Merex AG v. Fairchild Weston Systems, Inc.

• Decision Date: 06 January 1993
• Docket Number: No. 85 Civ. 6596 (MJL).,85 Civ. 6596 (MJL).
• Citation: 810 F. Supp. 1356
• Parties: MEREX A.G., Merex Corporation and Peter C. Lachmann, Plaintiffs, v. FAIRCHILD WESTON SYSTEMS, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

810 F. Supp. 1356

MEREX A.G., Merex Corporation and Peter C. Lachmann, Plaintiffs, v. FAIRCHILD WESTON SYSTEMS, INC., Defendant.

No. 85 Civ. 6596 (MJL).

United States District Court, S.D. New York.

January 6, 1993.

COPYRIGHT MATERIAL OMITTED

Daniel J. O'Callaghan, New York City, for plaintiffs.

Arent Fox Kintner Plotkin & Kahn, New York City (Roy A. Klein, Ronald W. Weiner, of counsel), for defendant.

MEMORANDUM OPINION AND ORDER

LOWE, District Judge.

Plaintiff, Merex A.G. ("Merex"), is an international trading and brokerage company located in what was formerly known as West Germany. Defendant, Fairchild Weston Systems, Inc. ("Fairchild"), is a United States corporation whose principal place of business is Syosset, Long Island, New York. This action is brought under the diversity jurisdiction of the Court.¹ 28 U.S.C. § 1332.

This action grows out of Merex's claim that it is entitled to collect a fee or commission, pursuant to an oral agreement, for introducing Fairchild to the Peoples Republic of China ("PRC") where a business opportunity was consummated between defendant and the PRC.

The claims for breach of contract, quantum meruit and declaratory judgment were dismissed after hearing on defendant's Fed.R.Civ.P. 50 motion. Since the only remaining claim was an equity claim of promissory estoppel, the Court informed the parties that the trial would proceed with the jury sitting as an advisory jury.² The jury returned a general verdict for plaintiff. Defendant timely moved for the Court to render a verdict for defendant. Plaintiff moved for recusal.

Rule 39. Trial by Jury or by the Court

(a) By Jury. When trial by jury has been demanded as provided in Rule 38, the action shall be designated upon the docket as a jury action. The trial of all issues so demanded shall be by jury, unless (1) the parties or their attorneys of record, by written stipulation filed with the court or by an oral stipulation made in open court and entered in the record, consent to trial by the court sitting without a jury or (2) the court upon motion or of its own initiative finds that a right of trial by jury of some or all of those issues does not exist under the Constitution or statutes of the United States.

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(c) Advisory Jury and Trial by Consent. In all actions not triable of right by a jury the court upon motion or of its own initiative may try any issue with an advisory jury ...

Rule 52. Findings by the Court; Judgment on Partial Findings.

(a) Effect. In all actions tried upon the facts without a jury or with an advisory jury, the court shall find the facts specially and state separately its conclusions of law thereon, and judgment shall be entered pursuant to Rule 58; and in granting or refusing interlocutory injunctions the court shall similarly set forth the findings of fact and conclusions of law which constitute the grounds of its action....

Findings of Fact

Plaintiff Merex alleged that in the late Summer of 1982 Robert Neasham ("Neasham"), defendant's European market manager, approached Gerhard Mertins ("G. Mertins"), the president of Merex, at his office in West Germany, and informed him that Fairchild would be interested in selling its system of military aerial surveillance cameras — the LORAP/MTRF System — to the PRC.³ Fairchild had no contacts with the PRC, and Mertins had an ongoing business relationship with that country.

G. Mertins alleges that at the meetings with Neasham in the late summer of 1982 he informed Neasham that such a deal could be arranged but he required a ten percent commission — an amount later reduced to eight percent. G. Mertins testified that no distributorship was discussed and that he and Neasham agreed he would earn his commission upon any Fairchild sale to the PRC. They shook hands on the deal. G. Mertins believed he had reached an agreement with Fairchild through Neasham. G. Mertins testified:

I asked him what is your authority? How long have you been with the company? He told me he was a lieutenant colonel in the Navy sic ...

I told him: We are together, the two old soldiers, and we have a good understanding. He Neasham said: Naturally, Fairchild is a generous company. And ... he asked me: What is your request? I said: We are making such deals normal on the base of 10 percent of the sales value ...

And he agreed. He said: Even if it is going — he promised even more. I said: No, we will make the deal for 10 percent. He was agreed.... We confirmed our agreement with sic shake hand.⁴

G. Mertins further testified that his German attorney advised him that such an oral contract was valid and enforceable under German law.

