                                   United States Court of Appeals,

                                              Fifth Circuit.

                                             No. 91–2752.

                                 VERO GROUP, Plaintiff–Appellee,

                                                    v.

          ISS–INTERNATIONAL SERVICE SYSTEM, et al., Defendants–Appellants.

                                            Sept. 17, 1992.

Appeal from the United States District Court for the Southern District of Texas.

Before JOHNSON, GARWOOD and WIENER, Circuit Judges.

        WIENER, Circuit Judge:

        In this Texas diversity case, Defendants–Appellants International Service System, Inc. A/S

(ISS), a Danish corporation, and International Service System, Inc. (ISS–USA), a Delaware

corporation of which ISS is the majority shareholder, appeal the jury verdict in favor of

Plaintiff–Appellee, The Vero Group (Vero), in its breach of contract action to recover compensation

resulting from the acquisition of Mediclean, a United Kingdom (U.K.) business. Concluding that the

jury committed no clear error in its factual findings as expressed in answers to jury interrogatories,

and that the district court committed no reversible error in holding that (1) the acquisition of

Mediclean entitles Vero to compensation under its agreement with ISS and ISS–USA, and (2)

recovery of that compensation is not barred under the securities laws of Texas, we affirm.



                                                    I.

                                   FACTS AND PROCEEDINGS

        ISS is an international holding company with over sixty subsidiaries worldwide. The

subsidiary corporations, owned in whole or in part by ISS, are primarily engaged in the business of

cleaning and maintaining nonresidential buildings. Two of the ISS subsidiaries are ISS–USA and

ISS–England. ISS–England is wholly-owned by ISS and, although not a party to this lawsuit or to

the contract that is the subject of this litigation, was involved in the underlying Mediclean acquisition.
Vero is a Texas partnership that specializes in locating companies available for acquisition and

introducing them to companies interested in acquisitions, and vice versa.



       On November 9, 1988, Vero informed ISS of the possible availability of ADT Maintenance,

an American subsidiary of ADT Operations, Inc., which was involved in the cleaning and maintenance

business. Two days later ISS and ISS–USA entered into an agreement (the referral agreement) with

Vero, pro viding for Vero to be compensated for furnishing "referrals and introductions ... [of]

acquisition candidate[s] or target[s]" to ISS. In the referral agreement the parties acknowledged that

acquisitions by ISS might take various forms, such as a "[a] leveraged buyout, purchase of stock or

assets for cash, notes, or exchange of assets." The referral agreement also provided that Vero was

to be compensated only if acquisition of the referred company was consummated. Additionally, the

referral agreement stipulated that it would be governed by the substantive law of Texas.



       Later in November, Vero met with representatives of ISS–USA and ADT. Vero worked with

the parties to complete ISS–USA's acquisition of ADT Maintenance from ADT. When ISS–USA

eventually acquired the assets of ADT Maintenance, Vero was paid a fee of $905,000.



       During negotiations for the ISS–USA purchase of ADT Maintenance, Vero wrote to

ISS–USA setting forth general information about other ADT subsidiaries that ISS might be able to

acquire. One of the subsidiaries of ADT mentioned in that letter was Mediclean. Soon after Vero's

letter was sent to ISS–USA, the parent, ISS, together with its U.K. subsidiary, ISS–England,

contacted Mediclean regarding the possibility of acquiring Mediclean. These contacts led to

negotiations which were eventually successful, with ISS acquiring Mediclean through its U.K.

subsidiary, ISS–England, by means of a 100% stock purchase.



       When Vero learned of that acquisition, it demanded compensation for its referral of

Mediclean. ISS refused to pay Vero on the Mediclean acquisition. Vero then sued ISS and
ISS–USA, alleging that (1) Vero had not been paid its full compensation for ISS–USA's acquisition

of ADT Maintenance1; and (2) ISS and ISS–USA had breached the referral agreement by refusing

to pay Vero any compensation in connection with the Mediclean acquisition.



