Bushkin Associates, Inc. v. Raytheon Co.

• Decision Date: 10 January 1985
• Citation: 393 Mass. 622,473 N.E.2d 662
• Parties: BUSHKIN ASSOCIATES, INC. et al. 1 v. RAYTHEON COMPANY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 662

473 N.E.2d 662

393 Mass. 622

BUSHKIN ASSOCIATES, INC. et al. ¹ v. RAYTHEON COMPANY.

Supreme Judicial Court of Massachusetts Suffolk.

Argued Sept. 12, 1984.

Decided Jan. 10, 1985.

Alan D. Rose, Boston (R. Reed Baer, Boston, with him), for plaintiffs.

Neal C. Tully, Boston (Dana C. Hanson, Boston, with him), for defendant.

Before WILKINS, LIACOS, NOLAN, LYNCH and O'CONNOR, JJ.

WILKINS, Justice.

We deal with questions certified to us by the United States Court of Appeals for the First Circuit, pursuant to S.J.C. Rule 1:03, as amended, 382 Mass. 700 (1981). The principal question involves a conflict of laws issue: whether the Massachusetts or the New York Statute of Frauds should be applied in this action involving an alleged oral agreement between the plaintiff Bushkin, a New York resident, and his New York corporation, on the one hand, and the defendant Raytheon Company (Raytheon), a Massachusetts based corporation, on the other. An action based on such an oral agreement would be barred under the New York Statute of Frauds (N.Y.Gen.Oblig.Law § 5-701[a] [McKinney 1978 & Cum.Supp.1984] ), but would not be barred under the Massachusetts Statute of Frauds (G.L. c. 259, § 1).

The Court of Appeals understandably concluded that it was not "confident of the choice that would be made by the Supreme Judicial Court in this important case." Our cases have not indicated with any certainty how this court would resolve the choice-of-law question presented to us (nor indeed the other questions certified to us, which concern G.L. c. 93A).

The three questions certified are:

"1. On the facts of this case, should New York or Massachusetts law determine the issue of validity of the alleged oral agreement between the parties?

"2. Does Massachusetts General Laws chapter 93A apply to the allegations of deceptive acts and practices?

"3. If the answer to question 2 is in the affirmative, is defendant entitled to the exemption of G.L. c. 93A, § 3(1)(b)(i) in that the alleged actions forming the basis of the chapter 93A claim did not occur 'primarily and substantially' in Massachusetts?" ²

The Court of Appeals appended to its certification "the summary of relevant facts as set forth by the district court in its opinion." We quote those facts in the paragraphs immediately hereafter.

"Factual Background. [a]

"Bushkin, a New York resident, is an investment banker specializing in mergers and acquisitions. He is the president of Bushkin Associates, a corporation organized and based in New York. Raytheon is a Delaware corporation with its principal place of business in Massachusetts.

"Bushkin's dealings with Raytheon concerning possible mergers and acquisitions began in 1971. In 1974, Bushkin discovered that Beech [Aircraft Corporation] might be available for acquisition. He attended a meeting in January, 1974, with Olive Ann Beech and Frank Hedrick, the president and vice president respectively of Beech, at which he learned some information regarding the type of merger that might interest them. [b]

"On May 21, 1974, Bushkin, in New York, telephoned Robert Seaman, a vice president of Raytheon, in Massachusetts, to ask if Raytheon would be interested in acquiring a general aviation company. Seaman replied that Raytheon might be interested if the company were either Cessna or Beech. Seaman followed up with a May 24 letter to Bushkin, stating that Raytheon's interest in a general aviation company was uncertain. During a July 19, 1974, telephone conference, Seaman told Bushkin that it was unlikely that Raytheon would have an interest in a general aviation company.

"The next conversation on the subject, and the one in which Bushkin alleges the oral fee agreement was made, occurred on January 28, 1975. Bushkin apparently telephoned Seaman (or Seaman returned Bushkin's call). In either event, Bushkin was in New York and Seaman in Boston. Bushkin asked if Raytheon were still interested in general aviation. Seaman replied yes, if the company were Beech or Cessna. Bushkin stated that he could reveal the name of the company, but first wanted to discuss a fee arrangement. Seaman told Bushkin that if Raytheon consummated an acquisition of the company Bushkin was discussing, Raytheon would pay a fee of one percent of the value of the transaction. Bushkin replied, 'fine,' and then identified the company as Beech. He went on to disclose information as to his understanding of the kind of acquisition or merger that Beech wanted.

