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TRAIN v. ARDSHIEL ASSOCS.

May 15, 1986

MARTIN A. TRAIN and VANTAGE INTERNATIONAL, Plaintiffs, against ARDSHIEL ASSOCIATES, INC., et al., Defendants


The opinion of the court was delivered by: STANTON

LOUIS L. STANTON, D. J.

This case presents one of the recurring types of disputes which arise when a large acquisition or merger has been completed and a brokerage commission or finder's fee is sought, based on an asserted oral agreement. Here the claim is by an alleged finder for a share of the fee already collected from the principal by a firm of financial consultants. It raises the familiar questions whether there was an agreement, whether such an agreement is barred by the statute of frauds, and whether the plaintiff performed his part.

After a three-day nonjury trial, I resolve those questions in this case in plaintiff's favor.

 BACKGROUND

 In January 1980 plaintiff Martin Train's employment as an executive in Brussels came to an end and he found himself, apparently in comfortable financial circumstances and with many . business contacts in Europe, interested in engaging in some enterprise of his own.

 He got in touch with the defendant Henry B. Turner, and visited him on February 7, 1980 in Turner's new office in New York City. Turner had recently become affiliated with the defendant Ardshiel Associates, Inc. ("Ardshiel") whose principal, Richard M. Hexter, was respected by both Turner and Train for his business acumen and connections. Turner told Train that Ardshiel represented a new start for him, he was very hopeful of its prospects and he wished Train to meet Hexter.

 Hexter and Train spent considerable time together on the morning of February 7, 1980, during which Hexter explained that Ardshiel's activities included consulting, evaluating companies and providing financial advice for investment banking purposes such as raising money, recapitalizing or selling a company. In particular, he showed Train a current Ardshiel project in which it had been retained by Comerco, Inc. ("Comerco") to analyze Comerco, to advise its management in appraising its value, and to obtain a purchaser for Comerco and assist with its ultimate sale. Ardshiel had performed the analysis and evaluation, for which it had already received a $25,000 fee, and it was then attempting to find it a buyer. When a buyer was found and the transaction closed with Ardshiel's assistance, Comerco would pay Ardshiel a much larger fee calculated as a portion of the purchase price.

 Those facts do not appear to be contested. What happened thereafter is in dispute. From the credible testimony, my observation of the witnesses, and the weight of the credible evidence at trial I find the following.

 During his meeting with Hexter, Train asked how the project of finding a buyer for Comerco was going. Hexter replied that it was not going well, and that Ardshiel had "scoured the world" with lists and letters without obtaining any solid interest. Train stated that he knew that many Europeans were investing in the United States, that those most apt to be interested in a company like Comerco were probably located in England and Germany, and that he could help. Hexter said that Ardshiel should do something pretty quickly since the engagement with Comerco was coming to an end and they had to produce some potential buyers. Train told Hexter that he knew a man whose specialty was the purchase of American companies by German companies, who was then in New York and might be interested. Hexter told Train that if he found a company which eventually purchased Comerco, Ardshiel would share its fee from Comerco fifty-fifty with Train.

 Ardshiel had prepared a "selling document" for Comerco, which was confidential and only to be given to potential buyers with Comerco's permission. Ardshiel gave a copy of the document to Train the weekend following the February 7, 1980 meeting.

 On the following Monday, February 11, 1980, Train met at Ardshiel's offices with defendant Louis Klein, Jr., who was in charge of the Comerco project for Ardshiel. They discussed the selling document and Klein's strategy for locating a buyer. Klein had already contacted several of the foreign companies Train believed might be interested, but to no avail. After this meeting, Train was convinced that his acquaintance, Frank F. Beelitz, a New York investment banker working primarily with German companies, could provide valuable help. He obtained the necessary clearance to show Beelitz the Comerco selling document, met with Beelitz, stimulated his interest in the project and obtained Beelitz' agreement that any compensation of Beelitz' employer Morgan Guaranty Trust Company of New York would be paid by Comerco's purchaser rather than by Comerco or Ardshiel.

 In a series of meetings and communications thereafter, Beelitz brought Comerco to the attention of a German company, BASF Ag (unsuccessfully) and of Henkel KG aA, a German chemical company. Henkel became interested in acquiring Comerco, but for various reasons thought the acquisition was not an appropriate one to make itself. Henkel referred the proposed acquisition to The Clorox Co., a U.S. corporation in which Henkel held a twenty percent stock interest. Clorox and Beelitz corresponded concerning the proposed acquisition, but in August 1980 Comerco stated that it was not interested in Clorox as a purchaser. At that point Beelitz' and Train's efforts came to an end.

 In mid-September 1980 Clorox engaged its traditional investment banker, Morgan Stanley & Co., to contact Comerco. Negotiations ensued, at first unsuccessfully, on the basis of a stock-for-stock transaction and then, after interim changes in Clorox management, an agreement resulted in Clorox'sacquisition-of Comerco for a combination of cash and notes.

 Under its agreement with Comerco, Ardshiel received a fee of $987,500. Asserting that he is entitled to half that amount under his own oral agreement with Hexter, Train claims $493,750, together with interest and costs.

 Defendants assert that (1) there was never any agreement between Ardshiel and Train; (2) since the alleged agreement between Ardshiel and Train is oral, it is barred by the applicable Statute of Frauds, New York General Obligations Law, Section ...


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