UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
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.
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.
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.
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.
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, Ltd. v. Daystrom, Inc., 24 N.Y.2d 372, 379, 300 N.Y.S.2d 817, 822, 248 N.E.2d 576, 579-80 (1969) (quoting Crabtree v. Elizabeth Arden Sales Corp., 305 N.Y. 48, 57, 110 N.E.2d 551, 555(1953).
It is well settled that the Statute of Frauds applies to claims for finder's fees. Indeed, in 1964 the New York Legislature amended the Statute, adding the above-quoted definition of "negotiating," specifically to clarify that the Statute covers finder's fee arrangements. In the note accompanying the 1964 amendment, the Law Revision Commission stated that the amendment's purpose was:
to make clear that the contracts required to be evidenced by writing include a contract or agreement for the compensation of a business broker for acting as a 'finder,' 'originator' or 'introducer,' or for assisting in the negotiation or consummation of the transaction, and that the requirement cannot be avoided by an action for compensation in quantum meruit.
N.Y. Legis. Doc. No., 1964, 65(F). See also Minichiello v. Royal Business Funds Corp., 18 N.Y.2d 521, 525, 277 N.Y.S.2d 268, 270, 223 N.E.2d 793, 795 (1966) (1964 amendment intended "to clearly apply the section to finders"). Thus, in Minichiello, where a broker sought a finder's fee in quantum meruit, but had no written memorandum of his alleged contract with the defendants, the Court of Appeals dismissed the action as barred by the Statute of Frauds. Id.3
Three years later, however, in Morris Cohon & Co. v. Russell, the Court of Appeals limited Minichiello's holding "to situations in which there is a complete absence of any memorandum." 23 N.Y.2d 569, 572, 297 N.Y.S.2d 947, 950, 245 N.E.2d 712, 713-14 (1969). In Morris Cohon, the plaintiff's quantum meruit claim for a broker's fee relied u1pon a clause in the written contract of sale between the parties which read:
The sellers represent and warrant that they have dealt with no person or persons other than Morris Cohon & Co. as broker or finder in connection with the transactions in this agreement, and that all negotiations relative to this agreement have been carried on by them without the intervention of any other broker or finder, and the Sellers agree to indemnify Buyer and the Company and hold them harmless against and in respect of any claim for brokerage or finder's commission relative to this agreement whether by said Morris Cohon & Co. or otherwise.
Id., 23 N.Y.2d at 573, 297 N.Y.S.2d at 950-1, 245 N.E.2d at 714. Finding that this writing identified all essential elements of the brokerage agreement except the amount of compensation to be paid to the broker, the Court held that the plaintiff's claim in quantum meruit for the reasonable value of its brokerage services was not precluded by the Statute of Frauds, even though the writing contained no specific compensation term. Id., 23 N.Y.2d at 574, 297 N.Y.S.2d at 952, 245 N.E.2d at 715. The Court reasoned that the writing did not have to establish the amount of compensation because "reasonable compensation" was implied by law, and, therefore, the Statute of Frauds was satisfied.
In so holding, the Court looked to the intent of the Statute's writing requirement, stating:
The Statute of Frauds was designed to guard against the peril of perjury; to prevent the enforcement of unfounded fraudulent claims. But, as Professor Williston observed: 'The Statute of Frauds was not enacted to afford persons a means of evading just obligations; nor was it intended to supply a cloak of immunity to hedging litigants lacking integrity; nor was it adopted to enable defendants to interpose the Statute as a bar to a contract fairly, and admittedly made.' (4 Williston, Contracts (3d ed.), § 567A, pp. 19-20).
Id., 23 N.Y.2d at 574, 297 N.Y.S.2d at 952, 245 N.E.2d at 715. The Court determined that where, as in Morris Cohon, the writing relied upon "identifies the parties to the contract, the subject matter of the contract and establishes that plaintiff in fact performed . . . the peril of perjury is largely, if not entirely, absent." Id.
