Bushkin Associates, Inc. v. Raytheon Co.

We deal with questions certified to us by the United States Court of Appeals for the First Circuit, pursuant to S.J.C. Rule 1:03, as appearing in 382 Mass. 700 (1981). The principal question involves a conflict of laws issue: whether the *623 Massachusetts or the New York Statute of Frauds should be applied in this action involving an alleged oral agreement between the plaintiff Bushkin, a New York resident, and his New York corporation, on the one hand, and the defendant Raytheon Company (Raytheon), a Massachusetts based corporation, on the other. An action based on such an oral agreement would be barred under the New York Statute of Frauds (N.Y. Gen. Oblig. Law § 5-701 [a] [10] [McKinney 1978 & Cum. Supp. 1984]), but would not be barred under the Massachusetts Statute of Frauds (G. L. c. 259, § 1).

The Court of Appeals understandably concluded that it was not “confident of the choice that would be made by the Supreme Judicial Court in this important case.” Our cases have not indicated with any certainty how this court would resolve the choice-of-law question presented to us (nor indeed the other questions certified to us, which concern G. L. c. 93A).

The three questions certified are:

“1. On the facts of this case, should New York or Massachusetts law determine the issue of validity of the alleged oral agreement between the parties?

“2. Does Massachusetts General Laws chapter 93A apply to the allegations of deceptive acts and practices?

“3. If the answer to question 2 is in the affirmative, is defendant entitled to the exemption of G. L. c. 93A, § 3 (1) (b) (i) in that the alleged actions forming the basis of the chapter 93A claim did not occur ‘primarily and substantially’ in Massachusetts?” 2

The Court of Appeals appended to its certification “the summary of relevant facts as set forth by the district court in its opinion.” We quote those facts in the paragraphs immediately hereafter.

*624 “Factual Background. [a]

“Bushkin, a New York resident, is an investment banker specializing in mergers and acquisitions. He is the president of Bushkin Associates, a corporation organized and based in New York. Raytheon is a Delaware corporation with its principal place of business in Massachusetts.

“Bushkin’s dealings with Raytheon concerning possible mergers and acquisitions began in 1971. In 1974, Bushkin discovered that Beech [Aircraft Corporation] might be available for acquisition. He attended a meeting in January, 1974, with Olive Ann Beech and Frank Hedrick, the president and vice president respectively of Beech, at which he learned some information regarding the type of merger that might interest them. [b]

“On May 21, 1974, Bushkin, in New York, telephoned Robert Seaman, a vice president of Raytheon, in Massachusetts, to ask if Raytheon would be interested in acquiring a general aviation company. Seaman replied that Raytheon might be interested if the company were either Cessna or Beech. Seaman followed up with a May 24 letter to Bushkin, stating that Raytheon’s interest in a general aviation company was uncertain. During a July 19, 1974, telephone conference, Seaman told Bushkin that it was unlikely that Raytheon would have an interest in a general aviation company.

“The next conversation on the subject, and the one in which Bushkin alleges the oral fee agreement was made, occurred on January 28, 1975. Bushkin apparently telephoned Seaman (or Seaman returned Bushkin’s call). In either event, Bushkin was in New York and Seaman in Boston. Bushkin asked if Raytheon were still interested in general aviation. Seaman *625 replied yes, if the company were Beech or Cessna. Bushkin stated that he could reveal the name of the company, but first wanted to discuss a fee arrangement. Seaman told Bushkin that if Raytheon consummated an acquisition of the company Bushkin was discussing, Raytheon would pay a fee of one percent of the value of the transaction. Bushkin replied, ‘fine,’ and then identified the company as Beech. [c] He went on to disclose information as to his understanding of the kind of acquisition or merger that Beech wanted.

