Grubb & Ellis Company v. Potomac Medical Building, LLC, No. 1:2008cv00971 - Document 112 (E.D. Va. 2009)
Court Description: AMENDED MEMORANDUM AND OPINION. /S/ by District Judge Gerald Bruce Lee on 9/29/09. (tbul, )
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IN THE UNITED FOR THE STATES DISTRICT COURT EASTERN DISTRICT OF VIRGINIA ALEXANDRIA DIVISION Grubb & Ellis Company, ) Plaintiff, ) v. ) Potomac Medical Building, LLC, Case No. l:08cv971(GBL) ) Defendant. ) AMENDED MEMORANDUM OPINION THIS MATTER is case concerns contract, procuring cause, pay Plaintiff commercial commissions first Agreement was 14, 2008, November 1, issue still where, 2008, second issue is, which if the February 20, of The the third quantum meruit, and Building, fraud claims LLC, for refusing to following the consummation of There are five (5) express stated, "Here's the email is whether Stratford University letter of expired on an email in fact and the parties' Plaintiff lease where intent on on extension." original Agreement had 2008, signed on July the Agreement Plaintiff the Exclusive Agency lease was terms, a issues before is whether the parties' issue negotiated a non-binding This Company's breach of of dealings with each other created a new, contract. cause & Ellis but Defendant sent February 20, course for a bench trial. in effect when the by its 2007, whether the Court Potomac Medical leasing deal. The the Plaintiff Grubb against Defendant Court. before The expired, subsequent enforceable was the procuring Plaintiff February, 27, 2008, ceased work on the Studley, Inc., transaction, and a later brokerage negotiated additional material terms firm, that ultimately led to a consummated lease. The fourth issue is, the absence of whether Plaintiff an enforceable contract, entitled to commissions under a quantum meruit Plaintiff was not the procuring cause of conducted negotiations services. The concealed its continuing fifth issue direct Plaintiff is theory where Stratford lease but whether Defendant and fraudulently to work on the intent is with Stratford and provided advertising intentions indicated its the in fraudulently induced Plaintiff Stratford lease into where Defendant to extend the Agreement and continued to to act on its behalf, but never actually signed an extension to the Exclusive Agency Agreement. The Court fact. First, finds for Defendant on all the Court finds of prior to 2008, email 2007, it Second, because "shall be the Court and the parties' not create a new contract because extension, they disputed the unresolved concerns the of express renewable upon finds executed that the subsequent conduct did the parties never signed the language contained therein, remained even of which indicate issues but no written extension was its expiration date. February 20, all 1, the Agreement provided that mutual written agreement," (5) that the Exclusive Agency Agreement automatically expired on November terms five after Defendant that no meeting of sent and the email, the minds occurred. Third, of the Court finds that Plaintiff was the Stratford lease because Stratford transaction and the Plaintiff not the procuring cause ceased work on the lease materialized only after Studley intervened and negotiated new material to both Defendant and Stratford University. finds that meruit Plaintiff value. Fifth, the Court Plaintiff presented no evidence at trial services it actually performed were of any the Court fraudulently conceal continue Fourth, is not entitled to recover under a quantum theory because showing that the terms acceptable finds its that Defendant did not intentions or induce Plaintiff to its work because: 1) Plaintiff failed to prove that Defendant never intended to extend the brokerage agreement; was unreasonable for Plaintiff amount as that it is Plaintiff failed damages. FINDINGS OF FACT The Exclusive Agency Agreement Between October of Grubb Sc Ellis Company Medical Building, of and 3) entitled to recover commissions or some other I. A. it to rely on any representations not contained in a signed written agreement; to prove 2) LLC 2006 and December ("Grubb & Ellis") final agreement as representation. to the ("Agreement") 2006, Plaintiff exchanged four versions terms and conditions On December 28, 2006, and Defendant Potomac ("Potomac Medical") the Exclusive Agency Agreement 18, Ms. before reaching a of the Jessica Padgett of Grubb & Ellis Medical, sent Mr. initials and signatures intact. The fully executed and final version of Agreement contained the this the principal of Potomac a final executed copy of the fourth version of the Agreement with all 1.) Emad Saadeh, (PL's Ex. the Exclusive Agency following