New Precedent on Apparent Authority and Contract Ratification in Municipal Employment: Town of Depew v. Gresham

I. Introduction

The case of Kevin Gresham v. Town of Depew, Oklahoma addresses complex issues surrounding municipal authority and contract law under Oklahoma statutes. Appellant Kevin Gresham, formerly the Chief of Police of the Town of Depew, challenges his termination by asserting both a breach of contract claim—centered on a self-drafted Employment Contract—and a constitutional Due Process claim under the Fourteenth Amendment.

Background information reveals that Mr. Gresham was hired by a statutory town governed by a five-member Board of Trustees, with the mayor having strictly delineated roles under 11 Okla. Stat. § 12-105. The Employment Contract in question was prepared by Mr. Gresham, signed by the Town’s mayor, and later became subject to dispute when the Town terminated his employment without honoring its buy-out provision. Key issues include: whether the mayor had (or appeared to have) the authority to bind the Town into such a contract, whether the Board ratified the Employment Contract, and whether these issues give rise to both a breach of contract claim and a Due Process violation.

II. Summary of the Judgment

The United States Court of Appeals for the Tenth Circuit affirmed the district court’s grant of summary judgment in favor of the Town. The Court concluded that the Employment Contract was invalid under Oklahoma law because the mayor lacked the actual—and, by extension, the apparent—authority to bind the Town. Additionally, the Board’s failure to formally ratify the contract further undermined Mr. Gresham’s breach-of-contract claim. Since the contractual property interest was predicated on an invalid agreement, the Due Process claim also failed.

III. Analysis

A. Precedents Cited

The Judgment draws on several Oklahoma and federal precedents to illuminate the principles of agency and contract ratification. Key cases include:

Deherrera v. Decker Truck Line, Inc. – The Tenth Circuit’s guidance on reciting facts in the light most favorable to the nonmovant established the framework for reviewing summary judgment.
TRADERS INS. CO. v. JOHNSON – Cited for the principle that apparent authority is determined solely by the principal’s conduct rather than the agent’s statements. This case highlighted that detrimental reliance, while discussed in some Oklahoma cases, is not strictly necessary when the principal’s representation is at issue.
Franco v. State ex rel. Bd. of Regents of the Univ. of Okla. – Emphasized that apparent authority results from a manifestation by the principal. The decision underscores that actions of the agent after contract execution are not relevant to the determination of authority at the time of contracting.
KINCAID v. BLACK ANGUS MOTEL, INC. – Provided the necessary framework for ratification, outlining the requirement of the acceptance of benefits, full knowledge, and the party’s competency to contract.
STEFFEY v. ORMAN – In the Due Process context, it defined the necessity of demonstrating a constitutionally cognizable property interest.

In addition, citations from Williston on Contracts and other recent opinions (e.g., GP3 II, LLC v. Litong Cap., LLC) contributed to the analysis regarding the timing and reasonableness of reliance on an agent’s apparent authority.

B. Legal Reasoning

The Court’s reasoning rested on several interconnected legal findings:

Authority of the Mayor: The district court, and subsequently the appellate court, determined that under 11 Okla. Stat. § 12-105 the mayor’s powers are narrowly circumscribed. Without an ordinance or another statutory expansion of the mayor’s authority, her signing of the Employment Contract did not confer contractual power on the Town.
Apparent Authority Analysis: The Court relied on the proposition that apparent authority must stem from the principal’s manifestations. Since the Town never showed any conduct suggesting that the mayor was empowered to bind it, any post-contractual actions (such as discussions by Board members) were insufficient to create a reasonable belief in apparent authority at the time of contract execution.
Ratification Consideration: For ratification to be established, the Board would have had to accept the benefits of the contract with full knowledge of its terms. The fact that Mr. Gresham was paid in a manner consistent with the pre-existing oral arrangement and not the additional contractual terms (such as the buy-out provision) weakened any argument for ratification.
Due Process Claim: The Due Process claim was dependent on the existence of a property interest in continued employment. Since the contract was found invalid, any purported property interest derived therein was also null, thereby negating the constitutional claim.

Ultimately, every major element of Gresham’s argument was challenged by the statutory limitations placed on municipal officials and the established requirements in Oklahoma case law regarding both apparent authority and ratification.

C. Impact on Future Cases and the Relevant Area of Law

The Judgment reinforces key legal principles with potentially far-reaching implications:

Clarification of Municipal Authority: Municipal entities and other governmental bodies will reference this case as a precedent when determining whether their elected or appointed officials have the authority to bind the entity contractually. It underscores that statutory limitations remain paramount.
Agency and Apparent Authority Standards: Future disputes over the authority of public officials will likely be resolved with close reference to this case. The decision makes clear that representations made after the fact cannot retroactively confer authority.
Ratification Doctrines: The Judgment also sets parameters on how ratification is to be analyzed in similar contractual disputes involving both public and private entities, particularly emphasizing the need for unequivocal acceptance of contractual benefits with full knowledge of the underlying facts.
Procedural Efficiency: By affirming summary judgment, the case demonstrates that courts will strictly scrutinize the essential elements of contract formation and due process claims prior to proceeding to trial, thus potentially reducing prolonged litigation over disputed facts that are central to contractual authority.

IV. Complex Concepts Simplified

To ensure a clear understanding, several complex legal concepts are simplified below:

Actual vs. Apparent Authority: Actual authority is the power actually granted to an agent by its principal. Apparent authority exists when a third party reasonably believes an agent is authorized to act on behalf of the principal based solely on the principal’s own conduct or representations—even if the agent did not have explicit permission.
Ratification: In contractual terms, ratification occurs when a principal confirms or approves an unauthorized act or contract entered into by an agent, thereby making the act binding. Key factors include acceptance of benefits, complete knowledge of the relevant facts, and the principal's capacity to contract.
Due Process Property Interest: For a Due Process claim to be successful, a plaintiff must have a legally protected property interest that the state interferes with. Here, the invalidity of the contract meant no protected employment benefit was at stake.

V. Conclusion

In conclusion, the Tenth Circuit’s decision in the Town of Depew v. Gresham case represents a significant affirmation of established legal doctrines regarding the scope of municipal authority, the boundaries of apparent authority, and the strict requirements for ratification of contracts. The judgment makes it abundantly clear that:

The mayor’s signing of an employment contract does not automatically convey binding authority unless supported by statutory empowerment or explicit ratification by the governing body.
Post-contractual discussions or the passive acceptance of contractual benefits under pre-existing arrangements cannot substitute for the principal’s clear manifestation of authority at the time the contract was negotiated.
An invalid contract cannot serve as a basis for a protected property interest, thereby nullifying related Due Process claims.

This comprehensive analysis highlights the decision’s role as persuasive authority for future disputes involving city or town officials’ contractual powers and offers significant clarity in navigating the interplay between municipal statute and judicially developed agency principles.

In the broader legal context, the case stands as a critical reference point, reinforcing the necessity for municipal clarity in contracting and cautioning third parties against relying on agents’ actions that fall outside the parent body’s clearly defined statutory powers.