Brokers’ Fee | Terminated Employee | Real Estate Purchase and Sale

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Brokerage Firm Not the Procuring Cause

Brokerage Firm Not the Procuring Cause

In Douglas Elliman v. Silver, a real estate brokerage firm commenced an action to recover a broker’s commission for the sale of the Huntington Town House by the defendants to Lowe’s Home Centers, Inc. The brokerage firm acknowledged that there was no written broker’s agreement and it was not involved in the final negotiations leading to the ultimate sale of the property. Nevertheless, it argued that it had an oral agreement with the defendant Rhona Silver in which a commission was implied. According to the brokerage firm, it was the procuring cause of the sale because it generated a “chain of circumstances that proximately led to the sale,” but Silver intentionally excluded it from the negotiations in order to avoid the payment of a broker’s commission. Following a trial, a jury returned a verdict in favor of the brokerage firm. A recent opinion of the Appellate Division, Second Department, reversed the Supreme Court’s order denying the defendants’ motion to set aside the verdict as contrary to the weight of the evidence, and dismissed the complaint.

In so doing, the Second Department reasoned that to “prevail on a cause of action to recover a commission, the broker must establish (1) that it is duly licensed, (2) that it had a contract, express or implied, with the party to be charged with paying the commission, and (3) that it was the procuring cause of the sale. ‘[T]he duty assumed by the broker is to bring the minds of the buyer and seller to an agreement for a sale, and the price and terms on which it is to be made, and until that is done his right to commissions does not accrue.’ To establish that a broker was the procuring cause of a transaction, the broker must establish that there was ‘a direct and proximate link, as distinguished from one that is indirect and remote, between the bare introduction and the consummation.’ Where, as here, the broker is not involved in the negotiations leading up to the completion of the deal, the broker must establish that it ‘created an amicable atmosphere in which negotiations proceeded or that [it] generated a chain of circumstances that proximately led to the sale.’”

The Second Department concluded that there was no valid line of reasoning which could have led to the conclusion that the brokerage firm was the procuring cause of the sale. “Viewing the trial evidence in the light most favorable to the plaintiff, it showed that in 2004, Lowe’s regional real estate manager, Wade Laufenberg, discussed the possibility of acquiring the subject property with Barry Newman, who had an ownership interest in the property along with the defendant Rhona Silver. In order to develop the property in the way Lowe’s intended, it would need certain approvals from the Town of Huntington. At that time, the Town indicated disapproval of the project. Sometime in late 2004, Silver began working with Esther Muller, a broker employed with the plaintiff, to develop condominiums on the property, which would require rezoning approval by the Town. By September 2005, Silver decided that she simply wanted to sell the property.” “[Plaintiff] put together a team that contacted Laufenberg and suggested that Lowe’s purchase the Huntington Town House property. Laufenberg told the plaintiff’s brokers that he previously had attempted to acquire the property, and they assured him that they could work out a deal with Silver. According to the plaintiff’s brokers, Silver agreed orally that if they could negotiate a deal with Lowe’s, Silver would pay them a commission.”

“The plaintiff’s brokers arranged for a meeting with Laufenberg and Silver on November 29, 2005, at which Silver stated that she wanted $38 to $46 million for the property and she would not “tie up” the property.” Over the course of the next two months, Laufenberg submitted three different offers to plaintiffs. The first to purchase the property for $27 million subject to contingencies or $17 million with no contingencies – which was rejected. The second to purchase the property for $28 million with certain contingencies – again, rejected. The third, to lease the property for 20 years at a cost of $1.5 million per year. “According to the plaintiff’s brokers, Silver indicated to them that she would consider this offer and discuss it with her accountants, but she never followed through with the brokers or took their advice of making a counterproposal to Laufenberg.”

