Karelitz v. Damson Oil Corp.

• Citation: 820 F.2d 529
• Decision Date: 05 June 1987
• Docket Number: No. 86-1816,86-1816
• Parties: Stephen H. KARELITZ, Plaintiff, Appellant, v. DAMSON OIL CORPORATION, Defendant, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 529

820 F.2d 529

Stephen H. KARELITZ, Plaintiff, Appellant, v. DAMSON OIL CORPORATION, Defendant, Appellee.

No. 86-1816.

United States Court of Appeals First Circuit.

Argued Feb. 3, 1987.

Decided June 5, 1987.

Arnold E. Cohen, with whom Malcolm D. Finks, Englander, Englander & Finks, P.C., James F. Meehan, and Meehan, Boyle & Cohen, Boston, Mass., were on brief, for plaintiff, appellant.

James S. Dittmar, with whom Richard R. Lavin and Widett, Slater & Goldman, P.C., Boston, Mass., were on brief, for defendant, appellee.

Before CAMPBELL, Chief Judge, BREYER and SELYA, Circuit Judges.

BREYER, Circuit Judge.

The plaintiff-appellant in this diversity case, Stephen Karelitz, a stockbroker, has sued the defendant-appellee, Damson Oil Corp., for a finder's fee that, he says, Damson Oil owes him because 1) Karelitz introduced Barrie Damson, the President of Damson Oil, to officials of Buttes Gas and Oil Co. in 1973, and 2) nine years later Damson Oil bought an important oil and gas property from Buttes. The basis for Karelitz's claim is a written contract, signed by the parties in 1973, that says that Damson Oil will pay Karelitz a commission should the company acquire from Buttes the property in question (called Juniper Oil Corp.). This contract, if read literally, seems to entitle Karelitz to his commission, for the contract says nothing about time. Rather, it simply says that "Karelitz will be entitled to a 3% fee" should Damson "conclude with Buttes Oil" an "acquisition ... or like transaction" involving Juniper. The parties agree, however, that they intended the contract to be a typical 'finder's fee' contract, governed by New York law. Karelitz concedes that for a finder to recover under such a contract "there must be a causal relation between the introduction of the parties and the ultimate conclusion of the transaction." Brief for Appellant at 13; see Simon v. Electrospace Corp., 28 N.Y.2d 136, 320 N.Y.S.2d 225, 269 N.E.2d 21 (1971); Seckendorff v. Halsey, Stuart & Co., 234 App.Div. 61, 254 N.Y.S. 250 (1931), rev'd. in part on other grounds, 259 N.Y. 353, 182 N.E. 14 (1932). The sole issue on this appeal is whether a jury might reasonably have found the necessary causal connection.

At trial, the jury gave a verdict in Karelitz's favor, thus implicitly finding for Karelitz on the causation question. The district court, however, set the verdict aside and granted judgment n.o.v. for Damson Oil. 640 F.Supp. 131. Karelitz now appeals. In our view, the district court was correct. No reasonable juror could have found the legally necessary causal relation between Karelitz's original introduction of the parties and the transaction that eventually took place.

I

We take the facts as those shown by the plaintiff's evidence and by at least such of defendant's uncontradicted and unimpeached evidence as, under all the circumstances, the jury virtually must have believed. See Dehydrating Process Co. v. A.O. Smith Corp., 292 F.2d 653, 656 n. 6 (1st Cir.), cert. denied, 368 U.S. 931, 82 S.Ct. 368, 7 L.Ed.2d 194 (1961); 9 C. Wright & A. Miller, Federal Practice and Procedure Sec. 2529 (1971); Cooper, Directions for Directed Verdicts, 55 Minn.L.Rev. 903, 928-55 (1971). The more important of these facts include the following:

1) Karelitz and Damson met in 1971. Karelitz became Damson's personal stockbroker, and they had an extensive, longlasting business relationship.

2) In early 1973, Karelitz suggested to Damson that his company might want to buy the interest that Buttes Gas and Oil owned in Juniper Oil Corp. Damson agreed.

