Appeal from a judgment of the District Court for the Southern District of New York (Keenan, J.) declaring, on motion for summary judgment, that claim for a finder's fee was barred by the New York State Statute of Frauds. Appellants also challenge a prior ruling denying motion to stay, dismiss or transfer declaratory judgment action. Affirmed in part, reversed in part and remanded.
Before: VAN GRAAFEILAND, NEWMAN and MINER, Circuit Judges.
Charles F. Huber, II ("Huber") and Thomson McKinnon Securities, Inc. ("Thomson McKinnon") appeal from a judgment of the United States District Court for the Southern District of New York (Keenan, J.), declaring that appellee Fort Howard Paper Company ("Fort Howard") was not liable in contract to either Huber or Thomson McKinnon for a finder's fee in connection with the 1983 merger between Fort Howard and the Maryland Cup Corporation ("Maryland Cup"). The judgment also dismissed counterclaims for fraud asserted by Huber against Fort Howard and Maryland Cup. The appeal also seeks review of Judge Keenan's denial of appellant's motion to stay, dismiss or transfer this declaratory judgment action, 578 F. Supp. 301 . We affirm Judge Keenan's ruling on the motion to stay, dismiss or transfer the declaratory judgment action. We also affirm Judge Keenan's decision on the contract claims but reverse and remand on the fraud claims.
The facts precipitating this controversy are, for purposes of this appeal, largely undisputed. Huber, a citizen and resident of Connecticut, was employed in New York City as a promoter of mergers and acquisitions by Thomson McKinnon until June of 1981, when he joined the New York firm of William D. Witter, Inc. ("Witter") in a similar capacity. In January of 1980, Gerald Zentz, a Thomson McKinnon Vice-President in the firm's Baltimore office, learned that Maryland Cup was interested in being acquired by another corporation. Zentz called Dr. Albert Shapiro, a former Maryland Cup Officer and Director, and offered Thomson McKinnon's services in locating an acquiring company. The next month, Shapiro, on behalf of Maryland Cup, accepted Thomson McKinnon's offer to act as a finder.
A few months prior to this agreement, Dean Porter, another Thomson McKinnon employee, had offered Thomson McKinnon's services to procure suitable merger candidates for Fort Howard. In May of 1980, Arnold Janofsky, Assistant to the President at Fort Howard, accepted Thomson McKinnon's offer and requested assistance in locating an "interesting situation." In a letter to Porter, Janofsky described the type of company Fort Howard was interested in acquiring and noted that "we would appreciate it if you would contact us with available facts and information including your fee, if any." At this point, both Zentz and Porter solicited Huber's involvement. From his New York office, Huber called Janofsky in Wisconsin and advised him that he had two possible acquisitions in mind for Fort Howard. Huber promised to try to arrange a meeting with the principals of each company, and Janofsky told Huber that Fort Howard would pay the customary finder's fee to Thomson McKinnon if a merger or acquisition were to be consummated.
On June 3, 1980, Huber telephoned Janofsky in Wisconsin and told him that he believed Maryland Cup would be a suitable acquisition for Fort Howard. Janofsky expressed interest and requested more information. Huber then telephoned Merrill Bank, Maryland Cup's Chairman, and scheduled a meeting at Bank's summer home on Cape Cod. Huber met with Bank on July 11th, and the two discussed the general possibility of Maryland Cup being acquired by a company like Fort Howard. Bank expressed great enthusiasm over such a prospect and Huber revealed the identity of Fort Howard as a likely acquiring company. Bank apparently was excited by this idea and promised Huber that he "would be protected with respect to a finder's fee." Huber had indicated to Bank that an appropriate fee would be one-percent of the value of the merger transaction (which ultimately amounted to $570,000,000). Bank reiterated his interest and suggested that Huber set up a meeting with Fort Howard's President, Paul Schierl, promising that if Fort Howard did not pay Huber's fee, Maryland Cup would.
One week later, on July 18, 1980, Huber placed a call to Janofsky in Wisconsin. He was referred to Walter Charles, a Fort Howard Senior Vice-President who had replaced Janofsky. Huber informed Charles of his earlier discussion with Janofsky concerning a possible Fort Howard-Maryland Cup merger and of Bank's desire to meet with Schierl. He also informed Charles that Janofsky had agreed to a one-percent finder's fee to be paid upon conclusion of the merger. Finally, Huber told Charles that, although Bank had offered to protect him with respect to a fee, he still considered himself to be working for Fort Howard and would look to it for his fee. Charles responded that that was "fine."
Subsequent to this conversation, Charles was replaced as Huber's contact on the Maryland Cup transaction by Gerald Korb, an Assistant Vice-President for Finance at Fort Howard. Huber wrote to Korb on August 27, 1980, describing the fee agreement that had been reached with representatives of both Maryland Cup and Fort Howard. Throughout September and October of 1980, Huber spoke with Korb in an effort to arrange a meeting between Schierl and Bank. After a number of changes and cancellations, Huber managed to schedule the meeting for October 21, 1980. Bank and Schierl met that day in a Chicago hotel room reserved by Huber; Huber was not invited to attend the meeting. In a memorandum to the file dated October 28, 1980, Schierl described the meeting and reported the following:
Bank said he did have a meeting with Huber and that
the subsequent events leading to our meeting were
with his knowledge and in Bank's opinion if any deal
was ever consummated, Huber would be ...