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`Case 6:20-cv-01131-ADA Document 40-1 Filed 07/05/21 Page 1 of 32
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`EXHIBIT A
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`EXHIBIT A
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`Case 6:20-cv-01131-ADA Document 40-1 Filed 07/05/21 Page 2 of 32
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`Restat 3d of Agency, § 1.01
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`Restatement of the Law, Agency 3d - Official Text > Chapter 1- Introductory Matters > Topic 1-
`Definitions and Terminology
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`§ 1.01 Agency Defined
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`Agency is the fiduciary relationship that arises when one person (a "principal") manifests assent to
`another person (an "agent") that the agent shall act on the principal's behalf and subject to the
`principal's control, and the agent manifests assent or otherwise consents so to act.
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`COMMENTS & ILLUSTRATIONS
`Comment:
`a. Scope and cross-references. Comment b discusses various usages of agency terminology. Comment c is a
`general discussion of the defining elements of agency. Comment d discusses how a relationship of agency is
`formed. It is not necessary that the agent manifest assent to the principal. See Comment c and § 3.01,
`Comment b. Comments e-h discuss the elements of agency in more detail. Section 1.02 states the principle
`that it is a legal conclusion whether a particular relationship is one of agency. Section 1.03 defines
`manifestation. Section 1.04 defines and distinguishes among some common types of agents and principals.
`b. Usage. This definition states the elements of the relationship widely referred to as "common-law agency" or
`"true agency." The definition excludes cognate relationships in which, although the legal consequences of one
`person's actions are attributed to another person, one or more of the defining elements of agency are not
`present. See §§ 3.12-3.13, dealing with powers given as security and irrevocable proxies, and § 8.09,
`Comment d, discussing the duties of an escrow holder. Nonetheless, such cognate relationships are often
`grouped with relationships of common-law agency. More generally, legal usage varies. Some statutes and
`many cases use agency terminology when the underlying relationship falls outside the common-law definition.
`Moreover, the terminology of agency is widely used in commercial settings and academic literature to
`characterize relationships that are not necessarily encompassed by the legal definition of agency. In
`philosophical and literary studies, "agency" often means an actor's capacity to assert control over the actor's
`own intentions, desires, and decisions. In economics, definitions of principal-agent relations encompass
`relationships in which one person's effort will benefit another or in which collaborative effort is required. In
`commercial settings, the term "principal" is often used to designate one who benefits from or is affected by the
`acts of another, or one who sponsors or controls another. It is also common usage to refer without distinction to
`parties who serve any intermediary function as "agents." Not all such situations, however, meet the legal
`definition of an agency relationship. Moreover, the legal consequences of agency may attach to only a portion
`of the relationship between two persons, a fact that dictates care in using the term "agency relationship."
`Aspects of an overall relationship may constitute agency and entail its legal consequences while other aspects
`do not. It is also possible for the same person to be a principal as well as an agent in an interaction with a third
`party. The Introduction states the coverage of this Restatement.
`c. Elements of agency. As defined by the common law, the concept of agency posits a consensual relationship
`in which one person, to one degree or another or respect or another, acts as a representative of or otherwise
`acts on behalf of another person with power to affect the legal rights and duties of the other person. The person
`represented has a right to control the actions of the agent. Agency thus entails inward-looking consequences,
`operative as between the agent and the principal, as well as outward-looking consequences, operative as
`among the agent, the principal, and third parties with whom the agent interacts. Only interactions that are within
`the scope of an agency relationship affect the principal's legal position. In some situations, the consequences of
`agency are imposed without a person's consent, such as when a court appoints a lawyer for a person
`appearing before the court, or when a statute designates an agent for purposes of service of process. See
`Comment d for further discussion of consent.
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`Restat 3d of Agency, § 1.01
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`The common-law definition requires that an agent hold power, a concept that encompasses authority but is
`broader in scope and connotation. The terminology of "power" is neutral in that it states a result but not the
`justification for the result. An agent who has actual authority holds power as a result of a voluntary conferral by
`the principal and is privileged, in relation to the principal, to exercise that power. Actual authority is defined in §
`2.01. Actual authority does not exhaust the circumstances under which the legal consequences of one person's
`actions may be attributed to another person. An agent also has power to affect the principal's legal relations
`through the operation of apparent authority, as stated in § 2.03. Additionally, a person may be estopped to deny
`the existence of an agency relationship, as stated in § 2.05. Separately, a person may, through ratification,
`create the consequences of actual authority with respect to an actor's prior act. See Chapter 4.
