Buysse v. Paine, Webber, Jackson & Curtis, Inc., s. 79-1605

• Decision Date: 29 July 1980
• Docket Number: Nos. 79-1605,79-1683,s. 79-1605
• Citation: 623 F.2d 1244
• Parties: Frank BUYSSE, Appellant, Cross-Appellee, v. PAINE, WEBBER, JACKSON & CURTIS, INC., Appellee, Cross-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1244

623 F.2d 1244

Frank BUYSSE, Appellant, Cross-Appellee, v. PAINE, WEBBER, JACKSON & CURTIS, INC., Appellee, Cross-Appellant.

Nos. 79-1605, 79-1683.

United States Court of Appeals,

Eighth Circuit.

Submitted Feb. 14, 1980.

Decided May 28, 1980.

Rehearing Denied July 29, 1980.

Geoffrey P. Jarpe (on briefs), Maun, Green, Hayes, Simon, Murray & Johanneson, St. Paul, Minn., for appellant, cross-appellee.

Maclay R. Hyde (on briefs), Lindquist & Vennum, Minneapolis, Minn., for appellee, cross-appellant.

Before LAY, Chief Judge, and BRIGHT and HENLEY, Circuit Judges.

LAY, Chief Judge.

The district court entered judgment in favor of Frank Buysse, a stockbroker employed by Paine, Webber, Jackson & Curtis, Inc. (PWJC), for his role in obtaining business for his employer. PWJC is a stock brokerage and investment banking firm. Buysse has appealed claiming an inadequate award; PWJC has cross-appealed from the judgment made. We vacate the judgment and remand for entry of a modified judgment by the district court.

Buysse began working for PWJC as a stockbroker in 1969. In October, 1971, PWJC formed its Public Finance Department. Shortly thereafter, the company's policy with regard to compensation of stockbrokers who introduce investment banking business to PWJC was formulated. A manual was published and distributed outlining the policy. ¹ In June of 1971, the Minnesota Legislature created the Minnesota Housing Finance Agency (MHFA) and gave it the authority to issue notes and bonds to aid in the construction of housing for low and moderate income families. Initially, the MHFA was limited to the issuance of $150,000,000 in notes and bonds. The amount was later increased to $645,000,000.

The MHFA hired an executive director, James Dlugosch, in the fall of 1971, and work progressed toward the initial offering of its bonds. Mr. Dlugosch attended an industry conference in Detroit in January of 1972, where he was contacted by representatives of 15 to 20 investment banking firms including PWJC. Thomas Caine, a member of PWJC's Public Finance Department, and Joseph Luby, head of PWJC's Public Finance Department, contacted Mr. Dlugosch at the Detroit conference to discuss the possibility of the MHFA selling bonds and to offer PWJC's services to the MHFA as managing underwriter. Mr. Dlugosch suggested that it was too early for the agency to consider proceeding with any bond issuance at that time but that Mr. Caine should call him back in approximately two months.

Following the Detroit conference, and independent of the efforts made by PWJC, Buysse attempted to obtain the MHFA business for his employer. In late January or early February, Buysse contacted Thomas Kelm, at that time the Administrative Assistant to Governor Anderson, to arrange a meeting concerning the MHFA. Buysse and Kelm had been roommates for one year during their college years but had seen each other infrequently since that time. The meeting lasted for only an hour but Kelm did refer Buysse to Dr. Gerald Christianson who was on the board of the MHFA.

Buysse's sister is married to Dr. Christianson's brother but their relationship was quite casual, based solely on the family connection. Prior to the events forming the basis of this lawsuit, they had met only three to five times. Buysse had a brief meeting with Dr. Christianson who referred him to Mr. Dlugosch.

Ultimately, Buysse had a two hour meeting with Dlugosch, with whom he had had no prior contacts, and reported his meeting to PWJC's Regional Manager. Several days later, Buysse and Dlugosch met again, along with the head of PWJC's Municipal Bond Department in the Minneapolis office. They discussed the MHFA's need for a financial advisor and PWJC's goal of being named managing underwriter for any bonds issued by the MHFA. Mr. Dlugosch requested that PWJC present a proposal to the MHFA to become its advisor and managing underwriter. Buysse contacted Mr. Luby and told him about the meeting with Dlugosch. Mr. Luby then had a proposal prepared to take to the MHFA.

On March 6, 1972, several PWJC employees, including Buysse, attended a luncheon meeting with Mr. Dlugosch and members of the MHFA board of directors to discuss the details of PWJC's proposal regarding its desire to become financial advisor and ultimately managing underwriter to the MHFA. As a result of that meeting PWJC was appointed financial advisor to the MHFA. At that time, the agency was not in a position to select a managing underwriter.

