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SPRINGWELL CORP. v. FALCON DRILLING CO.

May 4, 1998

SPRINGWELL CORPORATION, Plaintiff, against FALCON DRILLING COMPANY, INC., Defendant.


The opinion of the court was delivered by: SOTOMAYOR

MEMORANDUM OPINION AND ORDER

 The plaintiff brings this action claiming that it is entitled to a finder's fee, pursuant to an oral agreement, for introducing the defendant to an investment banking firm that later managed certain debt and equity offerings made by the defendant in 1994 and 1995. The defendant denies that plaintiff played any role either with respect to the 1994 and 1995 offerings or defendant's retention of a manager for those offerings, and moves for summary judgment, pursuant to Fed. R. Civ. P. 56, on the grounds that plaintiff's finder's fee claim is barred by the New York Statute of Frauds and by the doctrine of accord and satisfaction. For the reasons to be discussed, the Court grants defendant's motion for summary judgment based upon the Statute of Frauds and dismisses the action.

 BACKGROUND

 Plaintiff Springwell Corporation ("Springwell") is a financial advisory firm based in Manhattan. Roger Vincent ("Vincent") is Springwell's founder and president. Defendant Falcon Drilling Company, Inc. ("Falcon") is a Delaware corporation headquartered in Houston, Texas, that owns, leases and operates a fleet of drilling rigs and provides various services for the oil and gas industry. Steven A. Webster ("Webster") is Falcon's chief executive officer and founder, and William R. Ziegler ("Ziegler") is Falcon's director and legal counsel.

 Several key facts in this action are disputed. However, because this is a motion for summary judgment, the Court describes and considers the facts in the light most favorable to plaintiff, the non-moving party. Fed R. Civ. P. 56. Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986).

 Ziegler and Vincent were longtime personal friends. In early 1992, as a result of numerous discussions between Ziegler and Vincent, Ziegler orally engaged Springwell to assist Falcon in finding sources of capital. At the time, Falcon was aggressively seeking to expand its operations by acquiring additional rigs and related assets, and was looking for capital to finance these numerous potential acquisitions. Ziegler told Vincent that a successful introduction by Springwell to a source of capital would be "commissionable." Springwell maintains that its finder's agreement with Falcon was open-ended and not limited by time or to a specific project or acquisition.

 In subsequent conversations during 1992 and 1993, Ziegler reconfirmed, orally, that Springwell would receive a commission for its services in the event of a successful introduction. Ziegler also sent Vincent confidential information regarding Falcon's business plans to assist Springwell in talking about Falcon to prospective investors.

 No written finder's fee agreement was ever entered into by the parties. Vincent did not request any written retention agreement for Springwell's services even though Vincent testified at deposition that, except for Springwell's alleged agreement with Falcon, all other of its finder's fee agreements were in writing. Nevertheless, Springwell claims that no written agreement with Falcon was required because of "common understandings" developed between Ziegler and Vincent in other transactions, "ongoing communications and correspondence" between the parties, and Vincent's reliance on Ziegler's statement that Springwell's services would be commissionable. (Complaint P 43.)

 In 1992 and 1993, Springwell contacted numerous potential sources of capital on Falcon's behalf. For instance, in 1992, Springwell contacted potential investors about Falcon's "Maraven Project," a joint venture with Maravan S.A. to operate certain drilling rigs in Venezuela. Although Springwell's efforts did not lead to any actual investment in the Maraven Project, Webster, Falcon's CEO, acknowledged Springwell's efforts in a letter in which he thanked Vincent for an introduction to one potential investor.

 In early 1993, Springwell endeavored to find capital investors for a second Falcon acquisition initiative, the "Hutchnance Project." Ziegler supplied Vincent with confidential information regarding the Hutchnance Project to aid in Springwell's efforts. Springwell sent a copy of the Hutchnance proposal to, among others, Anthony Lundy ("Lundy"), a vice president at the investment banking firm of Donaldson, Lufkin, & Jenretter ("DLJ"). Springwell then arranged for a meeting between Falcon and DLJ on March 4, 1993. At the meeting, which was attended by Lundy, Ziegler, Webster and Vincent, the parties discussed the Hutchnance Project and Falcon's general business and capital needs. This was Falcon's first introduction to Lundy. The March 4 meeting, however, did not lead to any interest on DLJ's part in Falcon, and the Hutchnance Project was completed in April 1993 without the investment of DLJ.

