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MALKA v. E. F. HUTTON & CO.

February 14, 1979

Charles MALKA, Bernard E. Blanchard and Virgil Pacuraru, Plaintiffs,
v.
E. F. HUTTON & COMPANY INC., The E. F. Hutton Group Inc., and Joel B. Grae, Defendants



The opinion of the court was delivered by: POLLACK

OPINION AND DECISION

This is an action for a brokerage commission alleged to be due the plaintiffs for arranging a loan of money from Saudi Arabian interests to either the Government of France or French national corporations. The plaintiffs are citizens and residents of Canada. The defendants E. F. Hutton Group, Inc., and E. F. Hutton & Company, Inc., are Delaware corporations whose principal place of business is New York. Hutton & Co. is a subsidiary of Hutton Group. The defendant Grae is a citizen and resident of New York.

 The Hutton defendants have moved to dismiss the complaint for Forum non conveniens. For the reasons shown in detail below, their motion will be granted and the complaint dismissed.

 I.

 Procedural History

 The complaint was filed in December 1976. The Hutton defendants moved to dismiss the complaint for lack of jurisdiction over the subject matter, failure to join indispensable parties, improper venue, and Forum non conveniens. After oral argument on March 4, 1977, the Court on March 10, 1977, denied those branches of the motion asserting lack of jurisdiction over the subject matter and improper venue; denied without prejudice to renewal those branches of the motion asserting failure to join indispensable parties and Forum non conveniens ; and stayed all other proceedings pending discovery and an evidentiary hearing on other questions not pertinent here.

 The parties appeared again before the Court on June 17, 1977, at which time the Hutton defendants renewed their motion to dismiss for Forum non conveniens. On June 21, 1977, the Court filed a memorandum expressing grave misgivings about the propriety and fairness of exercising jurisdiction over this controversy. The Court expressed a desire for briefs on the law applicable to the plaintiffs' claim and, if foreign law was to be applied, on whether the plaintiffs' theory of liability was actionable in France. The Court requested as well a showing that a reasonable basis existed for the claim asserted herein. Pending receipt of these briefs, the Court held in abeyance its decision on the motion to dismiss.

 Discovery was then undertaken, including numerous depositions here and abroad. On the basis of the extensive matter so assembled, the parties supplied further briefs setting forth their arguments on the issue of Forum non conveniens. It appeared without contradiction that the law of France probably would govern the claim and that the theory of liability relied on by the plaintiffs was actionable in the French courts. The Court then took the matter under advisement.

 II.

 Plaintiffs' Version

 The plaintiffs allege that in 1974 either the Government of France or certain French national corporations ("the borrowers") were seeking loans of up to $ 4 billion. E. F. Hutton & Company (France) S.A. ("Hutton (France)"), then a second-tier subsidiary of Hutton & Co. but dissolved in 1977, agreed with the borrowers to act as their agent in obtaining the loans. Bernard J. Mallet, President of Hutton (France), turned in Paris for assistance in finding lenders to one Pinay, a Frenchman, who introduced Mallet to another Frenchman, one Lassagne. Mallet met with Lassagne in Paris, and the two agreed orally that Lassagne would help to raise the funds.

 Lassagne telephoned from Paris to the plaintiff Malka in Montreal, enlisted his assistance in the search for the loan, and promised him a 2.5% commission. Lassagne confirmed this arrangement by telex to Malka, sent from Paris with the consent of Hutton (France). Malka brought in his Montreal associates, the plaintiffs Blanchard and Pacuraru. The latter telephoned one Titu-Serban Ionescu, a citizen and resident of New York, and solicited Ionescu's assistance in the search for funds.

 Ionescu then took the matter up with the defendant Grae, one of his employers, and Axel Thiel, a West German then living in New York. Grae told Ionescu and Thiel that he knew one Hassan Enany, a well-placed Saudi Arabian who might be able to procure the loans. Ionescu, Grae and Thiel agreed that they would seek Enany's help.

 Ionescu then advised Malka and Blanchard in Montreal of the possibility that a loan could be arranged through Enany. Malka relayed the news of this possibility to Lassagne in Paris, who in turn informed Hutton (France).

 Lassagne then spoke again by telephone with Malka and Blanchard in Montreal. The three agreed that a loan of $ 4 billion for 20 years at 6.4% interest should be sought from Enany. The commission to the plaintiffs was to be 2.5%. These terms were to be confirmed by a telex from Hutton (France) to the Bank of the Rhone in Geneva, after which confirmation the borrowers and lenders would be put in touch with each other. Mallet then sent the following telex to the Bank of the Rhone:

 
attention : mm. pollack, director blanchard and malka
 
code e f hutton paris
 
paris montreal Lassagne / 7
 
operation 100 800 1500
 
1 conditions of the proposed loan, accepted by the borrowers
 
amount 2.500.000.000 us dollars (two billion five hundred million us dollars)
 
term 20 years (twenty years)
 
interest 6.40% compound fixed (six comma (point) forty percent)
 
net proceeds 100% (one hundred percent)
 
2 agreement of the borrowers on charges
 
engineering financing 2% (two percent)
 
commission code malka 2.50% (two comma (point) fifty percent)
 
commission code Lassagne 2.50% (two comma (point) fifty percent)
 
: ...

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