On August 26, 1982, Merex telexed Fairchild:

To efficiently pursue projects, it will become necessary for us to be granted your rights to act as Fairchild distributors. Kindly consider this matter and advise.⁵

Neasham testified by deposition that during the meeting with G. Mertins:

It was explained in exactly the terms that I had authorization to do. We could sell to Merex Corporation the systems involved, they would be, in turn, for Merex to mark it up and sell those to the Peoples Republic of China ...⁶

Neasham further testified:

Mertins, G.G. Mertins — not anybody else — said that he could provide the financial arrangements to finance us under our normal government schedule of payments, and he would take the payment from the Peoples Republic of China and carry that financial burden. That's why he could mark it up for resale.⁷

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Merex said he had enough money to do this, and that was going to be his role in this thing, was to carry on marketing activity and the liaison, and he would resell the system ... to the PRC.⁸

When asked if commissions had been discussed, Neasham replied:

There were no commissions. Commissions were the big problem area in these things because these people were not a sales representative; they were a group, a company that wanted to buy these things, buy these things and resell them. There was no commission, nothing. And I wouldn't be able to discuss that anyway.

There was sic no commissions discussed at this meeting primarily because I am not authorized by my company to state company policy on commissions per se, as to their amount.... That is the company lawyer — Legal and Executive Departments that do those things.⁹

Lachmann testified:

Neasham's proposal was to pay to Merex, on a sale/resale basis their requested recompensation or commission, and the amount that remained, Merex did request at that time, 10 percent of the sales price, which would be reached in their — with the contract with the Peoples Republic of China.

Mr. Mertins felt very clearly at the beginning, in the first meeting, and following on in the next meetings in that summer with Neasham, that an arrangement or how the commission or the recompensation sic of Merex should be structured is not in the hands of Merex nor in the hands of Fairchild because this depends largely on the wish of the customer of the Peoples Republic of China.

So Mr. Mertins said that no matter how this 10 percent would be structured, as long as Merex, A.G. would get paid, they would accept it, no matter which type of structuring of this 10 percent should be paid finally.¹⁰

Regarding Neasham's response, Lachmann testified:

Fairchild surely would pay a commission, and Mr. Neasham brought in the discussion concerning the sale/resale ... the commission on a sale/resale basis through a mark up.¹¹

Pighi and Lay testified that Fairchild was reluctant to do business in China in 1982 because China was just coming out of the cultural revolution and there was much instability in the country. Because of these conditions, Fairchild did not want to deal directly with the Chinese. Merex and G. Mertins, however, impressed Fairchild as well-connected and sophisticated, particularly with respect to the PRC. Fairchild decided to explore its possibilities with Merex.

In late August, 1982, Merex set up a meeting between Lachmann, Neasham and a delegation from NORINCO, a PRC purchasing agency. Neasham made a presentation of the LORAP camera system, and G. Mertins, Lachmann and Neasham were invited to the PRC for further discussions. In September of 1982, G. Mertins travelled to Fairchild's headquarters in New York and met with Louis Pighi, President of Fairchild, and Chris Lay, Fairchild's vice-president.

Fairchild, at the September meeting, told G. Mertins that the only way they would consider a deal with the PRC was for Merex to secure the financing. Fairchild would sell the camera system to Merex, and Merex would add to the Fairchild ex-factory price a sum for a Merex commission. Merex was then to negotiate a resale to the PRC. Mr. Lay testified that the sale/resale format was proposed so that Merex would take the risk of negotiating and collecting against a payment clause Clause 22.¹² Fairchild would assume the responsibilities of manufacturing the cameras per the PRC specifications, installing them on the military airplanes, and supervising their functioning for a limited period.¹³

All parties agree that they discussed the proposed sale to the PRC in terms of a distributorship, or sale/resale on back to back contracts, in which Merex was to receive a commission by marking up Fairchild's price and re-selling to the PRC.

G. Mertins testified that he believed the sale/resale was nonsense and rejected the proposal. After he returned to Germany, he continued his efforts with the Chinese. He testified that he did so based on the handshake agreement he made with Neasham.¹⁴

On October 6, 1982, G. Mertins wrote Lay:

For reasons verbally explained, we would like to work as distributors for you.¹⁵

Accepting the August invitation extended in West Germany by the PRC delegation, G. Mertins, Lachmann and Neasham met with the PRC purchasing delegates in Beijing from November 7 through November 19, 1982. During these meetings, Lachmann and Neasham presented technical details of the LORAP/MTRF...