CNE Direct, Inc. v. Blackberry Corporation

2016 | Cited 0 times | First Circuit | May 2, 2016

United States Court of Appeals For the First Circuit

No. 15-1954


Plaintiff, Appellant,



Defendant, Appellee,




[Hon. F. Dennis Saylor, IV, U.S. District Judge]


Thompson and Kayatta, Circuit Judges, and Mastroianni,* District Judge.

Jack Irving Siegal, with whom William C. Nystrom, Dana A. Zakarian, and Nystrom Beckman & Paris LLP, were on brief, for appellant. Sanford F. Remz, with whom Noemi A. Kawamoto, Donald K. Stern, and Yurko, Salvesen & Remz P.C., were on brief, for appellee.

* Of the District of Massachusetts, sitting by designation.

May 2, 2016

KAYATTA, Circuit Judge. CNE Direct, Inc. ("CNE") is a

Massachusetts corporation in the business of buying and reselling

bulk technological components. In November 2013, CNE reached an

agreement with Asset Recovery Associates Worldwide, Ltd. ("Asset")

to purchase phone parts manufactured by BlackBerry Corporation

("BlackBerry"). Asset thereafter failed to make the parts

available at the agreed-upon price, causing CNE to suffer a

substantial loss in connection with its own commitment to resell

the parts to other parties. In addition to suing Asset, CNE seeks

to hold BlackBerry itself liable, contending that Asset was acting

as BlackBerry's actual or apparent agent in the November 2013

transaction. After each party marshalled its best evidence

following full discovery, and after entering default judgment

against the now-defunct Asset, the district court entered summary

judgment in favor of BlackBerry. CNE Direct, Inc. v. BlackBerry

Corp., No. 14-cv-10149-FDS, 2015 WL 4750847 , at *6, *11 (D. Mass.

Aug. 10, 2015). After considering CNE's appeal, we affirm.

I. Background

As this is an appeal from a grant of summary judgment,

we recite the facts in the light most favorable to CNE, the non-

movant, and draw all reasonable inferences in its favor. See

Martinez v. Petrenko, 792 F.3d 173 , 175 (1st Cir. 2015).

On October 25, 2013, Asset received an email from

BlackBerry stating that it was "looking to move" excess memory

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parts and listing its excess units. Asset forwarded the email to

CNE. CNE thereafter entered into discussions with Asset on the

terms pursuant to which Asset would supply the BlackBerry parts to

CNE. According to CNE, CNE and Asset eventually reached agreement

on the terms of a sale. CNE then sent Asset a purchase order to

confirm the agreed-upon deal. The purchase order identified Asset

as the "supplier" of the parts and stated the agreed-upon price.

Asset then backtracked, first demanding a price increase of

approximately 2%, then an increase of approximately 28%. CNE

claims that Asset's back-tracking was an orchestrated attempt by

BlackBerry to take advantage of CNE's "position of weakness." CNE

complained to Asset, and also sought intercession by BlackBerry,

which declined.

As we will discuss, there was nothing about the foregoing

transaction and dealings in October and November 2013 that would

support an argument that Asset acted as an actual or apparent agent

of BlackBerry. As CNE points out, though, it had prior dealings

with Asset for the purchase and sale of BlackBerry parts. Those

prior dealings, CNE argues, provide a course of conduct, or at

least context, sufficient to cast the aborted November 2013

transaction in a different light. So we turn to consider those

prior dealings.

In May 2011, Christopher Tejeda, then a trader at CNE,

first called BlackBerry to inquire about purchasing excess

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inventory. He reached Chris Efstathiou, the individual

responsible for managing BlackBerry's excess inventory. During

their initial phone conversation, Efstathiou told Tejeda that if

he wanted to purchase BlackBerry's excess inventory, he should

speak to Stephen Miele, the individual in control of Asset. At

the time, Asset was one of many third-party resellers to which

BlackBerry sold its excess inventory. CNE suspected this was the

case by October 2012 and knew it to be true by October 2013,

notwithstanding Miele's best efforts to hold himself out as the

"exclusive" source of BlackBerry parts or as BlackBerry's "agent"

and BlackBerry's apparent lack of interest in helping to connect

CNE with a different inventory reseller.

