United States Court of Appeals,
Eleventh Circuit.
No. 95-4520.
TRUMPET VINE INVESTMENTS, N.V., Nacional Financiera, S.N.C.,
Plaintiffs-Counter Defendants-Appellees,
Pollypeck International P.L.C., P.P.I. (Holdings) B.V., P.P.I.
Delmonte Fresh Produce B.V., Counter-Defendants,
Jorge Aguilar, Enrique Portilla, Alejandro Portilla, William Van
Diepen and William Levin, Counter-Defendants-Appellees,
v.
UNION CAPITAL PARTNERS I, INC., Defendant-Counterclaimant-
Appellant.
Aug. 28, 1996.
Appeal from the United States District Court for the Southern
District of Florida. (No. 92-2032-CV-WDF), Wilkie D. Ferguson, Jr.
Judge.
Before COX and BARKETT, Circuit Judges, and BRIGHT*, Senior Circuit
Judge.
BRIGHT, Senior Circuit Judge.
This case arises from the 1992 sale of P.P.I. Del Monte Fresh
Produce B.V. (Del Monte) to Trumpet Vine Investments, N.V. (Trumpet
Vine). Trumpet Vine is a Netherlands Antilles corporation
organized by Mexican investors for the purpose of acquiring Del
Monte. Trumpet Vine's bid was supported by financing from Nacional
Financiera, S.N.C. (NAFINSA), a state-owned economic development
bank in Mexico. After the takeover bid was announced, Trumpet Vine
filed a declaratory judgment action against Union Capital Partners
I, Inc. (UCP) seeking adjudication that UCP was not entitled to
monetary damages or injunctive relief arising out of the Del Monte
*
Honorable Myron H. Bright, Senior U.S. Circuit Judge for
the Eighth Circuit, sitting by designation.
acquisition. UCP filed counterclaims alleging breach of fiduciary
duty, fraud, conspiracy to commit fraud and breach of an implied
contract. The district court determined that New York law governed
each issue and, applying that law, granted summary judgment in
favor of Trumpet Vine, dismissing all the counterclaims. This
judgment disposed of the litigation. We affirm.
I. BACKGROUND
UCP, a Delaware corporation with its principal place of
business in Florida, is a private investment corporation formed for
the purpose of acquiring or investing in companies. Gregory Aziz
founded and served as president of UCP. In late 1990 and early
1991, UCP began discussions to organize a deal to acquire Del Monte
from its parent company, P.P.I. Holdings B.V. (PPI). PPI, in turn,
is wholly owned by Polly Peck International P.L.C. (Polly Peck).
Polly Peck entered bankruptcy in England in 1990. UCP
characterized its role as that of a "deal sponsor," an individual
who assembles a group of investors to purchase a company and takes
all steps necessary to facilitate the transaction. UCP anticipated
a role in the ownership and management of the newly acquired
company as compensation for its efforts.
In August 1991, UCP, on behalf of its investor group,
unsuccessfully submitted an unsolicited bid for Del Monte. UCP
then attempted to aggregate another group of investors to acquire
Del Monte. UCP's efforts intensified when the bankruptcy
administrator announced in June of 1992 that Del Monte would be
sold at a private auction conducted by Goldman Sachs.
UCP claims that in July of 1992, representatives of Trumpet
Vine and NAFINSA approached its president, Aziz, regarding their
possible participation as equity partners in UCP's bid to acquire
Del Monte. On July 8, 1992, Aziz met with agents of Trumpet Vine
and NAFINSA at the New York offices of Kidder Peabody, which was
serving as Aziz' financial advisor. According to Aziz, the NAFINSA
representatives informed him that NAFINSA had attempted to
independently enter the bidding process, but that Goldman Sachs had
refused to provide them with financial information or allow them to
enter the bidding.
