The opinion of the court was delivered by: DUFFY
Plaintiff Issa Nakhleh, a Syrian lawyer and business broker, brought this suit against Chemical Construction Corporation, David Fulton and Boise Cascade Corporation (hereinafter "defendants")
for breach of an alleged oral contract whereby plaintiff, for a fee, was to help Chemical Construction Corporation ("Chemico") obtain a contract to build a large fertilizer plant in Saudi Arabia.
Defendants now move pursuant to Rule 56 of the Federal Rules of Civil Procedure for summary judgment. The role of the Court when determining a motion for summary judgment is rather circumscribed. It is a fundamental maxim that a court on a motion for summary judgment cannot decide issues of fact but can only determine whether they exist. American Manufactures Mutual Insurance Co. v. American Broadcasting-Paramount Theatres, Inc., 388 F.2d 272 (2nd Cir. 1967), cert. den. 404 U.S. 1063, 92 S. Ct. 737, 30 L. Ed. 2d 752 (1972). If the Court finds questions of material fact, then summary judgment must be denied. The standard to be used in testing whether there is a material fact at issue is a demanding one. In Doehler Metal Furniture Co., Inc. v. U.S., 149 F.2d 130 (2nd Cir. 1945), Judge Frank admonished trial courts to avoid too easily granting summary judgment in the following words:
"We take this occasion to suggest that trial judges should exercise great care in granting motions for summary judgment. A litigant has a right to a trial where there is the slightest doubt as to the facts." 149 F.2d at 135 [emphasis added].
However, it is true that courts and defendants should not be subjected to trials that are nothing more than harassment. Thus, the Second Circuit has required that the party opposing the motion present specific facts showing that there is a genuine issue for trial. Applegate v. Top Associates, Inc., 425 F.2d 92 (2nd Cir. 1970). In support of their motion defendants argue that there are no genuine issues of fact. They contend that even assuming the existence of the oral contract, that plaintiff would be unable to recover because of the prohibition against the enforcement of oral finders' contracts contained in the New York General Obligations Law, McKinney's Consol. Laws, c. 24-A, § 5-701, subd. 10.
This court finds it unnecessary to decide whether this alleged oral contract would come within § 5-701, subd. 10. Rather, I find that there are material questions of fact which must be decided since their resolution will affect whether New York law or Saudi Arabian law is to be used in testing the validity of the contract between plaintiff and defendant Chemico.
This case comes to this Court by way of diversity jurisdiction, 28 U.S.C. § 1332. The Supreme Court in Erie R.R. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938), and Klaxon Co. v. Stentor Electric Mfg. Co., Inc., 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941), has made it clear that in a diversity case the question of choice of law is to be decided by following the principles and rules of the forum state. Thus, the question becomes what law would the New York choice of law rules direct the Court to apply to the question of this oral contract's enforceability.
The New York courts have been in the forefront of the development of new approaches to choice of law questions, and have left to the past the formalism of lex loci delictus and lex loci contractus. In Auten v. Auten, 308 N.Y. 155, 124 N.E. 2d 99 (1954), the New York courts for the first time followed a "center of gravity" or "interest analysis" approach in determining what law applied to a question regarding contract rights.
Faced merely with an oral finder's contract, which did not allegedly indicate an intention of the parties that the contract be governed by the law of a specific jurisdiction, this Court would apply the New York General Obligations Law § 701, subd. 10, based on the substantial contacts this contract had with New York and guided by the decision of the New York Court of Appeals in Intercontinental Planning, Ltd. v. Daystrom, Inc., 24 N.Y. 2d 372, 300 N.Y.S. 2d 817, 248 N.E. 2d 576 (1969). However, plaintiff argues that the oral contract by its terms included an agreement among the parties that the contract was to be governed by Saudi Arabian law. In support of this argument, plaintiff in his affidavit calls attention to an alleged conversation between plaintiff Nakhleh and defendant Fulton wherein Fulton assented to be bound by Saudi Arabian custom in regards to the question of fees. Whether this issue of fact (namely whether they did agree to be governed by Saudi Arabian law) rises to the level of materiality sufficient to preclude summary judgment depends upon whether New York's choice of law rules would allow the parties to choose the law by which to test the validity of their oral contract. If New York choice of law rules would preclude the recognition of this intention to apply Saudi Arabian law, then the existence or non-existence of such an intention becomes an irrelevant issue of fact.
New York has recognized the choice of law principle that the parties to a contract have a right to choose the law to be applied to their contract. See Compania de Inversiones Internacionales v. Industrial Mortgage Bank of Finland, 269 N.Y. 22, 198 N.E. 617 (1935) and Dougherty v. Equitable Life Assurance Society of the United States, 266 N.Y. 71, 193 N.E. 897 (1934). However, the freedom of choice on the part of the parties is not absolute. In the past, some courts have distinguished between issues of contract interpretation and issues involving the validity of a contract. The former were governed by the parties' intentions but the latter were not. See Siegelman v. Cunard White Star, Ltd., 221 F.2d 189 (2nd Cir. 1955) (applying federal choice of law rules). There is a paucity of New York law as to whether New York recognizes this limitation on the power of the parties to choose the law to be applied to their contract.
In A.S. Rampell, Inc. v. Hyster Company, 3 N.Y. 2d 369, 165 N.Y.S. 2d 475, 144 N.E. 2d 371 (1957), the New York Court of Appeals held that an oral modification of a written contract was not made unenforceable by New York law, because under New York law the issue of validity was governed by the law chosen by the parties in the written contract which law allowed for the making of oral modifications. Thus, it seems clear that New York does not have a blanket prohibition against parties choosing the law by which to determine the validity of a contract.
In view of the dearth of recent New York cases dealing with the recognition of the parties' choice of law intention, this Court must seek to divine what the New York courts would do based on an analysis of general choice of law principles. Section 187 of the Restatement, Second, of Conflicts of Law states succinctly the approach, I believe, New York would follow. In relevant part, that section states:
"(2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue ...