Havenfield Corp. v. H & R Block, Inc.

• Decision Date: 02 June 1975
• Docket Number: No. 74--1401,74--1401
• Citation: 509 F.2d 1263
• Parties: HAVENFIELD CORPORATION, Appellee, v. H & R BLOCK, INC., Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1263

509 F.2d 1263

HAVENFIELD CORPORATION, Appellee, v. H & R BLOCK, INC., Appellant.

No. 74--1401.

United States Court of Appeals Eighth Circuit.

Submitted Nov. 13, 1974.

Decided Jan. 30, 1975.

Rehearing Denied Feb. 24, 1975.

Certiorari Denied June 2, 1975.

See 95 S.Ct. 2395.

Edward A. Smith, Kansas City, Mo., for appellant.

E. Frederick Beihl, Kansas City, Mo., for appellee.

Before VAN OOSTERHOUT, Senior Circuit Judge, HEANEY, Circuit Judge, and MEREDITH, Chief District Judge. ^*

MEREDITH, Chief District Judge.

Defendant appeals from a judgment rendered against it and in favor of plaintiff after a directed verdict as to liability and a jury verdict as to damages.

This is an action brought for the recovery of a finder's fee that plaintiff claimed was due it because of its action in bringing together the defendant and a company which was acquired by defendant, Consumer Communication Services Corporation (hereinafter C.C.S.C.). The action was brought in two counts. Count I alleged an implied-in-fact contract and requested damages based upon a customary fee of $120,000. The alleged customary fee was stated to be based upon a declining percentage formula of five percent (5%) of the first million dollars of the acquisition price, four percent (4%) of the second million, three percent (3%) of the third million, two percent (2%) of the fourth million, and one percent (1%) of the remainder (hereinafter 5--4--3--2--1). The purchase price involved in this transaction was $3,000,000, which would yield a fee of $120,000, if the claimed formula was used. Count II alleged in the alternative, that the court should find an implied-in-law contract (quasi-contract) for the reasonable value of plaintiff's services which plaintiff also alleged would entitle it to a recovery of $120,000. The district court granted plaintiff's motion for directed verdict at the close of all the evidence on the issue of liability only, and submitted the case to the jury on the issue of damages alone. The jury was instructed on two theories of measuring the damages, the customary fee, if it found that one was, in fact, in existence, or a reasonable fee based upon the value of the plaintiff's services. The verdict did not specify which theory was used by the jury to arrive at its verdict.

FACTS

Plaintiff is a brokerage house, incorporated in Delaware, and having its principal place of business in New York. Gerald Griffin was the manager of plaintiff's corporate finance department. Willis Polite was an employee of plaintiff in the same department and under Griffin's supervision, but based in Cleveland, Ohio.

Defendant is a Missouri corporation, Kansas City, Missouri. Kansas City Missouri.

C.C.S.C. was an Ohio corporation, having its principal place of business in Columbus, Ohio. C.C.S.C. was engaged in the private postal business.

Prior to the date of December 22, 1970, Grant Bowen, an accountant with Haskins & Sells in Columbus, Ohio, who were accountants for C.C.S.C., introduced C.C.S.C. to Willis Polite for the purpose of assisting C.C.S.C. in obtaining a loan. Polite obtained a copy of 'A Proposal' from Bowen, which contained financial and other information about C.C.S.C. The report had been prepared and submitted by Paul Eckelberry, president of C.C.S.C. Polite gave the report to Griffin and discussed with him C.C.S.C.'s interests on several occasions, either by telephone from Ohio or in Griffin's office in New York.

Griffin was aware of defendant's interest in acquisitions of companies in the service industry due to the fact that he had presented an acquisition candidate to defendant on a previous occasion while he had been employed by another investment banking house.

On or about December 22, 1970, Griffin called Henry Bloch, defendant's president, and inquired into defendant's interest in acquisition in the private postal area. Bloch referred Griffin to Anthony Schwegel, defendant's director of corporate planning. Griffin stated that he had some information on a firm in the private postal industry which he would send to Schwegel, if he was interested. Schwegel expressed an interest and Griffin sent him a letter and enclosed the document entitled 'A Proposal.'

Between December 22, 1970, and March 24, 1971, Griffin and Schwegel had several telephone conversations in which Schwegel expressed an interest in pursuing the matter of possible acquisition. Pursuant to these conversations, plaintiff arranged a meeting between defendant and C.C.S.C., which took place in Columbus, Ohio, on March 24, 1971.

