Keohane v. Swarco, Inc.

211 F. Supp. 256, 1962 U.S. Dist. LEXIS 3344
CourtDistrict Court, N.D. Ohio
DecidedNovember 27, 1962
DocketCiv. No. 37040
StatusPublished
Cited by2 cases

This text of 211 F. Supp. 256 (Keohane v. Swarco, Inc.) is published on Counsel Stack Legal Research, covering District Court, N.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Keohane v. Swarco, Inc., 211 F. Supp. 256, 1962 U.S. Dist. LEXIS 3344 (N.D. Ohio 1962).

Opinion

BATTISTI, District Judge.

The Plaintiff, William H. Keohane, is an industrial engineer-consultant who, as part of his work, actively solicits and advises persons and corporations in the sale and purchase of other business enterprises. Defendant Swarco, Inc. (hereinafter called “Swarco”), a manufacturer of products from crude rubber, sold its assets to Defendant Ameraee, Inc., (hereinafter called “Ameraee”), another manufacturer of products from crude rubber. Nussbaum, Ward, Loewy, Loughley and Halberstein, the individuals named as Defendants, were officers of Swarco at the time of the sale. In the main, Plaintiff’s dispute is with [257]*257Swarco and its officers. However, Amer-aee, in its purchase contract, agreed to indemnify Swarco and other Defendants against any claims arising from the purchase.

Plaintiff is a resident of Boston, Massachusetts. Defendants are all found in this district and none are residents of, or have their principal place of business in Massachusetts. The amount in controversy exceeds $10,000, thus the Court has jurisdiction of this dispute.

The events which led to this litigation have been well established by counsel at the trial. The issues of law have been briefed extensively. The facts, in substance are as follows:

Plaintiff voluntarily approached Defendant Nussbaum, President of Swarco, and stated that he knew of others (as yet unnamed) who might be interested in purchasing Swarco. Nussbaum advised Plaintiff that Swarco “was not for sale,” but added that “the company can be bought.” He was of the opinion that if the corporation were tendered an offer which would net each shareholder $30 per share, the corporation might be purchased. Plaintiff was also told that Nussbaum had no authority to solicit offers or brokers; and that if Plaintiff desired to seek prospective purchasers, he must do so at his expense and by looking to any purchaser for his commission or compensation.

Late in 1960, Plaintiff contacted the Baton Manufacturing Company (hereinafter called “Eaton”). He reported to the Eaton officials that Swarco might be purchased. Starting in October, 1960, and continuing through April of 1961, representatives of Eaton, chiefly the Vice President in charge of acquisitions and his staff, conducted an investigation to determine whether to recommend to Eaton’s Board of Directors that an offer be made to purchase Swarco. Swarco and its officers cooperated with the Eaton personnel by supplying them with confidential information relating to the company and by showing them around the Swarco facilities. Eaton engaged an outside consultant to make a market survey. The survey was not yet complete in early April. The staff in charge of acquisitions was anxious to see the results of the study before deciding whether the purchase of Swarco should be recommended to the Board of Directors of Eaton.

Eaton’s representatives understood that if they purchased Swarco, Eaton would have to pay Plaintiff a commission. Although Plaintiff expected a fee equivalent to not less than 350 nor more than 500 per share of Swarco stock, no final or definite agreement as to the commission payable was ever entered into between Plaintiff and Eaton. In this connection, it is notable that Eaton’s Vice President in charge of acquisitions had authority to enter into such a contract without Board approval. (Transcript, page 177.)

Plaintiff was advised by Swarco that he should not bring other prospective purchasers to survey the plant while negotiations with Eaton continued. It would seem that this order was motivated by the normal business caution against forewarning employees and others when a sale is being negotiated. Obviously, to have had a number of prospective buyers surveying the facilities would have been undesirable.

In April of 1961, the individual Defendants, Plaintiff and Eaton met with each other several times. At one of these meetings, Plaintiff and Eaton acquired definite knowledge that another company was negotiating for the purchase of Swarco. Parenthetically, it should be pointed out that when Plaintiff acquired this knowledge he did not assert any right to an exclusive agency with Swarco, nor did he object to Swar-co’s negotiations with another company. Thereafter, in the course of various telephone calls involving Eaton, Plaintiff, Nussbaum and Ward, it was made clear that if Eaton was to bid at all, it must bid soon. Other telephone calls to Nuss-baum dispelled the threat of an immediate sale to an outside party. However, in fairness to Eaton and Plaintiff, [258]*258these calls left an inference that Swarco did not contemplate a sale to an outside purchaser without first giving notice to Eaton. The notice, it seems, was to be given gratuitously, because no binding obligation was ever mentioned or suggested by anyone.

Finally, on April 11, Eaton placed a call to Nussbaum, who was on vacation in Florida. Evidently Nussbaum was not aware of the fact that Ward was in New York -negotiating with Amerace. On the basis of his knowledge at the time of the call, Nussbaum assured Eaton that it would have until April 20 to obtain the results of its market survey and to-decide whether to make an offer. Immediately after this conversation, Nuss-baum called Ward at the Swarco plant and was informed that Ward was in New York City. He then called Ward in New York, and Ward advised him that Amer-ace had met all of Swarco’s conditions and that a sale had just been agreed upon. Nussbaum informed Ward of the conversation he had with Eaton and he requested that Ward call Eaton to advise it of the sale. Within the hour V/ard called Eaton, informed it of the sale and Eaton in turn discontinued its activities relating to the possible purchase of Swarco.

On these facts, Plaintiff claims: (1) Plaintiff was an exclusive agent of the Defendant Swarco for the sale of that company, (2) Eaton “was ready, willing and able to purchase” Swarco upon the “terms” outlined by Swarco, (3) Swarco gave Eaton an option until April 20 to formalize an offer, (4) Eaton had promised (contracted?) to pay Plaintiff $370,-340 as broker in this transaction, and (5) Defendant breached the so-called option agreement to Plaintiff’s detriment.

Obviously, at the first meeting between Plaintiff and Nussbaum, no agreement was reached which would make Plaintiff an agent of any of the Defendants. Nor can Plaintiff be considered an agent of Defendant Swarco at any later, time. The facts do not prove either an, express or implied consent by either Plaintiff or Defendant to an agency relationship.

The Ohio rule places the burden of proof on Plaintiff to show that he was hired as a broker or agent. Tenbusch v. The L. K. N. Realty Co., 107 Ohio App. 133, 149 N.E.2d 42 (Cuyahoga County Court of Appeals 1958). At page 140, 149 N.E.2d at page 48, the Court of Appeals summarized the rule as follows:

“The burden of proof is upon the plaintiffs to establish a contract of employment or an offer upon the defendant’s part which would result in a binding contract when a purchaser was produced. The mere asking and receiving of the price of property and the discussion of a commission when the broker himself' is the party soliciting the listing of property, nothing more being shown, is insufficient as a matter of law to establish a basis for the recovery of a commission.”

On the contrary, the testimony shows that neither pai*ty believed that an agency existed or believed that consent had been manifested.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
211 F. Supp. 256, 1962 U.S. Dist. LEXIS 3344, Counsel Stack Legal Research, https://law.counselstack.com/opinion/keohane-v-swarco-inc-ohnd-1962.