(CN) – An investment broker can’t demand pay for his role in facilitating the $2.6 billion purchase of Warner Music, the New York Court of Appeals ruled, because he never agreed to compensation in writing.
Richard Snyder reconnected with acquaintance Edgar Bronfman Jr. in the Caribbean. The two men came to an oral agreement whereby Snyder would look for investment opportunities for Bronfman.
After failed attempts to strike deals with Columbia House, Vivendi and Prestige Brands, Snyder said he helped broker Bronfman’s purchase of Warner Music from Time Warner.
Snyder invested $1.3 million in the company, but Bronfman allegedly told Snyder there was “no room here for you at Warner’s” and refused to compensate him for brokering the deal.
Snyder sued for unjust enrichment, and the trial court ruled in his favor, saying Snyder could recover “reasonable value for any services actually rendered.”
However, the appellate division reversed and dismissed, ruling that Snyder’s claim was barred by the statute of frauds, which requires certain contracts to be in writing and signed by all parties.
The case proceeded to the New York Court of Appeals, the state’s highest court, where Judge Robert S. Smith ruled for Bronfman, citing the 1977 decision of New York’s 2nd Appellate Division in Freedman v. Chemical Construction Corp.
“The more relevant language in Freedman says that ‘where … the intermediary’s activity is … that of providing know-how or know-who in bringing about between principals an enterprise of some complexity or an acquisition of a significant interest in an enterprise,’ the statute of frauds applies,” Smith wrote.
“The essence of plaintiff’s claim is that he devoted years of work to finding a business to acquire and causing an acquisition to take place – efforts that ultimately led to defendant’s acquisition of his interest in Warner Music,” the judge added. “In seeking reasonable compensation for his services, plaintiff obviously seeks to be compensated for finding and negotiating the Warner Music transaction. His claim is precisely the kind the statute of frauds describes.”
The court upheld the appellate division’s dismissal.