According to UCP, the NAFINSA agents indicated that they
wished to "join forces" with UCP in submitting a bid for Del
Monte.1 The agents requested that UCP share its confidential
information regarding Del Monte and that they be invited to attend
a due diligence presentation.2 Aziz informed Polly Peck's
bankruptcy administrator of the discussions with NAFINSA and
subsequently scheduled a due diligence meeting at Del Monte's
headquarters in Coral Gables, Florida on July 20, 1992. On July
17, UCP, NAFINSA and Del Monte entered into a nondisclosure
agreement encompassing the disclosure to NAFINSA of confidential
and proprietary information about Del Monte. In the agreement
1
Trumpet Vine and NAFINSA contend that the July 8th meeting
was an introductory meeting to merely explore the possibility of
joint participation with UCP. They claim that NAFINSA always
remained an independent investor throughout the process, and
worked together with UCP so that both could get into the due
diligence process. NAFINSA argues that they never negotiated,
let alone agreed to, a joint venture, exclusive bidding or
compensation arrangement with UCP.
2
A "due diligence" presentation gives a prospective buyer
up-to-the-moment financial information and the opportunity to
question management and to examine the operations of the company
on site.
NAFINSA promised to hold all "proprietary information" in
confidence and to only disclose it to others "who need to know such
Propriety Information for providing services to UCP." The
agreement stated "UCP and [NAFINSA] intend to enter into
discussions slating to possible acquisitions, equity investments,
partnerships or joint venture operations involving [Del Monte]."
However, the agreement also provided "[NAFINSA] makes no express or
implied representation or warranty concerning the future
acquisition, partnership or joint venture involving [Del Monte]."
The agreement expressly provided for application of New York law.
After the due diligence meeting, UCP's potential financial
backers, First Chicago and Kidder Peabody, decided to discontinue
their involvement in the project. NAFINSA and the other Mexican
investors then announced that they would go their own way and
attempt an independent bid. UCP was unable to move forward and
submit a bid by the bidding deadline. Trumpet Vine subsequently
acquired Del Monte for approximately $500,000,000. NAFINSA
supported the bid by Trumpet Vine and became an equity investor in
Trumpet Vine for the Del Monte acquisition. UCP was not included
in the acquisition of Del Monte and received no remuneration as a
result of the transaction.
Trumpet Vine and NAFINSA initiated a declaratory judgment
action stating they had a bona fide dispute with UCP and seeking an
adjudication that UCP was not entitled to monetary damages or
injunctive relief arising out of the acquisition of Del Monte. UCP
asserted counterclaims of breach of implied contract, breach of
fiduciary duty, fraud and conspiracy to commit fraud. Trumpet Vine
moved for summary judgment and dismissal of the counterclaims.
The matter was referred to a magistrate judge3 who, on August
5, 1993, submitted a report recommending that New York law be
applied to all the claims. The magistrate judge recommended
granting summary judgment on the breach of fiduciary duty claim
because of a lack of any showing that "this relationship was
anything other than a conventional business or arm's length
transaction." The report recommended granting summary judgment on
the implied contract claims, determining the claims were barred by
the statute of frauds. The magistrate judge, however, recommended
denying the motion to dismiss the fraud claims because the
pleadings were sufficient and alleged justifiable reliance. The
district court adopted the report and recommendation in its
entirety.
Trumpet Vine later moved for summary judgment on the remaining
two fraud claims. In a report submitted on November 21, 1994, the
magistrate judge recommended granting summary judgment against UCP
on the fraud claims. The magistrate judge concluded that under New
York law, UCP must show a specific injury other than loss of
compensation. The magistrate judge determined that UCP had not
established that but for NAFINSA's successful bid, UCP would have
assembled a group of investors and acquired the company.
Accordingly, UCP could not establish injury. The district court
adopted the report and recommendation in its entirety.
II. DISCUSSION
3
The Hon. Barry L. Garber, United States Magistrate Judge
for the Southern District of Florida.