The Court further stated:
We specifically note that in reaching this conclusion we do no violence to the well-established rule that in a contract action a memorandum sufficient to meet the requirements of the Statute of Frauds must contain expressly or by reasonable implication all the material terms of the agreement, including the rate of compensation if there has been agreement on that matter. . . . In an action in quantum meruit, however, for the reasonable value of brokerage services, if it does not appear that there has been an agreement on the rate of compensation, a sufficient memorandum need only evidence the fact of plaintiff's employment by defendant to render the alleged services. The obligation of the defendant to pay reasonable compensation for the services is then implied.
Id., 23 N.Y.2d at 575-76, 297 N.Y.S.2d at 953, 245 N.E.2d at 715-16 (citations omitted).
Finally, the Morris Cohon Court concluded by emphasizing that the writing relied upon in that case was sufficient to support a quantum meruit claim under the Statute of Frauds because "it identifies the buyer, it identifies the defendant as one of the sellers, it establishes the fact of plaintiff's employment, it identifies the plaintiff as the broker, it establishes the subject matter of the transaction and, most important, it acknowledges performance by the plaintiff in bringing about the sale of defendant's stock." Id., 23 N.Y.2d at 576, 297 N.Y.S.2d at 953, 245 N.E.2d at 716.
The Morris Cohon decision concededly leaves some ambiguity as to whether, to sustain a quantum meruit action, the writing relied upon must contain all essential terms of the contract but the rate of compensation, whether it must further contain an acknowledgment by the defendant of the plaintiff's performance, or whether it need only "evidence that fact of plaintiffs employment by defendant to render the alleged services." 23 N.Y.2d at 575-76, 297 N.Y.S.2d at 953, 245 N.E.2d at 715-16. This question has not been squarely resolved. However, a review of the cases applying Morris Cohon indicates that courts have, at a minimum, required the writing relied upon to establish clearly the existence of the alleged finder's agreement and its subject matter. While written acknowledgment by the defendant of the plaintiff's performance has been found to be persuasive evidence of an agreement's existence, courts have not uniformly required it. See Flammia v. Mite Corp., 401 F. Supp. 1121, 1133 (E.D.N.Y. 1975) (quantum meruit claim satisfied Statute of Frauds where writings "sufficiently identified seller, identified and established plaintiff's role in the negotiations, established the subject matter of the transaction; and most, important, acknowledged performance by and obligation to the plaintiff as a consequence of his assistance"); Blye v. Colonial Corp. of America, 102 A.D.2d 297, 299, 476 N.Y.S.2d 874, 875 (1st Dep't 1984) (quantum meruit claim permitted where "except for the absence of a firm agreement as to the amount of plaintiffs' compensation, the letter adequately sets forth the terms of the contract claimed by plaintiffs"); Shapiro v. Dictaphone Corp., 66 A.D.2d 882, 884-85, 411 N.Y.S.2d 669, 672-73 (2d Dep't 1978) (quantum meruit claim not barred where writings evidenced the agreement's "subject matter, plaintiff's role, and the fact that the plaintiff's services were never intended to be gratuitously furnished," as well as defendant's acknowledgment of plaintiff's performance); Kalfin v. United States Olympic Comm., 209 A.D.2d 279, 281, 618 N.Y.S.2d 724, 725 (1st Dep't 1994) (letters in which defendant acknowledged obligation to compensate plaintiff for his role in bringing about transaction satisfied Statute of Frauds for purposes of quantum meruit claim); Peters v. Sigma Data Computing Corp., 397 F. Supp. 1098, 1101 (E.D.N.Y. 1975) (quantum meruit action not precluded by Statute of Frauds where letter agreement identified seller, established the fact of plaintiff's employment, identified the plaintiff as the exclusive finder, and where plaintiff's performance was not disputed).