material provisions relevant to lawsuit: i. H 2 provided that, "All sale/lease agreements and prospective purchasers and tenants shall be subject to the approval of the Owner in its discretion." ii. U 3(c) of the Agreement stated: "Notwithstanding other provisions of Agreement, G&E shall other real estate brokerage purchasers/tenants iii. sole this cooperate with and encourage firms to secure for the property." H 6 of the Agreement provided: The Owner agrees to compensate G&E rendered pursuant the to for services this Agreement according to following commission schedule: LEASES (a) Where G&E is in the the sole procuring broker transaction, G&E shall be paid four percent (4%) of the total aggregate rental stipulated in the fully base executed (b) leases. When a cooperating broker is involved, defined as any broker other than those named as members (as of the Marketing Team defined in Section 8), G&E shall be paid six percent (6%) of aggregate base rental fully leases. executed the total stipulated The in the cooperating broker shall be paid three percent (3%) of the out of the proceeds total aggregate paid base to G&E. rental iv. 11 9 of the Agreement stated: This as Exclusive Agency Agreement of the above force and effect shall be date and it shall be effective shall through October renewable upon mutual continue 31, reason without penalty upon thirty of to cancellation, shall provide Owner with a with whom there Property. This within is list date of G&E shall have consummate parties, have of an active prospect fifteen business effective (30) the other party. G&E In the bona for any days prior the right event to fide prospects interest list must (15) and written agreement. Either party may terminate this Agreement written notice in full 2007, days in the be provided after the the termination. six (6) months an agreement with after which time in which to such registered Owner shall have no obligation to pay a commission under the terms of this Agreement. Termination of this Agreement shall not relieve either party of its financial obligation to pay a commission under the terms of this (PL's Ex. 1.) By November Agreement was renewal Agreement. set 1, 2 007, the to expire, date that the parties by mutual written agreement. the Exclusive Agency had not However, executed a the parties continued to work with one another. provide brokerage and remained listed as the agent services Grubb & Ellis continued to Potomac Medical's property on CoStar, continued its construction of were no active prospective while the building. tenants for Potomac Medical At that for the building. time there B. "Extension" of the Exclusive Agency Agreement In January 2008, Mr. Ed Bretz of Grubb & Ellis realized the Exclusive Agency Agreement had not been renewed and instructed Ms. Padgett to follow up with Mr. On January 31, stated, 2008, Ms. "The original Padgett Saadeh sent Mr. listing agreement Center expired in October of to extend the Agreement. this year Saadeh an email for Potomac Medical [sic]. We overnighted an extension letter to your attention on October 5, 2007, not received a fully executed version for our files. attached both documents Keith Lipton, for your Executive Vice Grubb & Ellis's Washington, 2007, that review." (PL's Ex. and have I have 2.) Mr. President and Managing Director of D.C., offices, signed the October 5, proposed extension letter just as he had signed the original Exclusive Agency Agreement. contained a line Subsequent asked Mr. for Mr. to Ms. Padgett's Saadeh by email once on February 4, 2008 19, 3). 2008 (PL's Ex. proposed extension Mr. Saadeh's The proposed letter also signature. email, for return of (PL's Mr. Ex. 26), Mr. Bretz repeatedly the extension letter, and again on February Saadeh never signed or returned the letter. Saadeh was concerned about renewing the Agreement because he believed that an extension would bind him to working with Grubb & Ellis Tr., 152-53, July for an additional eighteen months. 9, 2009.) Mr. (Trial Saadeh wanted a proactive broker who would take charge to get the building leased despite the slowing economy. however, (Trial Tr., 152-53, July 9, 2009.) He did, express a willingness to enter into an agreement that would protect Grubb & Ellis's right to a commission if Mr. Bretz drafted an agreement that specifically addressed commissions. (Trial Tr., 145, July 9, 2009.) Mr. Bretz never drafted an agreement that specifically dealt with commissions; the only draft agreement sent to Mr. Saadeh was the October 5, proposed extension letter. (PL's Ex. 2.) On February 20, Bretz an email the concerns however, that that stated, I 2008, at 11:46 a.m., Mr. "Here's the extension. have." (PL's Ex. "please accept this extend Grubb and Ellis Ex. 3.) contained a place signature, Mr. concerns. that Mr. of for his letter unsigned to (Trial Tr., 175, secure July 9, Saadeh's letter was the Agreement. February 20, 2008, The attached letter, listing agreement throughout (PL's the You remember letter as our intent to University transaction." left Saadeh sent Mr. stated, 3.) Tr., at p.m., 1:23 the Although the Stratford letter Saadeh intentionally further conversation about his 2009.) Mr. insufficient (Trial. 