          The case was tried to a jury. Basing its findings on the jury's responses to the special verdict

form, the district court found that: (1) Vero and ISS had entered into an enforceable agreement; (2)

Vero had referred or introduced Mediclean to ISS; (3) under the referral agreement, ISS owed Vero

compensation of $550,716 for the Mediclean referral; and (4) ISS also owed Vero out-of-pocket

expenses of $2,703 and reasonable attorney fees of $200,000, plus an additional $35,000 in attorney's

fees if the case were appealed to this court and lost by appellant, and $10,000 more in attorney's fees

if ISS were to appeal to the United States Supreme Court. The di strict court entered judgment

accordingly, and ISS timely appealed to this court.



                                                    II.

                                        STANDARD OF REVIEW

          In reviewing a jury's findings of fact, this court applies the standard set out in Boeing Co. v.

Shipman.2 Boeing instructs that "a jury verdict will not be overturned unless the facts and inferences

point so strongly and overwhelmingly in favor of one party that the court believes that reasonable

[jurors] could not arrive at a contrary verdict."3 On questions of law, however, we review the trial

court's determinations de novo, owing that court no deference,4 including when that court sitting in

diversity is interpreting state law.5

   1
   The parties stipulated before trial that Vero was owed $18,015 on the acquisition of ADT
Maintenance.
   2
       111 F.2d 365 (5th Cir.1969).
   3
       LeBoeuf v. K–Mart Corp., 888 F.2d 330, 332 (5th Cir.1989).
   4
       Pullman Standard v. Swint, 456 U.S. 273, 287, 102 S.Ct. 1781, 1789, 72 L.Ed.2d 66 (1982).
   5
   Salve Regina College v. Russell, ––– U.S. ––––, ––––, 111 S.Ct. 1217, 1221, 113 L.Ed.2d
190 (1991).
                                                  III.

                                              ANALYSIS

          On appeal, ISS advances five arguments albeit with differing degrees of force. We shall

address those contentions seriatum.



A. The District Court's Denial of Judgment n.o.v.

          ISS argues that the district court erred in not granting ISS's motion for judgment n.o.v. We

conclude that ISS cannot prevail on this issue for two reasons, either of which would be sufficient.



1. No inconsistency between Jury Verdict and District Court Judgment.

           The Federal Rules of Civil Procedure contemplate the use of a special verdict form in some

jury trials. When that procedure is employed, the court may enter judgment based on the jury's

responses to such a form.6 If, without objection, a fact issue is not included on the special verdict

form, the parties are deemed to have waived their opportunity to have the jury consider the omitted

issue. The court is then free to make its own factual determinations on the omitted issue. Moreover,

if the court does not do so expressly, it is presumed to have made all factual findings consistent with

and necessary to support the judgment entered.7



           Generally, a trial court's judgment based on a jury verdict is not subject to challenge for

insufficiency of the evidence unless a motion for directed verdict was made before submission of the

case to the jury. The judgment may be challenged, however, even in the absence of a directed verdict

motion, when there is an inconsistency between the findings of the jury and the judgment of the




   6
       Fed.R.Civ.P. 49(a).
   7
    REO Indus., Inc. v. Pangaea Resource Corp., 800 F.2d 498, 501 (5th Cir.1986); Charles A.
Wright & Arthur R. Miller, Federal Practice and Procedure § 2507 (1971 & Supp.1992). We do
not speak to the situation in which the matter omitted from the submitted issues relates only to a
claim or defense distinct from any to which any of the submitted issues relate.
court.8 As ISS failed here to move for a directed verdict before the case was submitted, ISS must

show an inconsistency between the jury's special verdict and the district court's judgment in order

successfully to demonstrate reversible error in the district court's refusal to grant the motion for

judgment n.o.v.



          In attempting to demonstrate such an inconsistency, ISS observes that even though the jury

made no finding as t o the relationship between ISS and ISS–England, the district court entered

judgment against ISS and ISS–USA for Vero's compensation based on ISS–England's purchase of

all stock in Mediclean. In doing so in the absence of a specific finding by the jury as to the separate

corporate existences and the interrelationship of the various ISS companies, asserts ISS, the court

was inconsistent. We disagree. In the special verdict, the jury expressly found that Vero referred

Mediclean to ISS. The fact that ISS–England is the entity which eventually took title to all Mediclean

stock is undisputed, as is the fact that ISS–England is a wholly-owned subsidiary of ISS; and support

exists for each of these facts in the record.