On the other hand, courts have dismissed quantum meruit claims under the Statute of Frauds where the writings relied upon failed to establish that the defendant actually agreed to pay a finder's fee, or where the writings left ambiguity as to whether the agreement's terms covered the transaction upon which a fee was claimed. See R.B. Hamilton & Assocs. v. Gibbons Green and Van Amerongen, Ltd., 169 A.D.2d 554, 564 N.Y.S.2d 733 (1st Dep't 1991) (dismissing finder's fee claim where each of the writings relied upon by plaintiff "is limited to specific transactions expressly referred to therein, and not the particular transaction for which plaintiff now seeks a fee"); Klein v. Smigel, 44 A.D.2d 248, 354 N.Y.S.2d 117 (1st Dep't 1974) (dismissing quantum meruit claim where only writing negated defendant's intention to pay a finder's fee); Karlin v. Avis, 457 F.2d 57, 61 (2d Cir. 1972) (dismissing quantum meruit claim where writings failed to evince that defendant agreed to be bound by alleged agreement and where documents relied upon were not prepared or signed by defendant); Merex A.G. v. Fairchild Weston Systems, Inc., 810 F. Supp. 1356, 1367 (S.D.N.Y. 1993) (dismissing quantum meruit where writings failed to evidence the alleged terms of the oral contract). See also Intercontinental Planning, Ltd. v. Daystrom, Inc., 24 N.Y.2d 372, 379, 300 N.Y.S.2d 817, 822-23, 248 N.E.2d 576, 579-80 (1969) (dismissing finder's contract claim under Statute of Frauds where writing did not specifically cover the acquisition that ultimately took place).
The question here is whether the writings relied upon by plaintiff establish an agreement by Falcon to pay Springwell a commission for the identification of an underwriter in connection with the 1994 and 1995 Note Offerings. I conclude they do not.
A. The Writings Relied on by Springwell
Springwell relies upon twelve documents written over the course of four years as the basis for its claim that Falcon must pay a finder's fee based upon Falcon's engagement of DLJ to manage its Note Offerings. The writings, which the Court has numbered for reference, are described here in relevant part:
1. January 3, 1992 letter from Ziegler to Vincent stating that "Falcon is beginning the process of locating institutional investors, such as insurance companies and pension plans, for our next round of equity financing. . . I was hopeful that you might have some ideas as to who Falcon could approach with an investment opportunity of this kind. . . . Please let me know if you have any ideas as to who would have an interest in looking further at this. The Company is now just beginning the process of contacting potential investors and Steve Webster or I would be happy to set up a meeting. In addition to the enclosed private placement memorandum, a copy of Falcon's business plan is also enclosed."
2. February 6, 1992 letter from Ziegler to Vincent, enclosing "copies of additional materials concerning Falcon which . . . are obviously confidential and should not be given out to any third parties, but are for your information in talking to prospective investors for our equity offering."
3, 4. Two internal Falcon documents entitled "List Of Prospective Investors" (undated) and "Falcon Prospective Investor List" (dated March 14, 1992) which list Vincent as a "Finder" and "Initiator," respectively, with respect to certain potential investors (none of them DLJ). Neither document is signed.
5. June 29, 1992 letter from Webster to Vincent, thanking him for an introduction to a potential investor (not DLJ), and stating: "We would appreciate any other ideas you might have concerning potential investors for Falcon."
6. September 29, 1992 letter from Ziegler to Webster and Vincent providing update on the Maraven Project and stating that Vincent would "check on" the prospect of Bankers Trust's involvement in the project.
7. February 24, 1993 letter from Vincent to Lundy (DLJ) and copied to Falcon. "The purpose of this letter is to introduce you to a small financing Springwell is handling for one of its energy clients." The letter describes Falcon's interest in finding debt and equity investors to finance Falcon's acquisition of the jackup drilling rig business of the Hutchnance Division of Grace Offshore (the Hutchnance Project).
8. April 22, 1993 letter from Ziegler to Vincent regarding earlier "discussions concerning a refinancing of Falcon's indebtedness and/or a Venezuelan credit facility." The letter lists eighteen banks Falcon would consider as possible finance sources. (DLJ is not on the list.)
9. June 2, 1994 invoice from Springwell to Falcon for $ 25,000. The words "Annual Retainer" have been crossed out in pen (by Webster) so that the only words describing the purpose of the invoice are "1993 Financial advisory services." There is also a handwritten notation reading "Def Fin Costs-DLJ."
10. April 13, 1995 letter of recommendation from Webster to Lundy (DLJ) on behalf of Vincent's son, Roger Jr. "As you know, Roger [Vincent] Sr., has been a good friend to our company over the years and, in particular, in helping with the DLJ business. I would consider it important to Falcon's relationship with DLJ if your firm could find a trainee position for Roger Jr."
11. September 18, 1995 letter from Ziegler to Vincent in light of "the implicit threat of litigation." "There are several important things that I think I need to clarify at the outset. As you know, Falcon has, from its very inception, been reaching out for sources of debt and equity capital. . . . When new investors were introduced through brokers or finders, these individuals were compensated very generously by the Company in terms of fees for funds secured. Offhand, I can think of a half dozen situations where fairly hefty fees were paid whether or not there was a written agreement between the Company and the finder. . . .
The Company's situation did change at about the time . . . Falcon began to explore the public markets from its securities through major underwriters. My recollection of this process was that Steve Webster began contacting underwriters to select a house that could either take the Company's common stock public or access the high yield debt market. Because of his Wall Street background, Steve for years has had excellent contacts with all the major houses, including DLJ. . . .
I remember our conversation about your contact at DLJ and your suggestion that you set up a meeting between Steve and DLJ. I recall at the time that I said "Fine, go ahead" to set up a meeting and that I had mentioned this to Steve. . . . The subject of a commission from Falcon for an introduction to an underwriter was not discussed with you or Steve.
The process of selecting an underwriter went on for some weeks. . . . Unlike the years of raising capital from investors, the underwriters were aggressively touting their wares to Falcon. There were positives and negatives with all the leading candidates with respect to Falcon -- DLJ I think had a little edge overall because Steve Webster liked Tony Lundy and was impressed with Tony's grasp from an intellectual standpoint of what Falcon was all about. I am assuming that your conversations with Tony probably prepped Tony better than some of the competition on the Company. In any event, . . . Falcon eventually went with DLJ and Kidder for its initial high yield debt offering. . . . What I hope this makes clear is that unlike the experience of trying to introduce investors to Falcon, the Company was in a seller's market and was hiring a banking house which would be paid a fee as an agent to place its notes or its shares with other investors. . . . [emphasis in original]
As to the $ 25,000 fee you were paid by Falcon for the introduction, . . . I hoped that whatever shortfall you felt existed could be made up over time by creating a continuing relationship -- hence the suggestion about billing the $ 25,000 as an annual fee, an idea that the Company rejected."
12. March 27, 1996 letter from Webster to Vincent. "I understand that you plan to take legal action against Falcon based on your not being paid a more generous finders [sic] fee for introducing DLJ to Falcon. . . . I was never made aware by you before the meeting took place your introduction of Tony Lundy to Falcon had attached to it any kind of fee arrangement. . . . To my knowledge, you spent little or no time with Lundy on Falcon's behalf beyond the initial meeting. If you did, you were not asked by me or authorized to do so. . . Falcon paid you a $ 25,000 finders fee which I feel was more than generous, particularly since it was put to me after the fact. . . . From 1975-1978, I worked at the same firm with three senior level bankers at DLJ. . . . I needed no introduction to DLJ if there was a finders fee to be involved. This introduction was more for Lundy's benefit than mine."
B. Analysis of Writings Relied Upon
What is most immediately striking about the twelve documents relied upon by plaintiff is that not a single one of them authorizes Springwell to find an underwriter for Falcon. Not a single one of them explicitly engages Springwell's assistance with respect to the Note Offerings, or acknowledges that Springwell played any role or performed any service with respect to the Note Offerings. Indeed, with the exception of Ziegler's September 1995 letter and Webster's March 1996 letter (Documents 11 and 12) -- both written after the Note Offerings occurred and in response to plaintiff's pre-litigation demands -- none of the documents relied upon even mention the 1994 and 1995 Note Offerings.
Plaintiff contends it nevertheless is entitled to a commission based on DLJ's management of these transactions because Springwell's finder's fee agreement with Falcon to locate sources of capital "was of an ongoing nature and was never limited to a particular Falcon project or to a particular source of capital." (Pl.'s Brief at 24.) No matter what the parties may have agreed to orally, however, the writings upon which Springwell relies, even when read together, do not establish the open-ended, limitless agreement that is alleged. At best, these writings reflect Springwell's employment by Falcon to find investors for particular Falcon offerings, all of which were different from and predated the Note Offerings upon which plaintiff now seeks a commission. Moreover, nothing in the documents indicates that the scope of Springwell's alleged finder's agreement extended beyond the identification of potential investors to encompass the identification of potential underwriters.
Document 1, the January 3, 1992 letter from Ziegler to Vincent, requests Springwell's assistance in locating "institutional investors, such as insurance companies and pension plans for [Falcon's] next round of equity financing," and encloses a copy of Falcon's private placement memorandum for that purpose. It speaks neither of an open-ended finder's fee agreement, nor of Springwell's engagement for any purpose other than to find investors for the 1992 equity offering in question. Document 2 merely encloses additional materials in furtherance of the equity offering referenced in Document 1. While Documents 3 and 4 list Vincent as a "finder" and "initiator" with respect to three potential investors (none of them DLJ), these internal, unsigned memoranda do not reference the 1994 and 1995 Note Offerings and offer no support for the claim that Springwell's agreement with Falcon was limitless. Furthermore, Documents 3 and 4, from their titles, concern "Prospective Investors," not prospective underwriters. Document 5, a 1992 letter from Webster to Vincent stating "we would appreciate any other ideas you might have concerning potential investors for Falcon," comes closer to reflecting an ongoing finder's relationship between the parties, but, again, only for the purpose of locating "potential investors," not underwriters. Nor does the mere invitation of plaintiff's "ideas" establish an intent by Falcon to bind itself to pay a commission to Springwell based upon any transaction that might transpire at a future date. See Fort Howard Paper Co. v. William D. Witter, Inc., 787 F.2d 784 (2d Cir. 1986) ("invitational language" requesting facts and information regarding potential acquisition did not establish promise to pay a finder's fee and thus was insufficient to satisfy Statute of Frauds). Document 6 is limited on its face to the Maravan Project. Document 7, a letter from Springwell to DLJ, concerns only DLJ's possible investment in the Hutchnance Project, and cannot be read to reflect Springwell's engagement by Falcon to approach DLJ for any other purpose. Finally, while it is not clear what Document 8 concerns, it certainly does not authorize Springwell to perform any services in connection with finding an underwriter for Falcon's Note Offerings. In short, none of the writings relied upon which predate the 1994 and 1995 Note Offerings "evidence the fact of plaintiff's employment by defendant" to find an underwriter to manage Falcon's Note Offerings, or to render any services in connection with the Note Offerings. Morris Cohon, 23 N.Y.2d at 575-76, 297 N.Y.S.2d at 953, 245 N.E.2d at 715.
Springwell's reliance upon Crabtree v. Elizabeth Arden Sales Corp., 305 N.Y. 48, 110 N.E.2d 551 (1953) for the proposition that these writings can be pieced together to create an agreement broader than what is stated in the writings themselves is also misplaced. Writings can be read together to satisfy the Statute of Frauds "provided that they clearly refer to the same subject matter or transaction." Crabtree, 305 N.Y. at 55, 110 N.E.2d at 554. The writings relied upon by Springwell do not relate to the same subject matter or transaction. Rather, they refer to several discrete transactions, none related to the transactions at issue in the litigation. While oral testimony may be admissible to show a connection between a signed writing and an unsigned writing related to the same transaction, such testimony cannot be used to create an agreement not found in the writings. See Scheck v. Francis, 26 N.Y.2d 466, 470-72, 311 N.Y.S.2d 841, 843-45, 260 N.E.2d 493, 494-96 (1970). See also Horn & Hardart Co. v. Pillsbury Co., 888 F.2d 8, 11 (2d Cir. 1989) ("Parol evidence . . . is immaterial to the threshold issue whether the documents are sufficient on their face to satisfy the Statute of Frauds. . . . That issue must be determined from the documents themselves, as a matter of law.") (quoting Bazak Int'l Corp. v. Mast Indus., Inc., 73 N.Y.2d 113, 118, 538 N.Y.S.2d 503, 505, 535 N.E.2d 633, 635 (1989)). Here, the writings do not collectively, on their face, establish a finder's agreement for the transactions upon which a $ 1 million commission is now sought.