3) Karelitz then arranged a meeting, held on April 12, 1973, involving Karelitz, Damson, the President of Juniper (Sigmund Rosenfeld), and a friend of the President of Buttes (Louis Carnesale). Immediately after the meeting, Damson told Karelitz that he was "getting some facts and figures together," that Karelitz had done his job, and that he would be in touch with Karelitz later if he needed him. He and Karelitz also signed the written contract, which affirmed "that Stephen H. Karelitz introduced us to Juniper Oil Corp."

4) During the next two or three months, Carnesale and Rosenfeld discussed the possible sale of Juniper to Damson Oil, Juniper provided Damson Oil with engineering data, and Damson and Carnesale discussed the matter with John Boreta, the President of Buttes. The sale, however, did not take place.

5) The next relevant event took place nearly four years later, in April 1977, when Carnesale (not Karelitz) arranged a meeting (at Damson's request) between Damson and Boreta to discuss the sale of Juniper. Boreta did not sell Juniper, but he did later sell Damson Oil a drilling barge. Eventually, Damson Oil paid finder's fees to both Karelitz and Carnesale as a result of the barge sale. At that time (late 1977), when Karelitz protested that the barge fee was too small, Damson told him, "Your big money is going to be when we get the Juniper deal closed."

6) About two years later, in October 1979, Boreta (the President of Buttes) decided to see whether he could sell Juniper. He (or his company) compiled a list of twenty possible buyers; he sent eight of them confidential information about Juniper. He did not include Damson on either list.

7) Damson heard about Boreta's efforts to sell Juniper from one of the companies on the list of eight. A Damson Oil official asked Buttes to send him the confidential information. In February, 1980, Damson Oil returned the information to Buttes and indicated that it did not want to buy Juniper. Evidently no one else did either, for no sale took place.

8) In May 1981, a third party (not Karelitz) brought Damson and Boreta together again to discuss Juniper. This time the talks proved fruitful. On March 31, 1982, Boreta sold Buttes' interest in Juniper to Damson Oil. The next day, when the news became public, Damson called Karelitz and asked Karelitz to congratulate him. Karelitz did so; he also asked for his three percent commission. Damson refused to pay.

In addition to these chronological facts, Karelitz testified that he maintained his business relation with Damson (as his stockbroker) throughout the 1973-1981 period, that from time to time he "nudged" Damson about Juniper, and that in 1980 Damson said to him, "We got [Boreta] right where we want him....Stay cool." Karelitz does not dispute the additional facts that the oil market changed dramatically between 1973 and 1981, that Juniper's production grew during this period from 600 to 2000 barrels per day, and that Juniper's revenue grew from about $1 million to about $23 million per year, with its stock price rising accordingly.

II

These facts, in our view, demonstrate that Karelitz's initial introduction, while possibly a necessary condition of the eventual acquisition, was not a "cause." Here, as elsewhere in the law, a "cause" is more than simply a necessary "but-for" condition. A's negligence, for example, may be a necessary condition of B's injury--A may have driven his car too fast, thereby bringing his passenger B to a place where he is independently injured by a different car (or by a falling flower pot)--but the law of torts does not allow B to recover from A simply by showing the presence of "but-for" causality. See generally W. Keeton, Prosser and Keeton on Torts Sec. 43 (5th ed. 1984) (discussing liability for "unforeseeable consequences"); id. Sec. 44, at 316-19 (discussing liability for "foreseeable results of unforeseeable causes"). Similarly, here, the New York courts have insisted that the finder show more than that his service was a necessary condition. Rather, the finder must show that "the deal that was made resulted and flowed directly from the original" introduction. Seckendorff v. Halsey, Stuart & Co., 254 N.Y.S. at 260. He must establish a "continuing connection" between the finder's service and the ultimate transaction. Simon v. Electrospace Corp., 320 N.Y.S.2d at 229, 269 N.E.2d at 24. The case law has been summarized as follows:

Although "procuring cause" is a principle sometimes said to apply with respect to a finder, it is clear that a finder's fee is not dependent upon the finder's participation in negotiations, and that it may become payable even though a third person brings the parties to agreement. If a finder introduces two parties for the purpose of merger, negotiations ensue from this introduction, they proceed without a break, and a merger results, the causation requirement is probably satisfied. If a finder introduces A to B for the purpose of effectuating a sale of A's property to B, and instead, B subsequently agrees to sell...