“Seaman and Bushkin had a few more contacts with regard to Beech and, on June 27, 1975, Seaman presented Beech as a possible acquisition candidate to Thomas Phillips, Raytheon’s chairman of the board. An internal Raytheon ‘acquisition log,’ dated June 19, 1975, identifies Bushkin as the person who offered or suggested Beech as a candidate. On June 30, Seaman called Bushkin to report on the presentation, and to discuss various aspects of a possible Raytheon acquisition of Beech. Later that day, Seaman sent a memo to Phillips summarizing relevant aspects of his conversation with Bushkin. [d] In the memo, Bushkin was identified as ‘our contact in this matter. ’

“In a telephone conversation on July 29, 1975, Seaman told Bushkin that Raytheon had decided it was not interested in pursuing Beech as an acquisition candidate. Bushkin had subsequent contacts with Seaman and Phillips with regard to possible acquisition candidates other than Beech. On one occasion in November 1975 Bushkin broached the subject of Beech with Phillips (in the course of discussions about another candidate), and Phillips replied that he was not interested.

*626 “On September 1, 1976, Raytheon entered into a written agreement with Lonsdale Enterprises, Inc., and its principals Royal Little and James Robison, for consulting services in connection with Raytheon’s interest in mergers and acquisitions. About three months later, in letters to Phillips dated November 29 and December 9, 1976, Little and Robison suggested Beech as a possible acquisition candidate. Phillips’ fifst reaction was not enthusiastic, but by February 16, 1977, Phillips indicated that he wanted to meet with Olive Beech. On February 28, while Bushkin was meeting with Phillips concerning another company, Bushkin again mentioned Beech, but Phillips said he was not interested. Nonetheless, on March 3, Phillips authorized Little and Robison to contact Beech through their business associate Angus MacDonald. In June, 1977, it became public knowledge that Beech was negotiating a merger with General Dynamics, and Raytheon, therefore, dropped the matter until those negotiations fell through.

“Phillips finally met with Frank Hedrick, vice president of Beech, on January 24, 1978, and with Olive Beech on July 12, 1978. After further negotiations and studies, Raytheon and Beech reached a preliminary agreement on October 1, 1979. Raytheon subsequently entered written agreements, dated November 26,1979, to pay Lonsdale and MacDonald $600,000 and $500,000 respectively for their services in connection with the merger. The agreements were contingent on its consummation.

“In February, 1980, Raytheon acquired Beech. The value of the transaction was approximately $800,000,000.00.”

The action came before the Court of Appeals on Bushkin’s appeal following a Federal District Court judge’s allowance of Raytheon’s motion for summary judgment. In allowing that motion, the judge recognized that, in.this diversity action, his obligation was to apply the choice-of-law rules of Massachusetts. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). He concluded that this court would not apply the principle that the choice of law would be governed by the place of contracting and concluded further that the principles stated in the Restatement (Second) of Conflict of Laws (1971) *627 were “not an effective means for resolving the choice of law problem in this case.” In his view, “[djetermining the projected scope of a law by application of an expanded interest analysis” helped to resolve the choice-of-law issue. Applying this analysis, he ruled that New York had a strong interest in protecting defendants against unfounded claims, even when New York brokers and finders sued non-New Yorkers. He said “Massachusetts, in contrast, has at most a minimal interest in applying its law to this case.” He concluded that Bushkin could not avoid the laws of New York and should not benefit from forum shopping, and held that “[ejxpanded interest analysis clearly tips the scale in favor of applying New York law to the facts of this case.” 3

The judge further concluded that Bushkin’s G. L. c. 93A claim merely restated his contract claim, believing that it was based solely on Raytheon’s failure to abide by its agreement with Bushkin and its use, without payment, of information acquired pursuant to that agreement. Because the contract was unenforceable, it was his view that Bushkin’s G. L. c. 93A claims must necessarily fail. He thus allowed Raytheon’s motion for summary judgment and dismissed Bushkin’s complaint.

We conclude that the alleged oral fee agreement is not barred by the New York Statute of Frauds because the law of Massachusetts determines the enforceability of the alleged oral agreement. We further decide that Raytheon is entitled to the exemption from G. L. c. 93A provided by G. L. c. 93A, § 3 (1) (b) (i), because Bushkin’s G. L. c. 93A claim is not based on transactions' and actions that occurred primarily in Massachusetts. We thus answer question three in the affirmative. Because Raytheon is exempt from liability under G. L. c. 93 A, we need not answer question two, which inquires whether G. L. c. 93A applies to Bushkin’s allegations of deceptive acts and practices.

