Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 79 C 2254 -- James B. Moran, Judge.
Before Swygert, Senior Circuit Judge, Sprecher, Circuit Judge, and Bartels, Senior District Judge.*fn*
This appeal from a case brought under diversity jurisdiction involves questions relating to the status of finders and their entitlement to fees.
In March, 1975, Kenneth A. Lirtzman, an employee of NII Metals Corporation, a subsidiary of National Industries, Inc., became aware of the fact that National might be interested in selling its Hawthorn Mellody Inc. subsidiary, which operated a milk business. Kenneth contacted his father, the plaintiff in this action, and notified him of that fact, believing that the father could possibly earn a fee if he was able to find a buyer for Hawthorn Mellody. (KAL affidavit, pars. 1, 2 and 3; L. Dep. 15, 18).*fn1
The plaintiff's experience has been in the construction business (L. Dep. 11) and he is presently a partner in a firm acting as developers and general contractors. (L. Dep. 13). In 1974, he was employed by Enviro-Technics, Inc. as a construction manager and contractor. (L. Dep. 20-21; D. Dep. 39). Later in 1974, the plaintiff became the president, sole shareholder, and principal operating officer of Comaco, Inc., a corporation in the construction business. (Plf's. Answer to Interrogatories, Answer 6(e); L. Dep. 12, 21-22). The plaintiff's wife was vice president and his son was secretary of Comaco, which shared a common general office with Enviro-Technics. (L. Dep. 12-13, 24, 34; D. Dep. 39).
Shortly after the plaintiff was contacted by his son, he learned from Frank Clifford DiLorenzo that Certified Grocers of Illinois, Inc. was interested in purchasing a dairy manufacturing business. (Complaint, par. 8; L. Dep. 19). DiLorenzo has been the president since the founding in January, 1972, of Enviro-Technics, Inc., which carries on the business of architects, engineers and construction managers. (D. Dep. 3, 7). At the time that plaintiff's son told plaintiff about Hawthorn Mellody, Certified was one of Enviro's clients. (D. Dep. 6). At that time, Certified depended on DiLorenzo for general business counsel. (D. Dep. 23). For ten months from late in 1977 to September 1978, DiLorenzo was a vice president of Certified. (D. Dep. 8). Thereafter DiLorenzo continued as president of Enviro.
When the plaintiff learned from DiLorenzo of Certified's need for a dairy, he telephoned Joseph A. Gammon (L. Dep. 23), the president of National. (G. Dep. 4). Plaintiff confirmed with Gammon that National was interested in selling its Hawthorn Mellody dairy and told Gammon that plaintiff "had an interested buyer." (L. Dep. 24). Gammon then knew or learned that the plaintiff was the father of one of the employees of a National subsidiary. (L. Dep. 25). The plaintiff and Gammon agreed to meet to discuss the basis upon which National was willing to sell Hawthorn Mellody. (L. Dep. 25). There was no mention of a finder's fee or commission in the telephone conversation. (L. Dep. 26).
On March 18, 1975, the plaintiff, DiLorenzo and Howard Goode, Enviro's lawyer, went to National's offices at Louisville, Kentucky, where they met with Gammon. (G. Dep. 32; L. Dep. 26; Plf's. Br. 4). Donald McClinton, National's controller, was present for part of the meeting (L. Dep. 31; D. Dep. 54-55), which took forty-five minutes to one hour, according to DiLorenzo (D. Dep. 54) and two to three hours, according to the plaintiff. (L. Dep. 31). DiLorenzo described himself as the "protagonist" or spokesman at the meeting (D. Dep. 55), and the plaintiff deposed that his own input was very little, the bulk of the conversation being between Gammon and DiLorenzo. (L. Dep. 30).
At the meeting, Gammon advised the group that National would sell all of Hawthorn Mellody's Whitewater, Wisconsin, plants and all of its Chicago, Illinois, plants along with the going business for $18 million. (Plf. Ex. 8; G. Dep. 56; D. Dep. 57). It was understood at the meeting that DiLorenzo would learn if Certified was interested. (L. Dep. 32-33; D. Dep. 50-51).
During the Louisville meeting, no mention was made of a finder's fee or commission. (L. Dep. 34; D. Dep. 47-49, 82-83; G. Dep. 77, 89). After the meeting, the plaintiff had no further contacts with Certified regarding Hawthorn Mellody (L. Dep. 33) and none with National. (L. Dep. 49-50).
What happened after the meeting was that National insisted on selling the "package" of the Whitewater and Chicago plants as a going business (G. Dep. 62-63), whereas Certified was not interested in the going business (D. Dep. 62) and sought only the Chicago dairy plant. (D. Dep. 13, 23). National refused to split off and sell only the Chicago real estate and assets. (D. Dep. 13-14). After a few months, negotiations ended. (D. Dep. 63).
The plaintiff attached to his complaint a copy of a letter which he alleged he sent to Gammon on April 24, 1975, in which he wrote, "(a)s for Cliff (DiLorenzo) and myself, we would expect a normal finder's fee when and if the deal is consummated." (Plf's. Ex. 6). Gammon denied that he ever received such a letter (G. Dep. 73-74), but for the purpose of reviewing this summary judgment we accept that it was sent.*fn2
Three and a half years later, on October 12, 1978, Hawthorn Mellody sold $1,375,000 of real estate and $765,000 of machinery and equipment located in Chicago to Certified.*fn3 Several months before the consummation of the sale, the plaintiff wrote a letter dated April 24, 1978, to Gammon demanding a finder's fee as "the procuring agent for this sale." (Plf. Ex. 11). On May 2, 1978, Gammon responded by letter to the plaintiff, denying any liability for a finder's fee. (Plf. Ex. 10). On June 1, 1979, the plaintiff filed this diversity action. Inasmuch as National had in 1978 been merged into Fuqua Industries, Inc., the action was brought against National and Fuqua.
The district court entered summary judgment for the defendants on the ground that the original 1975 transaction had been abandoned and that in 1978 the parties to the transaction consummated a wholly different deal for which the plaintiff was not the procuring cause. The district court in its Memorandum and Order of August 21, 1981, also said:
To be sure, drawing all inferences in plaintiff's favor, the facts outlined above might possibly sustain a jury finding that some sort of implied contractual relationship was created by the circumstances surrounding the Louisville meeting. By directing Lirtzman and DiLorenzo to pursue further negotiations with Certified and by presenting them with financial data on Hawthorn-Mellody, Gammon provided a basis for a jury to conclude he had manifested consent to a contractual relationship.
In reviewing the propriety of a summary judgment, we must determine whether there is a genuine issue as to any material fact and whether the substantive law was correctly applied.
Without objection from either party, the district court applied Illinois law. Only relatively recently have finders been given recognition in Illinois, and the ultimate contours of the legal concept are far from fully developed. It was not until 1973 that an Illinois appellate court clearly recognized the status of a finder, although the court held against the finder in that case.*fn4 Modern Tackle Co. v. Bradley Industries, Inc., 11 Ill.App.3d 502, 507-09, 297 N.E.2d 688, 692-94 (1973). Modern Tackle established the principle for Illinois that a business opportunity broker or finder "must be the procuring cause of the transaction unless the contract specifies otherwise." 11 Ill.App.3d at 507, 297 N.E.2d at 693. See also Annot., Validity, Construction, and Enforcement of Business Opportunities or "Finder's Fees" Contract, 24 A.L.R.3d 1160, 1179.
There was obviously no express contract here and the plaintiff does not so contend. The plaintiff in order to succeed must rely either upon an ...