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Strauss v. NewMarket Global Consulting Group

October 14, 2010


Appeals from the Superior Court of the District of Columbia (04-CA-2957) (Hon. Mary A. Gooden Terrell, Trial Judge).

The opinion of the court was delivered by: Blackburne-rigsby, Associate Judge

Argued October 21, 2009

Before WASHINGTON, Chief Judge, BLACKBURNE-RIGSBY, Associate Judge, and NEWMAN, Senior Judge.

In this case, we are asked to determine whether an enforceable oral contract resulted from a series of conversations between two experienced businessmen: appellant Patrick Strauss, President of Icon Insurance Group, Inc. ("Icon"), and appellee Christopher Schrichte, President of appellee NewMarket Global Consulting Group, LLC ("NewMarket"). On appeal, Patrick Strauss seeks a reversal of the trial court's determination that an enforceable oral contract existed between him and Schrichte to split brokerage commissions, consulting fees, or finder or solicitor's fees. Additionally, appellant Michael Strauss, Patrick Strauss' father and the President of Icon spin-off company Private Equity Partners, LLC ("PEP"), contends that the trial court erred in dismissing with prejudice his counterclaim against NewMarket for breach of an oral accord and satisfaction and interference with an advantageous economic relationship.

We conclude that no enforceable oral contract existed between the parties. Given the oral nature of this alleged agreement involving a complex business transaction and the lack of evidence of the material terms of the alleged contract, appellees do not meet their burden of proving that there was a mutual agreement between the parties to split brokerage commissions, consulting fees, or finder or solicitor's fees. Additionally, we conclude that the trial court erred in dismissing the counterclaim with prejudice. Finally, because we conclude that no enforceable contract existed between Patrick Strauss and Schrichte, we do not reach or address Patrick Strauss' claims that the trial court erroneously pierced the corporate veil to find him personally liable, that appellees' claims were barred by the statute of limitations, or that the trial court erred in calculating damages. Accordingly, we reverse the trial court's judgment finding Patrick Strauss liable for breach of contract. We also reverse the trial court's decision to dismiss the counterclaim against Schrichte and NewMarket and remand to the trial court with instructions to reinstate the counterclaim consistent with this opinion.


Appellant Patrick Strauss, a newly licensed stockbroker and investment consultant, and Schrichte, a former stockbroker with fifteen years of experience who no longer held a brokerage license, were introduced by a mutual friend. Soon after being introduced, they met over lunch at a restaurant in Tyson's Corner, Virginia in November 1998. Both parties contest the facts surrounding this meeting. Schrichte contends that during the meeting, he and Patrick Strauss orally agreed that they would refer their business contacts and potential investors to each other. According to Schrichte, they agreed that the party making the referral would receive a 60% share of any resulting fees earned from the client's investments. Patrick Strauss disputes this and contends that the purpose of the meeting was to discuss potential business opportunities in the future.

The day after their lunch meeting, Schrichte prepared a memorandum ("November 19th memorandum"), which he contends memorialized the oral agreement. However, Patrick Strauss contends that the November 19th memorandum was merely a proposal for his consideration and not a memorialization of any oral agreement. Patrick Strauss never responded to the memorandum. The November 19th memorandum referred to a proposed 60/40 compensation split for transactions with two companies, Blueline/Online and Ballard Petroleum, neither of which is the subject of the instant dispute between the parties. The November 19th memorandum states in full:

As we discussed yesterday our agreement is as follows. I will agree to compensate you for introductions on NCG [NewMarket Consulting Group] originated deals at a rate of 24% of fees and [warrants] received for the Blueline/Online deal and a 33% split of compensation and [warrants] for monies received as a reseller. The split will be 33% of compensation for the Ballard Petroleum deal with the possibility of a 50% split of the warrants should a deal be worked out for some [warrants] above $5 mil being raised. Further compensation on NCG [NewMarket Consulting Group] originated deals will be agreed to on a case by case basis. As for deals you originate, our current agreement is for a 60/40% split of compensation and [warrants] with 100% paid to NCG and 40% of this paid out to you upon completion. Future deals you originate will be split on a case by case basis. (emphasis added)