*628 1. On the facts of this case, should New York or Massachusetts law determine the issue of validity of the alleged oral agreement between the parties'!

The plaintiff does not contend that his oral agreement would be enforceable under the substantive law of New York. The agreement would be held void under the New York Statute of Frauds. N.Y. Gen. Oblig. Law § 5-701(a)(10) (McKinney 1978 & Cum. Supp. 1984). The protection of the New York statute extends not only to residents, but also to “foreign principals who utilize New York brokers or finders.” Intercontinental Planning, Ltd. v. Daystrom, Inc., 24 N.Y.2d 372, 383 (1969). According to the Court of Appeals “[i]t is common knowledge that New York is a national and international center for the purchase and sale of businesses and interests therein. We conclude therefore that the Legislature in enacting subdivision 10 of former section 31 [now N.Y. Gen. Oblig. Law § 5-701 (a)(10)] intended to protect not only its own residents, but also those who come into New York and take advantage of our position as an international clearing house and market place. This is true because, of all the jurisdictions involved, New York law affords the foreign principals the greatest degree of protection against the unfounded claims of brokers and finders. This encourages the use of New York brokers and finders by foreign principals and contributes to the economic development of our State. Our brokers and finders need only ensure that their agreements for compensation comply with the Statute of Frauds to receive the benefits of New York’s position as a business center.” Id. at 383-384. 4

*629 It is also reasonably certain that, if this action had been commenced in New York, the New York courts under that State’s choice-of-law rules would have looked to New York, and not to Massachusetts, substantive law. Decisions subsequent to the Daystrom case suggest that New York claims a paramount “interest” in applying its Statute of Frauds, even when defendants (like Raytheon) do not “come into New York.” See Pallavicini v. International Tel. & Tel. Corp., 41 A.D.2d 66, 69 (1973), aff’d, 34 N.Y.2d 913 (1974). See also William J. Conlon & Sons v. Wanamaker, 583 F. Supp. 212, 215-216 (E.D.N.Y. 1984); O’Keeffe v. Bry, 456 F. Supp. 822, 827-828 (S.D.N.Y. 1978).

Another court has given a broad reach to the New York Statute of Frauds. In Denny v. American Tobacco Co., 308 F. Supp. 219 (N.D. Cal. 1970), the judge applied the “interest analysis” test used by California (see Bernkrant v. Fowler, 55 Cal. 2d 588 [1961]), and held that the New York Statute of Frauds barred a quantum meruit action brought by a California “finder” against a New York defendant demanding compensation for information contained in a letter concerning the possible sale of a California company. Although both the plaintiff and the acquired company were from California, he concluded that California’s interest in protecting the reasonable expectations of its residents was much less apparent than New York’s clear interest “in protecting its residents from just the sort of claim as is involved here.” Denny v. American Tobacco Co., supra at 223. The judge also commented that California law followed neither the first nor the second Restatement of Conflict of Laws and noted that “[a] practitioner of the second Restatement would be hard put to say which of these states [California or New York] had ‘the most significant relationship’ with the ‘contract’ involved herein.” Id. at 222. He concluded nevertheless that, under the second Restatement, New York law “might well be said to have the most significant contacts with the transaction here.” Id. at 223.

*630 Courts in other jurisdictions, however, have rejected the Empire State’s imperial reach. In three decisions applying the “most significant relationship” test, courts, faced with a defense of the New York Statute of Frauds pleaded against a New York plaintiff, have chosen forum and not New York law. See Havenfield Corp. v. H & R Block, Inc., 509 F.2d 1263 (8th Cir.), cert. denied, 421 U.S. 999 (1975); Ehrman v. Cook Elec. Co., 468 F. Supp. 98 (N.D. Ill. 1979); Edwin F. Armstrong & Co. v. Ben Pearson, Inc., 294 F. Supp. 163 (E.D. Ark. 1967), aff’d sub nom. Leisure Group, Inc. v. Edwin F. Armstrong & Co., 404 F.2d 610 (8th Cir. 1968). These cases are not directly on point because each case, but in varying degrees, presents “significant” contacts more strongly associated with the forum State than are the Massachusetts contacts in this case.

