Thursday, March 02, 2006

Was Howard Stern an "Agent" of CBS?

Stephen Bainbridge's case for Howard Stern's liability to CBS largely turns on whether Stern qualifies as not simply a mere "employee" of CBS, but as an "agent" as well. This is important because an "agent" has duties to the "principal" that are above and beyond those owed by a mere employee to an employer. And if Stern didn't owe those special "agency" duties, Brainbridge's (arguing for CBS) case against Stern probably falls apart.

Now, keep this in mind about Agency and Employment: 1) Not all employees are agents; 2) Not all agents are employees (some agents are independent contractors, like your real estate agent, or your stockbroker); 3) Some folks qualify as both agents and employees. Bainbridge seems to argue that Stern qualifies under 3). I'm not at all convinced that Stern was anything other than a mere employee of CBS.

Bainbridge simply gives the American Law Institute's Restatement (Second) of Agency generic definition of Agency:

"An agency relationship exists if you have a manifestation of consent by one person (the principal) that another person (the agent) act (a) on the principal's behalf; and (b) subject to the principal's control; and (2) the agent's consent to so act."

And then Bainbridge asserts, "The employment contract between Stern and CBS for him would suffice to demonstrate the requisite consents."

I am not at all convinced of this. Now, granted, Brainbridge is a much more distinguished academic than I and my knowledge of agency comes largely from two chapters that I teach in a Community College Business Law book, but let me raise some points anyway.

Agents are agents when they "act on behalf of" or "represent" the principal in some way that goes beyond mere employment duties. For instance, the guy who sweeps the floors at 7-11, even though they benefit, is not an "agent" of 7-11 but only an employee. He is simply performing his employment duties.

Most of the time "agents" perform their duties in contractual representation on behalf of the principal. And if they perform their duties properly and within the scope of their agency, the principal, not the agent, is bound by the contract negotiated by the agent. For instance, Les Moonves signs Stern to a 4-year contract, but does so acting in his official capacity as boss of CBS. Stern's employment contract would not be between Les Moonves personally and Howard Stern, but rather between CBS and Howard Stern. In other words Moonves was acting as an agent for CBS. And because the "personhood" of corporations is a legal fiction, all deals entered into by them are done under the concept of agency.

Now, the concept of agency does go beyond just entering into contracts. For instance, when Moonves sued Stern, he did so "on behalf of" CBS, acting as their agent. But Bainbridge (or CBS) needs to do a better job explaining how exactly it is that Stern acted as an "agent" for CBS.

And even if Stern did act, at times, as an agent for CBS, I'm not convinced that his alleged breaches of duty occurred while he was acting in his capacity as "agent" as opposed to mere employee. For instance, maybe Stern was involved in the hiring of various staff. If so, the contracts wouldn't be between Stern and his staff, but rather CBS and said staff. In that case, Stern would have been an agent for CBS.

But still no proof has been offered that Stern's allegedly illegal behavior occurred while acting in his capacity as agent for CBS, but rather as a mere employee.

In short, it does not look "like CBS has a very strong case," but rather their strong case has yet to be made. And I doubt they will be able to do so.

No comments: