Murray makes some very good points.  If Continental were trying
to evade liability to passengers' next of kin on the grounds that it was
not an actual operator of the plane, it sure sounds as if there would be
a good case for apparent authority.  Besides the long-ago airplane crash
case brought by singer Jim Croce's widow and others (remember "Big Bad
Leroy Brown," "Roller Derby Queen," "Operator," and, of course, "Time in
a Bottle") there are so many cases of apparent authority in the
franchising context.  
	I wrote about this long ago in the Hofstra Law Review, and will
soon have another article on the way to the law reviews.  Many have
written about it.
	Concerning the Texaco case Terence mentions, that was Gizzi v.
Texaco, Inc., 437 F.2d 308 (3d Cir.), cert. denied, 404 U.S. 829 (1971),
the Third Circuit Court of Appeals overturned a directed verdict for
franchisor Texaco.  The franchisee negligently had repaired the brakes
on a car that it subsequently sold to the plaintiff, who was injured
when these brakes failed.   There was no actual agency between Texaco
and its franchisee.   The appellate court, however, held that an
apparent agency may have been manifested by communications directly to
the plaintiff or, indirectly, by signs or other advertising to the
community.  This court found that Texaco insignia as well as its
national advertising slogan, "Trust Your Car to the Man Who Wears the
Star," could have led the plaintiff reasonably to rely on an apparent
agency; the matter was a question of fact for the jury to determine. 
	Gizzi's broad approach has been criticized.  Still, many courts
have found an apparent agency.  They have done so despite (i) attempted
disclaimers of franchisor responsibility and (ii) claims that no
"reasonable" interpretation of a franchisor's actions would infer agency
from a mass advertising campaign or from customary quality standards
imposed on all of the franchisees.   In numerous, other decisions,
judges have let the jury decide the apparent agency question.    
	Two other well-known cases (blasts from the past) are: 
	(1) Crinkley v. Holiday Inns, Inc., 844 F.2d 156 (4th Cir.
1988), in which the plaintiffs had been robbed by a gang of "Motel
Bandits" who burst into their room at a Holiday Inn - the court upheld a
jury verdict against Holiday Inns because the jury reasonably could have
concluded that the franchised hotel was purposely operated so as to
appear company-owned, with the hotel chain's national advertising, its
unclear-as-to-onwership directory of inns, and only one sign (in the
hotel's restaurant) indicating independent ownership; 
	(2) Drexel v. Union Prescription Centers, Inc., 582 F.2d 781 (3d
Cir. 1978), in which the franchise contract required the franchisee to
use both his own name and that of the franchisor, but the franchisee
pharmacy's advertisements, prescription labels, cash register receipts,
and medicine bags all simply bore the franchisor's name; because the
franchisor may have acquiesced to this "holding out" of an agency, the
apparent agency issue was sufficient to go to a jury in a wrongful death
case.  
	
	If you have read this far, congratulations!  If you remember,
"You can trust your car to the man who wears the star," well, we know
what that means. :)    

	Robert

Robert W. Emerson
Huber Hurst Professor of Business Law 
Warrington College of Business Admin.
University of Florida
[log in to unmask]
 

-----Original Message-----
From: Academy of Legal Studies in Business (ALSB) Talk
[mailto:[log in to unmask]] On Behalf Of Levin, Murray S
Sent: Wednesday, May 26, 2010 9:59 AM
To: [log in to unmask]
Subject: Re: Frontline

Regarding "It's an interesting sleight of hand created by contract,
isn't it?", what's unusual or unfair about this? How does this differ
from typical agent indemnification of principal (which doesn't even
require contract) or a typical insurance contract? Continental is liable
to the full extent, but will be indemnified to the extent that the
indemnifier is liable or solvent; beyond that Continental can be made to
pay; and Continental pays the price in terms of loss of reputation.
Except for a lack of consumer transparency at the outset, what's the
problem? 
 
Murray Levin
 
Murray S. Levin
Professor
University of Kansas
School of Business
[log in to unmask]
785-864-7506
913-262-2688


________________________________

From: Academy of Legal Studies in Business (ALSB) Talk on behalf of
Terence Lau
Sent: Wed 5/26/2010 8:16 AM
To: [log in to unmask]
Subject: Re: Frontline



I watched the documentary when it came out.  What happened on that
flight
was totally preventable, and did not need to happen.  There was a
specific
section of the documentary that discussed issues of liability and
indemnification between Colgan and Continental, discussed here:
http://www.pbs.org/wgbh/pages/frontline/flyingcheap/safety/codeshare.htm
l

As you might expect, Colgan is indemnifying Continental for all losses
caused by Colgan, so Continental is off the hook in spite of the product
bearing Continental's brand name in all aspects.  It's an interesting
sleight of hand created by contract, isn't it?  While I have no doubt
it's
enforceable and legal, it really leaves consumers in the dark,
especially
since more than 60% of Continental flights are now operated by
third-party
arms-length entities like Colgan.



This documentary centered on a recent air disaster of a Colgan commuter
plane
that was aligned with Continental.  You might remember the loss of life
as
the
flight into Buffalo crashed a few miles from the airport.

The FAA hearing concluded that pilot error was the cause of the crash.
Tickets
were purchased at a Continental counter, the planes were painted in
Continental
colors, the travelers (or most of them) probably thought they were in
Continental
hands, and so forth.  Plaintiffs were met with contractual firewall that
stymied their
efforts at recovery.

I got the idea that the documentary was of recent origin, but there was
no
report on
litigation.  Surely there's something cooking out there.  Anyone picked
up
on some
good articles, or maybe written about it?

Centuries ago, there was a case against Texaco for the negligent repair
of
an auto
by one of their independent dealers.  Plaintiff claimed that the motto,
"You can trust
your car to the man who wears the star," was one that inclined a person
to
trade
there, and that Texaco should be held for the dealer's negligence.
Anyone
remember
that, or how it came out?