As a threshold issue, this court must decide whether the
district court correctly applied New York law to UCP's substantive
claims. We review conflict of laws issues de novo. Fioretti v.
Massachusetts Gen. Life Ins. Co., 53 F.3d 1228, 1234 (11th
Cir.1995), cert. denied, --- U.S. ----, 116 S.Ct. 708, 133 L.Ed.2d
663 (1996). In determining which law applies, a federal district
court sitting in diversity must apply the choice of law rules of
the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S.
487, 496, 61 S.Ct. 1020, 1021-22, 85 L.Ed. 1477 (1941). Under
Florida law, a court makes a separate choice of law determination
with respect to each particular issue under consideration. See
Department of Corrections v. McGhee, 653 So.2d 1091, 1092-93
(Fla.Dist.Ct.App.1995), aff'd, 666 So.2d 140 (Fla.1996); Colhoun
v. Greyhound Lines, Inc., 265 So.2d 18, 21 (Fla.1972).
Once we have reviewed the determination of which state's law
applies, we turn our attention to the district court's decision to
grant summary judgment in favor of Trumpet Vine.
Under Rule 56(c) of the Federal Rules of Civil Procedure, a
party is entitled to summary judgment "if the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is
no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law." On
appeal, a district court's grant of summary judgment is
entitled to de novo review, and "[w]e resolve all reasonable
doubts about the facts in favor of the non-movant."
Browning v. Peyton, 918 F.2d 1516, 1519-20 (11th Cir.1990) (quoting
Tackitt v. Prudential Ins. Co. of Am., 758 F.2d 1572, 1574 (11th
Cir.1985)).
A. Breach of Fiduciary Duty
UCP argues that Trumpet Vine established a fiduciary
relationship with UCP through their mutual participation in
pursuing the acquisition of Del Monte and the execution of a
nondisclosure agreement. UCP claims that Trumpet Vine breached
this fiduciary duty by acquiring Del Monte without any form of
compensation to UCP.
1. Choice of Law
At least as to tort claims, the Florida Supreme Court has
abandoned the traditional lex loci delicti4 rule in favor of the
"most significant relationship" test set forth in the Restatement
(Second) of Conflict of Laws § 145. Bishop v. Florida Specialty
Paint Co., 389 So.2d 999, 1001 (Fla.1980). Section 145 provides:
(1) The rights and liabilities of the parties with respect to
an issue in tort are determined by the local law of the state
which, with respect to that issue, has the most significant
relationship to the occurrence and the parties under the
principles stated in § 6.5
4
"The law of the place where the crime or wrong took place."
Black's Law Dictionary 911 (6th ed. 1990).
5
Restatement (Second) of Conflict of Laws § 6 provides:
(1) A court, subject to constitutional restrictions,
will follow a statutory directive of its own state on
choice of law.
(2) When there is no such directive, the factors
relevant to the choice of the applicable rule of law
include
(a) the needs of the interstate and international
systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested
states and the relative interests of those states
in the determination of the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular
(2) Contacts to be taken into account in applying the
principles of § 6 to determine the law applicable to an issue
include:
(a) the place where the injury occurred,
(b) the place where the conduct causing the injury
occurred,
(c) the domicil, residence, nationality, place of
incorporation and place of business of the parties, and
(d) the place where the relationship, if any, between the
parties is centered.
These contacts are to be evaluated according to their relative
importance with respect to the particular issue.
The district court determined that the conduct giving rise to
UCP's injury, the alleged betrayal of UCP's confidences and the
acquisition of Del Monte without any compensation to UCP, occurred
primarily in New York. New York is where the parties' relationship
was created and is the state whose law the parties chose to govern
the nondisclosure agreement, the only formal agreement as to the
relationship between the parties. Based upon these factors, the
district court correctly determined that New York had the most
significant relationship to the breach of fiduciary relationship
claim.
