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Brough v. Imperial Sterling, Ltd.: Award for Future Commissions Reversed

A federal appellate court applying Florida law has considered whether a jury properly awarded future commissions to a property manager as damages.

In 1996, Imperial Sterling Limited ("Company") hired Richard Brough, Jr. ("Property Manager") as the property manager for the Company's real estate holdings in Brevard County, Florida. The Property Manager interviewed for the position with Harriet Golding ("President"), the Company's president, and her son, Jerrold Levy ("Shareholder"), who was the Company's vice president and also its majority shareholder. The Property Manager received a handwritten contract from the President which set forth a base salary, certain benefits, and also stated that the Property Manager would "receive commissions on sales of land or buildings but no commissions on leases." The contract went on to state that the Property Manager's responsibilities were not only to manage all of the Company's real estate holdings but also to work on the sale of its Florida real estate holdings. In 1997, the Property Manager received a five-year contract extension from the President which contained similar terms but now stated that the Property Manager would receive a 10% commission from all sales of the Company's Florida real estate holdings.

In 1999, a dispute between the President and the Shareholder resulted in the Shareholder assuming the presidency of the Company. The Shareholder discussed with the Property Manager a plan to sell all of the Company's Florida real estate holdings and told him to start looking for a broker to accomplish the sales. The Property Manager informed the Shareholder of his commission agreement, which the Shareholder later claimed was the first time he had heard of this arrangement. The Shareholder requested copies of the Property Manager's employment contracts, and later sent a letter to the Property Manager denying that the Company was bound by the two agreements.

The Property Manager terminated his employment and brought a lawsuit against the Company, alleging breach of contract. The Company counterclaimed against the Property Manager and the President, alleging that they fraudulently created the Property Manager's employment contracts after the President was forced out of the Company. The trial court dismissed the Company's counterclaim, but allowed the Property Manager's commission claims to go to the jury. The jury awarded the Property Manager the following: $2,585,000 in future commissions; $406,000 in commissions for properties sold after his employment terminated; and damages for lost salary and benefits. The Company appealed the jury verdict.

The United States Court of Appeals for the Eleventh Circuit reversed the jury verdict award for the future commissions. The Property Manager argued that there was substantial evidence presented to the jury which showed that the Company planned to sell all of its Florida property holdings and so he was entitled to a commission from all of these projected sales.

The court determined that Florida law requires that damages cannot be awarded for lost profits when the profits are dependent on the actions of another party who may not take such an action. Here, the future commission award was based on commissions projected from sales of properties which had not yet occurred at the time of trial. The court stated that until the properties were sold, the Property Manager had no right to claim a commission from the sales because the Company could decide at a later time to not sell all of its holdings. The court found that it might have been better for the Property Manager to wait to bring his lawsuit until after his employment contract would have expired, so that he could have sought commissions for all transactions which closed during the term of his employment contract. Since Florida law does not allow a jury verdict to be based on speculation, the court reversed the award of $2,585,000 for future commissions.

The court then considered the remaining claims. The court found that none of the procedural errors claimed by the Company were significant, and so affirmed the remaining awards made by the jury in favor of the Property Manager. The court also considered whether the Company's counterclaim had been properly dismissed. The Company's alleged damages were for the costs it incurred in investigating the Property Manager's employment contract. The court found that these could not serve as a legitimate basis for damages in a fraud claim and so affirmed the trial court's judgment in favor of the Property Manager and the President. Thus, the court reversed the jury verdict's award of future commissions but affirmed the other awards as well as the other rulings of the trial court.

Brough v. Imperial Sterling, Ltd., 297 F.3d 1172 (11th Cir. 2002).