AroChem Intern., Inc. v. Buirkle

• Decision Date: 30 June 1992
• Docket Number: No. 413,D,413
• Citation: 968 F.2d 266
• Parties: AroCHEM INTERNATIONAL, INC., AroChem Corporation and William R. Harris, Plaintiffs-Appellants, v. Harold W. BUIRKLE, Defendant-Appellee. ocket 91-7641.
• Court: U.S. Court of Appeals — Second Circuit

Page 266

968 F.2d 266

AroCHEM INTERNATIONAL, INC., AroChem Corporation and William

R. Harris, Plaintiffs-Appellants, v. Harold W. BUIRKLE, Defendant-Appellee.

No. 413, Docket 91-7641.

United States Court of Appeals, Second Circuit.

Argued Oct. 24, 1991.

Decided June 30, 1992.

Richard F. Lawler, Greenwich, Conn. (Kari A. Pedersen, Whitman & Ransom, of counsel), for plaintiffs-appellants AroChem Intern., Inc., and AroChem Corp.

Richard D. Weinberg, New York City (Adam B. Rowland, Shereff, Friedman, Hoffman & Goodman, of counsel), for plaintiff-appellant William R. Harris.

Charles E. Schaub, Jr., Boston, Mass. (Robert F. Sylvia, Susan B. Tuchman, William R. Moore, Hinkley, Allen, Snyder & Comen, Boston, Mass., James A. Moss, Glenn S. Kerner, Herrick, Feinstein, New York City, of counsel), for defendant-appellee.

Before MESKILL, WINTER and WALKER, Circuit Judges.

WINTER, Circuit Judge:

Appellants AroChem International, Inc., AroChem Corporation (collectively "AroChem"), and William R. Harris brought the instant matter against Harold Buirkle for defamation and for tortious interference with a contractual and commercial relationship. A jury trial commenced, and, at the close of the plaintiffs' main case, Judge Stanton directed a verdict in favor of Buirkle. He held that California law governed and that Buirkle's allegedly defamatory statements were privileged. 767 F.Supp. 1243. Additionally, Judge Stanton held that Harris and AroChem had failed to prove their tortious interference claims. Harris and AroChem appeal. We affirm.

BACKGROUND

Harris, a Connecticut resident, is founder, chair, president, and majority shareholder of AroChem, a petroleum and petrochemical business with executive offices in Stamford, Connecticut. In 1987, Edwin E. Wells assisted Harris in obtaining from Victory Holding Company, Crail Fund, and Victory Oil Company (collectively "Victory") financing needed to form AroChem. In return, Wells and Victory received a portion of AroChem's common stock and seats on its six-member board of directors. Pursuant to this agreement, Harris owned 60% of AroChem's common stock, Wells owned 10.625% of the stock, Victory owned 27.5%, and Wells' former employer, Allen & Company, owned 1.875%. Additionally, Wells and two individuals associated with Victory--S.L. Hutchison and Eric Johnson--were elected to AroChem's board of directors. Victory also holds $17.3 million in notes from AroChem.

Less than a year after AroChem's formation, disagreements about its operation arose among Harris, Victory, and Wells. These disputes intensified, and both Harris and Wells sought to purchase Victory's interests. Wells claimed that he entered into an agreement with Victory in March 1989 to purchase Victory's rights in AroChem. Victory disputed this claim and, on April 13, 1989, Victory filed suit against Wells in the District Court for the Central District of California. In that action, Victory sought a declaratory judgment that it was not contractually bound to sell its interests in AroChem to Wells. Wells answered the complaint, disputed its allegations, and asserted a number of counterclaims against Victory.

In July 1989, Harris sued Wells and Victory in the District Court for the District of Connecticut. Harris' complaint asserted a variety of state and federal claims, including securities fraud and RICO violations. In August 1989, Wells sued Harris and AroChem, again in the District of Connecticut. This action also involved allegations of securities fraud, RICO violations, and common-law fraud. In April 1990, this latter complaint was amended by Wells to assert similar claims against Victory. Victory responded with RICO and common-law counterclaims against Wells.

