Rosenthal v. Fonda

• Citation: 862 F.2d 1398
• Decision Date: 13 December 1988
• Docket Number: No. 87-5659,87-5659
• Parties: Richard M. ROSENTHAL, Plaintiff-Appellant, v. Jane FONDA, et al., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1398

862 F.2d 1398

Richard M. ROSENTHAL, Plaintiff-Appellant, v. Jane FONDA, et al., Defendant-Appellee.

No. 87-5659.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted Aug. 1, 1988.

Decided Dec. 13, 1988.

Lawrence B. Steinberg, Wyman, Bautzer, Kuchel & Silbert, Los Angeles, Cal., for plaintiff-appellant.

Stanton L. Stein, Stein & Kahan, Santa Monica, Cal., for defendant-appellee.

Appeal from the United States District Court for the Central District of California.

Before FLETCHER, CANBY and O'SCANNLAIN, Circuit Judges.

CANBY, Circuit Judge:

Richard Rosenthal appeals the district court's grant of summary judgment in favor of Jane Fonda and four of her related corporations. The district court determined that New York law controlled this dispute and that New York's statute of frauds barred Rosenthal's claim against Fonda for breach of an oral contract. On appeal, Rosenthal contends that California, not New York, law should control this action and that California's statute of frauds does not bar his oral contract claim against Fonda. In addition, Rosenthal contends that even if New York law does properly control, his contract with Fonda is not barred by New York's statute of frauds. We affirm the district court's holding that New York's statute of frauds controls and that it serves to bar Rosenthal from enforcing this oral contract against Fonda.

FACTUAL BACKGROUND

This action arises out of the twelve year relationship between Jane Fonda and her former attorney and general business manager, Richard Rosenthal. In 1968, Fonda, a California resident, retained the services of a New York law firm. She entered into an oral agreement with the firm that she would pay five percent of her earnings as compensation for the firm's services. Rosenthal, an attorney with the firm, assumed responsibility for a large share of the firm's activities on Fonda's behalf. In 1971, the law firm dissolved and in 1972, Rosenthal began to represent Fonda as an independent private practitioner. Rosenthal alleges that in April of 1972, he and Fonda entered into an oral contract whereby Rosenthal continued to represent Fonda from his New York office. In 1978, Rosenthal and his family moved to California, at Fonda's request, so that he could be closer to her and represent her more efficiently. Despite relocating, Rosenthal maintained a home and an office in New York. Fonda discharged Rosenthal approximately two years later, on May 30, 1980.

he agreed to continue performing a variety of services for Fonda and she, in turn, agreed to pay him ten percent of all gross professional income derived from the projects that were initiated during his tenure.

Rosenthal brought suit against Fonda in California district court to recover commissions on projects that were initiated during his tenure and produced or continued to produce income after his termination. The district court granted Fonda's motion for partial summary judgment, holding that New York's statute of frauds applied and served to bar Rosenthal's oral contract claim unless Fonda was equitably estopped from asserting the statute as a defense. After a bench trial on the equitable estoppel issue, the district court granted Fonda's motion for a directed verdict, ruling that she was not equitably estopped from asserting the defense. ¹ Accordingly, the court entered judgment for Fonda.

DISCUSSION

We have jurisdiction pursuant to 28 U.S.C. Sec. 1291. Rosenthal appeals the district court's grant of summary judgment in favor of Fonda, thus, we review the court's decision de novo. KL Group v. Case, Kay & Lynch, 829 F.2d 909, 914 (9th Cir.1987). See also Ledesma v. Jack Stewart Produce, Inc., 816 F.2d 482, 484 (9th Cir.1987) (district court's conflict of law determination is reviewed de novo ).

Rosenthal contends that the district court should have applied California, not New York, law to resolve this dispute. The district court correctly recognized that a federal court sitting in diversity must apply the conflict of law rules of the forum. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). This case comes from the United States District Court for the Central District of California; therefore, California's conflict of law rules apply to determine whether California or New York law should properly control this case. California utilizes the "governmental interest" analysis in deciding conflicts of law. See Liew v. Official Receiver and Liquidator, 685 F.2d 1192, 1195-96 (9th Cir.1982).

The application of California's governmental interest analysis requires three steps. Liew, 685 F.2d at 1196. First, the substantive law of each state must be examined to assure that the laws differ as applied to this transaction. Second, if the laws do differ, the court must determine whether a "true conflict" exists in that both New York and California have an interest in having its law applied. Finally, if a true conflict exists, the court must determine which state's interest would be more impaired if its policy were subordinated to the policy of the other. Id. The conflict is resolved by applying the law of the state whose interest would be most impaired if its law were not applied. Id.