          The argument advanced by ISS ignores this circuit's deemed waiver rule applicable to fact

questions not explicitly included in the special verdict form for answer by the jury.9 As noted earlier,

when such a waiver is deemed to have occurred and no express findings on such omitted questions

are made by the trial court, it is presumed to have made all factual findings on such omitted issues

necessary to sustain its judgment.10 Even though here the district court did not make express findings

as to corporate relationships among the several ISS corporati ons, that court is presumed to have

made any findings about those relationships necessary to support its judgment. As such, the district

court presumably found that the nature of the relationships among the various separate ISS entities


   8
   See Traders & Gen. Ins. Co. v. Mallitz, 315 F.2d 171, 175 (5th Cir.1963) (citing Roberts v.
Sawyer, 252 F.2d 286 (10th Cir.1958)).
   9
       See, e.g., REO Indus., 800 F.2d at 500–01.
   10
        Id. at 501.
was such that they supported—or at least did not prevent—the outcome of the case, given the

posture of the litigation—i.e., one contracting party to a "finders" contract suing the other parties to

that contract (a Danish parent corporation and its United States subsidiary) for compensation earned

on a business acquisition when a third entity (a noncontracting subsidiary of the contracting parent

company that is being sued) takes title to the stock of the acquired business.



2. Sufficiency of the Evidence

        The second reason that ISS's complaint about denial of its j.n.o.v. motion fails is that in truth

it constitutes nothing more than an attack on the sufficiency of the evidence to support a finding that

the stock purchase by ISS–England was tantamount to an acquisition of Mediclean by ISS within the

contemplation of the referral agreement with Vero. The district court's stated reason was the failure

of ISS to move for a directed verdict at the close of Vero's evidence or at the close of its own

evidence. Although ISS insists that its counsel moved for a directed verdict, no such motion is

reflected in the record. Aside from our conclusion, hereafter explained, t at the thrust of ISS's
                                                                         h

argument mischaracterizes this as an alter ego or veil-piercing case, we find that the trial court did

not err in refusing to allow ISS to attack the court's judgment collaterally in the guise of a motion for

a j.n.o.v. based on inconsistency with the jury's special verdict. As that motion in reality attacked the

jury's verdict on grounds of sufficiency of the evidence rather than inconsistency with the jury verdict,

the court was within its right to reject the j.n.o.v. motion of ISS as procedurally unsustainable in the

absence of a prior timely motion for a directed verdict.



B. Asserted Factual Errors of the Trial Court

        ISS asserts two challenges to the findings of fact of the trial court, which were based on the

jury verdict: (1) that Vero furnished written referral to ISS concerning Mediclean; and (2) that the

quantum of attorney's fees was excessive and unreasonable. Evidence was adduced at trial to

substantiate the jury's findings on both issues. To overturn factual findings of a jury, this court must

conclude that, considering all the evidence adduced at trial, no reasonable jury could have reached
the same result.11 Here we find the record contains evidence on the basis of which a reasonable jury

could reach the results challenged by ISS, so we do not conclude that the jury's determinations were

unreasonable. It follows that the judgment of the district court, reflecting precisely those findings of

the jury, is not clearly erroneous.



1. No Written Referral

           ISS asserts that it was entitled to have its j.n.o.v. motion granted because "as a matter of law

Vero never made a written referral of Mediclean." We disagree first that the issue is a legal one, and

second that factually the jury erred. On November 23, 1988, Vero sent a letter to ISS listing and

describing companies that it might acquire. Vero asserted that this letter, which on its second page

referred to and briefly described Mediclean, constituted a written referral as contemplated in the

referral agreement, particularly when read in light of the several preceding discussions in which Vero

had mentioned Mediclean to ISS. The jury found that, among other things, the inclusion of

Mediclean on the list set forth in the November 23, 1988, letter constituted a referral and entitled

Vero to compensation upon consummation of the Mediclean acquisition by ISS. We are not prepared

to say that this finding falls outside the bounds of reason.