Springwell also relies upon Documents 9 through 12 in an attempt to show that, after the Note Offerings occurred, Falcon admitted that plaintiff was entitled to a fee in connection with Falcon's engagement of DLJ as an underwriter. However, these writings do not achieve the purpose for which they are offered. While Ziegler's and Webster's letters to Vincent (Documents 11 and 12) may acknowledge that Springwell's "prepping" of Lundy helped DLJ become Falcon's underwriter, these letters emphatically deny that Falcon ever agreed to pay Springwell a commission in connection with Falcon's retention of an underwriter. See Klein v. Smigel, 44 A.D.2d 248, 354 N.Y.S.2d 117 (1st Dep't 1974) (dismissing quantum meruit claim under Statute of Frauds where only writing negates any expression of an intention to pay a finder's fee).
Plaintiff also relies on Webster's letter to DLJ recommending Vincent's son for a job, in which Webster states that Vincent has been a "good friend" and "in particular, in helping with the DLJ business" (Document 10). However, this casual statement, written for the evident purpose of procuring a job for Vincent's son at DLJ, is not the type of admission of performance contemplated by Morris Cohen. In Morris Cohon, the contract clause deemed to be an admission stated that the defendant had dealt "with no person or persons other than Morris Cohon & Co. as broker or finder in connection with the transactions in this agreement." Id. at 573, 245 N.E.2d at 714, 297 N.Y.S.2d at 950. By contrast, Webster's letter to DLJ does not even mention the transactions upon which a fee is claimed.
Finally, Springwell relies on the $ 25,000 Springwell invoice bearing the notation "Def Fin Costs-DLJ" (Document 9). According to plaintiff, this writing reflects Falcon's partial payment of a commission specifically in connection with "DLJ," and therefore constitutes an admission that Falcon owed Springwell a finder's fee for its introduction of Falcon to DLJ. I disagree. Falcon could have paid Springwell $ 25,000 for any number of reasons: to avoid litigation, in the hopes of maintaining personal and professional relations with Springwell, to thank Springwell for its past, albeit unsuccessful efforts to recruit DLJ for the Hutchnance Project, or, as plaintiff contends, because Falcon felt legally obligated to do so. While plaintiff is entitled to have this Court draw all reasonable inferences in its favor from the documents it relies upon, this Court cannot, under the Statute of Frauds, find an enforceable finder's fee agreement unless the existence of that agreement is clearly discernable from the writings. Here, the simple notation "Def Fin Costs--DLJ" does not provides a sufficient basis for divining a legally enforceable finder's fee agreement. See Merex A.G. v. Fairchild Weston Systems, Inc., 810 F. Supp. 1356, 1367 (S.D.N.Y. 1993) (defendant's internal file reference to "commission to Merex" was insufficient to establish defendant's intent "to authenticate such statement as a contractual commitment to pay a commission to Merex"). Even if the "DLJ" notation in Document 9 is read together with the eleven other documents relied upon by plaintiff, the collective writings simply do not evidence that Falcon retained Springwell to find an underwriter or agreed to pay a fee for anything other than Springwell's identification of capital investors for transactions predating the Note Offerings.