We surmise that the District Court judge in the case before us, by his reference to an expanded interest analysis, anticipated that we would adopt an approach to choice of law not unlike that of the California and New York courts. Of course, in the Denny case, the California Federal District Court applied New York law to protect a New York resident against a “finder” who “came into” New York. In our case, the question is whether the law of New York should be applied to protect a “resident” of Massachusetts from the claim of a New York broker or “finder.”

The Court of Appeals and the District Court judge in this case were correct in concluding that this court would not permit the choice-of-law question to turn on where the contract was made. See McKinney v. National Dairy Council, 491 F. Supp. 1108, 1112 (D. Mass. 1980), to the same effect. See also Emery Corp. v. Century Bancorp., Inc., 588 F. Supp. 15, 17 (D. Mass. 1984) (tort case); Rudow v. Fogel, 12 Mass. App. Ct. 430, 436-437 (1981) (New York law governs question of constructive trust of Massachusetts real estate). We rejected that simple rule in Choate, Hall & Stewart v. SCA Servs., Inc., 378 Mass. 535, 540-541 (1979), and not solely for those cases in which reference to the law of the place of making would produce “awkward or arbitrary results.” Id. at 541. Almost all *631 States have abandoned the lex loci rule (id.) and, as this case demonstrates, with good cause. Although for summary judgment purposes we must accept Bushkin’s assertion that the contract was made in Massachusetts, the governing principles of law should hardly turn on a parsing of the disputed content of a telephone call or, more importantly, on the fortuitous fact that an oral offer was accepted orally in one State rather than in the other.

In our Choate, Hall & Stewart opinion, we noted that there were various doctrines that had replaced “one-factor tests with a more functional approach,” but because of the particular facts of that case we were deprived “of an opportunity to elect among the extant doctrines.” Id. at 541. In our opinions issued since the Choate, Hall & Stewart case, we have not dealt with choice-of-law questions in a contract case and, in the area of tort law, we have not elected by name any particular choice-of-law doctrine. See Cohen v. McDonnell Douglas Corp., 389 Mass. 327, 333-337 (1983).

The facts of this case present us with the “opportunity” unavailable in the Choate, Hall & Stewart case. As with our tort cases, we decide here not to tie Massachusetts conflicts law to any specific choice-of-law doctrine, but Seek instead a functional choice-of-law approach that responds to the interests of the parties, the States involved, and the interstate system as a whole. Having surveyed the academic commentary and recent decisional law, we agree with Professor Leflar’s perception that, despite the rhetoric of choice-of-law scholars, the courts and commentators “are arriving at results broadly consistent with each other’s holdings.” R.A. Leflar, American Conflicts Law § 99, at 198 (3d ed. 1977).

We, therefore, determine the choice-of-law question by assessing various choice-influencing considerations. It is, of course, obvious that, when courts turn to such considerations, they undertake to reach a fair result in a given case but may provide little guidance for anticipating the “fair result” in other cases. By considering a variety of factors and not simply, as some have argued, choosing the State with the greatest “interest” in the particular issue, some vagueness in the formula- *632 tians applied is probably unavoidable. Reese, The Second Restatement of Conflict of Laws Revisited, 34 Mercer L. Rev. 501, 518 (1983). Our approach, however, while producing less predictability, rejects artificial constructions. This, after all, was the primary reason for rejecting the traditional lex loci approach in favor of more modem methods. It makes little sense to reject one artificial approach only to replace it with another.