`Agency encompasses a wide and diverse range of relationships and circumstances. The elements of common-
`law agency are present in the relationships between employer and employee, corporation and officer, client and
`lawyer, and partnership and general partner. People often retain agents to perform specific services. Common
`real-estate transactions, for example, involve the use of agents by buyers, sellers, lessors, and lessees.
`Authors, performers, and athletes often retain specialized agents to represent their interests in dealing with third
`parties. Some industries make frequent use of nonemployee agents to communicate with customers and enter
`into contracts that bind the customer and a vendor. Agents who lack authority to bind their principals to
`contracts nevertheless often have authority to negotiate or to transmit or receive information on their behalf.
`Some common forms of agency have a personal and noncommercial flavor, exemplified by the relationship
`created by a power of attorney that confers authority to make decisions regarding an individual's health care,
`place of residence, or other personal matters. See Comment d. On durable powers of attorney, see § 3.08(2).
`Not all relationships in which one person provides services to another satisfy the definition of agency. It has
`been said that a relationship of agency always "contemplates three parties--the principal, the agent, and the
`third party with whom the agent is to deal." 1 Floyd R. Mechem, A Treatise on the Law of Agency § 27 (2d ed.
`1914). It is important to define the concept of "dealing" broadly rather than narrowly. For example, a principal
`might employ an agent who acquires information from third parties on the principal's behalf but does not "deal"
`in the sense of entering into transactions on the principal's account. In contrast, if a service provider simply
`furnishes advice and does not interact with third parties as the representative of the recipient of the advice, the
`service provider is not acting as an agent. The adviser may be subject to a fiduciary duty of loyalty even when
`the adviser is not acting as an agent. The common law of agency, however, additionally encompasses the
`employment relation, even as to employees whom an employer has not designated to contract on its behalf or
`otherwise to interact with parties external to the employer's organization. In contrast, the common term
`"independent contractor" is equivocal in meaning and confusing in usage because some termed independent
`contractors are agents while others are nonagent service providers. The antonym of "independent contractor" is
`also equivocal because one who is not an independent contractor may be an employee or a nonagent service
`provider. This Restatement does not use the term "independent contractor," except in discussing other material
`that uses the term. Section 7.07(3) states the criteria that classify a person as an employee, as opposed to a
`nonagent service provider, for purposes of an employer's vicarious liability for torts committed within the scope
`of employment.
`Despite their agency relationship, a principal and an agent retain separate legal personalities. Agency does not
`merge a principal's personality into that of the agent, nor is an agent, as an autonomous person or organization
`with distinct legal personality, merged into the principal. The fact that an agent acts on behalf of, or represents,
`another person implies the existence of limits on the scope of the agency relationship and on the extent to
`which the principal is accountable for the agent's acts. The metaphor of identification, which merges an agent's
`distinct identity with the principal's, is potentially misleading and not helpful as a starting point for analysis.
`A relationship is not one of agency within the common-law definition unless the agent consents to act on behalf
`of the principal, and the principal has the right throughout the duration of the relationship to control the agent's
`acts. A principal's manifestation may be such that an agency relationship will exist without any communication
`from the agent to the principal explicitly stating the agent's consent. If the principal requests another to act on
`the principal's behalf, indicating that the action should be taken without further communication and the other
`consents so to act, an agency relationship exists. If the putative agent does the requested act, it is appropriate
`to infer that the action was taken as agent for the person who requested the action unless the putative agent
`manifests an intention to the contrary or the circumstances so indicate.