Springwell insists that in Davis & Mamber, Ltd. v. Adrienne Vittadini, Inc., 212 A.D.2d 424, 622 N.Y.S.2d 706 (1st Dep't 1995), the plaintiff's quantum meruit claim survived dismissal under the Statute of Frauds "with less extensive writings than are in the record here." (Pl. Br. at 20.) In Davis & Mamber, the plaintiff premised its claim upon a letter written by the defendants that specifically authorized the plaintiff to approach a certain manufacturer about entering into a licensing agreement with defendants. The plaintiff set up meetings to introduce the defendants to the manufacturer and, three years later, the parties entered into a licensing agreement. Although the letter relied upon by the plaintiff did not mention a finder's fee, the Court found that it satisfied the Statute of Frauds for purposes of bringing a quantum meruit claim because the letter, written and signed by the defendants, evidenced the fact of plaintiff's employment by the defendants for the specific purpose of procuring a licensing agreement with the manufacturer, and that purpose was achieved. In contrast, the documents relied upon by Springwell in the instant case do not establish that Falcon authorized Springwell to approach DLJ for any purpose other than to solicit DLJ's involvement in Falcon as a capital investor. Davis & Mamber is therefore eminently distinguishable. Nothing in the law entitles Springwell to a fee because Falcon later happened to select an underwriter for the Note Offerings which Springwell had earlier approached for a different purpose.
Springwell's appeal to the holding of Blye v. Colonial Corp. of America, 102 A.D.2d 297, 476 N.Y.S.2d 874 (1st Dep't 1984) is similarly misplaced. There, the Court permitted the plaintiffs' quantum meruit action for a brokerage fee based upon a letter by the defendant that (i) described the plaintiffs' and defendant's joint strategy for negotiating a licensing agreement with a target manufacturer, and (2) cited two methods in which the plaintiffs' commission could be calculated based upon the transaction as "an area for future discussion." Id., 102 A.D.2d at 298, 476 N.Y.S.2d at 875. Unlike the instant case, the specific transaction for which the plaintiffs' services were sought in Blye was clearly identified in a writing, and the same writing acknowledged defendant's belief that plaintiffs should be compensated for those services. Blye does not lend support to Springwell's case here, where none of the documents relied upon so much as mentions Falcon's engagement of Springwell to find an underwriter (except to deny that fact).
In sum, I find that Springwell's finder's fee claim is precluded by the Statute of Frauds for lack of a sufficient writing. Any other conclusion would contravene the Statute's strong intent "to guard against peril of perjury" and "to prevent the enforcement of unfounded fraudulent claims." Morris Cohon, 23 N.Y.2d at 574, 297 N.Y.S.2d at 952, 245 N.E.2d at 715. See also R.B. Hamilton, 169 A.D.2d 554, 564 N.Y.S.2d 733 (1st Dep't 1991) (Statute of Frauds serves "New York's paramount interest in protecting against unfounded claims, and the possibility of erroneous verdicts."). In the instant case, the peril of perjury is significant given that the parties disagree on key factual issues of the dispute: Springwell contends its finder's agreement with Falcon was open-ended; Falcon contends that any agreement at most covered specific projects in 1992 and 1993. Springwell claims that it arranged and hosted a March 27, 1993 meeting between DLJ and Falcon that led directly to DLJ's interest in managing Falcon's Note Offerings; Falcon denies such a meeting ever took place. Springwell claims that Ziegler admitted to Vincent that Springwell was owed a commission for the DLJ introduction; Falcon adamantly denies that contention and maintains that Ziegler was outraged by the request. All of these issues would have to be decided by a jury if the case went to trial, creating the very risk of an erroneous outcome that the Statute of Frauds is intended to prevent.
In granting summary judgment for the defendant, this Court is also mindful that Vincent, Springwell's president, apparently understood the risks of doing business absent a written agreement because, as he admitted at deposition, all of Springwell's finder's agreements, except for this one, were in writing. A writing likewise could have been easily obtained in this case. See Freedman v. Chemical Construction Corp., 43 N.Y.2d 260, 267, 401 N.Y.S.2d 176, 180, 372 N.E.2d 0,12 (1977) (an "alleged agreement, . . . in the absence of a writing, so easily obtained in a proper case, is unenforceable").
Because defendant is entitled to summary judgment is based upon the Statute of Frauds, the Court need not address defendant's defense of accord and satisfaction.
For the reasons discussed above, this Court grants summary judgment to the defendant. In light of this holding, the Court also dismisses as moot the defendant's objections to the decision of Magistrate Judge Buchwald, concerning discovery-related matters. The Clerk of the Court is hereby directed to dismiss the action.
Dated: New York, New York
May 4, 1998