UCP argues that Florida was the situs of UCP's injury and thus
has the most significant relationship to this cause of action. UCP
asserts that under Florida law, the place of injury is
presumptively controlling. In support of this position, UCP relies
field of law,
(f) certainty, predictability and uniformity of
result, and
(g) ease in the determination and application of
the law to be applied.
primarily upon cases involving personal injury or products
liability suits. See State Farm Mut. Auto. Ins. Co. v. Olsen, 406
So.2d 1109, 1111 (Fla.1981). The commentary to Restatement § 145
provides,
the place of injury is of particular importance in the case of
personal injuries and of injuries to tangible things.... On
the other hand, the place of injury is less significant in the
case of fraudulent misrepresentations ... and of such unfair
competition as consists of false advertising and the
misappropriation of trade values.
Restatement (Second) of Conflict of Laws § 145 comment f; see also
Default Proof Credit Card Sys., Inc. v. State Street Bank & Trust
Co., 753 F.Supp. 1566, 1570-71 (S.D.Fla.1990). Because breach of
fiduciary duty is more akin to a claim of fraud rather than a
personal injury claim, we determine that the district court
correctly balanced the competing factors in accordance with Florida
law.6
2. Application of New York Law
Under New York law, a fiduciary duty exists when a person is
under a duty to act or render advice for another's benefit.
Flickinger v. Harold C. Brown & Co., 947 F.2d 595, 599 (2d
Cir.1991) (citing Mandelblatt v. Devon Stores, Inc., 132 A.D.2d
162, 521 N.Y.S.2d 672, 676 (1987)); Litton Indus., Inc. v. Lehman
Bros. Kuhn Loeb Inc., 767 F.Supp. 1220, 1231 (S.D.N.Y.1991), rev'd
on other grounds, 967 F.2d 742 (2d Cir.1992). The existence of a
6
UCP argues that the district court failed to give
sufficient weight to the fact that UCP's primary place of
business is in Florida. We disagree. Application of the
"domicile" factor implicates Florida, New York, Delaware, Mexico
and the Netherlands Antilles. We also note that although UCP's
president, Aziz, was himself located in Florida, the company had
no offices or employees in the state.
fiduciary relationship is a question of fact. Accordingly, in
order to survive a motion for summary judgment, UCP must present
sufficient evidence to support a finding that a fiduciary
relationship existed between UCP and Trumpet Vine. The district
court determined that UCP made no showing that the relationship was
anything other than a conventional business or arm's length
transaction. We agree.
UCP argues that the record contains sufficient evidence to
create a material issue of fact as to the existence of a fiduciary
relationship. UCP asserts that it reposed trust and confidence in
Trumpet Vine when it disclosed its proprietary information and
arranged for Trumpet Vine's entry into the due diligence process.
New York law provides, however, that " "a conventional business
relationship, without more, does not become a fiduciary
relationship by mere allegation.' " Compania Sud-Americana de
Vapores, S.A. v. IBJ Schroder Bank & Trust Co., 785 F.Supp. 411,
426 (S.D.N.Y.1992) (quoting Oursler v. Women's Interart Center,
Inc., 170 A.D.2d 407, 566 N.Y.S.2d 295 (1991)). As a general
matter, merely reposing confidential information in and of itself
will not create a fiduciary relationship under New York law.
Litton Indus., 767 F.Supp. at 1231. The fiduciary relationship
must inspire and provide the context for the disclosures. Id. at
1232; United States v. Reed, 601 F.Supp. 685, 715 (S.D.N.Y.),
rev'd in part on other grounds, 773 F.2d 477 (2d Cir.1985). UCP
has presented no evidence of any special relationship with Trumpet
Vine or NAFINSA which inspired the disclosures. Rather, the record
reveals that the parties were largely unknown to each other only a
short time prior to the due diligence meeting.