Harold Buirkle, a New Jersey resident and the defendant-appellee in the instant matter, became involved when he agreed to In November 1989, Harris and Victory signed a Stock Purchase and Settlement Agreement (the "Harris/Victory Agreement"), which provided for Harris' acquisition of Victory's interests in AroChem for $24.4 million and the resignation of the two Victory representatives on AroChem's board of directors. The agreement was executed in Connecticut and was scheduled to close on January 2, 1990, or on some other mutually-agreed upon date. Wells obtained a copy of the Harris/Victory Agreement in late-November 1989. He, in turn, informed Buirkle of the agreement. The Harris/Victory Agreement never closed. Indeed, Harris and AroChem brought the instant lawsuit because, they allege, Buirkle's and Wells' actions during November and December 1989 caused the deal to fall through.

                assist Wells in his attempt to purchase Victory's interests in AroChem.   This agreement was formalized in October 1989, when Wells and Buirkle signed a detailed "Joint Litigation Agreement."   The Joint Litigation Agreement provided that Buirkle would help finance expenses for litigation and related matters incurred by Wells in his bid to acquire Victory's stock and other interests in AroChem.   Buirkle also agreed to assist Wells in raising the capital needed to finance a buy-out of Victory and Harris.   In return, if Wells was successful in his attempt to obtain a controlling interest in AroChem before December 31, 1990, Buirkle would be entitled to purchase certain AroChem common stock
                

The allegations concerning Buirkle's and Wells' actions are based on the following events. On November 25, 1989, Wells wrote to Victory and Harris, requesting additional information about the Harris/Victory Agreement. On December 7, 1989, Wells sent a second letter to Victory, objecting to the proposed sale of AroChem stock to Harris and threatening Victory with a lawsuit if it closed on the sale. Buirkle learned of this correspondence.

Harris and AroChem had made arrangements with Chase Manhattan Bank ("Chase") and Drexel Burnham Lambert ("Drexel") to obtain financing for certain AroChem operations. On January 2, 1990, and again on January 5, 1990, representatives of Wells sent letters on Wells' behalf to Chase and Drexel, urging them, for a number of reasons, not to provide financing to AroChem. Additionally, on December 11, 1989, representatives of Wells sent a letter to the Office of the Commissioner of Financial Institutions for the Commonwealth of Puerto Rico ("OCFI"), detailing a number of unlawful activities that AroChem was alleged to have engaged in with respect to its Puerto Rican operations, and suggesting that the OCFI investigate these activities.

On December 20 and 21, 1989, at Wells' request, Wells and Buirkle met with representatives of Victory in Los Angeles, California. The evidence indicated that the reason for the meeting was to attempt to settle the ongoing disputes between Victory and Wells, including the California litigation. Before discussions began, the participants signed a confidentiality agreement, which stated in pertinent 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....

At this meeting, Wells made a number of allegations of wrongdoing by Harris. He claimed that Harris was looting AroChem and accumulating this stolen money in offshore bank accounts. Additionally, Wells suggested that Harris was planning to flee the United States within the year. Buirkle allegedly corroborated these statements by nodding, gesturing, and saying "yeah." And, at the conclusion of the second day of discussions, Buirkle stated that "it's ironic that here we are getting together to talk about buying Mr. Harris out when in fact we should be putting him in jail."

During the second day of the meeting, Wells made an offer to purchase Victory's interests in AroChem, rather than have Representatives of Victory met with Harris in New York on January 11, 1990. Eric Johnson, a Victory representative, told Harris that Victory was not prepared to complete the sale of Victory's interest in AroChem because of what Wells and Buirkle had intimated about Harris during the December meeting. The closing was postponed until February, so that Victory could investigate the charges made against Harris. By the time the investigation was completed, and Victory was once again prepared to sell to Harris, one of Harris' sources of financing, Drexel, had filed for bankruptcy. Harris was unable to find alternative funding, and the deal never closed.

                Victory sell those interests to Harris.   Wells offered less money to Victory for its AroChem interests than Harris had offered.   However, Wells did propose to release Victory from any liability stemming from Harris' alleged improprieties.   Wells' attorney stated that if Victory sold its interests to Harris, Wells would sue Victory, and the ensuing lawsuit would be an unpleasant experience
                

Harris and AroChem filed the instant matter against Buirkle in a New York State court on May 3, 1990. They alleged that Buirkle defamed Harris at the December meeting, and that he tortiously interfered with the contractual and commercial relationship between Harris and Victory. The latter claims are based in part on Buirkle's remarks at the December meeting. They are also based on Buirkle's aiding of Wells' effort to acquire Victory's interest in AroChem and on the letters described above.

Buirkle removed the suit to the Southern District of New York. A jury trial began on June 3, 1991. At the conclusion of Harris' and AroChem's main case, Buirkle moved for a directed verdict. Judge Stanton granted this motion on the ground that any statements made by Buirkle during the Los Angeles negotiations were privileged under California law and could not be the basis of a defamation claim. In addition, Judge Stanton held that Harris and AroChem...