CNE thereafter dealt with Miele. An initial phone call

between Tejeda and Miele in May 2011 led to additional

conversations regarding the available BlackBerry parts and

negotiations over CNE's bid for the parts. Once CNE and Asset

reached an agreement, CNE prepared a "purchase order" to confirm

the purchase price, listing a company affiliated with Asset as the

supplier. When Asset passed this documentation along to

BlackBerry, BlackBerry objected and asked that it instead be listed

as the supplier. CNE changed the purchase order form to

accommodate this request, received an invoice from BlackBerry in

return, and wired the funds directly to BlackBerry. BlackBerry,

in turn, paid Asset a five percent commission on the sale.

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The next relevant transaction, in August 2011, followed

a slightly different course. Viewing the record most favorably to

CNE, it appears that BlackBerry first passed along a list of its

on-hand excess inventory to Asset. Asset disseminated the lists

to its customers, including CNE, seeking per-unit bids. Asset

then collated the bids it received and shared the amounts of bids

and identities of the bidders with BlackBerry, profiting by

reserving for itself a markup on the products that varied between

approximately 10% and 50% of the bid.1 No written agreement

governed the terms of Asset's relationship with BlackBerry, though

the parties operated under an understanding that BlackBerry

retained the right to refuse to sell to Asset based on the amount

it was willing to pay for the parts or the identity of the intended

downstream purchaser.2

Once CNE placed its bid with Asset and BlackBerry had

informed Asset that the bid was acceptable, CNE confirmed the

transaction by issuing to Asset a purchase order memorializing the

agreed-upon price. Asset then remitted a "pro forma" invoice to

confirm the exact quantity of goods that would be sold. As with

the original transaction, CNE's purchase order identified

BlackBerry as the supplier. Unlike the first transaction, CNE did

1CNE knew that this was how Asset profited. 2For obvious reasons, BlackBerry preferred to avoid selling excess parts to its competitors.

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not pay BlackBerry but instead wired funds to Asset or its


Between August 2011 and August 2012, the parties

conducted seven transactions for BlackBerry parts that followed

this pattern and amounted to approximately $836,000. At no point

in the parties' dealings did Asset take physical possession of the

goods. Rather, CNE retrieved the parts at BlackBerry's warehouse.

Over time, CNE grew frustrated with Miele's conduct. On

August 30, 2012, CNE emailed BlackBerry and expressed frustration

with Miele. On October 23, 2012, CNE emailed BlackBerry to

complain about Miele's lack of professionalism. CNE at that point

had determined that Miele was untrustworthy and had lied to CNE

repeatedly. BlackBerry's response, from a new manager who had

taken over BlackBerry's dealings with Asset, characterized CNE's

acquisition of the parts as involving two transactions, one between

BlackBerry and Asset, and a second between Asset and CNE.

Consistent with this characterization, the emailed response

concluded as follows:

As for professional business standards, the purchase of the LCD's was between you and Stephen and that is the forum that should be maintained is it not? Sorry, but I don't wish to get in the middle between yourself and Stephen as relationships are important to myself and RIM as a whole. I suggest you need to deal on this with Stephen. I am not sure how else I can help you in this situation.

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When CNE thereafter emailed BlackBerry to try to address Miele's

dealings with CNE, BlackBerry called and turned down CNE flatly,

telling CNE that it "ha[d] to discuss it with Mr. Miele."

After this conversation, CNE and Asset entered into one

additional transaction in 2012. Then, in August 2013, Miele told

CNE to change the supplier listed on future purchase orders to

Asset, rather than BlackBerry. CNE did so, and entered into at

least six additional transactions totaling approximately $730,000

following this new practice prior to the aborted November 2013

transaction. During this time, BlackBerry and Asset appear to

have had no further communication, save, perhaps, brief exchanges

relating to the logistics of picking up inventory at BlackBerry's

warehouse. Asset occasionally interfaced with BlackBerry to

facilitate pickup on CNE's behalf. In one October 2013 email sent

by Catherine Miele--Stephen Miele's wife and apparently an Asset

employee--to BlackBerry, she explained that "[Asset] ordered the

parts . . . . I sold the parts to CN Direct [sic] and they are

sending their trucker to pick up the parts."