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`Restat 3d of Agency, § 1.01
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`A principal's right to control the agent is a constant across relationships of agency, but the content or specific
`meaning of the right varies. Thus, a person may be an agent although the principal lacks the right to control the
`full range of the agent's activities, how the agent uses time, or the agent's exercise of professional judgment. A
`principal's failure to exercise the right of control does not eliminate it, nor is it eliminated by physical distance
`between the agent and principal. For further discussion of control, see Comment f. The common-law definition
`of agency presupposes a principal who exists and who has legal capacity throughout the duration of the
`relationship; otherwise the principal will not be able on an ongoing basis to assess the agent's performance in
`relationship to the principal's interests. See § 3.04. The requirement that an agent be subject to the principal's
`control assumes that the principal is capable of providing instructions to the agent and of terminating the
`agent's authority. Comments d and f discuss, inter alia, the tension between these elements of the common-law
`definition and durable powers of attorney. The chief justifications for the principal's accountability for the agent's
`acts are the principal's ability to select and control the agent and to terminate the agency relationship, together
`with the fact that the agent has agreed expressly or implicitly to act on the principal's behalf.
`d. Creation of agency. Under the common-law definition, agency is a consensual relationship. The definition
`requires that an agent-to-be and a principal-to-be consent to their association with each other. In contrast to the
`formulation in Restatement Second, Agency § 1, the definition in this section refers to a principal's
`manifestation of "assent," not "consent." The different terminology is intended to emphasize that unexpressed
`reservations or limitations harbored by the principal do not restrict the principal's expression of consent to the
`agent. See Restatement Second, Contracts § 17, Comment c. If an agent is otherwise on notice of the meaning
`the principal ascribes to a particular expression, that meaning is operative as between principal and agent. See
`§ 1.03, Comment e. A principal's manifestation of assent to an agency relationship may be informal, implicit,
`and nonspecific. See § 1.03, which defines manifestation.
`As to the agent, a relationship of agency as defined in this section requires that the agent "manifests assent or
`otherwise consents so to act," in contrast to the requirement in Restatement Second, Agency § 1 that the agent
`"consent." The formulation in this section, consistent with Restatement Second, recognizes that it is not
`necessary to the formation of a relationship of agency that the agent manifest assent to the principal, as when
`the agent performs the service requested by the principal following the principal's manifestation, or when the
`agent agrees to perform the service but does not so inform the principal and does not perform. It is a question
`of fact whether the agent has agreed.
`Additionally, the consensual aspect of agency does not mean that an enforceable contract underlies or
`accompanies each relation of agency. Many agents act or promise to act gratuitously. While either acting as an
`agent or promising to do so creates an agency relation, neither the promise to act gratuitously nor an act in
`response to the principal's request for gratuitous service creates an enforceable contract. See Restatement
`Second, Contracts § 71.
`In some instances, however, relationships that are less than fully consensual and, therefore, not common-law
`agency relations trigger legal consequences equivalent to those of agency. A notable instance is a durable
`power of attorney. The basic presupposition that agency is a consensual relationship that vests in the principal
`the right of interim control over the agent is at odds with the relationship between principal and agent created by
`a durable power of attorney, a relationship in which the agent's power survives or is triggered by the principal's
`loss of mental competence. Once the principal becomes unable to terminate the relationship or to provide
`instructions to the agent, the principal's relationship with the agent is no longer the relationship presupposed by
`the common law of agency, even though in creating the power the principal consented initially to the
`mechanism that led to the later and less consensual relationship with the agent. Although no res exists, the
`relationship then resembles a trust. Durable powers are treated in § 3.08(2) and in Restatement Third, Property
`(Wills and Other Donative Transfers) § 8.1, Comment l.
`Many of the legal consequences of agency also apply in situations that resemble agency in form but in which
`the parties' consent is subject to constraints imposed by law or by legal or regulatory institutions. As a
`consequence of such constraints, the decision to appoint a particular agent or to continue the agency relation is
`not within the parties' exclusive control. For example, the law implies a principal-agency relationship between
`the owner of a lost item and government officials who recover it. Additionally, court-appointed counsel
`represents the client, notwithstanding the client's objection, and counsel's withdrawal from representation in
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`Restat 3d of Agency, § 1.01
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`litigation requires the court's assent. All attorneys are subject to ethical responsibilities that constrain the
`authority of their clients as principals.