 Springwell maintains that it continued to encourage DLJ's investment in Falcon during subsequent conversations in March, April, and May of 1993. In that regard, Springwell alleges that it arranged a second meeting between the same parties from Falcon and DLJ on May 27, 1993. According to plaintiff, at this meeting Ziegler and Webster gave Lundy a thorough briefing on Falcon's business and succeeded in sparking DLJ's interest in Falcon. *fn1"

 Shortly thereafter, in or about June 1993, Falcon began looking for an underwriter to manage a high yield debt offering for Falcon. Falcon met on its own with Lundy and other DLJ personnel to discuss Falcon's possible engagement of DLJ for this purpose. Falcon also interviewed other investment banking firms that might potentially serve as Falcon's underwriter for the offering. At deposition, Vincent conceded that Falcon at no time asked Springwell to assist in finding an underwriter or to play any role in connection with Falcon's high yield debt offering. Falcon retained DLJ in October 1993 as one of two underwriters to manage the offering, which was successfully marketed in January 1994, resulting in cash proceeds to Falcon of approximately $ 120 million (the "Initial Note Offering"). DLJ managed a Second Note Offering for Falcon in March 1995 that raised approximately $ 50 million. Finally, in July 1995, DLJ managed an Initial Common Stock Offering for Falcon that raised approximately $ 35 million. The Court will collectively refer to the 1994 and 1995 offerings managed by DLJ as "the Note Offerings."

 Vincent contacted Ziegler after the Initial Note Offering in January 1994 to discuss Springwell's commission resulting from Falcon's engagement of DLJ as an underwriter. Plaintiff maintains that Ziegler did not dispute Springwell's entitlement to a commission and agreed to speak to Webster on its behalf. *fn2" Ziegler then recommended that Springwell bill Falcon for its services in the form of an Annual Retainer of $ 25,000 a year because Ziegler and Webster were concerned that a single, lump-sum payment to plaintiff would create a problem for them with Falcon's majority shareholders. Springwell accordingly sent Falcon an invoice for $ 25,000 dated June 2, 1994, with the annotation "Financial Advisory Services--Annual Retainer." Webster paid the amount, but crossed out the words "Annual Retainer" on the return copy of the invoice. The return copy of the invoice also bore the handwritten notation by Webster: "Falcon-Def Fin [deferred financing] costs-DLJ." Springwell deposited the $ 25,000 check. Nine months later, in March 1995, plaintiff wrote to Falcon to settle its claim for additional fees. When Defendant refused to pay any additional amount, Springwell retained counsel and filed the instant lawsuit.

 The complaint, which alleges a singe cause of action in quantum meruit, claims that Springwell is entitled to a commission of at least $ 1 million based upon the three Note Offerings managed by DLJ, pursuant to Springwell's oral agreement with Falcon. Falcon denies that any commission is due and moves for summary judgment on the grounds that (1) plaintiff's claim to a fee based upon the alleged oral agreement is barred by the New York Statute of Frauds, and (2) Springwell's acceptance of the $ 25,000 payment constitutes accord and satisfaction and precludes the instant claim. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332.

 DISCUSSION

 I. Standard of Review

 Summary judgment is appropriate if "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A court's role on a motion for summary judgment is "not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried, while resolving ambiguities and drawing reasonable inferences against the moving party." Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986) (citing Anderson v. Liberty Lobby Inc., 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986)). The moving party has the initial burden of demonstrating the absence of a genuine issue of material fact. See Celotex Corp v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Once the movant satisfies its initial burden, the nonmoving party must then come forward with "specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). If a court determines that the "record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial." Porky Prods. v. Nippon Express U.S.A., Inc., 1997 U.S. Dist. LEXIS 12506, 1997 WL 481618, at *2 (S.D.N.Y. 1997) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986) (citations omitted).

 II. The Statute of Frauds

 Falcon argues that Springwell's finder's fee claim is barred by the New York Statute of Frauds. N.Y. Gen. Oblig. Law § 5-701(a). The Statute of Frauds provides that:

 
Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking:
 
. . . (10) is a contract to pay compensation for services rendered in negotiating a loan, or in negotiating the purchase, sale, exchange, renting or leasing of any real estate or interest therein, or of a business opportunity, business, its good will, inventory, fixtures or an interest therein, including a majority of the voting stock interest in a corporation and including the creating of a partnership interest. "Negotiating" includes procuring an introduction to a party to the transaction or assisting in the negotiation or consummation of the transaction. This provision shall apply to a contract implied in fact or in law to pay reasonable compensation. . . .

 Id. at § 5-701(a)(10). The writing required by the Statute must contain all material terms of the agreement. See Morris Cohon & Co. v. Russell, 23 N.Y.2d 569, 575, 245 N.E.2d 712, 715, 297 N.Y.S.2d 947, 953 (1969). Those terms need not be contained in a single document, however. Rather, a sufficient writing under the Statute of Frauds "may be established by a combination of signed and unsigned documents, letters or other writings provided 'at least one writing, the one establishing a contractual relationship between the parties, must bear the signature of the party to be charged (or his authorized agent), while the unsigned document must on its face refer to the same transaction as that set forth in the one that was signed.'" Intercontinental Planning, ...


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