II. Analysis

We review a district court's grant of summary judgment

de novo. Martinez, 792 F.3d at 179. The moving party is entitled

to summary judgment if it "shows that there is no genuine dispute

as to any material fact and [it] is entitled to judgment as a

matter of law." Fed. R. Civ. P. 56(a).

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The parties agree that Massachusetts law governs.

"[T]he question of agency," the Massachusetts Supreme Judicial

Court has held, "is usually an issue for the fact finder," but

summary judgment can be appropriate if the party asserting the

existence of an agency relationship "fail[s] to advance specific

facts sufficient to establish the existence of a genuine issue of

material fact as to [the putative agent's] actual or apparent

authority to act on behalf of [the principal]." Theos & Sons,

Inc. v. Mack Trucks, Inc., 729 N.E.2d 1113 , 1119 (Mass. 2000).

Massachusetts follows the Second Restatement view of

principal-agent relationships, "the essential ingredients" of

which are:

1) the agent's power to alter the legal relationships between the principal and third parties; 2) a fiduciary relationship toward the principal regarding matters within the scope of the agency; and 3) the principal's right to control the agent's conduct in matters within the scope of the agency.

Sorenson v. H & R Block, Inc., 107 F. App'x 227 , 231 (1st Cir.

2004) (unpublished) (citing, inter alia, Restatement (Second) of

Agency §§ 12–14 (1958)). According to Massachusetts courts,

particularly salient among these criteria is the principal's right

to control. See Spencer v. Doyle, 733 N.E.2d 1082 , 1086 (Mass.

App. Ct. 2000) (an "essential characteristic of agency is the right

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of the principal to control what the agent shall or shall not do

before the agent acts" (internal quotation omitted)).3

CNE argues that, as an agent, Asset was cloaked with

both actual and apparent authority to bind BlackBerry, its

principal, in contract. We address each argument in turn.

A. Actual Authority

Actual authority is a product of "mutual consent,

express or implied, that the agent is to act on behalf and for the

benefit of the principal, and subject to the principal's control."

Theos & Sons, 729 N.E.2d at 1119. CNE points to no evidence of

any express consent manifested by both Asset and BlackBerry.

Rather, it argues that there was an implied agreement pursuant to

which BlackBerry authorized Asset to act on behalf of BlackBerry

in agreeing to sell parts to CNE. See id. at 1120 n.13 ("Implied

authority is actual authority that evolves by implication from the

conduct of the parties." (citing T. D. Downing Co. v. Shawmut

Corp., 139 N.E. 525 , 526 (Mass. 1923))).

In support of this argument, CNE points only to

representations by Miele that he had secured an agreement with

BlackBerry that Asset would find buyers and that BlackBerry would

3 Under Massachusetts law, "the principal need not in fact exercise that control" over an agent. DiMaria v. Concorde Entm't, Inc., No. 12-cv-11139-FDS, 2014 WL 991567 , at *4 (D. Mass. Mar. 12, 2014). Rather, "the crucial inquiry is whether [it] has a right to control." Id.

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simply pay Asset a 5% finder's fee. After June 2011, however,

there is zero evidence that BlackBerry ever entered into such an

agreement, impliedly or otherwise. To the contrary, the

transaction at issue in November 2013 (and at all points other

than in June of 2011) involved no finder's fee, leaving Asset with

the upside or downside of any spread between what it agreed to pay

BlackBerry and what CNE agreed to pay it. In this respect, the

fact that Miele unsuccessfully sought to proceed on a fixed

commission basis rebuts rather than supports any claim that there

was an implied agreement that Asset act as BlackBerry's agent.

See T. D. Downing Co., 139 N.E. at 526 (declining to find an

implied principal-agent relationship when "[t]he risks of . . . the

contracts between the two were wholly with the [putative agent] to

whom alone the profits would accrue").