2. Attorney's Fees

           ISS also asserts that the jury's award of $200,000 in attorney's fees was unreasonable.12 ISS

notes that the trial court phase of this case lasted just over two years; that the damages were

stipulated; that Vero took only four pre-trial depositions; and that Vero called only two witnesses

at trial. Therefore, ISS contends, the fees bear no reasonable relationship to the amount in

controversy ($568,000) or to the complexity of the issues as reflected by the amount of preparation

time needed by counsel.


   11
        See Boeing, 411 F.2d at 374.
   12
    The jury also awarded a prospective fee of $35,000 if the case were to be appealed to this
court and an additional $10,000 if the case were appealed to the United States Supreme Court.
        Vero presented an expert witness who had reviewed the number of hours Vero's counsel had

devoted to the case, and who was familiar with fees usually charged for this type of litigation. This

expert considered, among other factors, the fees customarily charged in the Houston area for business

litigation of this complexity. He testified that a reasonable charge for this amount of work would be

$283,000; the jury awarded $200,000. Again, we are not prepared to say that no reasonable jury

could have reached that conclusion. The same is true for the advance determination that Vero should

receive a liquidated sum of $35,000 as attorney's fees if ISS and ISS–USA should appeal

unsuccessfully, which they have.



C. Separate Entities: Inapplicability of Alter Ego Analysis

         In complaining that the district court failed to deal with the various corporate and

intercompany relationships, ISS begins by reminding us that its wholly-owned U.K. subsidiary,

ISS–England, which took title to 100% of the Mediclean stock, is not a party to this lawsuit and was

not a party to the referral agreement. As such, asserts ISS, the district court had to have ignored the

independent corporate existence of ISS–England in order to hold the contracting corporations (ISS

and ISS–USA) liable to Vero for compensation on the Mediclean transaction. ISS further asserts

that, under Texas law,13 the district court erred in allowing Vero to recover at all without proving

actual fraud, an element essential to prevail in an alter ego case. But as ISS mischaracterizes both

the findings and the holding of the district court in this regard, we conclude that this assignment of

error is itself erroneous.



        The district court did not disregard any corporate entity; it merely recognized that here the

parent corporation and sole stockholder, ISS—not the subsidiary or purported alter ego,

ISS–England—was the obligor under the referral agreement with Vero. Given that realization, the

district court was imminently correct in concluding that ISS, as the obligor, could not duck its


   13
    See DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 688 (Tex.1990); see also Edwards Co.
v. Monogram Indus., Inc., 730 F.2d 977, 985–87 (5th Cir.1984) (en banc).
responsibility to Vero simply by arranging unilaterally for title to the Mediclean stock to be taken in

the name of one of the obligor's many subsidiaries. This is so irrespective of whether such

orchestrated taking of title were done in complete good faith and with a valid business purpose.



       The facts and relationships of the parties in this case simply do not equate to the corporate

veil-piercing paradigm.    That model, unlike the instant situation, envisions an economically

responsible corporation or individual (the Stockholder) of a shell or essentially valueless entity (the

Corporation), inducing a third party to contract with the Corporation even though the performance

to be rendered by the third party will inure to the benefit of the Stockholder. In other words, in the

true alter ego situation, the parent or shareholder reaps the benefit of the third party's performance

but then asserts that it is insulated from liability by the interposition of the judgment-proof

corporation as the only party with which the third party has privity of contract.



       The corporate and contract ual pattern now before us, however, is precisely the reverse.

Instead of causing a judgment-proof subsidiary to contract with Vero for its matchmaking services

under the referral agreement, ISS itself contracted directly with Vero for those services. Clearly, ISS

did not use an alter ego to incur the obligation; rather, ISS itself incurred the obligation, and ISS

itself enjoyed the benefits of Vero's performance. Only subsequently—well after Vero performed and

ISS accepted that performance—did ISS cause its subsidiary, ISS–England, nominally to take title

to the Mediclean stock. And now, with wide-eyed innocence, ISS implores this court to bless that

eleventh-hour corporate two-step and relieve ISS of its obligation to pay for Vero's services.