UCP relies heavily upon Browning v. Peyton, 918 F.2d 1516
(11th Cir.1990), where this court reversed summary judgment on a
breach of fiduciary duty claim, determining that material issues of
fact remained. Browning, a real estate investor and developer,
reached an oral agreement to form a joint venture with Peyton for
the purpose of bidding for a large group of real estate holdings.
Browning alleged that Peyton later informed him that he was no
longer interested in the real estate, causing Browning to abandon
the project. Peyton subsequently submitted an independent bid and
purchased the real estate. This court concluded that the record
raised questions of fact as to whether a fiduciary relationship had
been established between Browning and Peyton. Id. at 1522.
Browning, however, is distinguishable from the case before us.
As an initial matter we note that Browning applied the law of
Florida and not New York. Moreover, Browning alleged that the
parties had in fact agreed to form a joint venture thus creating a
special relationship between the parties. UCP has not asserted the
existence of any such agreement between itself and Trumpet Vine or
NAFINSA. UCP has failed to make any showing that its disclosures
and assistance arose from any relationship between the parties
other than a conventional business transaction.
UCP points to the existence of the nondisclosure agreement as
proof of a confidential relationship. A fiduciary duty may arise
out of a contractual relationship which is independent of the
contract itself. Davis v. Dime Sav. Bank of New York, FSB, 158
A.D.2d 50, 557 N.Y.S.2d 775, 776 (1990). However, under the terms
of the nondisclosure agreement, NAFINSA had no obligation to enter
into any kind of transaction with UCP, nor did it promise that it
would not proceed independently in the future. The nondisclosure
agreement expressly negates any obligation on the part of NAFINSA
to participate with UCP in acquiring Del Monte.
B. Fraud Claims
UCP alleges that it reasonably relied upon Trumpet Vine's
representations that Trumpet Vine was interested in joining forces
with UCP. UCP argues that Trumpet Vine never intended to enter
into any partnership or equity investment with UCP but intended
from the outset to utilize information supplied by and through UCP
strictly for its own benefit.
1. Choice of Law
The Restatement (Second) of Conflict of Laws provides
specific sections for particularized torts. Section 148 provides
the choice of law principles for fraud and misrepresentation, and
the parties agree that Florida courts would apply this section.
The pertinent part of section 148 provides:
(2) When the plaintiff's action in reliance took place in
whole or in part in a state other than that where the false
representations were made, the forum will consider such of the
following contacts, among others, as may be present in the
particular case in determining the state which, with respect
to the particular issue, has the most significant relationship
to the occurrence and the parties:
(a) the place, or places, where the plaintiff acted in
reliance upon the defendant's representations,
(b) the place where the plaintiff received the
representations,
(c) the place where the defendant made the
representations,
(d) the domicil, residence, nationality, place of
incorporation and place of business of the parties,
(e) the place where a tangible thing which is the subject
of the transaction between the parties was situated at
the time, and
(f) the place where the plaintiff is to render
performance under a contract which he has been induced to
enter by the false representations of the defendant.
The district court found that the alleged misrepresentations
primarily occurred at the July 8th meeting in New York. Although
UCP contends that Trumpet Vine and NAFINSA subsequently repeated
the misrepresentations, the district court concluded that those
misrepresentations, if any, arose from the initial acts in New
York. Thus the district court determined that New York was the
location where Trumpet Vine made and UCP received the alleged
misrepresentations.
The court found that some acts in reliance (the due diligence)
occurred in Florida while others (the agreement to share
information) occurred in New York. Thus neither state emerged as
the place of reliance. Application of the fourth factor, the
domicil, residence, nationality and place of business of the
parties, implicated Florida, New York, Delaware, Mexico and the
Netherlands Antilles. Finally, the district court determined that,
although Del Monte was headquartered in Florida, the takeover
itself was to be consummated in New York. We agree with the
district court's determination that New York had the most
significant contacts, as the place where the misrepresentations and
the initial acts of reliance occurred.