One obvious source of guidance is the Restatement (Second) of Conflict of Laws (1971). Under that Restatement, a choice-of-law question involving a Statute of Frauds is resolved according to the choice-of-law principles applicable to all substantive contract issues (§ 141). The principles contained in § 186 and § 187 provide that, in the absence of a choice of law by the parties, their rights “are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6.” Id. at § 188(1). “[T]he contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include: (a) the place of contracting, (b) the place of negotiation of the contract, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the domicil, residence, nationality, place of incorporation and place of business of the parties.” Id. at § 188(2). Factors under § 6 that are said to be relevant to the choice of the applicable mie of law include: “(a) the needs of the interstate and international systems, (b) the relevant policies of the fomm, (c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the determination and application of the law to be applied.” Id. at § 6(2).

We do not view the process, intended under § 188, for determining the State with the most significant relationship to the issue as simply adding up various contacts. Each side has argued to us that the contacts with the State whose law it wishes *633 applied are greater in quantity.* *34 5 Understandably they do not agree on which contacts are important or even relevant, such as events occurring after the date of the alleged contract. 6 In *634 any event, the contacts analyzed by themselves (without regard to § 6 principles) lead us neither to Massachusetts nor to New York as the State with the more significant relationship to the transaction or the parties. No simple and objective test can provide an acceptable choice-of-law answer in this case, nor should it.

We choose, instead, to emphasize the choice-influencing factors listed in § 6 (2) of the Restatement (Second) of Conflict of Laws, quoted above. Alternatively, we could consider the five considerations proposed by Professor Leflar in American Conflicts Law, supra at 195, on which we have previously relied. Saharceski v. Marcure, 373 Mass. 304, 312 n.7 (1977).* ***** 7 We agree with Professor Leflar that these five considerations generally parallel the considerations contained in longer lists, including § 6 (2) of the Second Restatement. R.A. Leflar, American Conflicts Law, supra at 194-195. We feel free, however, to borrow from any of the various lists to help focus our attention on the considerations particularly relevant to the case before us.

We begin by noting that the laws of both Massachusetts and New York favor the enforcement of contracts. The difference is that New York believes that the protection of defendants’ rights requires that, in the circumstances of this case, there be a writing to prove the defendant’s promise, while the law of Massachusetts does not (G. L. c. 259, § l). 8 New York has *635 given focused attention to this question and its conscious adoption of a position on the question is obvious. Intercontinental Planning, Ltd. v. Daystrom, Inc., 24 N.Y.2d 372, 383 (1969). However, one would hardly expect the Massachusetts Legislature to state affirmatively, that no writing is required in the circumstances of an oral agreement to pay such a broker’s or finder’s fee when the Massachusetts Statute of Frauds already achieves that result. The choice by Massachusetts to permit a trier of fact to resolve conflicts in testimony, as is true in many cases involving large sums of money, is a policy that should be balanced against the policy of New York. We find, therefore, that the “relative interests [of New York and Massachusetts] in the determination of the particular issue” in this case, Restatement (Second), supra at § 6 (2) (c), point clearly toward neither State.

We find similarly that other important considerations, such as uniformity of result, maintenance of interstate order, and simplification of the judicial task, R.A. Leflar, American Conflicts Law, supra at 195, point toward neither Massachusetts nor New York. Uniformity and interstate order could be advanced only if all States accepted New York’s extrajurisdic-tional reach, but other jurisdictions have not done so. See, e.g., Havenfield Corp. v. H & R Block, Inc., 509 F.2d 1263 (8th Cir. 1975).

One significant consideration, the justified expectations of the parties, militates for Massachusetts law. Restatement (Second), supra at § 6 (2) (d); § 141, comment (g); § 188 comment (b); R.A. Leflar, American Conflicts Law, supra at § 103. Here Bushkin and Raytheon expected that any oral agreement would be enforced. Raytheon had made other, similar oral agreements to which it expected to be bound, including others with Bushkin. Since Bushkin is not in the business of supplying free information, we may assume he expected any agreement for such information to be enforced as well.