       In light of that distinction, the contention of ISS that the theory of "piercing the corporate

veil" or "alter ego," coupled with the need to show "actual fraud" pursuant to Texas law in order for

Vero to recover, is exposed as nothing more than a smoke screen. What really happened here is that

Vero (1) sent an initial letter to entice ISS to contract for Vero's referral services; (2) prepared,

submitted and entered into the referral agreement with ISS and ISS–USA; (3) rendered services to
ISS and ISS–USA pursuant to that agreement in connection with the acquisition of ADT

Maintenance; (4) provided additional referral information to ISS, through ISS–USA, regarding

Mediclean's potential as an acquisition target for ISS; (5) was left out of the loop and thus kept in

the dark while ISS (a) negotiated with ADT for Mediclean, (b) transferred funds to ISS–England, and

(c) had ADT transfer title of its Mediclean stock to ISS–England in exchange for the funds that ISS

had transferred there; and (6) learned of the Mediclean transaction only after it had been completed,

demanded compensation but to no avail, and then filed the instant suit against ISS and ISS–USA.



       A brief review of the details of step (5) above, i.e., the negotiations, financial arrangements,

and consummation of the Mediclean transaction—of which Vero was not aware, much less a

participant—eschews the conclusion urged by ISS and demonstrates beyond cavil just which

corporation truly "acquired" Mediclean—ISS, not ISS–England. The record reveals that after it

received Vero's referral of Mediclean via ISS–USA, ISS began its own forced march to acquire

Mediclean for itself. Correspondence and conversations occurred directly between officials of ISS

and ADT, the owner of Mediclean. Although the director of ISS–England was involved in the initial

verification of ADT's interest in selling Mediclean, Poul Andersen and Waldemar Schmidt, who were

ISS executives, conducted all substantive acquisition negotiations directly with Michael Ashcroft and

John Jermine, executives of ADT, the parent of Mediclean. None of the executives of either

subsidiary company were involved other than in minor, ministerial roles. When the time came to pay

for Mediclean, the cash was provided by ISS in an unwritten "loan agreement" on which no interest

was charged to, and no payments made by, ISS–England. Even though ISS–England is a separately

organized and existing corporation, there is no evidence in the record to refute that ISS not only owns

100% of ISS–England but also controls ISS–England completely, as though it were merely a division.

Any lingering doubts about the accuracy of the court's implicit finding that, for purposes of the

referral agreement, ISS acquired Mediclean notwithstanding ISS–England's taking of title, vanishes

when viewed in the perspective of the details surrounding the acquisition.
              When thus analyzed, this case is recognized as the antithesis of an alter ego situation; at best

this is a "reverse" alter ego case. Once that becomes apparent, it is equally apparent that Vero has

no need to pierce the corporate veil of ISS–England in order to hold ISS liable for the compensation

to which Vero became entitled upon the de facto acquisition of Mediclean by ISS. That in turn

obviates the requirement under Texas law to show actual fraud. That ISS funneled purchase money

for the Mediclean acquisition into the coffers of one of the sixty or so ISS subsidiaries and had that

same subsidiary take title to all of ADT's capital stock in Mediclean does not change the

characterization of the transaction as an ISS acquisition one jot or tittle.



D. Does Article 581–3414 of the Texas Securities Act Bar Vero's Recovery?

              Finding that Vero is contractually entitled to compensation from ISS does not end our

inquiry. Vero's ability to recover that compensation in Texas is a more complex issue in light of the

language of bar contained in The Securities Act of Texas (TSA).15 ISS asserts that even if Vero is

entitled to be paid, the federal district court, sitting in diversity, erred in allowing Vero to use that

forum to collect the compensation. This is so, insists ISS, because the Mediclean acquisition was

accomplished through a purchase of stock, and Vero was not a licensed dealer under Texas securities

law. ISS argues that for Vero to collect compensation as a finder on the Mediclean stock transaction,