`Likewise, the legal consequences resemble those of common-law agency when an "agent's" powers are
`specified by operation of law, not by the parties. A statutory designation of the Secretary of State as agent to
`receive service of process is not a consensual choice of agent on the part of the principal or specification of the
`agent's powers but follows a choice to carry on activity in a particular state. In maritime law, under the 1989
`International Convention on Salvage, a ship's master has authority to contract for salvage operations on behalf
`of the vessel's owner, and the master and the owner have authority to conclude such contracts on behalf of the
`owner of property on board the vessel. Additionally, the law may mandate that an agent be used to perform a
`particular function, such as the federal statutory requirement that stock in an employee ownership plan be held
`and voted by trustees.
`e. Fiduciary character of relationship. The scope of an agency relationship defines the scope of an agent's
`duties to a principal and a principal's duties to an agent. If the relationship between two persons is one of
`agency as defined in this section, the agent owes a fiduciary obligation to the principal. The word "fiduciary"
`appears in the black-letter definition to characterize or classify the type of legal relationship that results if the
`elements of the definition are present and to emphasize that an agency relationship creates the agent's
`fiduciary obligation as a matter of law.
`As a general matter, the term "fiduciary" signifies that an agent must act loyally in the principal's interest as well
`as on the principal's behalf. See Comment g for a discussion of "acting on behalf of." See § 8.01 for an agent's
`basic duty of loyal action. Any agent has power over the principal's interests to a greater or lesser degree. This
`determines the scope in which fiduciary duty operates. An agent has such power even when the principal holds
`a superior economic position or possesses greater expertise or acumen.
`To establish that a relationship is one of agency, it is not necessary to prove its fiduciary character as an
`element. The obligations that a principal owes an agent, specified in §§ 8.13-8.15, are not fiduciary. In addition
`to an agent's fiduciary duties, the agent has a duty to fulfill specific contractual undertakings that the agent has
`made to the principal and to third parties, as well as to fulfill any duties imposed on the agent by law.
`Correlatively, a principal can owe duties created by contractual undertakings to the agent. Chapter 8 states the
`specific duties owed by the agent and the principal. Section 8.06 governs consent by the principal to conduct
`that would otherwise breach the agent's duties of loyalty.
`Fiduciary duty does not necessarily extend to all elements of an agency relationship, and does not explain all of
`the legal consequences that stem from the relationship. Fiduciary duty does not operate in a monolithic fashion.
`Most questions concerning agents' fiduciary duty involve the agent's relationship to property owned by the
`principal or confidential information concerning the principal, the agent's undisclosed relationship to third parties
`who compete with or deal with the principal, or the agent's own undisclosed interest in transactions with the
`principal or competitive activity. It is open to question whether an agent's unconflicted exercise of discretion as
`to how to best carry out the agent's undertaking implicates fiduciary doctrines.
`Three types of consequences result from an agent's fiduciary duties to the principal. First, if an agent breaches
`a fiduciary duty of loyalty, distinctive remedies are available to the principal. Moreover, burdens of proof are
`often allocated differently in cases alleging breach of fiduciary obligation than in civil litigation generally. A
`different limitation period may apply, and it may not begin to run until the principal discovers the breach of duty.
`These points are elaborated in §§ 8.01-8.06.
`Second, the content of an agent's duties to the principal is distinctive. Unless the principal consents as stated in
`§ 8.06, an agent may not use the principal's property, the agent's position, or nonpublic information the agent
`acquires while acting within the scope of the relationship, for the agent's own purposes or for the benefit of
`another. Similarly, unless the principal consents as stated in § 8.06, an agent may not bind the principal to
`transactions in which the agent deals with the principal on the agent's own account without disclosing the
`agent's interest to the principal. Without the principal's consent, an agent may not compete with the principal as
`to the subject matter of the agency, nor may the agent act on behalf of one with interests adverse to those of
`the principal in matters in which the agent is employed. See §§ 8.01-8.06 for a detailed treatment of these
`duties.