Finally, we note that, although the Statute of Frauds involves a question of substantive law and is not a procedural rule governed by the law of the forum (but see Emery v. Burbank, 163 Mass. 326, 329 [1895]), the Statute of Frauds concerns the *636 necessary proof of a case and not the substantive merits of a plaintiff’s claim. Cf. Twerski & Mayer, Toward a Pragmatic Solution of Choice-of-Law Problems — At the Interface of Substance and Procedure, 74 Nw. U.L. Rev. 781, 784-786 (1979). Where relevant contacts and considerations are balanced, or nearly so, we are inclined to resolve the choice by choosing that law “which would carry out and validate the transaction in accordance with intention, in preference to a law that would tend to defeat it” (footnotes omitted). Boston Safe Deposit & Trust Co. v. Paris, 15 Mass. App. Ct. 686, 691 (1983). In this case, the law that will validate the agreement, if indeed there was an agreement, is that of Massachusetts.

In answer to the first question, we conclude that the law of Massachusetts should determine the issue of the validity of the alleged oral agreement between the parties.

2. Does Massachusetts General Laws chapter 93A apply to the allegations of deceptive acts and practices?

We construe question two as inquiring about the extent to which, apart from any exemption, G. L. c. 93A applies to allegedly unfair or deceptive acts or practices of the sort alleged in this interstate transaction. 9 Because we conclude in our answer to the third question that Raytheon is exempt from Bushkin’s G. L. c. 93A claim, we need not answer the question.

*637 3. If the answer to question 2 is in the affirmative, is defendant entitled to the exemption ofG. L. c. 93A, § 3(l)(b) (i) in that the alleged actions forming the basis of the chapter 93A claim did not occur “primarily and substantially” in Massachusetts?

Under G. L. c. 93A, § 3 (1) (b), as amended by St. 1969, c. 814, § 2, 10 Raytheon is exempt from Bushkin’s G. L. c. 93 A claim unless that claim involved “transactions and actions which (z) occurred] primarily and substantially within the commonwealth.” This exemption represents a legislative determination that G. L. c. 93 A should not apply to certain transactions and actions that do not occur principally and significantly in Massachusetts. This court has had little occasion to consider the scope of the exemption. In Burnham v. Mark IV Homes, Inc., 387 Mass. 575, 580 (1982), we noted that the facts of the case did “not require us to define the outer boundaries of those transactions and actions which may be held to have occurred primarily and substantially within the Commonwealth.” Federal cases have involved this general issue, but on the facts the various judges have been able to determine with relative ease whether particular actions and transactions occurred primarily and substantially in Massachusetts or elsewhere. 11

*638 Bushkin’s G. L. c. 93A claim is based on alleged representations made during a telephone call or calls in 1975 between a Raytheon officer in Massachusetts and Bushkin in New York. Bushkin asserts that Raytheon’s officer obtained information from Bushkin concerning Beech by falsely representing that Raytheon would pay for Bushkin’s services. 12 Bushkin in New York then relied on those representations and from New York disclosed the name of Beech and provided information about Beech. Thereafter, Bushkin alleges he sustained a loss.

Raytheon has met its burden of showing that the transactions and actions on which Bushkin relies did not occur primarily in Massachusetts. G. L. c. 93A, § 3 (2). The telephone conversations were between New York and Massachusetts. The alleged unfair or deceptive acts or practices were statements made in Massachusetts but received and acted on in New York. Any loss was incurred in New York.

If it were proper (and we need not decide the point) 13 to engage in a broader analysis of this issue, similar to the func *639 tional approach we used to decide the choice-of-law question in this action, the result would be the same. The significant contacts in this action are approximately in balance (see note 5 above) and thus show no primary involvement with Massachusetts. Further, the choice-influencing factors on which we relied to answer the first question (expectations of the parties and the presumption of a contract’s validity) are not relevant to the G. L. c. 93A claim and provide no basis for resolving this third question.

We therefore answer Question three in the affirmative.

4. Our answer to the first question is that the law of Massachusetts should determine the issue of the validity of the alleged oral agreement between the parties. We answer the third question in the affirmative, and thus need not answer the second question.