CNE further argues that BlackBerry's control over Asset

was such that Asset acted as a "mere conduit for the passing of

prices [and] terms between Blackberry and CNE." BlackBerry's

"control" over Asset's operations extended to, at most, the ability

to decline to sell Asset its excess inventory if the price Asset

named was not high enough or if Asset stated that it planned to

resell the parts to one of BlackBerry's competitors or to a

customer in a foreign country controlled by a loathsome regime.

These basic commercial ground rules, "merely reflective of the

ordinary desire of manufacturers to set sufficient minimum

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performance and quality standards to protect the good name of their

trademark," simply do not approach the "kind of close control" a

principal would be expected to assert over an agent's operations.

Theos & Sons, 729 N.E.2d at 1120; see also Brown-Forman Corp. v.

Alcoholic Beverages Control Comm'n, 841 N.E.2d 1263 , 1269–71

(Mass. App. Ct. 2006) (finding that an alcohol distributor was not

the agent of a wholesaler even though the wholesaler had veto power

over the distributor's marketing plan and pricing structures).

B. Apparent Authority

We turn, therefore, to CNE's primary argument: That

Asset acted with apparent authority on behalf of BlackBerry.

Unlike actual authority, apparent authority need not find its

provenance in an agreement between the agent and the principal.

Rather, apparent authority arises when the principal, here

BlackBerry, says or does something that, "reasonably interpreted,

causes the third person to believe that the principal consents to

have the act done on his behalf by the person purporting to act

for him." Theos & Sons, 729 N.E.2d at 1120 (quoting Restatement

(Second) of Agency § 27).

CNE correctly notes that the parties' prior "course of

dealing" is relevant to ascertaining the existence of apparent

authority. Binkley Co. v. E. Tank, Inc., 831 F.2d 333 , 337 (1st

Cir. 1987); see generally Mass. Gen. Laws ch. 106, § 1-303(b) ("A

'course of dealing' is a sequence of conduct concerning previous

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transactions between the parties to a particular transaction that

is fairly to be regarded as establishing a common basis of

understanding for interpreting the parties' expressions and other

conduct."). Pointing to the parties' prior transactions here, CNE

fairly argues that a factfinder could reasonably conclude that,

given the origin of the transactions in 2011, and given

BlackBerry's request that the purchase orders list BlackBerry as

the supplier, CNE could have reasonably formed a belief that

BlackBerry was its counterparty, with Asset acting only as

BlackBerry's selling agent.

The problem for CNE, though, is that the subsequent

emails and phone conversation in October 2012 constituted an

obvious and express clarification that should have disabused CNE

of relying on any such view of the respective relationships. Cf.

Hudson v. Mass. Prop. Ins. Underwriting Ass'n, 436 N.E.2d 155 , 159

(Mass. 1982) (apparent authority conferred by "conduct by the

principal [that] causes a third person reasonably to believe that

a particular person has . . . [such] authority" (citation

omitted)); see generally Restatement (Second) of Agency, § 8 cmt. c

("Apparent authority exists only to the extent that it is

reasonable for the third person . . . to believe that the agent is

authorized."). In light of the October 2012 communications, the

reasonableness of any belief that BlackBerry held out Asset as its

agent would have been tenuous at best. See, e.g., Moreau v. James

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River-Otis, Inc., 767 F.2d 6 , 10 (1st Cir. 1985) (applying Second

Restatement view, inference of apparent authority unreasonable

where only manifestation by international union that it could be

bound by its local representatives was its signature on a master

collective bargaining agreement); Theos & Sons, 729 N.E.2d at 1121–

22 (inference of apparent authority unreasonable where third party

relied on presence of would-be principal's logo and name displayed

on putative agent's invoices and in its place of business, in

addition to statements by made by putative agent). Our dissenting

colleague nevertheless posits that perhaps CNE interpreted

BlackBerry's October 2012 you-deal-with-Asset directives as simply

indicating that BlackBerry, as supplier, had in-house and outside

agents, and CNE need deal with the latter. While we find it

difficult to read the communications in context in this manner,

the simpler point is that CNE thereafter changed the order forms

to list Asset as its supplier. There is simply no reasonable basis

to claim that CNE thereafter viewed BlackBerry as its supplier.4

CNE, lastly, points out that Asset never took physical

possession of the goods in question and was a "one-man operation"

run from Miele's offices, lacking warehouses of its own. It was

4 We need not weigh conflicting evidence on an ambiguous record to reach this conclusion. Rather, we are simply recognizing that, whatever ambiguity may have existed prior to 2013, the logic of chronology and subsequent events rendered any earlier ambiguity irrelevant to ascertaining the identity of CNE's putative counterparty in that aborted 2013 deal.

