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Court Dismisses Claims That Warner Music CEO Owed Former Simon & Schuster Exec for Role in Music Deal
New York Law Journal
November 24, 2009
Image: Stockbyte Silver
Warner Music Group mogul Edgar M. Bronfman Jr. is not obligated to pay former Simon & Schuster CEO Richard E. Snyder more than $100 million for work Snyder insists he did to facilitate Warner Music's purchase by Bronfman's investment group, the New York Court of Appeals ruled Monday.
The judges decided unanimously that Snyder's claims for unjust enrichment and quantum meruit are barred by a provision in the statute of frauds voiding every "agreement, promise or undertaking" unless there is "some note or memorandum thereof in writing."
The agreement between Snyder and Bronfman was an oral one with nothing in writing, the 7-0 Court noted Monday in Snyder v. Bronfman, 153.
The ruling in the Bronfman case extinguished the final two claims by Snyder of his entitlement to significant compensation for his role in what became the $2.6 billion purchase of Warner Music from Time Warner in 2004.
Bronfman is Warner Music's CEO.
Snyder maintained he and Bronfman, who were only casually acquainted, made a handshake deal while vacationing in the Caribbean in winter 2001-2002 to acquire and operate companies in the media industry.
Snyder described his role in exploring deals for Bronfman as serving as Mr. Bronfman's "experienced right hand," "sounding board," "loyal ally" and "consigliere."
Snyder said he also believed he would be entering into "joint ventures" with Bronfman and that once deals were made, Snyder would receive a "fair and equitable" share of the value.
According to the ruling, Snyder had space in Bronfman's Manhattan offices and was briefly invited to invest $1.3 million of Snyder's own money when the Warner Music deal closed.
The following month, however, Bronfman told Snyder "there's no room here for you at Warner's" and refused to compensate Snyder for his role in the transaction.
Unjust enrichment and quantum meruit were the two surviving claims until Monday in the suit Snyder subsequently filed.
Writing for the court, Judge Robert S. Smith held that Snyder's claims are for performing "precisely" the kinds of business activities described in the statute of frauds, General Obligations Law §5-701(a)(10).
They include "negotiating the purchase, sale, exchange, renting or leasing of any real estate or interest therein, or of a business opportunity" or "business."
The statute also says, "Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent."
The written contract or agreement is not present in Snyder's claim, the court ruled.
Citing Freedman v. Chemical Constr. Corp., 43 NY2d 260 (1977), the court held that when an intermediary's activity is 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," then the statute of frauds applies.
"That describes what plaintiff did here," Judge Smith wrote.
The court rejected Snyder's argument that since he was seeking "joint venture" agreements with Bronfman, his business activities did not apply to the statute of frauds.
Lower courts had earlier dismissed Snyder's claims for breach of a joint venture agreement, breach of fiduciary duty and promissory estoppel.
Orin S. Snyder, Bronfman's attorney, said the decision was a clear statement from the court that no matter how "expansive or self-congratulatory" a litigant is in describing his role in a business transaction, courts must "look behind the labels to the core of the claim."
"The Court of Appeals recognizes that if it starts creating exceptions based on the label a plaintiff attaches to his role, it will be a slippery slope and the statute [of frauds] will be fundamentally undermined," said Snyder, of Gibson Dunn & Crutcher.
Orin Snyder described Richard Snyder's role in the Warner Music purchase as limited to "networking" and said Bronfman, skilled and experienced at high finance, did not need the former publishing executive to pull off the deal.
Paul Shechtman, a partner at Stillman, Friedman & Shechtman represented Richard Snyder. He was unavailable for comment Monday.