Ben Bedford of PWJC was assigned to be the liaison man with the MHFA, but Mr. Luby was in charge of the overall MHFA operation for PWJC. Mr. Buysse continued to keep in touch with Mr. Dlugosch, regarding PWJC's role as financial advisor, even though he was not required to do so. Some time after the March 6, 1972, meeting, Dlugosch expressed his dissatisfaction with PWJC because of Mr. Bedford's failure to respond to Dlugosch's correspondence. Mr. Buysse assured Mr. Dlugosch that Bedford would be removed as the liaison man and PWJC would get back on track. Bedford's replacement, Mr. Caine, performed satisfactorily as far as Mr. Dlugosch was concerned.

On November 10, 1972, the MHFA decided that it should appoint a managing underwriter and directed Mr. Dlugosch to solicit proposals for that position. He sent letters to a number of investment banking firms asking for proposals. The MHFA appointed a subcommittee on December 8, 1972, to review the proposals that had been submitted by a number of firms including PWJC.

In early 1973, a rumor was circulating that Goldman Sachs, another investment banking firm, had been selected as the managing underwriter for the MHFA. PWJC arranged a meeting with Mr. Kelm, at which Mr. Buysse was present, to discuss the rumor. Mr. Kelm said there was nothing he could do for them. Mr. Buysse then contacted Dr. Christianson and told him about the rumor and said that PWJC was very disappointed that they had not been chosen as the managing underwriter. Dr. Christianson checked out the rumor and called Buysse back with the news that PWJC had been selected. The subcommittee's recommendation was formally adopted at the MHFA meeting of February 9, 1973.

PWJC was co-underwriter with the firm of Piper, Jaffray & Hopwood which required them to split the management fee with that firm. On August 23, 1973, the MHFA sold its first public offering of bonds in the amount of $30,000,000. PWJC earned a net management fee of $81,000 for this sale. PWJC gave Buysse $11,580 as compensation for being the introducing broker. According to PWJC's Investment Banking Services manual, the introducing broker is entitled to compensation in the amount of 20% of the company's net management fee, in this instance $16,200.

On September 19, 1974, the MHFA sold its second public offering of bonds in the amount of $53,930,000 and PWJC earned a net management fee of $94,447. Initially, PWJC offered Buysse only $500 as his share of the fee. Upon his objection, they offered him $2,500 and upon further objection finally offered him an additional $2,500, for a Two more public offerings of MHFA bonds were made prior to Buysse's discharge. On September 24, and November 20, 1975, the MHFA sold bonds in the amount of $8,985,000 and $18,640,000, respectively. PWJC earned an aggregate net management fee from these two sales of $64,402. Buysse did not receive any compensation from these sales, even though he was aware of them and requested that he be paid the compensation to which he was entitled.

total of $5,000. Mr. Buysse continued to dispute the amount that was owed to him.

On January 28, 1976, Buysse filed this suit for recovery of compensation he claims PWJC owes to him. One week later, he met in New York City with officials of PWJC to attempt a resolution of the compensation problem. Plaintiff was told that if he maintained his lawsuit he would be jeopardizing his employment with PWJC. On March 22, 1976, with Mr. Buysse's litigation still pending, PWJC terminated his employment. ²

Between the time Mr. Buysse's employment was terminated and the time of the trial, PWJC had acted as managing underwriter in several additional public offerings of MHFA bonds the total amount of which is $584,610,000. PWJC's total management fees on these offerings are $673,299.84. Buysse has received no compensation from these post-termination offerings. PWJC, as of the time of the trial, continued to be the managing underwriter for the MHFA bond offerings.

In addition to the fees it earned as managing underwriter for the MHFA's public bond offerings, PWJC has also earned fees for work involved with the MHFA State-Home Improvement Program, 1976 Series A and 1977 Series A. The fees were $30,895 and.$23,670 respectively and were advisory fees which are different than the management fees charged for the public offerings, and which were negotiated with the agency. Mr. Buysse claims that these too are subsequent financings within the meaning of the contract outlining compensation to stockbrokers for investment banking introductions.

The district court held Buysse is entitled to a full 20% of the management fee of $81,000 on the initial underwriting. The court further held Buysse is entitled to 5% of the management fee on all subsequent financings of MHFA offerings until Buysse reaches the age of 65. The court included the advisory fees charged for work with the MHFA State-Home Improvement Program, 1976 Series A and 1977 Series A.

Plaintiff appeals from the judgment, claiming that the district court erred in its decision that "reduced scale" in this instance meant only 5%. The plaintiff also asserts error in the district court's decision to terminate his compensation at age 65. PWJC cross-appeals claiming that the district court erred in awarding Buysse any compensation beyond the date at which his employment was terminated.

Both parties agree that Minnesota law governs. They also agree that an employment contract which...