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Note: Overseas Carriers, Inc. (OCI) was an approved vendor of Team Ocean Services (TOS), a freight-forwarder and non-vessel operating common carrier. Jim Sandifer, an independent contractor, was the owner and head of TOS's Dallas office. Paul Powell, a TOS employee, was the International Manager for the Dallas office who reported directly to Sandifer. At a meeting between TOS and OCI, Sandifer told OCI's president in the presence of TOS's president that he had final authority to act for TOS. Accordingly, Sandifer had "apparent authority" to act on behalf of TOS. On the other hand, Powell had "actual authority" because he was an employee.

Subsequently, Sandifer and Powell negotiated a Contract of Affreightment between TOS and Great American Silica Company. Powell fraudulently signed Sandifer's name on the Contract of Affreightment. OCI sued TOS for fraud. The U.S. District Court for the Southern District of Texas, Houston Division, Werlein, J., found that TOS, the employer to whom Powell was an agent, was required to bear the burden of Powell's improper act. The court held that the Contract of Affreightment was a maritime contract and the dispute which arose from it fell under the purview of the Federal Arbitration Act, and ordered the parties to proceed with arbitration.

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