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SCOTT/HUBBARD CO. v. SIKA CHEM. CORP.

March 16, 1989

SCOTT/HUBBARD COMPANY, INC., Plaintiff,
v.
SIKA CHEMICAL CORPORATION, etc., Defendant


James B. Moran, United States District Judge.


The opinion of the court was delivered by: MORAN

JAMES B. MORAN, UNITED STATES DISTRICT JUDGE

 Plaintiff Scott/Hubbard Company, Inc. seeks recovery of a $ 210,000 finder's fee from defendant Sika Chemical Corporation (Sika) for providing information regarding the availability of a third party for acquisition. Sika, in its affirmative defense, responds that the suit is barred because plaintiff failed to comply with state licensing requirements applicable to brokers. Scott/Hubbard moves to strike the affirmative defense pursuant to Rule 12(f) of the Federal Rules of Civil Procedure. That motion is denied.

 BACKGROUND

 Choice-of-law questions are implicated in this case. In an earlier memorandum and order, Scott/Hubbard Co. v. Sika Chemical Corp., 694 F. Supp. 1311 (N.D. Ill. 1988), we rejected defendant's contention that Missouri law controlled since the nexus between Missouri and the finder's fee agreement was minimal, and held that either New Jersey or Illinois law controlled in this dispute. Although the parties cited to Illinois case law, neither addressed the applicability of New Jersey law to the licensing question and we reserved judgment on the conflict-of-law issue pending submission of additional memoranda.

 For purposes of this motion we consider the facts in the light most favorable to Sika. See Coca-Cola Co. Foods Div. v. Olmarc Packaging Co., 620 F. Supp. 966, 970 (N.D. Ill. 1985); 5 C. Wright & A. Miller, Federal Practice and Procedure, Section 1363.

 In late October 1986, Sika, a New Jersey corporation, received information from Scott/Hubbard, an Illinois corporation, regarding the possibility of acquiring a chemical company. This information was sent by Peter Poulos, president of Scott/Hubbard. Sika alleges that Poulos represented Scott/Hubbard to be an agent or broker for the proposed chemical company. Upon receiving this information, Reinhard Rutz, president of Sika, suspected that the company referred to by Scott/Hubbard was "Chemsco," a subsidiary of Ash Grove Cement Company.

 On November 4, 1986, in a phone conversation with Poulos, Rutz learned that the company for sale was indeed Chemsco. Poulos also told Rutz he believed Sika could acquire Chemsco for approximately ten or eleven million dollars and encouraged Rutz to contact James Sunderland of Ash Grove Cement Company directly. When Rutz contacted Sunderland he was told that Scott/Hubbard did not represent Ash Grove, and that if he wished to acquire Chemsco he should engage in direct negotiations.

 Rutz then received a letter from Scott/Hubbard on November 10, 1986, containing additional information on Chemsco and a proposed fee agreement. Sika did not respond to this letter and instead contacted Chemsco to negotiate its acquisition. Rutz notified Poulos on December 8, 1986, that Sika would not accept Scott/Hubbard's proposed agreement but did agree to meet with Poulos to discuss what services Scott/Hubbard could provide Sika.

 On December 10, 1986, Poulos traveled to New Jersey to meet with Rutz. In New Jersey, Rutz offered to pay a fee for information provided to Sika if Scott/Hubbard afforded additional services relating to the consummation of the transaction. A week after receiving this offer from Sika, Scott/Hubbard notified Rutz that it rejected the offer and demanded compensation for the services it had provided.

 DISCUSSION

 The first step in any choice-of-law dispute is to determine whether the laws of the subject jurisdictions are actually in conflict. If the two states would resolve the licensing question in the same manner, there is no conflict and we would treat the finder's fee agreement as if it was both made and performed in one state. See Restatement (Second) Conflicts of Law ยง 186 comment c.

 New Jersey courts do not distinguish between finders and brokers for the purposes of real estate licensing requirements. Corson v. Keane, 4 N.J. 221, 72 A.2d 314 (1950). See also Baron & Co. v. Bank of New Jersey, 504 F. Supp. 1199, 1205-06 (D. N.J. 1981) (without regard to labels, the production of a purchaser to meet the seller's price is conduct within the reach of New Jersey's licensing statute). Under an old New Jersey rule an unlicensed person may not collect any compensation for his role in the sale of a business that includes the transfer of real estate, unless the terms of the agreement expressly divide the sale of the real property from the remainder of the sale. See Kenney v. Paterson Milk & Cream Co., 110 N.J.L. 141, 164 A. 274 (E. & A. 1933). This rule has come under considerable attack, and in Kazmer-Standish Consultants, Inc. v. Schoeffel Instruments Corp., 89 N.J. 286, 288, 445 A.2d 1149, 1150 (1982), the New Jersey Supreme Court abandoned it for the minority view that a business broker, although not ...


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