Vero would have to have been registered as a securities dealer. When ISS acquired ADT

Maintenance after the Vero referral, the transaction took the form of an assets purchase, one of the

several means illustratively listed in the referral agreement. ISS concedes that the TSA was not

implicated under those circumstances. On the other hand, states ISS, the Mediclean stock purchase,

while admittedly just another of the foreseeable acquisition manifestations listed in the referral

agreement, directly implicates the TSA. ISS thus contends that because securities rather than assets

were purchased in the acquisition of Mediclean, the TSA bars Vero's recovery of compensation.



   14
        Tex.Civ.Stat.Ann. art. 581–34 (Vernon 1987).
   15
        Id.
          Texas law provides that persons engaging in securities transactions must be registered

pursuant to the TSA in order to use the courts of Texas to recover compensation. Article 581–34

of the TSA states:



                  No person or company shall bring or maintain any action in the courts of this state for
          collection of a commission or compensation for services rendered in the sale or purchase of
          securities, as that term is herein defined, without alleging and proving that such person or
          company was duly licensed under the provisions hereof and the securities so sold were duly
          registered under the provisions hereof at the time the alleged cause of action arose....16

In Star Supply Co. v. Jones,17 a Texas appeals court, interpreting this section of the TSA held that

a finder who was not a registered securities dealer could collect his commission for putting companies

in contact with each other, even though the transaction was ultimately accomplished by means of a

stock transfer. The finder in Star Supply had a contract with the company's owners, who were

interested in selling, to find a purchaser for the business. Well after the referral was made, the buying

and selling parties agreed on the terms and conditions of the acquisition, a principal feature of which

was that the acquisition would be consummated through the buyer's purchase from the sellers of one

hundred percent of the stock of the company being acquired.18 The litigation arose when the sellers

refused to pay the finder's fee. The sellers attempted to avoid the finder's claim by asserting that, as

the finder was not a registered securities dealer, he was barred by the provisions of article 581–34

from collecting a fee.19



          To determine whether, under Texas securities law, t he finder was thus barred by the

registration requirement of article 581–34, the Star Supply court turned to federal securities




   16
        Id. (emphasis added)
   17
    665 S.W.2d 194, 196 (Tex.App.—San Antonio 1984); see also Rogers v. Ellsworth, 501
S.W.2d 756 (Tex.App.—Houston 1973).
   18
        Star Supply, 665 S.W.2d at 195.
   19
        Id. at 195–96.
decisions.20 Applying the "economic reality" test of S.E.C. v. W.J. Howey Co.,21 and United Housing

Foundation v. Forman,22 the court stated that "transferring the stock of the company was a means

of effecting transfer of the corporate entity and merely indicated ownership of the entire business."23

The court continued, "[b]ecause this was not a sale of securities as contemplated by article 581–34,

there was no necessity that [the finder] be licensed as a securities broker."24



              The "economic reality" test of the Howey and Forman decisions involved the question

whether, between buyers and sellers, different types of "stock" were securities and thus regulated

under federal securities law.25 The Star Supply decision, however, focused on the relevant transaction

of that case—the one between the finder and its client—and found that the economic reality of that

transaction only incidentally involved securities. It clearly held that finders, who are generally not

concerned with the structure of the acquisition once they put the parties together, are entitled to

collect their compensation even if the acquisition is eventually consummated through a stock transfer

and irrespective of the fact that the finders may not be licensed securities dealers.26



              An earlier case that drew a more distinct line between stockbrokers and finders in the context

of dealer registration was Rogers v. Ellsworth.27 In Ellsworth, another Texas appellate court dealt


