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AROCHEM INTERN., INC. v. BUIRKLE

June 24, 1991

AROCHEM INTERNATIONAL, INC., AROCHEM CORPORATION, AND WILLIAM R. HARRIS, PLAINTIFFS,
v.
HAROLD W. BUIRKLE, DEFENDANT.



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

MEMORANDUM OPINION

Plaintiffs sue defendant Harold W. Buirkle for defamation and for tortious interference with a contract and with a business relationship. At the close of plaintiffs' presentation of their case to the jury, the court directed a verdict for defendant.

BACKGROUND

This case is a skirmish in the battle between plaintiff William R. Harris and Mr. Edwin E. Wells, Jr. (not a party to this lawsuit) for the shares in Arochem International, Inc. and Arochem Corporation ("Arochem") held by "Victory" (comprising Victory Oil Company, Victory Holding Company and the Crail Fund — none of whom is a party to this lawsuit) which might give Harris or Wells control of Arochem.

Defendant Buirkle is an ally of Mr. Wells, with whom he made an October, 1989 Joint Litigation Agreement (Joint Tr. Exh. 21) in which Buirkle agreed to help Wells finance his litigation expenses and related costs of preserving Wells' rights in Arochem, and received rights to purchase an equity interest in Arochem if Wells succeeded in buying out Victory's and Harris' interest. Id. Buirkle has advanced $1,850,000 to Wells under that agreement. (Stipulated Facts ¶ 11).

In 1987, Mr. Wells had helped plaintiff Harris obtain financing from Victory to enable Harris to form Arochem, in return for which Mr. Wells and Victory collectively received a portion of Arochem's common stock. Mr. Harris, a Connecticut resident, is Arochem's founder, chairman, president and majority shareholder. Arochem is in the petroleum and petrochemical business and has its executive offices in Connecticut. (Stip. Facts ¶¶ 1, 3, 5).

Beginning in 1988, disputes concerning Arochem's operation arose among the three parties. Because of these disputes, Victory decided to sell its interest in Arochem either to Wells or to Harris. Wells claims that sometime in March, 1989 he made a binding agreement with Victory to purchase its interest. (Stip. Facts ¶¶ 4-6).

On April 13, 1989, Victory filed suit in the United States District Court for the Central District of California seeking, among other things, a declaration that it was free to sell its interest in Arochem to persons other than Wells. Wells answered and counterclaimed, alleging that Victory had (i) repudiated its contract to sell him its interest in Arochem, (ii) repudiated its contractual obligation to obtain his consent to Victory's sale of its Arochem interests, and (iii) denied, in bad faith, the existence of its contract to sell him its Arochem interest. On July 17, 1989, Harris sued both Wells and Victory in the United States District Court for the District of Connecticut. On August 28, 1989, Wells sued Harris in the same court and also asserted derivative claims against Victory. (Stip. Fact ¶¶ 7, 9).

In November, 1989, Harris and Victory entered into a Stock Purchase and Settlement Agreement which provided for Harris' purchase, and Victory's sale to him, of its interest in Arochem (Joint Tr. Exh. 12). That Agreement was executed in Connecticut.

Then at Mr. Wells' request, Robert Johnson, Eric Johnson, and Sherry Hutchinson of Victory met with Edwin Wells and defendant Buirkle in Los Angeles, California, on December 20 and 21, 1989. Before beginning their discussions, the participants signed a Memorandum (Joint Tr. Exh. 70) which stated in part:

  The undersigned have agreed to meet together to
  attempt to resolve business and legal disputes
  between and among themselves, including settlement
  of claims that have been or might be brought in
  litigation presently pending between and among
  them in California and Connecticut. It is the
  intention of the parties that the meeting shall be
  deemed a compromise negotiation within the meaning
  of Rule 408 of the Federal Rules of Evidence. As a
  condition of participating in these settlement
  discussions, the participants have each agreed
  that all discussions at such meeting, to be held
  on December 20 and 21, 1989, in Los Angeles,
  California, shall be confidential settlement
  discussions, to be used solely for the purposes of
  settlement.

At the meeting, Mr. Wells urged that Victory should sell its Arochem interest to him, rather than to Mr. Harris, who (he claimed) was looting Arochem, putting the money into offshore accounts, and preparing to escape from the jurisdiction of the United States courts. According to plaintiffs, defendant Buirkle not only endorsed these statements (Johnson Trial Testimony at 22-28), but at the close of the December 20 discussion, Mr. Buirkle also stated that it was ironic that they were talking about "buying Mr. Harris out, when in fact we should be putting him in jail." (Id. at 28).

The next day, the participants were joined by Mr. Wells' attorney, Mr. Connell, and by Victory's attorney, Mr. Singer. Buirkle presented Wells' offer to purchase Victory's interest in Arochem. Although Wells offered less money than Harris, Wells' offer included releases from litigation against Victory for its alleged association with Harris' looting and lack of effort to remove him from Arochem's management (Id. at 30-36). Mr. Connell stated that he was a "tough, East Coast litigator" (Id. at 36), and that his client Wells would sue Victory if it sold to Harris, and the lawsuit would be unpleasant.

  We would be brought up in front of a jury. I would
  be cross-examined by him and be made to show that
  I was a party to thefts of the company, thefts
  that could have aggregated as much through that
  period of time as 40 million dollars; generally
  indicating that you better take a good, hard look
  at the portion of the consideration that's not
  cash, i.e., that is the releases, don't
  underestimate the value of those.
  And his role in this meeting was to convey to us
  how valuable, how important it was for us not to
  go up against him and up against Mr. Wells and to
  take their deal otherwise a lot of bad things
  would happen to us.

Id. at 36-37.

Apparently, Victory felt that the meeting was a "set up;" that its purpose was not to discuss settlement of the litigation between Wells and Victory, but rather to provide a forum for Wells and Buirkle to malign Harris and urge acceptance of their competing offer (See Johnson Tr. Test. at 26; cf. at 35, 85; Pl. Mem. on Privilege at 10).

On January 11, 1990 Mr. Harris and his representatives met in New York City with Eric Johnson of Victory and others to complete the sale of Victory's interest in Arochem to Harris. The parties had resolved most of the open issues, and seemed prepared to close the transaction, when Mr. Johnson privately told Mr. Harris that Victory would not proceed with the sale because of Wells' and Buirkle's statements at the December 20 and 21, 1989 meeting (Id. at 37-46, Harris Tr. Test. at 22-25).

The closing was postponed until February, while Victory investigated Mr. Harris' finances and management of Arochem. By the time the investigation was finished and Victory was once again ready to sell its Arochem interest to Mr. Harris, the corporate parent of his source of financing (Drexel Burnham ...


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