Cushman & Wakefield of New Jersey, Inc. v. Alexander Summer Co: Brokerage Awarded Commission Relating to Property It Did Not Show
The Superior Court of New Jersey awarded a broker a commission in connection with the leasing of a property it did not actually show to the lessee. Cushman & Wakefield of New Jersey, Inc. v. Alexander Summer Co..
In March, 1984, a United Jersey Bank (the "Bank") officer asked two brokers affiliated with the brokerage firm Cushman & Wakefield ("C&W") to locate space to lease for an operations center. They suggested an undeveloped tract known as the Overpeck Office Park (the "Overpeck Property"), where the center could be constructed. The C&W brokers and the owner, Hartz Mountain ("Hartz"), agreed on a commission, and drafts of a commission agreement were created, but an agreement was not signed. By the end of 1985, the Bank was committed to the Overpeck Property for the operations center. In addition, the Bank discussed its need to lease property for two branch banks with the C&W brokers and Hartz.
Meanwhile, the Alexander Summer Company (the "Summer Company") had been pursuing the same transaction. In early 1985, a Summer Company representative had met with a Bank representative, was told that C&W was handling the site selection and had identified the Overpeck Property. In April 1986, the Summer Company presented the Bank with a list of potential sites for the operations center, one of which was the Overpeck Property.
In January 1987, the Bank retained the Summer Company as its exclusive broker, and that June they entered into an agreement giving the Summer Company the exclusive right to obtain a lease for the operations center. Later that year, the Bank’s board of directors approved locating the center on the Overpeck Property, but because of environmental contamination on that property, the Bank’s insurance broker recommended they consider other sites.
Both Hartz and the Summer Company claimed that they suggested constructing the building on the adjacent site. In December 1988, the Bank and Hartz executed a lease for a building to be built on the adjacent site. The terms were identical to those that had been agreed upon for the Overpeck Property. Also, in conjunction with this transaction, the Bank leased two retail branch locations from Hartz. The Summer Company received commissions of $3,721,875 in connection with the operations center, and $131,250 in connection with the branch banks.
C&W brought this lawsuit against the Summer Company to recover the brokerage commissions, and also for punitive damages, claiming tortious interference with contract and tortious interference with prospective economic advantage. The lower court decided that the Bank and the Summer Company wrongfully had interfered with C&W’s reasonable expectation of earning commissions on the branch bank leases, and awarded C&W $131,250 in compensatory damages and $400,000 in punitive damages. The court held that C&W was not entitled to a commission on the operations center lease since the property to which it had introduced the Bank had been rejected and another site had been selected.
On appeal, C&W argued that it was entitled to the commission on the operations center because, had there not been wrongful interference, there was a reasonable probability that C&W would have introduced the Bank to the adjacent property. The appellate court reviewed the basic principles of procuring cause and stated that the question of the commission on the operations center transaction hinged on whether the Bank’s rejection of the Overpeck Property and its acceptance of the adjacent site constituted a substantial break in the transaction.
Stating that it had "no doubt whatsoever" that without the defendants’ wrongful conduct, C&W would have consummated the operations center lease, the court found that C&W also was entitled to the commission earned on the operations center lease, as well as to punitive damages.
Note: While the Cushman & Wakefield court may have stretched the law a bit to rule in favor of C&W on the operations center transaction, it should be kept in mind that the court easily could have reached the opposite conclusion and affirmed the lower court decision.
Cushman & Wakefield of New Jersey, Inc. v. Alexander Summer Co. , 295 N.J. Supr. 173, 684 A.2d 975 (N.J. Super. Ct. 1996 ).