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clear to CNE, nevertheless, that in reselling BlackBerry's excess

inventory, Miele "act[ed] in his own name and receive[d] the title

to the property which he thereafter [was] to transfer."

Restatement (Second) of Agency § 14K cmt. a. Nor is there any

reason why title to the inventory could not pass from BlackBerry

to Asset, and then from Asset to CNE, while the inventory remained

at BlackBerry’s warehouses. See Circuit City Stores, Inc. v.

Comm’r of Revenue, 790 N.E.2d 636 , 641 (Mass. 2003) (title to goods

may pass even though goods remain in physical possession of

vendor). The fact that Miele did not take on the risk of damage

or loss under U.C.C. § 2-509 sheds no relevant light in this

context on the question of agency. In short, nothing about the

size or manner of his operation belied the fact that BlackBerry

did not hold him out as its agent in negotiating the aborted deal.

These findings have particular force given that CNE is

a commercially sophisticated "third party of reasonable prudence

in the [same] business" as Asset. Binkley, 831 F.2d at 337. This

is not to say that CNE must have assumed Asset's relationship with

BlackBerry to parallel CNE's with its customers. Rather, it is to

point out that sophisticated commercial parties operate in a world

in which the terms of commercial forms exchanged with one another

are customarily controlling. See U.C.C. § 2-207(2). The

controlling forms here made clear that CNE and Asset shared a

nearly identical business model: buy products in bulk from

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manufacturers and re-sell them to other customers in other markets

"downstream." Just as CNE, not Asset, supplied CNE's customers;

Asset, not BlackBerry, supplied CNE.

III. Conclusion

The arrangement between these sophisticated parties

during the relevant time period was that CNE dealt only with Asset,

that CNE listed Asset and not BlackBerry as the supplier, and that

CNE paid only Asset, all in accord with BlackBerry's express

rejection of CNE's request that it exercise some control over

Asset. On such a record, no fact finder could rationally conclude

that BlackBerry gave CNE reason to think that Asset was acting as

BlackBerry's agent in negotiating the price of the aborted November

2013 deal. The district court's ruling is affirmed.

-Dissenting Opinion Follows-

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THOMPSON, Circuit Judge, dissenting in part. While I

agree with the majority's conclusion on the actual authority

question, I dissent from its holding as to apparent authority.

On our de novo review of a summary judgment motion, the

court is to view the record in the light most favorable to the

non-moving party, in this case CNE, and draw all inferences in its

favor. Maldonado-Denis v. Castillo-Rodriguez, 23 F.3d 576 , 581

(1st Cir. 1994). In other words, "at the summary judgment stage

the judge's function is not himself to weigh the evidence and

determine the truth of the matter." Anderson v. Liberty Lobby,

Inc., 477 U.S. 242 , 249 (1986). But this is exactly what the

majority has done. The majority opinion has laid out the facts

that, on one hand, would establish apparent authority, and those

that, on the other, would suggest there was none. The majority

has then concluded that the second set of facts outweighs the

first, and that CNE could not have believed Asset Recovery was

BlackBerry's agent. But I think a reasonable jury could come out

the other way, and summary judgment is therefore not proper here.

An agency relationship exists by way of apparent

authority where the putative principal's conduct led a "third party

of reasonable prudence in the business to rely on the agent's

authority." Binkley Co. v. E. Tank, Inc., 831 F.2d 333 , 337 (1st

Cir. 1987); see also Theos & Sons, Inc. v. Mack Trucks, Inc., 729

N.E.2d 1113 , 1121–22 (Mass. 2000). Viewing the record before us,

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I think a jury could conclude that CNE believed, based on a

reasonable interpretation of BlackBerry's conduct, that Asset

Recovery was BlackBerry's agent.