“Unknown to the plaintiff’s brokers, on February 6, 2006, Silver entered into a written agreement to sell the property to Dan Shovolian for $37.5 million. By June 6, 2006, that deal had unraveled to such an extent that Silver and Newman commenced an action in the Supreme Court for specific performance on the contract. Sometime in the spring of 2006, someone apparently working for Shovolian contacted Laufenberg and represented that Shovolian was the owner of the Huntington Town House property and was interested in making a deal with Lowe’s. Laufenberg independently verified that ownership of the property had not been transferred, and he reached out to Newman to discuss the status of the property. Upon failure of the Shovolian deal, Newman and Laufenberg began negotiations again on the possibility of Lowe’s purchasing the property. They entered into a contract of sale on February 6, 2007, in which Lowe’s agreed to purchase the property for $38.5 million with no contingencies. Closing of the title occurred in June 2007.”

The Appellate Court reasoned that “there was no evidence that the parties were ‘in the midst of negotiations instituted by the broker…which were plainly and evidently approaching success’ when Silver purposely excluded the brokers so that she could conclude the bargain without their aid and avoid payment of commissions about to be earned. To the contrary, the evidence showed that the plaintiff’s brokers procured three offers, all of which were significantly lower than what Silver indicated she would consider, and those negotiations came to an end when Silver independently found a buyer willing to pay her asking price on the terms she sought. When that deal eventually fell through, Newman and Laufenberg, who had worked together in the past, began negotiations, without any broker intervention, that led to the subject sale. Consequently, the defendants’ motion to set aside the jury’s verdict should have been granted.”

Terminated Employee Fails The Test

Terminated Employee Fails The Test

In Koss v. Strippit, Inc., Debra Koss’s employment as a service communications coordinator at the machine tool maker Strippit Inc. was terminated as part of a reduction in force (“RIF”) affecting six employees, the other five of whom were men. Koss brought an action alleging, among other things, gender based discrimination in violation of Title VII of the Civil Rights Act and New York State’s Human Rights Law. The Court granted Strippit’s motion for summary judgment under the burden-shifting framework first set out by McDonnell Douglas Corp. v.Green.

“Under that framework, the plaintiff has the burden of first establishing a prima facie case of discrimination. If she meets her burden, the defendant is presumed to have unlawfully discriminated against her, and the burden shifts to the defendant to articulate a legitimate, nondiscriminatory reason for its actions. And if the defendant makes that showing, the burden shifts back to the plaintiff to show that the defendant’s reason is pretextual.”

“To establish a prima facie case of gender discrimination under Title VII and the NYSHRL, the plaintiff must show that: (1) she is a woman; (2) she was qualified for her position; (3) she was discharged or suffered an adverse employment action; and (4) her firing or adverse employment action occurred under circumstances giving rise to an inference of discrimination.”

Koss alleged two adverse employment actions: (1) the denial of her request for training and (2) the termination of her employment. Before her termination, Koss had asked for Strippit’s permission and assistance to take a four-month solid-modeling course that she asserts would have helped her advance in her employment. Strippit denied the request. Koss argued that as a result, “any forthcoming promotional opportunities in the drafting department that Plaintiff would have sought would have been unavailable to her because Defendant refused to train her.” Strippit’s Director of Engineering/Service e-mailed Koss stating:

The problem I have is drafting/designing is not part of your job description. It’s difficult to justify you taking the class during normal work hours. The class runs for approximately 4-months this is a significant amount
of time to disrupt the business. I’m not closing the door on other opportunities for you in the company. We know your skills and capability and your desire for a positionin engineering. I’ve told John McKinney
[Strippit’s Human Resources Director] that in the future if we have a requirement for drafting/designer help that you be considered.

Because it was undisputed that her then-current employment did not change in any way as a result of the denial of training, that no positions requiring the training were available at that time, and that Strippit nevertheless was amenable to considering her for the position to which she aspired without the training, the Court concluded that there was no evidence that the denial of her request for training cost her any career advancement opportunity, and it therefore was not an adverse employment action.

