## Facts

- Jane Fonda, a California resident, retained a New York law firm in 1968 under an oral agreement to pay a percentage of her earnings for legal services.
- Richard M. Rosenthal, then an attorney at that firm, performed substantial services for Fonda.
- After the firm dissolved, Rosenthal began representing Fonda independently and alleged that in April 1972 the parties made an oral contract: Rosenthal would provide varied services, and Fonda would pay him 10% of gross professional income from projects initiated during his tenure.
- Rosenthal performed most work from New York for several years; in 1978 he moved to California at Fonda’s request while maintaining a home and office in New York.
- Fonda terminated Rosenthal on May 30, 1980.
- Rosenthal sued to recover commissions on income from projects initiated during his tenure but paid after termination, including income that could continue indefinitely.

## Issues

1. Under California choice-of-law rules, whether New York or California substantive law governed enforcement of the alleged oral percentage-of-earnings agreement.
2. If New York law applied, whether New York’s statute of frauds barred enforcement of the alleged oral agreement providing for post-termination commissions.
3. Whether any doctrine (including equitable estoppel) prevented Fonda from invoking the statute of frauds defense.

## Decision

- The Ninth Circuit affirmed partial summary judgment for Fonda.
- Applying California’s governmental-interest analysis, the court held New York law governed the dispute.
- Under New York law, the alleged oral agreement was unenforceable under the statute of frauds because it obligated continuing commission-type payments extending beyond termination and of potentially indefinite duration.
- The court rejected Rosenthal’s argument that his performance during the relationship removed the agreement from the statute of frauds, and it did not accept avoidance theories such as equitable estoppel on the facts shown.

## Legal Principles

- A federal court sitting in diversity applies the forum state’s choice-of-law rules to select the applicable substantive law.
- Under California’s governmental-interest approach, a court (1) identifies material differences between potentially applicable state laws, (2) assesses each state’s interest in applying its law, and (3) applies the law of the state whose interest would be more impaired if its law were not applied.
- Under New York’s statute of frauds, an oral agreement providing for continuing or post-termination commissions or participation in revenue streams, particularly where performance/payment may extend beyond one year or indefinitely, is generally unenforceable absent a writing.
- Equitable estoppel to defeat a statute of frauds defense requires strong proof under New York law; reliance and continued performance alone typically do not suffice.

## Conclusion

The Ninth Circuit held that New York law applied under California’s choice-of-law rules and that New York’s statute of frauds barred enforcement of an alleged oral agreement granting an attorney/manager a continuing percentage of income from projects initiated during the relationship but generating post-termination earnings.


Rosenthal v. Fonda, 862 F.2d 1398 (9th Cir. 1988)