phone conversations and Zlotnick arranged a meeting for May
18, 1978 in New York City between the seller and defendants,
so that the parties could discuss the proposed sale, and to
enable the potential purchasers to inspect the business.
Shortly thereafter Zlotnick met with MacArthur in New York,
at which time MacArthur told Zlotnick that he did not intend
to pay plaintiff any fee and, moreover, that his company had
no interest in acquiring Hammacher-Schlemmer.
Nevertheless, defendants continued negotiating directly with
the sellers, and on April 28, 1980 G&W and Bradford executed
a purchase agreement at G & W's headquarters in New York. The
closing for the sale of Hammacher-Schlemmer also took place in
Based on these facts, defendants have moved for summary
judgment on both counts of the complaint. Plaintiff does not
dispute that under New York law an agreement to pay a finder's
fee is not enforceable unless it is in writing. See Cohn v.
Geon Intercontinental Corp., 62 A.D.2d 1161, 404 N.Y.S.2d 206
(1978). Nor does plaintiff deny that the purported agreement to
pay a fee was oral. Instead, Zlotnick contends that Illinois
law governs this action and permits the recovery of a finder's
fee — whether oral or written — once it is shown that the
finder was the "procuring cause" of the acquisition, and that
the acquisition actually took place through his efforts. Ehrman
v. Cook Electric Co., 630 F.2d 529 (7th Cir. 1980). Thus, the
sole issue for resolution is whether this court should apply
New York or Illinois law.
The Choice of Law Principles
In a diversity action a federal court must follow the
conflict-of-law rules prevailing in the state in which it
sits. Klaxon Co. v. Stentor Electric Manufacturing Co.,
313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941).
Under traditional Illinois conflict of law principles,*fn2
the validity, construction and obligation of a contract are
determined by the law of the place where it is made and
performed. Walker v. Lovitt, 250 Ill. 543, 95 N.E. 631 (1911).
Where the place of performance differs from the place of making
the contract, and the agreement is to be performed wholly in
one jurisdiction, then the law of the place of performance
governs. Ehrman v. Cook Electric Co., 468 F. Supp. 98, 99
(N.D.Ill. 1979), aff'd 630 F.2d 529 (7th Cir. 1980). If more
than one place of performance is involved, the place of
contracting determines the construction of the document.
Charles O. Finley & Co., Inc. v. Kuhn, 569 F.2d 527, 542 (7th
Cir.), cert. denied 439 U.S. 876, 99 S.Ct. 214, 58 L.Ed.2d 190
(1978). Finally, in a "multifaceted situation where the place
of making is
arguable and performance takes place in several states, the
Seventh Circuit Court of Appeals has ruled that Illinois
applies the law of the state with the most significant
contacts to the transaction." Ehrman v. Cook Electric, supra,
468 F. Supp. at 99 — 100. See P.S. & E. Inc. v. Selastomer
Detroit, Inc., 470 F.2d 125, 127 (7th Cir. 1972).
In this case it appears not only that the place of execution
and performance differ, but additionally that both took place
in more than one jurisdiction. See Adams Laboratories, Inc. v.
Jacobs Engineering Co., 486 F. Supp. 383, 389 (N.D.Ill. 1980).
"Negotiations" between Zlotnick and MacArthur took place via a
telephone conversation between New York and Illinois, and the
contract could arguably be said to have been executed in either
state.*fn3 Much of the performance under the contract took
place in New York, where Zlotnick acquired information
concerning Hammacher-Schlemmer, and part of the performance
conceivably took place in Illinois, since Zlotnick communicated
the information he discovered to Bradford headquarters in
Morton Grove. Accordingly, this case fits precisely within what
Judge Robson described in Ehrman as a multifaceted situation.
In Ehrman, the plaintiff, a New York finder, contacted Cook
Electric in Illinois by telephone and suggested that he could
interest Northern, a Canadian company, in merging with Cook.
Ehrman then contacted Northern in Canada and later sent
Northern information about Cook. The district court held that
the making of the finder's fee agreement, and its performance,
arguably take place in several states. In these circumstances
conflict-of-law rules of Illinois dictate that the district
court apply the law of the state with the most significant
contact to the transaction. Contrary to plaintiff's suggestion,
the fact that the instant case involves only two states rather
than the three jurisdictions implicated in Ehrman, make no
difference; the crucial question is not how many, but whether
there is more than one jurisdiction involved. Accordingly, this
case, like Ehrman, is governed by the "significant contacts"
Several courts have had occasion to identify the significant
contacts to be considered in a finder's fee transaction. As
defendants note, such factors include (1) the location of the
acquired company; (2) the state where the closing of the
acquisition took place; (3) the state where the benefits
accrue; and (4) the state where the offer to perform the
finder's services was sent. See Ehrman, supra, 468 F. Supp. at
100; Havenfield Corp. v. H & R Block, Inc., 509 F.2d 1263, 1268
(8th Cir.), cert. denied 421 U.S. 999, 95 S.Ct. 2395, 44
L.Ed.2d 665 (1975). Cf. Denny v. American Tobacco Co.,
308 F. Supp. 219 (N.D.Cal. 1970).
Consideration of the first two criteria clearly point to New
York. Hammacher-Schlemmer is a New York corporation, and the
closing took place in New York. As for the third factor, both
New York and Illinois would likely receive the benefits of the
acquisition. Finally, while Illinois was the state into which
the offer was sent, this factor should be given the least
weight. Just as valid would be to add into the equation that
the acceptance was "sent" into New York, cancelling out the
inference that one party came into the other's state and
thereby accepted the protection and assumed the burdens of that
Based on these facts, and the additional consideration that
the vast majority of the acts constituting performance under
the contract occurred in New York, this court finds that New
York has the most significant relation to the cause of action.
And because New York precludes an action for quantum meruit or
for enforcement of a contractual arrangement based on an oral
contract, defendants' motion for summary judgment is granted.