Will No One Rid Me of This Meddlesome Priest?

Teaching “actual authority” in agency law allows me to show students this great scene from the 1964 movie “Becket,” which received 12 Oscar nominations but won only one, for best adapted screenplay:

Henry II (here played by a young Peter O’Toole) may or may not have said those words, but almost certainly said something along those lines. Frank Barlow (Thomas Becket, p. 235) writes:

At some point, probably on Christmas Day itself, Henry, maudlin with anger at Thomas’s ingratitude and railing at the cowardice of his vassals, uttered the fatal words reported by Edward Grim, “What miserable drones and traitors have I nourished and promoted in my household, who let their lord be treated with such shameful contempt by a low-born clerk!”

This was the signal for a secret plot to be hatched by four of his knights, William de Tracy, Reginald fitzUrse, Hugh de Morville and Richard le Bret.

Barlow says that the King’s words were a “signal.” Surely, that’s how the four knights interpreted it. In the movie scene, the four men silently look at one another and nod. They interpreted Henry’s statement as a mandate to kill Becket.

We know how it ends. The four knights went to visit Becket in Canterbury, they aggressively tried to convince him to back off and do what the King wanted, and when Becket showed no sign of relenting, they killed him. Later, the King felt guilt and remorse. But, as Barlow writes (p. 251):

The question on all men's lips, asked anxiously by some, gloatingly by others, was what part had the king played in the murder?

And we, who study agency law, wonder the same. Were the knights acting on behalf of the King? Were they his agents? Did they have what we call in jargon “actual authority”?

As my students pointed out the other day, the answer hinges on whether the King’s words could be reasonably interpreted by the four knights as an order to kill Becket. The King didn’t say “Go kill him.” He said something dramatically and legally more interesting: “Will no one rid me of this meddlesome priest?” The key question, for agency law, is not what the King truly meant, but what the knights would reasonably take it to mean.

To be sure, the kind of agency law we’re interested in in business law does not typically involve murder. But sometimes business cases involve ambiguous instructions from the principal (and sometimes the relevant issue is whether a firm acted on behalf of another to commit fraud or other crimes).

A recent case decided by the Utah Court of Appeals is a good modern illustration of the first problem: ambiguous instructions (Stein Eriksen Lodge Owners Ass'n Inc. v. MX Techs. Inc., 508 P.3d 138 (UT App. 2022) (Westlaw). Here are the key facts:

After being asked by her superiors to help plan a major corporate conference, the Events Manager of MX Technologies Inc. (MX) signed contracts—totaling more than $350,000—for rooms, food, and services at the Stein Eriksen Lodge (Stein). MX later decided not to hold the conference, and claimed that the contracts were invalid, in whole or in part, because Events Manager did not have authority to sign them...

At the time, Events Manager was twenty-four years old, and had been hired by MX only a few months earlier. Events Coordinator reported to Events Manager, who reported to Marketing Director, who reported to the company’s newly hired Chief Marketing Officer (CMO). Events Manager and Events Coordinator were tasked with the assignment of negotiating a prospective contract with Stein…

What kind of instructions had the Events Manager received? According to the court, CMO told the Events Manager to “get cranking” to lock down the venue by the end of the year. When December came, and Stein warned the Events Manager that they had another offer for the same dates, the Event Managers got anxious and signed the contract.

Did she have actual authority?

The trial court said yes, she did. But the court’s analysis was a bit superficial. For example, it did not distinguish actual from apparent authority—something my students should do.

The Court of Appeals is much more analytical. Just like in the “Becket” scene, the court “examine[s] the acts of the principal [the King, MX] from the agent’s [the Knights, Events Manager] perspective.”

At root, this inquiry turns on the reasonableness of the agent’s belief that she possessed sufficient authority. See Restatement (Third) of Agency § 2.01 (Am. L. Inst. 2006) (“An agent acts with actual authority when ... the agent reasonably believes, in accordance with the principal’s manifestations to the agent, that the principal wishes the agent so to act.”)… The inquiry contains both an objective and a subjective component: the agent must subjectively hold the belief that she possesses authority, and that belief must be objectively reasonable in light of the principal’s actions… On appeal, MX does not argue that Events Manager lacked a subjective belief that she was authorized to sign the contracts…

In evaluating the objective part of the test, we examine whether the agent’s belief was reasonable under the circumstances, in light of the actions and manifestations of the principal… [R.3d:] “Whether an agent’s belief is reasonable is determined from the viewpoint of a reasonable person in the agent’s situation under all of the circumstances of which the agent has notice.”…

The problem here was that MX company policy clearly said that any payment over $20,000 had to be approved by the CFO, and therefore the Events Manager could not reasonably have believed that she had authority to sign a $350,000 contract based on some ambiguous words (“get cranking,” “lock down” the venue) from the CMO. (The court did, however, conclude that the Events Manager had apparent authority and therefore MX was bound by the contract; but that’s a different issue.)

A less recent example of the second problem—ambiguous principal-agent relationships in unlawful contexts—is a case decided by the Southern District of New York in a securities-fraud class action arising from the collapse of the Italian dairy conglomerate Parmalat [In re Parmalat Sec. Litig., 594 F. Supp. 2d 444 (S.D.N.Y. 2009)]. Plaintiffs bought Parmalat securities before the collapse and the discovery of massive corporate fraud and later sued Parmalat’s accountants Deloitte (plus bankers and others).

One of the questions in the case is about the relationship between the Deloitte corporate headquarters, organized as a Swiss entity and located in New York (DTT), and Deloitte Italy and Deloitte Brazil, two local affiliates of Deloitte, directly advising Parmalat entities. At some point, Deloitte Italy and Deloitte Brazil disagreed on whether to disclose certain related-party transactions. Following the DTT Professional Practice Manual, they requested that DTT “arbitrate the matter.” And DTT did arbitrate it and issued a conclusion, which the two local companies followed. Were the two local entities acting as agents of DTT or not? The court thought that it was a genuine issue of fact.1

Are the words uttered by the CMO in the Utah case and by DTT in the New York case more ambiguous than the poetic and dramatic words attributed to Henry II? It’s not clear. But let’s not forget that our ways of understanding words are much closer to those of XXI-century corporate employees than to those of XII-century English knights.

Words do not exist in a vacuum, but within rich and messy contexts, and what a “reasonable” interpretation of words is depends on those contexts and the communities that make them. That’s why, as I tell students, reading lots of cases and reading lots of literature, and, later, being involved in those communities and contexts, are the only ways to train one’s intuitions on how to apply vague standards like “reasonable belief.”