Authorizing Third Party to Make Purchases on Your Behalf May Result in Ruling that Such Party Was Authorized to Make Purchases on Your Behalf

In Santis Produce LLC v. Elite Farms, Inc., 18-CV-4018 (E.D.N.Y. Mar. 31, 2020), the respondent Elite Produce was the loser in a formal reparations action filed by Santis before the U.S. Department of Agriculture. On appeal to the U.S. District Court, the administrative ruling was upheld, and Santis lost again.

The issue before the court was a narrow one: did Elite authorize Stay Fresh Distributors to act as its agent in procuring mangoes from Santis, in view of two conflicting findings on the issue, one from a court and the other from the USDA?

The facts are simple and straightforward. At some point Stay Fresh received an email from Mike Green, an employee of Elite, authorizing Stay Fresh to procure mangoes for Elite. When the two truckloads of mangoes, valued at a total price of $29,993 (including brokerage fees) arrived at Elite’s place of business in New York, Elite refused to pay the invoices, arguing that Stay Fresh was not its agent and was not authorized to purchase mangoes on its behalf. Elite did, however, offer to pay Stay Fresh’s brokerage fees totaling $11,036.00. (Why Elite agreed to pay the brokerage fees while at the same time denying that Stay Fresh was its agent, is not explained.)

Elite then went to New York state court and filed a lawsuit seeking a declaratory judgment that Stay Fresh was not Elite’s agent and was never authorized to purchase mangoes on Elite’s behalf. Stay Fresh did not appear in that case, so Elite obtained a default judgment finding that there was no agency. This judgment was entered while the formal reparation proceeding was still pending before the USDA. About six months later the USDA ruled that Stay Fresh was Elite’s agent and that Elite was bound to pay Santis for the mangoes.

On appeal to the U.S. District Court, Elite presented only one argument: that the state court judgment was binding, under the law of collateral estoppel, and that therefore Santis could not contend that Stay Fresh was Elite’s agent.

[For readers unfamiliar with the concept of collateral estoppel, it is often confused with the related doctrine of res judicata. Res judicata arises when the parties engage in a lawsuit, a judgment is issued, and one or both of the parties then files another lawsuit involving the same claim, or other claims or issues that could have been made in the first case but were not. In that case, the prior judgment will defeat a subsequent attempt to re-litigate the same claims decided upon, or that could have been decided upon, in the earlier case.

Collateral estoppel is the cousin of res judicata. There, generally, the issues and the parties are the same in both lawsuits but there may not be a final judgment as to all claims. Also, the causes of action in the two cases might be different, but the issues are the same. If the issues have been addressed on the merits in the first case, and decided incident to a judgment, collateral estoppel will prevent them from being re-litigated in a subsequent case. As one might surmise, applying collateral estoppel to a case is generally trickier and more complicated than applying res judicata which is usually more cut-and-dried and straightforward. Some courts, over-simplifying, describe res judicata as “claims preclusion,” while collateral estoppel involves “issue preclusion.”]

The federal Court also opined on the quality of the “evidence” submitted by Elite on its appeal, which evidence (affidavits) was mostly self-serving and conclusory. Finally, in answer to Elite’s argument that there were no emails, texts, letters, contracts, etc. establishing that Stay Fresh was ever Elite’s agent, the Court pointed to Mr. Green’s email authorizing Stay Fresh to go out and procure some mangoes for Elite. The Court pointedly observed that this email was ignored by Elite in its presentations and arguments.