Monday, March 13, 2006

Railroad Loses $116,000 After Responding to E-Mail Pitch
Railroad Loses $116,000 After Responding to E-Mail Pitch
By DONNA HIGGINS, Andrews Publications Staff Writer

Railroad giant CSX Transportation Inc. has lost its bid to collect almost $116,000 from a company whose name appeared in the domain name of an unsolicited e-mail that offered to buy old railcars for scrap.

The mere presence of the company's name as part of the sender's e-mail address is not enough, without more, to establish that the sender had authority to enter into a binding contract on the company's behalf, U.S. District Judge William G. Young in Boston said, noting that the issue appeared to be one of first impression.

"Before delivering goods worth over $115,000 to a stranger, one reasonably should be expected to inquire as to the authority of that person to have made such a deal," the judge said. "Given the anonymity of the Internet, this case illustrates the potential consequences of operating — even in today's fast-paced business world — as CSX did."

CSX filed the breach-of-contract case in the U.S. District Court for the District of Massachusetts against Recovery Express Inc. and Interstate Demolition & Environmental Corp. IDEC shared office space with Recovery Express, and two of Recovery Express' principals were also active in IDEC, the opinion says.

CSX provides freight rail service in 23 states in the eastern United States and in two Canadian provinces.

As the ruling explained, a CSX employee received an e-mail from Albert Arillotta, who claimed he worked for Recovery Express and used the e-mail address The message — rife with spelling and grammatical errors — claimed Recovery Express was interested in buying old CSX railcars to resell for scrap.

The CSX employee spoke by phone with Arillotta, who eventually showed up at a CSX rail yard and hauled away several railcars. There is no evidence as to where the railcars are now or what happened to them, the opinion notes.

A check from Arillotta for $115,757 bounced, and Recovery Express refused to pay, claiming Arillotta never worked for the company. The judge said Arillotta actually worked for IDEC, and the two companies apparently shared an e-mail system. IDEC is now defunct.

Recovery Express moved for summary judgment, contending that CSX has no grounds for forcing it to pay the bill for the railcars.

Judge Young agreed, saying the outcome of the case boiled down to whether the presence of Recovery Express' name as part of Arillotta's e-mail address was enough by itself to confer "apparent authority" on Arillotta to enter into a contract for Recovery Express.

The judge concluded it did not, and he likened an e-mail address to a business card or corporate stationary, which can create an association between an individual and a company but does not automatically mean the person has any authority to act on the company's behalf.

If the court adopted CSX's argument, the judge said, it would mean "every subordinate employee with a company e-mail address — down to the night watchman — could bind a company to the same contracts as the president. That is not the law."

CSX Transportation Inc. v. Recovery Express Inc., No. 04-12293, 2006 WL 235068 (D. Mass. Feb. 1, 2006).
Computer & Internet Litigation Reporter
Volume 23, Issue 20