I. Do The Laws of the Two States Differ?

The principal issue in this dispute is whether Rosenthal's breach of oral contract claim is barred under the statute of frauds provision that requires that all contracts not to be performed within one year be in writing. Textually, the relevant New York and California provisions of the statute of frauds are essentially identical. New York's statute of frauds provides that "[e]very agreement, promise or undertaking is void or unenforceable unless it or some note or memorandum thereof be in writing and subscribed by the party to be charged therewith, or his agent, if such agreement, promise or undertaking, by its terms is not to be performed within one year from making thereof ..." N.Y.Gen.Oblig.Law Sec. 5-701. Similarly, California's statute provides that "[t]he following contracts The district court found that while these two provisions are facially identical, they are interpreted differently. The court correctly determined that in California, Rosenthal's employment contract with Fonda, terminable at the will of either party, would fall outside the bar of the state's statute of frauds because it is capable of being performed within a year. See Eisenberg v. Insurance Company of North America, 815 F.2d 1285, 1291 (9th Cir.1987). California's one year provision is interpreted literally and narrowly. Plumlee v. Poag, 150 Cal.App.3d 541, 198 Cal.Rptr. 66, 71 (1984). Only those oral contracts which "expressly preclude performance within one year" or that "cannot possibly be performed within one year" are unenforceable. Id.; White Lighting Co. v. Wolfson, 68 Cal.2d 336, 66 Cal.Rptr. 697, 701, 438 P.2d 345, 349 (1968); see Robards v. Gaylord Brothers, Inc., 854 F.2d 1152 (9th Cir.1988). In this case, Fonda could have discharged Rosenthal after he had worked for her for six months; therefore, this contract was capable of being performed within one year. Moreover, California's statute of frauds does not invalidate oral employment contracts that call for the payment of commissions after one year or upon termination of the employment relationship. White Lighting, 66 Cal.Rptr. at 701-02, 438 P.2d at 349-50. Thus, Rosenthal's oral contract with Fonda would not be barred under California's statute of frauds.

are invalid, unless the same, or some note or memorandum thereof, is in writing and subscribed by the party to be charged or by his agent: 1. An agreement that by its terms is not to be performed within a year from the making thereof ..." Cal.Civ.Code Sec. 1624.1.

In New York, however, while a typical employment contract with no fixed term is not barred by the statute of frauds, Fisher v. Ken Carter Industries, Inc., 127 A.D.2d 817, 512 N.Y.S.2d 408, 409 (1987), a commission sales arrangement that extends beyond the employee's termination or that has no specific time frame has repeatedly been held to be one that cannot be performed within one year. See Zupan v. Blumberg, 2 N.Y.2d 547, 161 N.Y.S.2d 428, 429, 141 N.E.2d 819, 822 (1957); Urvant v. Imco Poultry, Inc., 325 F.Supp. 677, 683-85 (E.D.N.Y.1970), aff'd, 440 F.2d 1355 (2d Cir.1971) (summarizing New York case law applying the one year provision to continuing commission arrangements). The New York rule was enunciated in McCollester v. Chisholm, 104 A.D.2d 361, 478 N.Y.S.2d 691 (1984), aff'd, 65 N.Y.2d 891, 493 N.Y.S.2d 310, 482 N.E.2d 1226 (1985):

A service contract of indefinite duration, in which one party agrees to procure customers, or accounts, or orders on behalf of the second party, is not by its terms performable within one year--and hence must be in writing and signed by the party to be charged--since performance is dependent, not upon the will of the parties to the contract, but on that of a third party.

Id. at 692.

The key element in deciding whether New York's statute of frauds applies to bar a commission sales agreement is whether the defendant can unilaterally terminate the contract, discharging all promises made to the plaintiff including the promise to make commission payments. See North Shore Bottling Co. v. C. Schmidt & Sons, Inc., 22 N.Y.2d 171, 292 N.Y.S.2d 86, 90, 239 N.E.2d 189, 191 (1968). If commission payments are due under the contract after one party has fully performed, the contract, by its own terms, cannot be performed within a year because there is no way the defendant can unilaterally terminate the contract. See Shirley Polykoff Advertising, Inc. v. Houbigant, Inc., 43 N.Y.2d 921, 403 N.Y.S.2d 732, 733, 374 N.E.2d 625, 626 (1978) (contract providing that advertising agency receive $5,000 a year for every year the advertisement is used cannot be performed within one year). See also Urvant, 325 F.Supp. at 685-86 (Under New...