2. Application of New York Law
To sustain a claim for fraud under New York law, UCP must
prove by clear and convincing evidence the existence of five
elements: (1) a representation of material fact, (2) falsity of
the statement, (3) scienter, (4) deception, and (5) injury or
detrimental reliance. Channel Master Corp. v. Aluminium Ltd.
Sales, Inc., 4 N.Y.2d 403, 176 N.Y.S.2d 259, 151 N.E.2d 833, 835
(1958); Lehman v. Dow Jones & Co., 783 F.2d 285, 295 (2d
Cir.1986). Although the district court determined that UCP had
established material issues concerning the first four elements, it
concluded UCP failed to produce competent evidence sufficient to
create a genuine issue of material fact as to injury.
Under New York law, the measure of damages for fraud is
governed by the "out-of-pocket" rule which limits recovery to costs
incurred in preparation or in performance or in passing up other
business opportunities. Fort Howard Paper Co. v. William D.
Witter, Inc., 787 F.2d 784, 793 n. 6 (2d Cir.1986); Lehman, 783
F.2d at 296. UCP did not assert that it incurred any additional
expenses as a result of Trumpet Vine's representations or that it
passed up opportunities with other investors. Moreover, the
district court determined that UCP presented insufficient evidence
to support a finding that UCP could have successfully participated
in the acquisition of Del Monte absent Trumpet Vine's
representations.
On appeal UCP does not assert that it suffered any actual
injury. Rather, UCP argues that New York law permits the recovery
of nominal damages for fraud in the absence of any actual
injury/damages. In Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 595
N.Y.S.2d 931, 612 N.E.2d 289 (1993), the New York Court of Appeals
stated, "Nominal damages are always available in breach of contract
actions, but they are allowed in tort only when needed to protect
an "important technical right.' " Id. 595 N.Y.S.2d at 934, 612
N.E.2d at 292 (citation omitted). As an example of such an
"important technical right", the court pointed to a landowner's
right to be free of trespass. Id. The court stated that in that
particular instance a departure from the actual injury rule is
warranted because a continuing trespass may ripen into a
prescriptive right and deprive a property owner of title. Id. The
court held that an exception is not warranted for the tortious
inducement of breach of contract, the claim presented in Kronos.
The court continued,
In tort, ... there is no enforceable right until there is
loss. It is the incurring of damage that engenders a legally
cognizable right. To recognize nominal damages element of
tort claims would be to wrest the cause of action from its
traditional purposes—the compensation of losses—and to use it
to vindicate nonexistent or amorphous inchoate rights when
unlike in trespass to property, there is no compelling reason
to do so.
Id. 595 N.Y.S.2d at 935, 612 N.E.2d at 293. There is no similarly
compelling reason to depart from the actual injury rule in this
case. Accordingly, the district court correctly concluded that
nominal damages were not appropriate absent a showing of injury.
See Dress Shirt Sales, Inc. v. Hotel Martinique Assocs., 12 N.Y.2d
339, 239 N.Y.S.2d 660, 662-64, 190 N.E.2d 10, 12 (1963); Gordon v.
Dino De Laurentiis Corp., 141 A.D.2d 435, 529 N.Y.S.2d 777, 779
(1988); Lehman, 783 F.2d at 296.
C. The Implied Contract Claims
UCP raised two similar claims, breach of contract
implied-in-fact (quantum meruit) and breach of contract
implied-in-law (unjust enrichment).7 UCP argues that it provided
Trumpet Vine with research, experience and confidential and
proprietary information regarding Del Monte and arranged for
Trumpet Vine's entry into the bidding process. UCP contends that
Trumpet Vine requested and accepted the services and information
and should compensate UCP for the benefits received.