   20
        Id. at 196 (citing Searsy v. Commercial Trading Corp., 560 S.W.2d 637 (Tex.1977)).
   21
        328 U.S. 293, 301, 66 S.Ct. 1100, 1104, 90 L.Ed. 1244 (1946).
   22
        421 U.S. 837, 847, 95 S.Ct. 2051, 2058, 44 L.Ed.2d 621 (1975).
   23
        Star Supply, 665 S.W.2d at 196.
   24
        Id.
   25
    Id.; see Forman, 421 U.S. at 844–46, 95 S.Ct. at 2056–57 (deciding that "stock" issued by
a housing cooperative as a prerequisites to renting a unit was not a security under the Act);
Howey, 328 U.S. at 299–301, 66 S.Ct. at 1103–1104 (holding that agreements whereby investors
took part in a citrus venture were "securities" under the Act).
   26
        Id.
   27
        501 S.W.2d 756 (Tex.App.—Houston 1973).
with a finder who, like Vero, had facilitated an acquisition of a business by putting a buyer and seller

together. As in Star Supply, the seller of the business refused to pay the commission, asserting that

under article 581–34 the finder could not maintain an action to recover a commission because he was

not a properly registered securities dealer. The Ellsworth court drew a sharp distinction between

finders and stockbrokers, stating that "[a] finder is an intermediary who contracts to find and bring

parties together, but he leaves the ultimate transaction to the principals; he is the procuring cause,

and his function ceases when the negotiations between the principals begin."28 The court held that

the distinction between licensed securities dealers and finders "has long led courts to hold that a finder

is not precluded from recovering his fee by statutes requiring a broker to possess a license."29

Applying the principles of Ellsworth and Star Supply to the instant case, we are left with no doubt

but that Vero is not required to be a licensed securities dealer to recover compensation for the

Mediclean referral.



          Undaunted, ISS responds by asserting that, in light of the U.S. Supreme Court's

pronouncement in Landreth Timber Co. v. Landreth,30 regarding the continued viability of the

economic reality test and the definition of "security," the rule of Ellsworth and Star Supply has been

changed implicitly, and that the Texas courts would now require Vero to be licensed under article

581–34 to recover compensation as a finder, even in a 100% stock acquisition. We disagree.



          In Landreth, the Supreme Court held that the sale of all of the stock of a company was a

securities transaction for purposes of the anti-fraud provisions of the federal securities laws. The case

involved a closely-held corporation the owners of which broadly offered the company for sale through

a number of brokers. After some discussions and investigations, the buyer group purchased one

   28
     Id. at 757 (citing and discussing the implied recognition of the distinction between finders
and stockbrokers in Hall v. Hard, 160 Tex. 565, 335 S.W.2d 584 (1960)).
   29
    Id. (citing Shaffer v. Beinhorn, 190 Cal. 569, 213 P. 960 (1923), and Seckendorff v. Halsey,
Stuart & Co., 229 A.D. 318, 241 N.Y.S. 300 (1930)).
   30
        471 U.S. 681, 105 S.Ct. 2297, 85 L.Ed. 2d 692 (1985).
hundred percent of stock of the company from the owners. When the business did not live up to the

expectations of the buyers, they sued the sellers, alleging t hat the stock had been widely offered

without being registered as required by the Securities Act of 1933. The sellers defended the lawsuit

with the assertion that, as the transaction transferred the entire company, the "sale of a business"

exception applied and registration of the securities was not required. The Supreme Court disagreed,

holding that even the sale of stock constituting one hundred percent of the business was subject to

the anti-fraud provisions of the Securities Act; that the stock was a "security"; and that the sale of

a business doctrine did not apply.31



          Given those facts, we are not persuaded that the ruling in Landreth would cause the Texas

Supreme Court to change the rule of Star Supply and Ellsworth if faced with the finder's fee issue

before us. As an anti-fraud case involving wide broker listings, Landreth is factually distinguishable

from both Ellsworth and Star Supply. The relevant agreement in the Landreth case was the stock

purchase agreement between the buying and selling principals; the relevant agreements at issue in

Star Supply and Ellsworth, as in the instant case, were those between a finder and one of the parties

to the eventual stock transaction. Landreth did not implicate the issue of whether a buyer or seller

of a business could properly refuse to pay for the services of an unregistered finder merely because

the buying and selling parties elect to employ a stock sale to effect the transfer of the business.