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`Restat 3d of Agency, § 1.01
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`Third, the fiduciary character of an agent's position, on the one hand, and the principal's right to control the
`agent, on the other hand, are linked in a manner that differentiates both (a) the function of an agent-fiduciary
`from that of a nonagent-fiduciary and (b) agency relationships from nonagency relationships that are defined
`and controlled solely by contract. An agent's fiduciary position requires the agent to interpret the principal's
`statement of authority, as well as any interim instructions received from the principal, in a reasonable manner to
`further purposes of the principal that the agent knows or should know, in light of facts that the agent knows or
`should know at the time of acting. An agent thus is not free to exploit gaps or arguable ambiguities in the
`principal's instructions to further the agent's self-interest, or the interest of another, when the agent's
`interpretation does not serve the principal's purposes or interests known to the agent. This rule for interpretation
`by agents facilitates and simplifies principals' exercise of the right of control because a principal, in granting
`authority or issuing instructions to an agent, does not bear the risk that the agent will exploit gaps or ambiguities
`in the principal's instructions. In the absence of the fiduciary benchmark, the principal would have a greater
`need to define authority and give interim instructions in more elaborate and specific form to anticipate and
`eliminate contingencies that an agent might otherwise exploit in a self-interested fashion. That is, the principal
`would be at greater risk in granting authority and stating instructions in a form that gives an agent discretion in
`determining how to fulfill the principal's direction. For organizational principals, this rule simplifies the process
`through which directions are communicated, understood, and executed within an organization. Accordingly,
`instructions need not be drafted with the detail and specificity that typify the instruments embodying the terms of
`many arm's-length commercial and financial relationships.
`Illustrations:
`1. P Corporation manufactures tobacco products, including two brands of cigarettes. Brand C has the
`largest sales in North America. Brand D has fewer sales in North America but exceeds Brand C in
`worldwide sales, chiefly in less-developed countries. A is employed by P Corporation as the general
`manager of its cigarette division. A reports to P Corporation's Executive Vice President. A forms the beliefs
`that cigarette smoking is injurious to health and that it is socially desirable that fewer rather than more
`people smoke cigarettes. A does not disclose these beliefs to P Corporation. The Executive Vice
`President, intending to refer to Brand D, instructs A as follows: "Redirect all expenditures on advertising to
`the best-selling brand." A believes that it is socially undesirable to export cigarette consumption in the face
`of a declining domestic market. A enters into an advertising contract with T Corporation, in which T
`Corporation will advertise Brand C exclusively.
`A has breached the fiduciary duty A owes to P Corporation. Although the Executive Vice President's
`direction to A did not precisely specify how to determine the identity of "the best-selling brand," A's
`interpretation of the instruction was contrary to P Corporation's interests as A should reasonably have
`understood them. P Corporation is a party to the contract A made with T Corporation if T Corporation
`reasonably believed A had authority to make the contract. See § 2.03, which defines apparent authority. A
`lacked actual authority to make the contract because A could not reasonably believe P Corporation wished
`A to do so. See §§ 2.01-2.02, which define actual authority and its scope.
`2. P, an operatic tenor, employs A as a business manager with authority to book P's performances. P
`directs A to book P to perform a concert in a particular concert hall owned by T. A knows that the acoustic
`quality of T's concert hall has recently deteriorated in quality due to an error made in remodeling. Neither
`the error nor the deterioration is public knowledge, and A has no reason to believe P knows of it. A books P
`to perform in T's concert hall without telling P about the acoustic deterioration because A hopes to obtain
`employment with T. A has breached A's fiduciary duty to P, even though A carried out P's literal
`instructions.
`f. Principal's power and right of interim control
`(1). Principal's power and right of interim control--in general. An essential element of agency is the principal's
`right to control the agent's actions. Control is a concept that embraces a wide spectrum of meanings, but within
`any relationship of agency the principal initially states what the agent shall and shall not do, in specific or
`general terms. Additionally, a principal has the right to give interim instructions or directions to the agent once
`their relationship is established. Within an organization the right to control its agents is essential to the
`organization's ability to function, regardless of its size, structure, or degree of hierarchy or complexity. In an
`organization, it is often another agent, one holding a supervisory position, who gives the directions. For
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`Restat 3d of Agency, § 1.01
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`definitions of the terms "superior" and "subordinate" coagents, see § 1.04(9). A principal may exercise influence
`over an agent's actions in other ways as well. Incentive structures that reward the agent for achieving results
`affect the agent's actions. In an organization, assigning a specified function with a functionally descriptive title to
`a person tends to control activity because it manifests what types of activity are approved by the principal to all
`who know of the function and title, including their holder.
`A relationship of agency is not present unless the person on whose behalf action is taken has the right to
`control the actor. Thus, if a person is appointed by a court to act as a receiver, the receiver is not the agent of
`the person whose affairs the receiver manages because the appointing court retains the power to control the
`receiver.
