ORDERLINE WHOLESALE DIST. v. Gibbons, Green, Van Amerongen, Ltd., 85 Civ. 4973 (MGC).

• Decision Date: 14 December 1987
• Docket Number: No. 85 Civ. 4973 (MGC).,85 Civ. 4973 (MGC).
• Citation: 675 F. Supp. 122
• Parties: ORDERLINE WHOLESALE DISTRIBUTORS, INC. and Elliot I. Fine, Plaintiffs, v. GIBBONS, GREEN, van AMERONGEN, LTD., Taylor Freezer Co., and Daniel Greenwood, individually and as President of Taylor Freezer Co., Defendants.
• Court: U.S. District Court — Southern District of New York

675 F. Supp. 122

ORDERLINE WHOLESALE DISTRIBUTORS, INC. and Elliot I. Fine, Plaintiffs, v. GIBBONS, GREEN, van AMERONGEN, LTD., Taylor Freezer Co., and Daniel Greenwood, individually and as President of Taylor Freezer Co., Defendants.

No. 85 Civ. 4973 (MGC).

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

December 14, 1987.

Reboul, MacMurray, Hewitt, Maynard & Kristol by Wayne A. Cross, New York City, for plaintiffs.

Kramer, Levin, Nessen, Kamin & Frankel by Michael S. Oberman, Fred H. Perkins, New York City, for defendant GGvA.

OPINION

CEDARBAUM, District Judge.

This action was commenced on June 27, 1985. The plaintiffs are Orderline Wholesale Distributors, Inc., ("Orderline"), an Ohio corporation, with its principal place of business in Maumee, Ohio, and Orderline's vice-president, director, and 50% shareholder Elliot I. Fine, also a resident of Ohio. Plaintiffs sued Gibbons, Green, van Amerongen, Ltd., ("GGvA"), a New York corporation with its principal place of business in New York, Taylor Freezer Co., ("Taylor"), a Delaware corporation with its principal place of business in Illinois, and Daniel Greenwood, a resident of Illinois. This is a diversity case in which the parties agree that New York law applies. Discovery has been completed.

The complaint alleges that plaintiffs entered into an enforceable oral agreement with GGvA to participate in the acquisition of certain food service equipment companies, and that GGvA breached this agreement. Plaintiffs assert claims for breach of contract, together with companion claims of quantum meruit, breach of fiduciary duty, fraudulent inducement and constructive fraud. GGvA has moved for summary judgment pursuant to Fed.R. Civ.P. 56 on the ground that plaintiffs cannot make a showing sufficient to establish the existence of all elements essential to each of their claims against GGvA. For the reasons discussed below, GGvA's motion for summary judgment is granted.

UNDISPUTED FACTS

Orderline is engaged in the business of purchasing and reselling food service equipment acquired from various sources. For a time, Orderline purchased and leased Taylor equipment to small food stores and restaurants. Fine was involved in the leasing of Taylor equipment and had on-going contacts with Taylor and some of its distributors. (Fine Dep. 9-10).

In July 1984, plaintiffs learned that Beatrice Cos. ("Beatrice") intended to sell five companies engaged in the manufacture of food service equipment. (Fine Dep. 109). Those companies were Bloomfield Industries, Market Forge Co., Wells Manufacturing Co., World Dryer Corp., and Taylor Freezer Co., (collectively, "the five companies").

Upon learning of the intended sale, Fine called Richard Vitkus, Beatrice's vice-president and general counsel, to inquire about the planned sale of Taylor. Fine learned that Taylor would be sold only as part of a package of the five companies. (Fine Dep. 127).

On July 24, 1984, Beatrice publicly announced its plan to sell the five companies. A report of Beatrice's announcement appeared in The Wall Street Journal and The New York Times on July 25, 1984, but the names of the individual companies were omitted. To assist in finding purchasers for the five companies, Beatrice retained Salomon Brothers ("Salomon") and Lazard Freres & Co. ("Lazard"), which planned and implemented a bidding procedure.

Fine began to contact various people whom he believed might be interested in the five companies, and who might have the means and expertise to put a deal together for the purchase of the companies. (Fine Dep. 129). Fine, who had had no previous contact with GGvA, learned of GGvA from an article that appeared in late July in the Midwest Edition of The Wall Street Journal, reporting on GGvA's role in the acquisition of Ekco Housewares. After reading the article, Fine decided to call GGvA. (Fine Dep. 149).

GGvA was then a New York corporation that had specialized in leveraged and management buyouts since 1969. Sometime after this action was commenced, the corporation was liquidated, and its activities were continued as a New York partnership.