The record shows that CNE originally reached out to

BlackBerry in order to buy its bulk technological parts, and that

it was BlackBerry that referred CNE to Asset Recovery. During

CNE's first transaction for the purchase of the parts, CNE's

purchase order listed a company affiliated with Asset Recovery as

the supplier, but BlackBerry explicitly directed CNE to change its

purchase order to list BlackBerry as the supplier. CNE also wired

payment for the parts directly to BlackBerry, and then picked up

the parts directly from a BlackBerry warehouse. After this first

payment, CNE began to make payments to Asset Recovery, but for at

least seven subsequent transactions it remained the practice that

BlackBerry was listed as the supplier on the purchase orders, and

that CNE always picked up the products from BlackBerry.

Up until this point, it appears the majority and I are

in agreement that it would be fair to argue that a factfinder could

find that CNE reasonably believed, based on this course of dealing,

that Asset Recovery was BlackBerry's agent. According to the

majority, however, the conversations between CNE and BlackBerry in

October 2012 change everything.

The October 2012 communications to which the majority

refers consist of an email and subsequent phone call, in which

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BlackBerry refused CNE's request that it get involved in CNE and

Asset Recovery's souring relationship. Specifically, in late

August 2012, CNE wrote to BlackBerry to complain that it could not

"do business through this channel anymore" -- the "channel" being

Stephen Miele of Asset Recovery. As disagreements between CNE and

Asset Recovery continued, CNE wrote to BlackBerry again in October

2012, and in response, a BlackBerry representative told CNE:

"Sorry, but I don't wish to get in the middle between yourself and

Stephen as relationships are important to myself and RIM as a

whole. I suggest you need to deal on this with Stephen. I am not

sure how else I can help you in this situation . . . ." The

BlackBerry representative then reiterated in a subsequent phone

call that BlackBerry would not get involved.

It is the majority's position that these communications

made it irrefutably clear that Asset Recovery was not BlackBerry's

agent, and that no jury could conclude otherwise. I beg to differ.

At the summary judgment stage, we are to view the facts in the

light most favorable to CNE, and draw all inferences in its favor.

It is certainly true that one way to interpret those emails would

be to conclude that BlackBerry refused to get embroiled in the

spat between CNE and Asset Recovery because Asset Recovery was an

independent actor and not BlackBerry's agent. It would be equally

reasonable, however, to conclude that BlackBerry refused to get

involved simply because it did not want to undermine the decisions

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that one of its agents had made in handling customer business that

fell within the scope of that agent's authority. Both

interpretations are plausible.

The majority may be right that the first of these

interpretations is more convincing, and that it was made more

convincing when a year later, in August 2013, Stephen Miele

directed CNE to change the purchase orders once again, this time

to list Asset Recovery as the supplier. But when there is this

kind of toss-up at the summary judgment stage as to how the

evidence should be weighed, or which interpretation of the evidence

is more plausible, the question must go to a jury. In this case,

the question of whether the later October 2012 communications

disabused CNE of any notion that Asset Recovery was BlackBerry's

agent is a question that requires such weighing and interpreting

of evidence. To decide it ourselves would be to engage in an

exercise that we are not permitted at the summary judgment phase,

and would preclude CNE from exercising its constitutional right to

a trial by jury.

Finally, I briefly address the majority's point that CNE

is a "commercially sophisticated" party whose business model

(i.e., buying and reselling bulk parts) was nearly identical to

that of Asset Recovery. The majority seems to suggest that because

CNE conducted its own business autonomously, and not on behalf of

any principal, CNE should have known that Asset Recovery was also

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an independent actor and not an agent of BlackBerry. I am not

certain I agree. Why could it not be the case that one company

conducted its business independently and another conducted the

same business as an agent of a principal? Regardless, to the

extent that it is relevant that CNE and Asset Recovery were engaged

in the same business, this is, again, something for the jury to

weigh, along with the rest of the evidence, in determining whether

it was reasonable for CNE to believe that Asset Recovery was

BlackBerry's agent.

For these reasons, I respectfully dissent from the

majority's holding as to the question of apparent authority.

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