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November 7, 1990


The opinion of the court was delivered by: Conboy, District Judge:


Plaintiff Harold R. Warshay ("Warshay") brings this action against defendant Guinness PLC ("Guinness") for breach of an oral "finder's fee" agreement. Currently pending before the Court are Guinness's motions for summary judgment pursuant to Fed.R.Civ.P. 56(c) and for sanctions pursuant to Fed.R.Civ.P. 11 and 56(g). For the reasons set forth below, both motions are granted.


Warshay, a resident of New York, is an investment banker who, in 1986 and early 1987, was a consultant to Arthur Young & Co. ("Arthur Young") in New York. Deposition of Harold R. Warshay at 53, 59.*fn1 Although, according to Warshay, Arthur Young "was not in the mergers and acquisitions business either by itself or with [him]," Affidavit of Harold R. Warshay, sworn to on July 9, 1990 ("Warshay 7/9/90 Aff."), ¶ 19, Arthur Young's New York office staked the costs of Warshay's merger and acquisition activity outside New York in exchange for sharing in any fees generated by Warshay's activity. Id. Thus, Warshay used Arthur Young's New York office to make telephone calls, send and receive correspondence, and do research in connection with his work. He reported to James O. Lippert ("Lippert"), a partner at Arthur Young's New York office, and submitted expense reports for travel outside of New York for Lippert's approval. Arthur Young's New York office also introduced Warshay to its European offices.

A.  Warshay's Agreement with Guinness

According to Warshay,*fn2 in October 1986 Meshulam Riklis ("Riklis"), then the owner of Schenley Industries, Inc. ("Schenley"), a liquor distributor, called him in Los Angeles, California and asked him to come to Denver, Colorado to meet with Riklis. (Warshay 89) Warshay flew to Denver that night and met with Riklis the next day. (Warshay 102) Riklis told Warshay that he would like Warshay to try to sell Schenley, then a Delaware Corporation headquartered in Texas, to a European buyer. (Warshay 103) Riklis provided Warshay with confidential financial information which Warshay later took down on two yellow sheets of paper (which no longer exist). (Warshay 338-39)

Warshay left immediately for Paris. From Paris he made a day-trip to London (Warshay 304), where he discussed the Schenley acquisition with Richard Mead ("Mead"), head of mergers and acquisitions at the London office of Arthur Young. Mead suggested that Guinness would be the "best fit" and informed Warshay that the person to contact at Guinness was Olivier Roux ("Roux"), the London-based Chief Financial Officer of Guinness and the person in charge of mergers and acquisitions. (Warshay 127)

Warshay spoke to Roux that day by telephone from Mead's office. During the course of their conversation, Roux agreed to compensate Warshay in accordance with the "Lehman formula"*fn3 if Guinness acquired any company identified by Warshay as available for acquisition. Warshay then informed Roux that Schenley was available for acquisition. Roux expressed astonishment that Schenley was available for sale and said that he was definitely interested although he was involved with other matters and would not be able to consider such an acquisition immediately. (Warshay 142-50)

In November of 1986, Warshay met Riklis a second time at Riklis's New York office. At this meeting, Riklis gave Warshay a two-page computerized printout containing confidential financial information about Schenley. (Warshay 344) Soon thereafter, Warshay returned to London and again called Roux from Arthur Young's London office. Warshay and Roux met in a hotel near Roux's office and Warshay gave Roux a copy of the data sheets he had received from Riklis. Upon seeing the printout, Roux finally appeared truly convinced of Schenley's availability. (Warshay 339) In addition, Roux reaffirmed his interest in Schenley, his current involvement in other matters, and his fee agreement with Warshay. (Warshay 153-60)

In January of 1987, Warshay again called Roux from London. (Warshay 160-61) By that time, however, Roux had left Guinness, and Warshay called him at a number supplied to him by the Guinness office. (Warshay 535-37) Warshay never contacted anyone else at Guinness concerning the acquisition of Schenley until he learned months later that Guinness had, in fact, acquired Schenley. (Warshay 163-64)

B.  Guinness's Acquisition of Schenley*fn4

On September 16, 1987, Guinness America, a Guinness subsidiary then located in New York,*fn5 entered into a purchase agreement to acquire certain of the assets of Schenley. The purchase agreement was executed in New York and is governed by New York law. The closing took place in New York on October 20, 1987. In addition, in the negotiation of the purchase agreement and at the closing, all parties were represented by attorneys located in New York.

At the time of Warshay's contacts with Guinness, and until its acquisition by Guinness America, Schenley was Guinness's largest distributor in the United States. In November 1986, Guinness transferred to Schenley its trademark in its Dewar's brand of Scotch whiskey. In early 1987, Guinness determined that efforts should be undertaken to recover its Dewar's trademark. In February 1987, representatives of Guinness met with representatives of Schenley to discuss, among other things, the recovery of the Dewar's trademark.

In March 1987 Guinness was informed by Seagram that Seagram was interested in acquiring Schenley. After learning of Seagram's interest, Guinness informed Seagram that it would not approve an acquisition of Schenley by Seagram (such approval by Guinness was apparently required by agreement between Guinness and Schenley), and began discussions with Schenley regarding a possible acquisition of Schenley. The acquisition of Schenley by Guinness America occurred after months of discussions and negotiations beginning at that time.


Guinness initially moved to dismiss this action on the pleadings, arguing that New York law should apply and that Warshay's claim was barred by New York's Statute of Frauds provision with respect to alleged oral agreements for finder's fees agreements, N.Y.Gen.Oblig.L. § 5-701(a)(10). After the Court determined that this issue should be determined on a motion for summary judgment (see Memorandum Endorsement dated April 4, 1989), Guinness moved for summary judgment. Guinness argued that because Warshay was, according to his affidavit submitted in opposition to the motion to dismiss, a New York-based finder, Affidavit of Harold R. Warshay, sworn to on June 24, 1988 ("Warshay 6/24/88 Aff."), ¶ 3, there was sufficient contact with New York to warrant the application of New York law.

In opposition to Guinness's motion for summary judgment, however, Warshay submitted a second affidavit in which he explained that, at the time of his agreement with Guinness, he was working in London. Affidavit of Harold R. Warshay, sworn to on May 19, 1989 ("Warshay 5/19/89 Aff."), ¶ 5. Specifically, Warshay averred:

  Although I presently maintain an office in my
  home in New York through which a substantial
  portion of my investment banking business passes,
  at the time of the promise to pay me a fee and
  for about nine months prior thereto, and for
  approximately six months thereafter, I worked in
  Europe, with an office in London, England. During
  this approximate fifteen month period, from
  London, I visited France and Germany during which
  I pursued a variety of investment banking

Id. In his affidavit, Warshay made no mention of his affiliation with Arthur Young's New York office, outlined earlier, or of the meeting he had with Riklis in New York. To the contrary, Warshay declared, "New York has not had a single contact with any aspect of the promise which is the basis for this litigation." Id. ¶ 4. By memorandum endorsement dated July 14, 1989, the Court denied the motion for summary judgment without prejudice to its renewal at trial.

Guinness has now renewed its motion for summary judgment, contending that discovery has revealed that Warshay was affiliated with Arthur Young's office in New York and was not based in London.*fn6 Guinness again argues that this action should be governed by New York law and is therefore barred by the Statute of Frauds. In the alternative, Guinness argues that, assuming this action is governed by English law, Warshay cannot meet his burden of showing that he was the "effective cause" of the Schenley acquisition. Warshay responds first that English law should apply, or at least that issues of fact preclude a choice of law determination on summary judgment. Warshay further responds that he need not prove that he was the ...

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