Freedman v. Chemical Construction Corp.
372 N.E.2d 12, 401 N.Y.S.2d 176, 43 N.Y.2d 260 (1977)
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Rule of Law:
A general, conclusory assertion that parties orally agreed to apply foreign law, without presenting evidentiary facts, is insufficient to defeat a summary judgment motion based on the New York Statute of Frauds. An oral agreement to pay a fee for an intermediary's services in procuring an introduction and facilitating the opportunity for a complex construction contract constitutes 'negotiating a business opportunity' under New York General Obligations Law § 5-701(10), thus requiring a written agreement to be enforceable.
Facts:
- In 1961, Benjamin H. Freedman met David Fulton, an officer of Chemical Construction Corporation, in New York City.
- Freedman allegedly arranged the meeting to interest Chemical in constructing a plant in Saudi Arabia to convert natural gas into fertilizer.
- Freedman and his Syrian associate, Issa Nakhleh, allegedly negotiated with Saudi officials at Chemical's request.
- These negotiations reportedly resulted in Chemical being removed from the Arab blacklist.
- In December 1966, Chemical was awarded a $41 million contract to build the plant.
- The plant was completed in 1970, with Freedman not having visited Saudi Arabia until 1973, after the plant was operating.
- Freedman asserts there was an oral agreement that he would be paid a 5% fee (approximately $2.05 million) for his services upon completion of the plant.
- No written agreement of any kind existed to evidence this alleged fee arrangement.
Procedural Posture:
- Benjamin H. Freedman brought an action in the New York Supreme Court (trial court) against Chemical Construction Corporation based on an alleged oral agreement for a fee.
- Chemical Construction Corporation moved for summary judgment in the Supreme Court, arguing the claim was barred by the Statute of Frauds.
- The Supreme Court denied Chemical Construction Corporation's motion for summary judgment.
- Chemical Construction Corporation appealed the Supreme Court's denial to the Appellate Division.
- The Appellate Division reversed the Supreme Court's order, granting summary judgment in favor of Chemical Construction Corporation and dismissing Freedman's complaint.
- Benjamin H. Freedman appealed the Appellate Division's decision to the New York Court of Appeals.
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Issue:
1. Is a general, conclusory averment that parties orally agreed to be governed by foreign law sufficient to defeat a motion for summary judgment based on the New York Statute of Frauds? 2. Does an alleged oral agreement to pay a fee for an intermediary's services in procuring an introduction and facilitating the opportunity for a large construction contract constitute 'negotiating a business opportunity' within the meaning of General Obligations Law § 5-701(10), thereby requiring a writing?
Opinions:
Majority - Chief Judge Breitel
No, a general averment is not sufficient to defeat summary judgment. Yes, the alleged services constitute 'negotiating a business opportunity' requiring a writing. The court affirmed the Appellate Division's decision, dismissing Freedman's complaint. First, regarding the choice of law, the court found that Freedman failed to present any evidentiary facts that the parties manifested an intention that Saudi law would govern the agreement. Conclusory assertions are insufficient to defeat summary judgment; an opponent must present evidentiary facts to raise a triable issue. Freedman's vague reference to Saudi law related to Nakhleh's separate agreement, which Freedman disavowed connection to. Therefore, New York law applies. Second, applying the New York Statute of Frauds (General Obligations Law § 5-701), the court addressed two subdivisions. Subdivision 1, which bars agreements "by its terms... not to be performed within one year," does not apply. The critical test is whether the agreement's terms expressly prevent performance within a year, not whether performance is unlikely or improbable within that timeframe. Since the alleged agreement contained no such provision, it falls outside subdivision 1. However, the court found that subdivision 10 of the statute, which requires a writing for contracts to pay compensation for services rendered in "negotiating... a business opportunity," does bar Freedman's claim. This provision was enacted to protect principals from "unfounded and multiple claims for commissions" from various intermediaries, including 'finders' as well as 'brokers.' The term "business opportunity" must be interpreted in light of the statute's purpose to prevent mischief. While not covering every common parlance "business opportunity," where an intermediary's activity involves providing "know-how" or "know-who" in bringing about an enterprise of some complexity or an acquisition of a significant interest, it falls within the statute's scope. Freedman's role of arranging for Chemical to meet "appropriate persons" and procure the opportunity to build a multimillion-dollar plant, using his "connections" and "knowledge," clearly constitutes negotiating a "business opportunity." Thus, in the absence of a writing, the alleged agreement is unenforceable.
Analysis:
This case significantly clarifies the scope of New York's Statute of Frauds, particularly GOL § 5-701(10), by explicitly including 'finder's' fees for facilitating complex commercial transactions under the definition of 'negotiating a business opportunity,' even when the intermediary does not participate in contract terms. It reinforces the high evidentiary burden required to demonstrate an agreement to apply foreign law, preventing litigants from easily circumventing the Statute of Frauds. The decision underscores the statute's protective purpose against speculative claims for commissions in significant business dealings, compelling parties to secure written agreements for such services.