On July 30, 1984, Fine telephoned the office of GGvA, and asked to speak to the person who handled acquisitions. (Fine Dep. 158-59). His call was referred to Todd Goodwin. (Fine Dep. 160-61). In this telephone conversation and possibly another telephone call made the following day, Fine told Goodwin about Orderline, his experience with Taylor and the food service equipment industry, the availability of the five companies, and the name of Richard Vitkus as the Beatrice officer in charge of the sale. (Fine Dep. 169-77). Fine relayed to Goodwin his understanding that GGvA did acquisitions of this sort, and expressed his interest in participating with GGvA in the acquisition of the five companies. (Fine Dep. 177). Fine's hope was to establish an acquiring corporation to purchase all five companies, and eventually to spin off Taylor to the plaintiffs. (Fine Dep. 135-36).

Prior to these telephone conversations, neither Goodwin nor anyone else at GGvA had considered a possible acquisition of the five companies, nor had GGvA had any experience with similar deals in the food service equipment industry. Goodwin confirmed that the proposed acquisition sounded like the kind of deal that GGvA would be interested in. (Fine Dep. 173, 177).

Goodwin proceeded to call Vitkus on July 31 and was advised that Salomon and Lazard represented Beatrice. (Goodwin Dep. 21-22). Goodwin entered into a confidentiality agreement with Salomon on September 10, and received an overview of the five companies prepared by Salomon and Lazard. (Pl. Ex. 2). GGvA was not authorized to show this report to Fine, and did not do so. (Goodwin Dep. 37-38).

Goodwin met with Beatrice at Salomon's Chicago office on September 19, and thereafter requested and received financial information for GGvA. (Pl. Ex. 6). In mid-October, Goodwin visited three of the five companies and met with their top management. (Pl. Ex. 6).

Following the initial telephone calls, and over the course of the next three months, Fine and Goodwin spoke by telephone at least ten times regarding the sale of the five companies. (Fine Dep. 187). During this period there was no written correspondence between the parties, no exchange of any written material, and no face-to-face meeting between any representatives of Orderline and GGvA. (Fine Dep. 185-187).

After the early conversations, Fine believed that GGvA was committed to him and Orderline, but that they were not committed to GGvA. (Fine Dep. 213).

Until October 5, 1984, Fine believed that he was free to deal with anyone else he wanted, and this was confirmed by Goodwin. Fine even told Goodwin that he was working with someone else. (Fine Dep. 213). By October 5, when Fine decided that he wanted to participate with GGvA, his other potential investors had withdrawn and GGvA was his only possible investment opportunity. (Fine Dep. 327-28).

On October 9, Goodwin met with Greenwood, who was then President of Taylor. In a memorandum written shortly after this October 9 meeting, Goodwin noted the following:

Fine has no relationship with Taylor or its distributors. Greenwood considers him a pleasant man but a "con artist" who does not represent the Taylor distributors. Fine has been in touch with Greenwood as well as TG Goodwin. Greenwood has no interest in Fine becoming involved in any way and suggests that he has no significant ability to invest. I explained that we had never met; that we have no commitment to Fine; that we operate as principals; and that we have told Fine to find an investment banker if he wants to make an independent proposal.

(Pl. Ex. 6).

Goodwin telephoned Fine shortly after this October 9 meeting with Greenwood to advise Fine that he would not be invited to participate in the transaction with GGvA. (Goodwin Dep. 26, 31).

On behalf of Beatrice, Salomon issued a request for bids on October 22, 1984, with a November 2, 1984 bid deadline. At that point, Salomon and Lazard had contact with approximately 115 prospective bidders. In the end, five bids were received and GGvA's bid of more than $115 million prevailed. A negotiated letter of intent was executed on November 14, 1984, and a public announcement was made on November 28, 1984. The transaction closed on January 30, 1985. (Pl.Ex. 7, Goodwin Dep. 95).

The central issue in this case is whether at some point during the telephone conversations between Fine and Goodwin they made an enforceable oral agreement to proceed together in purchasing the five companies.

Plaintiffs allege that GGvA orally entered into an enforceable joint venture or partnership agreement with one or both of them to acquire the five companies being sold by Beatrice, with plaintiffs and GGvA respectively to contribute and then to own 10% and 90% of the equity of the acquiring corporation. They further allege that it was part of this agreement that the acquiring corporation would ultimately spin off Taylor to plaintiffs. It is plaintiffs' contention that once GGvA had received all of Fine's information regarding the acquisition opportunity and the food service equipment industry, and no longer needed Fine and Orderline, GGvA refused to permit plaintiffs to continue to participate in the acquisition. Plaintiffs have also made claims for damages on the basis of quantum meruit, breach of fiduciary duty, fraudulent inducement and constructive fraud.

Defendant GGvA argues that the undisputed material facts show that no agreement was reached with plaintiffs, and that GGvA has not violated any duty to plaintiffs.

DISCUSSION

Fed.R.Civ.P. 56(c) provides that "a court shall grant a motion for summary judgment if it determines that `there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.'" Knight v. U.S. Fire Insurance Co., 804 F.2d 9, 11 (2d Cir.1986), cert. denied, ___ U.S. ___, 107 S.Ct. 1570, 94...