1. Choice of Law
Florida has traditionally applied the lex loci contractus
rule for choice of law determinations regarding issues of contract
law. Fioretti, 53 F.3d at 1235; Goodman v. Olsen, 305 So.2d 753,
755 (Fla.1974), cert. denied, 423 U.S. 839, 96 S.Ct. 68, 46 L.Ed.2d
58 (1975); Jemco, Inc. v. United Parcel Serv., Inc., 400 So.2d
499, 500-01 (Fla.Dist.Ct.App.1981), rev. denied, 412 So.2d 466
(Fla.1982). Under the lex loci contractus method issues concerning
the validity and substantive obligations of contracts are governed
by the law of the place where the contract is made. Ray-Hof
Agencies, Inc. v. Petersen, 123 So.2d 251, 253 (Fla.1960); Jemco,
400 So.2d at 501. A contract is made where the last act necessary
to complete the contract is performed. Jemco, 400 So.2d at 500.
While Florida has adopted the significant contacts approach
of the Restatement (Second) of Conflict of Laws for tort actions,
see Bishop, 389 So.2d at 1001, the Florida Supreme Court has
continued to apply the traditional lex loci contractus approach for
contract actions. In Sturiano v. Brooks, 523 So.2d 1126, 1129
(Fla.1988), the Florida Supreme Court expressly declined to adopt
7
We treat these claims together because both would be barred
if the New York statute of frauds is applicable.
the Restatement approach and applied the lex loci contractus rule.
Although the Florida Supreme Court specifically limited its
decision to contracts for automobile insurance, the Florida
appellate courts have continued to apply the rule to other areas of
contract law as well. See In re Estate of Nicole Santos, 648 So.2d
277 (Fla.Dist.Ct.App.1995) (validity of an antenuptial contract);
Stratford Fin. Corp. v. Security Pac. Nat. Bank, 580 So.2d 806
(Fla.Dist.Ct.App.1991) (enforceability of a brokerage contract).
Accordingly, we apply the lex loci contractus approach.8
UCP argues that the implied contract was "made" when UCP
conferred and Trumpet Vine received the benefits, i.e.
participation in the due diligence meeting and access to the
proprietary information, which occurred in Florida. The district
court, however, determined that the last necessary act in this
cause of action was the acquisition of Del Monte which took place
in New York. In Stratford, the Florida District Court of Appeal
held an oral brokerage contract unenforceable under New York law.
580 So.2d at 806. Under the agreement, the brokerage commission
was to be payable out of the proceeds of any closing. Id. The
court of appeal determined that the closing was thus the last act
necessary to complete the contract. Id. at 806-07. Similarly, UCP
alleges that it should have received stock and a managerial role in
return for its assistance. As in Stratford, compensation could not
be awarded without a closing. As the site of the closing, New York
8
"A federal court applying state law is bound to adhere to
decisions of the state's intermediate appellate courts absent
some persuasive indication that the state's highest court would
decide the issue otherwise." Silverberg v. Paine, Webber,
Jackson & Curtis, Inc., 710 F.2d 678, 690 (11th Cir.1983).
law governs.9
2. Application of New York Law
The district court concluded that because there was no
written compensation agreement between the parties, New York's
statute of frauds barred the claims. New York's statute of frauds
provides:
Every agreement, promise or undertaking is void, unless it or
some note or memorandum thereof be in writing, and subscribed
by the party to be charged therewith, or by his lawful agent,
if such agreement, promise or undertaking: ... (10) Is a
contract to pay compensation for services rendered in
negotiating a loan, ... or of a business opportunity,....
"Negotiating" includes procuring an introduction to a party to
the transaction or assisting in the negotiation or
consummation of the transaction. This provision shall apply
to a contract implied in fact or in law....
N.Y.Gen.Oblig.Law § 5-701(a)(10) (McKinney 1989).
UCP argues that the statute of frauds is inapplicable because
UCP is not seeking a set monetary fee, but rather seeks an equity
interest in the acquired company and a role in its management. The
New York statute of frauds expressly includes contracts to pay
"compensation" and is not limited to monetary fees. While UCP
correctly notes that section 5-701(a)(10) does not extend to
9
Although the final signatures were applied in a ceremonial
signing in Mexico City, virtually all the closing activities,
including payment of the purchase price, took place in New York,
and none of the closing activities occurred in Florida. New York
is thus best characterized as the situs of the closing. In any
event, New York has a significant interest in the application of
its statute of frauds. In Intercontinental Planning, Ltd. v.