As for the termination of Koss’s employment, which was an obvious adverse employment action, Koss had to show that the action took place under circumstances that gave rise to an inference of discrimination. However, it was undisputed that Koss was terminated as part of a larger reduction in force affecting six employees. The five other employees who were terminated all were male, and prior to Koss’s termination, Strippit had taken a number of actions favorable to Koss including granting her request to transition from part time to full time, and finding her drafting work to do as long as it did not interfere with her other duties. The Court found that none of that gave rise to an inference of discrimination.

Koss also relied on vague and conclusory allegations of gender bias in an attempt to create that inference, but those allegations failed to accomplish their purpose because they were entirely unconnected to Koss’s termination. For example, she asserted that Strippit had “a history of a male dominated work force.” The Court responded that “whatever that means, it has nothing to do with the termination of Koss’s employment and is insufficient to give rise to an inference of discrimination.” Koss also claimed that some Strippit employees made “comments indicating gender bias,” but the alleged comments were not made by employees who had decision-making authority with respect to Koss’s employment.

This decision is another example of why, even when someone is an “at-will employee,” an employer should have a non-discriminatory documented basis for termination – here it was a documented RIF and a legitimate e-mail explanation as to why a request for a promotional opportunity was denied.

Statute of Frauds Bars Suit to Purchase

Statute of Frauds Bars Suit to Purchase

In Fuller v. 79 Hamilton Place Housing Development Fund Corp., the Fullers commenced an action to, among other things, enforce an alleged agreement to purchase a unit in the defendant’s cooperative. The defendant moved to dismiss the case under the “Statute of Frauds.”

In New York, the Statute of Frauds require certain contracts to be in writing. Concerning certain leases or the sale of real property, New York State’s General Obligations Law Section 5-703(2) provides that a contract “for the leasing for a longer period than one year, or for the sale, of any real property, or an interest therein, is void unless the contract or some note or memorandum thereof, expressing the consideration, is in writing, subscribed by the party to be charged,or by his lawful agent thereunto authorized by writing.”

As explained by the Court, for a writing to satisfy the statute of frauds, “there must be a memorandum signed by the party to be charged which designates the parties, identifies and describes the subject matter and states all of the essential terms. Moreover, no contract for the sale of real property is created ‘when a material element of the contemplated bargain has been left for further negotiation.’”

The Court further explained that it is “well-settled that a written agreement to purchase real property will not constitute an enforceable contract pursuant to the statute of frauds where the terms of said agreement do not include terms material to a contract of sale. Material terms of a real estate contract of sale, which must be in writing to be enforceable under the statute of frauds, ‘include those terms customarily encountered in transactions of this nature’…such as the purchase price, the time and terms of payment, the required financing, the closing date, the quality of title to be conveyed, the risk of loss during the sale period, adjustments for taxes and utilities, etc.”

In this case, the Court found “that the cause of action for breach of contract must be dismissed on the ground that there is no enforceable written agreement between the parties which includes all the terms material to a contract of sale sufficient to satisfy the statute of frauds. The memorandum sent by the real estate broker for the defendant does not satisfy the statute of frauds because it is not a writing ‘subscribed by the party to be charged, or by his lawful agent thereunto authorized by writing.’ Even assuming, arguendo, that the memorandum could be considered a writing signed by the party to be charged, it would be insufficient to satisfy the statute of frauds as it does not contain all the material terms of a complete agreement for the purchase of property. It does not state what the closing date for the sale will be; it does not state when the plaintiffs will be required to pay the down payment to defendant; it does not contain any provision for adjustments for taxes and utilities; it does not contain any provision regarding the quality of title to be conveyed.”

Although a draft contract of sale was exchanged between the parties following the broker’s memorandum, the Court concluded that even though that draft contained the above listed provisions that were missing from the memorandum, “neither party ever signed the contract of sale or agreed to be bound by the provisions contained in the contract of sale and the plaintiffs never made the down payment required by the contract of sale.”

Finally, the Court concluded that “there are no other writings signed by the defendant which contain all of the material terms of an agreement to sell real property.”

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