Rather, Landreth involved whether under the 1933 Act a security had to be registered under federal

law to be sold without implicating the anti-fraud provisions of the Act.



          In addition to Landreth's being factually distinct from Star Supply, Ellsworth, and the instant

case, the anti-fraud concerns of the 1933 Act, which drove the Landreth Court, do not exist in this

case. In Landreth, the court was concerned with whether the anti-fraud provisions, which were

written to protect consumers, should be interpreted broadly enough to apply to sales of one hundred

percent of the stock of a going business. The question before the Court was whether the purchaser

   31
        Id. at 696–97, 105 S.Ct. at 2307.
of the stock, regardless of the percentage of the stock in the company at issue, could justifiably "

"assume that federal securities laws apply' " to the transaction.32 This rationale for applying the

federal securities laws is meaningless in the context of a buyer or a seller negotiating and contracting

with a finder to locate a third party interested in the acquisition of the business or to locate businesses

with the potential for acquisition.



          In a letter filed pursuant to rule 28(j) of this circuit, ISS cited cases from four state courts that

had adopted Landreth as controlling state securities law.33 We are unpersuaded, however, that any

of these decisions are relevant to this case. The cases thus cited adopted Landreth in situations

factually congruent with the Landreth circumstances—disputes involving buyers and sellers of large

blocs of stocks that represented at least control if not the entire ownership of the businesses. In those

disputes as in Landreth, the stocks were not registered pursuant to applicable securities laws. None

involved broker or finder commissions as does the instant case. Although it is foreseeable that Texas

could follow Landreth in securities fraud contests between buyers and sellers, we are not persuaded

that the Texas courts would allow the results in Landreth or any of the cited state court cases to spill

over into cases concerned with transactions between a finder and one of the parties to the sale or

purchase of a business which merely happens to be structured as a stock sale rather than a sale of

assets, an exchange of securities, or the like. If Landreth is going to eliminate Texas's application of

the "economic realities" rules of Star Supply and Ellsworth, the courts or legislature of that state will

have to say so.



          Moreover, in cases such as this, when the claimant's sole function is to make the initial

introduction of the buyer and seller, we are satisfied that article 581–34 is not applicable by its own

terms. The plain wording of that article clearly requires a nexus between the "services rendered" for

   32
        Id. at 686, 105 S.Ct. at 2302 (quoting Forman, 421 U.S. at 851, 95 S.Ct. at 2060).
   33
    See Banton v. Hackney, 557 So.2d 807, 824 (Ala.1989); Kovatovich v. Barnett, 406
N.W.2d 516, 518 (Minn.1987); Specialized Tours, Inc. v. Hagen, 392 N.W.2d 520, 535
(Minn.1986); Barnes v. Sunderman, 453 N.W.2d 793, 796 (N.D.1990).
which compensation is sought and "the sale or purchase" of t he securities in question. Here, the

initial introduction of Mediclean to ISS for which Vero seeks compensation is far too attenuated from

the eventual stock transaction between Mediclean and ISS through its English subsidiary—a stock

transaction of which Vero was wholly unaware—to be deemed services rendered in that sale or

purchase of securities.34



                                                   IV.

                                            CONCLUSION

        The district court did not commit reversible error in finding ISS and ISS–USA liable to Vero

for compensation on the acquisition of Mediclean. The court was not clearly erroneous in finding no

significance in the fact that the ISS co mpanies were separate entities. ISS, one of the contracting

parties, was properly found to be the acquirer of Mediclean as the direct result of Vero's referral, and

thus legally responsible for Vero's finder's fee based on that referral. Neither did the district court err

in holding that Vero was not barred from collecting its referral fee by article 581–34 of The Securities

Act. And we find no reversible error in the jury's award of $200,000 in attorney's fees for services

of Vero's attorneys at trial and an additional $35,000 for their services in ISS's unsuccessful appeal

to this court. Therefore, the judgment of the district court is, in its entirety, AFFIRMED.




   34
   See Hamilton v. Industrial Equity (Pacific), Ltd., No. 91–2325, slip op. at 11–12 (5th Cir.,
August 21, 1992).
