Stein Eriksen Lodge Owners Association Inc. v. Mx Technologies Inc.

Facts

D began internal discussions about hosting a major corporate conference, to which it planned to invite current and prospective clients. D's Director of Community and Client Advocacy sent an email explaining the vision, goals, and potential agenda of the event. Among the recipients of this email were-in order of placement on the corporate organizational chart-the company's Chief Financial Officer (CFO), Marketing Director, Events Manager, and Events Coordinator. The Events Manager was twenty-four years old and had been hired by D 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 P, which had been tentatively selected as the site for the potential event. Events Manager and Events Coordinator toured P's facilities. Events Coordinator continued to correspond with P and stated that, because D had just hired a new CMO, she needed 'to get approval from him before moving forward.' P indicated that it needed a commitment from D in order to hold the rooms open. The following week, the Marketing Director, Events Manager, and the new CMO-met to discuss the event. The group made the decision to move forward with the conference, and CMO noted that they needed to 'get cranking' to lock down the venue by the end of the year. Events Manager called P to discuss contract terms. P emailed proposed contracts to both Events Manager and Events Coordinator. Events Manager informed P that D would need some time to review the contracts 'and have [its] legal team also glance over [them]' before they could be executed. On New Year's Eve, P followed up with Events Manager, alerting her that another group had submitted a proposal that conflicted with D's proposed dates and asking to 'confirm everything and finalize the contract.' Events Manager signed the contracts on December 31, 2015. According to the contracts, the conference was to begin on August 1, 2016. D agreed to pay for 720 room nights (the room charges totaled $176,080) and for at least $146,000 for food and drink charges, plus a 23% service charge. D was obligated to pay more than $350,000 to P for services related to the conference. The contracts also contained liquidated damages provisions specifying the amount D would pay if it cancelled the event. If cancellation occurred between sixty-one and ninety days prior to the event, D would be required to pay 90% of the contracted amount. But if cancellation occurred sixty or fewer days prior to the event, D would be required to pay the entire contracted amount. During talks, P had told Events Manager that it would be 'flexible' with its deposit and cancellation policies. Pursuant to D company policy, any payment over $20,000 had to be approved by the CFO. No such approval was obtained. A few months before signing the contracts at issue, Events Manager had executed at least one other similar contract, this one with Sundance Resort. The Sundance contract was for 105 room nights, which likely would have been valued at more than $20,000, thus triggering D's company approval policy. P's contracts required a $2,500 deposit to be paid upon signing, with an additional $75,000 deposit due a few weeks later. Events Manager paid the $2,500 using the Marketing Director's company credit card. Marketing Director testified, however, that her awareness of these small deposits did not equate to awareness of executed contracts, because she thought these charges were merely for P to 'hold' the dates. The new CMO was apparently under the same impression. In February 2016, Marketing Director contacted an audiovisual technician about potential needs for the event. And in April, MX's creative director spoke by phone with P about video footage that D might use in promoting the event. Several D representatives, including Events Manager, also traveled to P for a planning visit. D recruited-and signed a contract with-a keynote speaker for the event, and began to promote the conference internally. Events Manager-at the direction of Marketing Director-sent a company-wide email promoting the conference. Both CFO and CMO testified that, at the time this email went out, they were unaware of the existence of the signed contracts. D had not paid the larger $75,000 deposit which, pursuant to the contracts, was due in February. In March, P had contacted Events Manager to inquire about the past-due deposit, Events Manager raised the issue with CMO and Marketing Director. of them were under the impression that payment of the $75,000 deposit is what would formally commit D to the event. At their instruction, Events Manager asked P if D could defer the deposit until 'Q2,' and P agreed. In late April, Events Manager sent a $75,000 invoice to D's accounting department. The accounting department told Events Manager that the invoice, along with any corresponding contract, needed to go through MX's accounting software for approval. Thereafter, the invoice reached CFO, who responded that it was 'not approved.' P inquired again about the late deposit, expressing its concern that CFO was 'delaying a contractual obligation' and-for the first time-taking the view that D was 'in default' and had committed 'a breach of agreement.' The Marketing Director, who emailed CFO and CMO, alerting them that she was 'atwitter regarding the news that [CFO] is considering pulling the plug' on the conference and noting that D had 'signed a contract with P that we cannot get out of.' According to CFO and CMO, this email-sent on May 13-was how they first became aware of the existence of signed contracts. CFO attempted to negotiate a resolution with P, explaining in an email that, in his view, the contracts had not been approved per corporate policy, and had been 'executed by an employee who [was] not authorized to sign on behalf of or legal[ly] bind MX.' Eventually the CFO sent a follow-up letter to P stating that D did not intend to stage any conference at Stein in 2016 and 'providing notice that D [did] not intend to do business with [P] now or in the future.' That letter was exactly 60 days before the conference was to begin. P sued seeking $350,660 in liquidated damages-or, in the alternative, actual damages in an amount to be proved at trial-plus interest and attorney fees. D claimed as a matter of law and undisputed fact, Events Manager had no authority to bind D and that D had not ratified the contracts. The district court granted P's motions. Itdetermined that Events Manager had authority to sign the contracts and that, even if she did not, her 'actions were ratified by D's upper management.' The court also determined that the liquidated damages provisions were not unconscionable, concluding that they 'appear to be standard in the hospitality industry.' The total judgment amount against D exceeds $1 million. D appealed. D asserts in part that questions of fact remain as to whether Events Manager had authority to sign the contracts, and if not, whether D ratified Events Manager's unauthorized act. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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