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Hiller v. Franklin Mint Inc.

decided: July 26, 1973.

MELVIN HILLER, APPELLANT, AND PHILIP STOLLER (57) (STOLLER DISMISSED)
v.
THE FRANKLIN MINT, INC. AND JOSEPH M. SEGEL



(D.C. Civil Action No. 69-658) ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA.

Seitz, Chief Judge, and Staley and Hunter, Circuit Judges.

Author: Staley

Opinion OF THE COURT.

STALEY, Circuit Judge.

This action was commenced in the district court by a complaint filed on behalf of Melvin Hiller, a New York resident, and Philip Stoller,*fn1 which alleged that the Pennsylvania appellees, Joseph Segel and The Franklin Mint, Inc.,*fn2 breached an oral contract to pay Hiller a finder's fee. Jurisdiction rested on diversity and an amount in controversy in excess of $10,000. The appellees moved for summary judgment, asserting that the alleged contract was governed by New York law and that under the relevant New York statute of frauds, it was void. The district court granted the motion.

On appeal Hiller argues that the district court erred in granting summary judgment to the appellees. He maintains, inter alia, that neither the law of New York nor that of Pennsylvania precludes proof of the alleged oral contract. We agree and, therefore, reverse the district court's grant of summary judgment.

In paragraph 11 of his amended complaint, Hiller alleged the following:

"On February 29, 1968, at GNC's then place of business in Yeadon, Pennsylvania, Segal, acting on behalf of himself and GNC, orally promised plaintiff Hiller that, if Hiller could find a source of the additional funds which GNC required on terms more favorable to GNC than those proposed by Weis, Voisin,*fn3 Hiller would be granted an option to purchase 5,000 shares of GNC stock at its then market value of $30 per share, which option would be exercisable at any time within two years, and Hiller orally agreed to undertake to find such a source."

Hiller introduced appellee Segel to C. E. Unterberg, Towbin, a New York brokerage house. This firm subsequently committed itself to and ultimately arranged for the placement of 33,000 shares of common stock of The Franklin Mint. The appellees deny the existence of the alleged oral offer. However, their denial at this stage of the proceedings is immaterial. The question is, at this point, whether the district court erred in determining that the appellant was barred from proving the alleged oral contract.

Operating on the assumption that New York law and Pennsylvania law were different with respect to the contractual issue before it, the district court approached the choice of law issue. It analyzed what it conceived to be the relevant facts in determining what law was applicable in this multistate case. The court determined that New York had more significant contacts with the alleged contract than did Pennsylvania and that its law was applicable. We believe that the district court's initial determination that a different result would be obtained under New York law than would be under Pennsylvania law was erroneous.

The New York statute of frauds which the district court held to be a bar to the appellant's claim provides in pertinent part as follows:

"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 in negotiating the purchase, sale, exchange, renting or leasing of any real estate or interest therein, or of a business opportunity, business, its good will, inventory, fixtures or an interest therein, including a majority of the voting stock interest in a corporation and including the creating of a partnership interest. '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 to pay reasonable compensation * * *." (Emphasis added.) General Obligations Law, 23A McKinney's Consolidated Laws of New York, c. 24-A, ยง 5-701 (1964).

This statute bars the appellant's claim if that which Hiller negotiated was the sale of a "business opportunity" or a ...


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