Ostensible Agencies

Loyle v. The Hertz Corporation, Pa. Super. Court, opinion by Daniels, J., dissent by McEwen, P.J.E. 2007 WL4555201. 

Plaintiff, a citizen of Pennsylvania, called Hertz to rent a car in connection with a business trip which he had to take to Toronto, Canada.  He traveled to Toronto’s airport and picked up the vehicle without incident.  He returned the vehicle also without incident and proceeded to the boarding terminal at the airport where he was taken into custody by police, stripped and cavity searched and questioned for four hours regarding his alleged possession of a loaded handgun which Hertz’s cleaning personnel had found in the leased car while cleaning it.

He then sued the Hertz Corporation alleging that it was negligent in failing to inspect the vehicle after the previous renter had returned it to Hertz and/or before it was rented to him; failing to train and supervise inspection personnel; failing to follow company policy on handling cars after they are returned and before they are rented out again and failing to act with due care such that the plaintiff was endangered by the presence of the loaded gun in his car.  As a result of the incident, plaintiff claimed that he had suffered from post-traumatic stress disorder.  After the denial of Hertz’s preliminary objections, it filed an answer to the complaint and then a motion for summary judgment asserting that since the rental contract was perfected in Canada and that all of the conduct at issue took place in Canada, the proper defendant should have been Hertz Canada, Ltd., a separate and distinct corporate entity from itself.  Hertz further alleged that all it had done was to take the reservation by phone and that plaintiff had neither pleaded nor established that an agency relationship existed between the Hertz Corporation and Hertz Canada, Ltd.  The lower court granted summary judgment in favor of Hertz, the plaintiff appealed, and the Superior Court panel, in a two to one vote, reversed and remanded the case to the trial court. 

The Superior Court first discussed the issue of whether plaintiff pursued an agency theory in the pleadings, in its answer to Hertz’s preliminary objections, and throughout discovery.  The trial court concluded that the complaint had not sufficiently alleged the issue of apparent authority as nowhere in the complaint was it alleged that Hertz Canada was an agent of the Hertz corporation, nor was it alleged anywhere that Hertz Canada’s tortious actions fell within the scope of the agency authority, or, alternatively, was ratified by Hertz.  Plaintiff asserted that the complaint did properly recite an allegation of an agency relationship between the Hertz Corporation and Hertz Canada by referencing the following allegations: “defendant The Hertz Corp. at all times material to the complaint, was a car rental company doing business in Pennsylvania, with its headquarters located at 225 Brae Boulevard, Park Ridge, New Jersey.  Defendant also does business in Canada as The Hertz Corp.  Defendant Hertz, through its employees, servants, and agents, was negligent, careless, and/or reckless ...”  The Superior Court majority concluded that those allegations raised sufficient facts to form the basis for a claim of ostensible or apparent agency, even though the complaint did not name Hertz Canada, specifically, citing Ettinger v. Triangle, Pacific Corp., 799 A.2d 95 (Pa. Super. 2002).

Even beyond the issue of the insufficiency of the pleadings, the lower court granted summary judgment as plaintiffs failed to establish sufficient facts as to the existence of an agency relationship between Hertz Corporation and Hertz Canada.  (An issue on which plaintiffs bear the burden of proof.)  Plaintiff contended that the facts in the case fell within at least one of three respondent superior theories: (1) alter ego; (2) participation theory; and (3) apparent authority theory, although plaintiff stressed that he believed that the apparent authority argument was the strongest.  Apparent authority exists where a principle, by words or conduct, leads people with whom the alleged agent deals to believe that the principle has granted the agency the authority he or she purports to exercise. 

The trial court rejected the assertion of apparent authority, stating that the fact that the Hertz Corporation made an oral contract with plaintiff on the phone does not change the fact that the tortious conduct alleged was committed by Hertz Canada.  Plaintiff did not allege that the negligent conduct was a result of plaintiff’s oral contract entered into with Hertz Corporation.  The Superior Court majority stated: “We find the lower court’s observations in that regard to be somewhat misguided and not in consonance with existing appellate authority in Pnnsylvania.”    The majority opinion noted several cases cited by the plaintiff, but went  on to note that the court’s independent research unearthed the case of Gizzi v. Texaco, Inc., 437 F.2d 308 (3d Cir. 1971) that the court found to be directly on point.  In Gizzi, the plaintiff had his car brakes repaired at a Texaco service station and repair shop.  He was later injured in an accident when the brakes failed.  The lower court granted a motion for directed verdict in favor of Texaco, but the Third Circuit reversed and stated that the concepts of apparent authority and agency by estoppel are closely related.  Both depend on manifestations by the alleged principal to a third person and reasonable belief by the third person that the alleged agent is authorized to bind the principal.  Further, in order for the third person to recover against the principal, he must have relied on the indicia of authority originated by the principal, and such reliance must have been reasonable under the circumstances.  The opinion in Gizzi further stated that questions of apparent authority were questions of fact and were therefore for the jury to determine.

Finding that the Gizzi decision was most persuasive, the majority reversed the grant of summary judgment.  It stated that Hertz clearly marketed its car rental business as local, national and international.  Its advertising and reservation systems gave no indication whatsoever that any entity other than “Hertz” was the entity with whom the consumer was dealing and a reasonable person could, indeed, have justifiably relied upon such representations and concluded that Hertz was the entity with whom he or she was contracting and upon whom they could rely.

In his dissent, Judge McEwen argued that the decisions cited by the plaintiff and the court majority were: (1) not binding; and (2) distinguishable from the case at bar.  More particularly, he noted in the Gizzi case, the exchange between the parties was based primarily on an oral transaction and that there was no written contract provision or disclaimer identifying the proper parties.  Judge McEwen noted that the rental agreement signed by Loyle contained on the signature page a logo with the explicit identification language “Hertz Canada Limited” prominently displayed, as well as a contract paragraph that read: “you [lessee] understand and agree that it is improper for you to file a lawsuit concerning this agreement against any business entity other than the one with which you have this agreement as identified on the rental record.”

The dissent also expressed concern that the majority analysis accepted as a cognizable fact the assertion by plaintiff that “defendant also does business in Canada as the Hertz Corp.”  That allegation which was contained in the plaintiff’s original complaint was denied in the answer filed by Hertz, thus placing the burden upon plaintiff to prove that assertion and, as the dissent noted: “this was an apparently impossible burden given the record in the case.”