After the November 19th memorandum was sent,Schrichte introduced Patrick Strauss to his former brokerage client, a wealthy investor named Francois Bitz, at a Super Bowl party in January 1999. Bitz became Patrick Strauss' brokerage client at Merrill Lynch and maintained his account with Strauss when Strauss moved to Morgan Stanley and to Deutsche Bank Alex Brown. Patrick Strauss contends that he paid Schrichte 10% of the brokerage commissions that he earned from Bitz's trading activities while he was employed at Merrill Lynch and Morgan Stanley to "show gratitude" for introducing him to Bitz. Patrick Strauss now says that these payments were illegal because Schrichte was no longer a licensed agent with the National Association of Securities Dealers Regulation, Inc. As such, a deal to split the commissions that Strauss earned for Bitz's stock trading was prohibited under applicable law. Schrichte asserts that he was not seeking to split brokerage commissions, which he concedes would have been improper. Instead, he argues that he is seeking his share of the "finder's fee" for introducing Strauss to Bitz.

In addition to trading with Patrick Strauss at the brokerage firms, Bitz also invested in the hedge funds of clients of the Strauss family-owned Icon entities.*fn1 According to Schrichte, once Patrick Strauss began to cultivate Bitz as a client, Strauss pressed Schrichte to change the compensation split for the "consulting fees" earned from Bitz's investments from a 60/40 split to a 50/50 split. Schrichte claims that he and Patrick Strauss orally agreed to change the compensation split, but never reduced the change to writing. According to Schrichte, the change was made pursuant to the language in the November 19th memorandum stating that: "Future deals you originate will be split on a case by case basis." Patrick Strauss denies the existence of the alleged oral agreement and the subsequent modification.

Three years after the Tyson's Corner lunch meeting, Patrick Strauss paid Schrichte $125,000. The parties dispute the purpose of this payment. According to Schrichte, Patrick Strauss told him that Bitz's investments into the hedge funds of MassMutual, one of the Icon entities' clients, earned Strauss $250,000 in consulting fees. Therefore, the $125,000 represented NewMarket's 50% share under the modified oral agreement. Patrick Strauss contends that the $125,000 payment was "go-away" money because Schrichte threatened to report the brokerage commission payments that Strauss split with Schrichte to Strauss' employer. Additionally, Strauss said he feared that Schrichte would disclose to Strauss' employer that he was "moonlighting," or negotiating side deals, with Icon. After receiving the $125,000 payment, Schrichte suspected that his 50% share should have been more, so he repeatedly requested documentation about the total amount that the Icon entities received from Bitz's investments. Schrichte alleges that Patrick Strauss eventually disclosed to him that Bitz invested a total of $35 million through multiple installments into the MassMutual hedge funds, and that these Bitz investments yielded solicitor's fees to Strauss and the Icon entities totaling approximately $975,000.

Schrichte and NewMarket filed suit against Patrick Strauss, Mary Strauss, Michael Strauss, and all six Icon entities, seeking to enforce what Schrichte contends was the oral agreement to split 50/50 any compensation earned from Bitz's investments. Schrichte sought an accounting of the compensation the Icon entities received from the Bitz investments and a declaratory judgment that the oral agreement was an enforceable contract entitling Schrichte to 50% of the estimated compensation earned from the Bitz investments. Additionally, Schrichte sought recovery for: breach of contract, breach of covenants of good faith and fair dealing, breach of fiduciary duty, quantum meruit/restitution, estoppel, unjust enrichment, and fraud. The parties filed cross motions for summary judgment, which were both denied.

The case proceeded to a bench trial. Both Patrick Strauss and Schrichte testified about the Tyson's Corner lunch meeting and their correspondence afterwards. Mary Strauss testified about her e-mail correspondence with Schrichte leading up to the $125,000 payment. Additionally, appellants' expert witness, Adam Kreisel, testified about finder or solicitor's fee agreements and sub-finder's fee agreements. According to Kreisel, Schrichte was seeking compensation under an alleged sub-finder's agreement, because he wanted a percentage of the finder's fee Strauss received from MassMutual for securing Bitz's investments into MassMutual's hedge funds. Kreisel testified that the starting point for splitting finder's fees with a sub-finder is usually 10-15%. Further, Kreisel testified that he had never seen an oral sub-finder agreement because the custom and practice in the brokerage industry are to comply with the Investment ...

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