`A principal's control over an agent will as a practical matter be incomplete because no agent is an automaton
`who mindlessly but perfectly executes commands. A principal's power to give instructions, created by the
`agency relationship, does not mean that all instructions the principal gives are proper. An agent's duty of
`obedience does not require the agent to obey instructions to commit a crime or a tort or to violate established
`professional standards. See § 8.09(2). Moreover, an agent's duty of obedience does not supersede the agent's
`power to resign and terminate the agency relationship. See § 3.10.
`The power to give interim instructions distinguishes principals in agency relationships from those who contract
`to receive services provided by persons who are not agents. In many agreements to provide services, the
`agreement between the service provider and the recipient specifies terms and conditions creating contractual
`obligations that, if enforceable, prescribe or delimit the choices that the service provider has the right to make.
`In particular, if the service provider breaches a contractual obligation, the service recipient has a claim for
`breach of contract. The service provider may be constrained by both the existence of such an obligation and
`the prospect of remedies for breach of contract. The fact that such an agreement imposes constraints on the
`service provider does not mean that the service recipient has an interim right to give instructions to the provider.
`Thus, setting standards in an agreement for acceptable service quality does not of itself create a right of
`control. Additionally, if a service provider is retained to give an independent assessment, the expectation of
`independence is in tension with a right of control in the service recipient.
`To the extent the parties have created a relationship of agency, however, the principal has a power of control
`even if the principal has previously agreed with the agent that the principal will not give interim instructions to
`the agent or will not otherwise interfere in the agent's exercise of discretion. However, a principal who has
`made such an agreement but then subsequently exercises its power of control may breach contractual duties
`owed to the agent, and the agent may have remedies available for the breach.
`Illustrations:
`3. P arranges with A for A to buy large quantities of coffee beans on P's behalf. The compensation agreed
`to is predicated on P's assurance that A will not need to travel abroad to make the purchases. Later P
`directs A to fly to Colombia to buy coffee beans. A has a choice. A may resign as P's agent. If A does not
`resign, A must obey the instruction but may have a claim against P for the increased cost of A's
`performance. A may waive the claim if A fails to remind P of P's assurance before departing for Colombia if
`it is reasonable to do so, for example if it appears that P has forgotten the assurance.
`4. P owns a professional baseball team. Needing a new general manager, P negotiates an agreement with
`A, a manager. A insists that P provide an assurance in A's employment agreement that A will have
`autonomy in running the team. P agrees. Before the start of the season, P directs A to schedule no night
`games on weeknights during the school term. It is feasible for A to comply with P's directive. A must obey
`the instruction. Alternatively, A may resign. If A resigns, A has a contract claim against P. If A does not
`resign, A may have a contract claim against P, but A's ability to recover on the claim would depend, inter
`alia, on A's ability to show damage.
`If an agent disregards or contravenes an instruction, the doctrine of actual authority, defined in § 2.01, governs
`the consequences as between the principal and the agent. Section 8.09 states an agent's duties to act only
`within the scope of actual authority and to comply with lawful instructions. The rights and obligations of the third
`party with whom the agent interacts are governed by the doctrines of actual authority and apparent authority.
`Doctrines of estoppel, restitution, and ratification are also relevant under some circumstances. See §§ 2.03,
`2.05-2.07, and 4.01-4.08.
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`Restat 3d of Agency, § 1.01
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`Illustrations:
`5. Same facts as Illustration 4. After A learns of P's directive, A enters into a scheduling agreement with
`another team, owned by Q, under which P's team will play night games during the school term. Q has no
`notice of P's directive to A. Although A lacks actual authority to bind P to the agreement, the agreement
`may bind P and Q if A acted with apparent authority.
`6. Same facts as Illustration 5, except that Q has notice of P's instructions to A. Unless P ratifies A's
`conduct, neither P nor Q is bound by the agreement because A has neither actual nor apparent authority to
`bind P. Section 4.01(2) states the circumstances under which ratification occurs.
`The principal's right of control in an agency relationship is a narrower and more sharply defined concept
`than domination or influence more generally. Many positions and relationships give one person the ability
`to dominate or influence o