon principles of agency. It follows that the ultimate
determination on this factual issue, including whether there was implied actual authority, apparent

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authority, or no agency relationship at all, should be made by the jury. The Defendants’ objections
to this portion of Judge Giblin’s summary judgment analysis are, therefore, misplaced.
The Court has considered the objections and the magistrate judge’s report. Having
conducted a de novo review, the Court is of the opinion that the findings and conclusions of the
magistrate judge are correct. It is therefore ORDERED that the Report and Recommendation on
Motion for Summary Judgment (Doc. No. 83) is ADOPTED. The defendants’ objections (Doc.
No. 91) are OVERRRULED. This Court therefore ORDERS that Defendants’ Motions for
Summary Judgment (Doc. No. 44 and Doc. No. 45) are GRANTED IN PART AND DENIED
IN PART.
The Court grants summary judgment in favor of defendant Forest River, Inc., on the
plaintiffs’ causes of action for breach of contract, breach of implied warranty of fitness for a
particular purpose, negligence and gross negligence. The Court also grants summary judgment in
favor of Myers RV on the plaintiffs’ causes of action for breach of implied warranty for a particular
purpose, breach of implied warranty of merchantability, and gross negligence. Those claims are
DISMISSED, with prejudice. All other causes of action remain pending for trial.

So ORDERED and SIGNED this 4 day of December, 2017.

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Ron Clark, United States District Judge

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