Daystrom, Inc., 24 N.Y.2d 372, 300 N.Y.S.2d 817, 825-28, 248
N.E.2d 576, 582-83 (1969), the New York Court of Appeals
emphasized one of the important legislative purposes underlying
this particular section of the statute of frauds: reducing the
number of unfounded and multiple claims for commissions. The
court found this purpose particularly compelling given New York's
role as a "national and international center for the purchase and
sale of businesses and interests therein." Id.
agreements between parties in a joint venture, see Dura v. Walker,
Hart & Co., 27 N.Y.2d 346, 318 N.Y.S.2d 289, 291-93, 267 N.E.2d 83,
85 (1971); Natuzzi v. Rabady, 177 A.D.2d 620, 576 N.Y.S.2d 326,
328 (1991), UCP has not alleged nor does the record support the
existence of a joint venture between UCP and the defendants in this
action. See Natuzzi, 576 N.Y.S.2d at 328; Orderline Wholesale
Dist., Inc. v. Gibbons, Green, van Amerongen, Ltd., 675 F.Supp.
122, 126 (S.D.N.Y.1987). UCP's complaint merely alleges, "it was
implied that the services and information were given and received
with the expectation that UCP would be compensated for them" and
that UCP "conferred a substantial benefit on defendants for which
UCP ought to be compensated." Accordingly UCP's implied contract
claims are not beyond the scope of New York's statute of frauds.
See Orderline Wholesale Dist., 675 F.Supp. at 127-28.
UCP further argues that even if the statute of frauds
applies, there are outstanding issues of fact surrounding the "part
performance" exception to the statute which preclude granting
summary judgment on this basis. The district court correctly
rejected this argument. "[P]art performance may only be asserted
to overcome the defense of the Statute of Frauds in an action for
specific performance of the contract, and may not be raised, as
here, in an action to recover damages...." Papell v. Calogero, 114
A.D.2d 403, 494 N.Y.S.2d 127, 129 (1985), mod. on other grounds, 68
N.Y.2d 705, 506 N.Y.S.2d 309, 497 N.E.2d 676 (1986); see also
Spodek v. Riskin, 150 A.D.2d 358, 540 N.Y.S.2d 879, 881 (1989);
Mauala v. Milford Management Corp., 559 F.Supp. 1000, 1004
(S.D.N.Y.1983). In any event, under New York law, the doctrine of
part performance may be invoked only if the complaining party's
actions can be characterized as "unequivocally referable" to the
agreement alleged. Anostario v. Vicinanzo, 59 N.Y.2d 662, 463
N.Y.S.2d 409, 409-10, 450 N.E.2d 215, 216 (1983). The actions must
be " "unintelligible or at least extraordinary,' explainable only
with reference to the oral agreement." Id.; Burns v. McCormick,
233 N.Y. 230, 135 N.E. 273 (1922). Here, the nondisclosure
agreement between the parties provided that the parties "intend to
enter into discussions slating to possible acquisitions...." The
part performance exception does not apply when "the performance
undertaken by plaintiff is also explainable as preparatory steps
taken with a view toward consummation of an agreement in the
future." Anostario, 463 N.Y.S.2d at 410, 450 N.E.2d at 216; see
also McDermott v. Town of Goshen, 207 A.D.2d 612, 615 N.Y.S.2d 525,
527 (1994); Ghura v. Islip Resource Recovery Agency, 122 A.D.2d
106, 504 N.Y.S.2d 503, 504 (1986).
III. CONCLUSION
For the reasons stated above, the district court's grant of
summary judgment in favor of Trumpet Vine is AFFIRMED.