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Hutner v. Greene

decided: May 8, 1984.


Appeal from an order of the United States District Court for the Southern District of New York (Robert L. Carter, Judge) granting summary judgment and dismissing this diversity action on the ground that the omission of a material term rendered on a purported contract unenforceable.

Newman and Winter, Circuit Judges and MacMahon, District Judge.*fn*

Author: Winter

WINTER, Circuit Judge:

Plaintiff Herbert L. Hutner appeals from Judge Carter's grant of summary judgment for the defendants and dismissal of his complaint on the ground that the contract he seeks to enforce lacks a material term under New York law.

We affirm in part, reverse in part and remand for further proceedings consistent with this opinion.


Since the district court granted defendants' motion for summary judgment, we state the fact in the light most favorable to Hutner.

This litigation arose out of the settlement of an earlier dispute concerning the future of C.I. Realty Investors ("C.I. Realty"), a Massachusetts real estate investment trust whose shares were traded at relevant times on the New York Stock Exchange. A controlling interest in C.I. Realty was owned by City Investing Company ("City Investing"), but by the end of 1978, David J. Greene and Company, ("Greene & Co."), a New York limited partnership in the investment banking field, controlled about 9% of the shares of C.I. Realty. A group of C.I. Realty shareholders, including David Greene, the general partner of Greene & Co., and Jerome Greene (no relation to David Greene), believed that C.I. Realty should be liquidated. To that end they formed a shareholders' group to wage a proxy fight to unseat C.I. Realty's management, an effort opposed by City Investing.

Hutner, a resident of California, engages in various investment activities, including investing for his own account and facilitating the purchase and sale of businesses by others. Hutner became aware of the C.I. Realty dispute sometime in late 1978. Hutner was acquainted with both David Greene and the officers of City Investing and developed the idea of bringing the two sides together with a view to inducing one to buy out the other's stake in C.I. Realty. After David Greene asked Hutner to arrange a meeting between the two sides, Hutner broached the proposal to David Brown, City Investing's general counsel, who expressed a willingness to meet with David Greene. Accordingly, Hutner arranged such a meeting, which was attended by him, David Greene and Brown on January 5, 1979 in Palm Springs, California.

At the meeting, the participants discussed both a sale of City Investing's C.I. Realty stock to Greene & Co. and a sale of Greene & Co.'s C.I. Realty stock to City Investing. During the discussions, Brown expressly stated that if any such transaction were consummated, City Investing would not pay Hutner a finder's fee for his role in having brought the two sides together. Hutner then turned to David Greene and indicated that if a purchase or sale of the kind under discussion took place and involved parties represented by David Greene, he would "expect to receive a normal fee for [his] services." David Greene's response was, "we will take care of you." No formal agreement on such a fee was ever executed, however.

A direct transaction between Greene & Co. and City Investing never materialized, although following the meeting Hutner did pass information, offers, and counteroffers between City Investing and David Greene. Meanwhile, Jerome Greene, who was also in frequent contact with David Greene about possible transactions involving the purchase or sale of C.I. Realty stock, contacted George Scharffenberger, chief executive officer of City Investing, to discuss a possible sale of City Investing's shares in C.I. Realty. After initially declining interest, Scharffenberger began negotiations with Jerome Greene regarding such a sale. In the course of these negotiations David Greene obtained from Hutner Scharffenberger's weekend telephone number, which he gave to Jerome Greene. Scharffenberger and Jerome Greene ultimately agreed that City Investing would sell its C.I. Realty stock, and Jerome Greene set out to find purchasers for it. Such purchasers, including Jerome Greene himself, were eventually located, and the sale of City Investing stock in C.I. Realty went forward in July, 1979. Hutner's involvement in the discussions between City Investing and Jerome Greene was limited to providing Scharffenberger's telephone number.

Hutner's complaint, filed in July, 1981, asserted two alternative claims for relief.*fn1 In the first, a claim based on express contract, Hutnner alleged that the defendants had breached an agreement to pay Hutner a finder's fee in the event a purchase or sale of C.I. Realty stock between City Investing on the one hand and David J. Greene and other investors on the other occurred. In the second, a claim based on quantum meruit, Hutner alleged that he was entitled to compensation for finder's services rendered to the defendants in connection with the sale of City Investing stock in C.I. Realty. Identical damages were sought under the two theories of liability -- viz. $237,981, a sum derived from the "Lehman formula," which is alleged by Hutner to be widely used in investment banking circles in the calculation of finder's fees.*fn2 Federal jurisdiction was based on diversity of citizenship.

After extensive discovery, Judge Carter granted the defendants' motion for summary judgment. Hutner v. Greene, 572 F. Supp. 49 (S.D.N.Y. 1983). Applying New York choice of law rules, he concluded that a New York court would apply New York substantive law to every issue raised in the complaint. Judge Carter then dismissed the entire action, holding that, because the ...

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