The March 24, 1971, meeting was attended by Bowen, Griffin, Schwegel, Eckelberry, and Robert Perrin, attorney for C.C.S.C. No agreement was reached at the meeting, because after some discussion, it became evident that C.C.S.C. was more interested in obtaining a loan, while defendant was more interested in an acquisition. Schwegel called Griffin shortly after the meeting and informed him that defendant was primarily interested in acquisition and wanted to think about the matter further.

On March 29, 1971, Schwegel wrote to Eckelberry and told him that defendant was interested in considering a possible association with C.C.S.C. and requested a copy of an analysis of C.C.S.C., which had been prepared by a Mr. Rose for a lending institution, and Eckelberry sent the analysis to Schwegel.

Schwegel wrote to Eckelberry on April 16, 1971, with a copy to Griffin, stating that defendant would not establish a relationship with C.C.S.C. at that time, because they were still interested in acquisition, while C.C.S.C. only wanted a loan.

Nothing further happened until August of 1971, when Eckelberry called Schwegel and said that he was ready to consider an acquisition of C.C.S.C. by defendant. Two meetings between defendant and C.C.S.C. occurred on September 13, 1971, in Kansas City, Missouri, and on November 1, 1971, in Columbus, Ohio, at which the possible acquisition was discussed. Plaintiff was not notified that the meetings were to be held or that any negotiations had resumed.

On or about November 22, 1971, Polite told Griffin that he had learned from Bowen and Eckelberry that C.C.S.C. had resumed negotiations with the defendant. Griffin telephoned Schwegel the next day, and during the course of the conversation, Schwegel acknowledged plaintiff as the 'finder.' Griffin confirmed this in a letter dated November 23, 1971, in which he offered plaintiff's services in helping to consummate the deal. Neither defendant nor C.C.S.C. availed themselves of these services.

Sometime during the fall of 1971, Schwegel and Richard Bloch, defendant's board chairman, discussed plaintiff's interest in a fee, and concluded that plaintiff was, in fact, entitled to some compensation.

After meetings held in November or December of 1971 and on January 26, 1972, in Kansas City, attended by defendant, C.C.S.C., and counsel for both parties, defendant acquired the assets of C.C.S.C. for $3,000,000 in the common stock of the defendant.

Defendant has raised four issues on appeal, which will be dealt with individually below.

I.

Defendant first argues that the district court erred in ruling that the New York Statute of Frauds, section 5--701.10, New York General Obligations Law, McKinney's Consol. Laws, c. 24--A, which requires finder's fee contracts to be in writing, did not apply in this case. The district court held that under the Missouri rule governing choice of law, which the court was bound to follow, Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), the law of the state which has the most significant contacts with the parties and the transaction is to be applied. This is also the rule stated in the Restatement of the Law, 2d, Conflict of Laws, section 188, which deals with contract actions where no express choice of law has been made:

§ 188. Law Governing in Absence of Effective Choice by the Parties

(1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6.

(2) In the absence of an effective choice of law by the parties (see § 187), the contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:

(a) the place of contracting,

(b) the place of negotiation of the contract,

(c) the place of performance,

(d) the location of the subject matter of the contract, and

(e) the domicil, residence, nationality, place of incorporation and place of business of the parties.

These contacts are to be evaluated according to their relative importance with respect to the particular issue.

(3) If the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied, except as otherwise provided in §§ 189--199 and 203.

The Restatement was established as the law in Missouri by the Missouri Supreme Court in Kennedy v. Dixon, 439 S.W.2d 173 (Mo. en banc 1969), which was a tort action. It has since been held that the contract rules of the Restatement are also to be followed in Missouri, American Institute of Marketing Systems v. Brooks, 469 S.W.2d 932 (Mo.App.1971).

The district court held that both Ohio and Missouri had more significant contacts with the parties and transactions than did New York. Neither Ohio nor Missouri law bars the enforcement of oral contracts for finder's fees.

Defendant contends that the significant contacts approach is meaningless in this situation, because of the difficulty in pinpointing the location of contracting, negotiations, and performance. Defendant also contends that New York has a greater interest in having its law applied and that, therefore, it should be applied. Three cases are cited in support of this argument. Intercontinental Planning, Ltd. v....