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Clarion Corp. v. American Home Products Corp.

decided: April 2, 1974.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. Civil No. 67 C 437 WILLIAM J. LYNCH, Judge.

Kiley, Senior Circuit Judge, Sprecher, Circuit Judge, and Jameson,*fn* Senior District Judge.

Author: Sprecher

SPRECHER, Circuit Judge.

This appeal represents a pro se attempt to relitigate matters which have become final either through failure to appeal in timely fashion or through a prior concluded appeal.

The Clarion Corporation brought an action against American Home Products Corporation and Lehman Brothers on March 21, 1967 for a "finder's fee" of $980,000 alleged to be due as a result of its activities in bringing together the principals of American Home and Ekco Products Company, culminating in the merger of Ekco into American Home on November 5, 1965. Count I of the complaint alleged an oral agreement of March 20, 1965 for 1/2 of 1% (which was alleged to be $980,000) of the gross consideration paid for the acquisition of Ekco. Count II alleged that the reasonable compensation for services requested and rendered was $980,000. Count III sought $980,000 from Lehman Brothers for allegedly inducing the breach of the oral contract alleged in Count I.

American Home in its answer admitted that Clarion had performed some services in connection with bringing Ekco and American Home together and that American Home had assumed responsibility for paying whatever finder's fee might be due.

American Home pleaded as one affirmative defense that Clarion had agreed in a writing addressed to Ekco and signed by Clarion's president and sole shareholder, Paul J. Klein, on August 5, 1962, "that in the event a merger of your company is actually consummated with American Home Products Corporation, we are willing to accept $100,000.00 in settlement of our fee." The writing concluded with "we would naturally appreciate your good offices should the circumstances be amenable to further reviewing the amount of the fee." On or about October 1, 1965, American Home sent Clarion its check for $100,000, which it held but did not cash.

Extensive depositions were taken, written interrogatories were exchanged and discovery generally proceeded apace. Discovery indicated that the 1962 attempts to consummate the merger had failed and that the attempts were revived in 1964; that Clarion's claim rested upon oral discussions between Arthur Keating, Chairman of the Board of Ekco, and Klein; that the merger was completed on November 5, 1965; that Lehman Brothers received on or about September 30, 1965 a fee of $916,064; that Arthur Keating died in 1967; and that at some time in 1965 consideration had been given by American Home to offering Clarion $200,000 for its services and if such an offer was formally or informally made to Klein, he had rejected it.

On January 30, 1970, Clarion was given leave to file an amended complaint, which repeated Counts I, II and III, but added Count IV, charging a conspiracy among officials of American Home, Ekco and Lehman Brothers to pay a $916,064 fee to Lehman and to refuse to pay Clarion the reasonable value of its services. The basis for the adding of Count IV was the fact that discrepancies had apparently been discovered as to whether the Lehman fee was payment for its services in the American Home-Ekco merger or was in fact payment in whole or substantial part for other unrelated services performed for Ekco. A discovery dispute also centered around Lehman's contention that finders' fees were customarily 10 to 15% of investment bankers' fees (which presumably would make a finder's fee of $100,000 reasonable). In view of the written agreement of 1962 establishing Clarion's fee at $100,000 and Lehman's contention that $100,000 was reasonable, the probability of Clarion's succeeding under Counts I and II was highly speculative and undoubtedly motivated the adding of Count IV.

The case was set for trial on April 8, 1970. Literally on the eve of trial (the day and night of April 7) the parties agreed to a settlement of fourteen annual payments of $35,000 each, or a total amount of $490,000. Consequently, the case was dismissed on April 8 without prejudice and with the leave of court to reinstate if necessary, pending the completion of complicated settlement documents. On that date, the trial judge placed on the record the fact that by accident he had run into Klein the night before while the judge was taking his evening walk and that Klein had reported the details of the settlement at that time to the judge.

The settlement documents required some ten months to prepare. When they were ready, however, Klein refused to execute them on behalf of Clarion because of a dispute he was having with Clarion's lawyers in regard to attorneys' fees. Upon American Home's motion, the court on February 8, 1971 reinstated the case and dismissed it with prejudice, retaining jurisdiction for the sole purpose of supervising (if requested) the exchange of settlement documents. On February 8, Klein advised the court that "I am prepared to . . . . execute the documents" and "I am prepared to close the documents." He also filed a memorandum with the court which set forth the attorney fee dispute and concluded with "I stand ready . . . . to go ahead with Mr. Burnham in closing the settlement agreement." The February 8, 1971 judgment order was not appealed.

On March 16, 1971, the court ordered that the parties exchange executed settlement documents and that defendants deliver the first annual payment of $35,000, the proceeds of which were to be divided $17,707.44 to Clarion's attorneys for fees and the balance to Clarion. At this point, Klein proceeded to act without counsel on behalf of Clarion and appealed the order.

We affirmed the district court in Clarion Corp. v. American Home Products Corp., 464 F.2d 444 (7th Cir. 1972) stating:

"Plaintiff's president has not presented to this court or the District Court any valid reason why the lien imposed upon the first installment of the settlement proceeds should not be enforced. Indeed, the only defense offered by plaintiff in regard to the claim for attorneys' fees is that the case for Clarion against American and Lehman was not handled properly; and yet, as indicated earlier, when the settlement was offered, plaintiff accepted the terms and conditions thereof without objection. Thus, this court has no choice but to affirm the decision of the lower court. Moreover, even if we were free to go back into the original case and scrutinize the conduct of plaintiff's attorneys, we would reach the identical conclusion. However, since ...

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