"Seaman and Bushkin had a few more contacts with regard to Beech and, on June 27, 1975, Seaman presented Beech as a possible acquisition candidate to Thomas Phillips, Raytheon's chairman of the board. An internal Raytheon 'acquisition log,' dated June 19, 1975, identifies Bushkin as the person who offered or suggested Beech as a candidate. On June 30, Seaman called Bushkin to report on the presentation, and to discuss various aspects of a possible Raytheon acquisition of Beech. Later that day, Seaman sent a memo to Phillips summarizing relevant aspects of his conversation with Bushkin. [d] In the memo, Bushkin was identified as 'our contact in this matter.'

"In a telephone conversation on July 29, 1975, Seaman told Bushkin that Raytheon had decided it was not interested in pursuing Beech as an acquisition candidate. Bushkin had subsequent contacts with Seaman and Phillips with regard to possible acquisition candidates other than Beech. On one occasion in November 1975 Bushkin broached the subject of Beech with Phillips (in the course of discussions about another candidate), and Phillips replied that he was not interested.

"On September 1, 1976, Raytheon entered into a written agreement with Lonsdale Enterprises, Inc., and its principals Royal Little and James Robison, for consulting services in connection with Raytheon's interest in mergers and acquisitions. About three months later, in letters to Phillips dated November 29 and December 9, 1976, Little and Robison suggested Beech as a possible acquisition candidate. Phillips' first reaction was not enthusiastic, but by February 16, 1977, Phillips indicated that he wanted to meet with Olive Beech. On February 28, while Bushkin was meeting with Phillips concerning another company, Bushkin again mentioned Beech, but Phillips said he was not interested. Nonetheless, on March 3, Phillips authorized Little and Robison to contact Beech through their business associate Angus MacDonald. In June, 1977, it became public knowledge that Beech was negotiating a merger with General Dynamics, and Raytheon, therefore, dropped the matter until those negotiations fell through.

"Phillips finally met with Frank Hedrick, vice president of Beech, on January 24, 1978, and with Olive Beech on July 12, 1978. After further negotiations and studies, Raytheon and Beech reached a preliminary agreement on October 1, 1979. Raytheon subsequently entered written agreements, dated November 26, 1979, to pay Lonsdale and MacDonald $600,000 and $500,000 respectively for their services in connection with the merger. The agreements were contingent on its consummation.

"In February, 1980, Raytheon acquired Beech. The value of the transaction was approximately $800,000,000.00."

The action came before the Court of Appeals on Bushkin's appeal following a Federal District Court judge's allowance of Raytheon's motion for summary judgment. In allowing that motion, the judge recognized that, in this diversity action, his obligation was to apply the choice-of-law rules of Massachusetts. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). He concluded that this court would not apply the principle that the choice of law would be governed by the place of contracting and concluded further that the principles stated in the Restatement (Second) of Conflict of Laws (1971) were "not an effective means for resolving the choice of law problem in this case." In his view, "[d]etermining the projected scope of a law by application of an expanded interest analysis" helped to resolve the choice-of-law issue. Applying this analysis, he ruled that New York had a strong interest in protecting defendants against unfounded claims, even when New York brokers and finders sued non-New Yorkers. He said "Massachusetts, in contrast, has at most a minimal interest in applying its law to this case." He concluded that Bushkin could not avoid the laws of New York and should not benefit from forum shopping, and held that "[e]xpanded interest analysis clearly tips the scale in favor of applying New York law to the facts of this case." ³

The judge further concluded that Bushkin's G.L. c. 93A claim merely restated his contract claim, believing that it was based solely on Raytheon's failure to abide by its agreement with Bushkin and its use, without payment, of information acquired pursuant to that agreement. Because the contract was unenforceable, it was his view that Bushkin's G.L. c. 93A claims must necessarily fail. He thus allowed Raytheon's motion for summary judgment and dismissed Bushkin's complaint.

We conclude that the alleged oral fee agreement is not barred by the New York Statute of Frauds because the law of Massachusetts determines the enforceability of the alleged oral agreement. We further decide that Raytheon is entitled to the exemption from G.L. c. 93A provided by G.L. c. 93A, § 3(1)(b )(i), because Bushkin's G.L. c. 93A claim is not based on transactions and actions that occurred primarily in Massachusetts. We thus answer question three in the affirmative. Because Raytheon is exempt from liability under G.L. c. 93A, we need not answer question two, which inquires whether G.L. c. 93A applies to Bushkin's allegations of deceptive acts and practices.

1. On the facts of this case, should New York or Massachusetts law determine the issue of validity of the alleged oral agreement between the parties?

The plaintiff does not contend that his oral agreement would...