2007, 198-200, Mr. Bretz realized to act as an extension July 7, Bretz 2009.) On replied to Mr. Saadeh's email and suggested that the parties set a date to discuss Mr. Saadeh's concerns. also asked Mr. (Def.'s Ex. 29.) Saadeh to sign the attached letter. Importantly, {Def.'s Ex. he 29.) Just over four hours p.m., Mr. modify the Bretz later, again emailed Mr. language on February 20, Saadeh, this 2008, time in the attached letter to read, accept this letter as an extension of the at 5:57 asking him to "please listing agreement through the conclusion of the current transaction negotiations with the current prospect, Ex. 31.) requested. Mr. ..." (Def.'s Saadeh neither signed nor modified the letter as Furthermore, extension letter, October 5, Stratford University. 2007, the parties never exchanged a either the version produced Mr. extension letter signed by Mr. Also in February, Mr. signed Saadeh or the Lipton. Saadeh began to seriously consider bringing in another broker to work on leasing Potomac Medical because he had concerns about Grubb & Ellis's performance. {Trial Tr. 146-51, July 9, Glen Peacock of Studley, 2009.) Inc., Mr. Saadeh reached out to Mr. with whom he maintained contact, for help in marketing the property. C. Stratford University Negotiations Meanwhile, by the end of December 2007 and leading into early January 2008, Stratford University ("Stratford") identified Potomac Medical Center as a potential site for its Prince William County campus. Stratford is a private educational institution that offers various associate, programs with two campuses, the other in Woodbridge, one bachelor, in Falls Virginia. Mr. and master degree Church, Virginia, Craig Estey and Mr. and Junius Tillery of UGL Equis, a global real estate firm that provides brokerage services for commercial clients, Stratford University. Ellis The Equis brokerage to express Stratford's represented team contacted Grubb & interest in the Potomac Medical Center. On February 27, 2008, Stratford University and Potomac Medical executed a non-binding proposal to lease, intent ("February LOI"). (PL's Ex. February LOI contained a nor Tenant clause 6.) that Among other things, stated, shall have any obligations regarding any provision set both parties." Despite (PL's the about believed that Ex. Stratford as Stratford was the February LOI, a potential level had been in business earnings to for speak of. of business Tr., 163, as a university, tenant with unique tenant 9, 2009.) thirty years yet (Trial. also concerned because, July July 9, Mr. Saadeh had Saadeh and questioned why accounting program and had only an interim chief 162, Mr. tenant. financially weak, conducted its (Trial Tr., is executed by 6.) execution of a university that officer. the "Neither Landlord forth in this proposal unless a lease agreement concerns or letter of lacked an financial He questioned why it had no retained July 9, 2009.) Stratford was improvement needs. He was a unique (Trial Tr., 85-86, 2009.) On Monday, March 3, 2008, Mr. Saadeh read an automated Dun & Bradstreet previous ("D&B") Sunday. email alert sent to his work email The alert notified him of a drop University's credit rating. (Trial Tr., 61, Saadeh immediately forwarded the email alert At Dovi, the in Stratford July 9, 2009.) Mr. to his broker at Grubb & Ellis and to Stratford University's broker, (PI.'s Ex. account Mr. Tillery. 35.) some point during that week, Mr. the acting Chief Financial Officer University, along with Mr. Saadeh met with Mr. ("CFO") Chris Bergstrom, John for Stratford the Regional President and Chief Credit and Risk Officer of Cardinal Bank. Bergstrom was Mr. of Saadeh's banker in financing the Potomac Medical Saadeh's Center. The parties met concerns over Stratford's Mr the construction to discuss Mr. financial viability given its intent to enter into a ten-year lease. Stratford University's real estate broker was present with Stratford University represented. this Mr. Bretz was aware that Mr. Saadeh had scheduled important meeting with Stratford University representatives and their broker but he made no effort to engage Mr. whether he should attend On March 12, 2008, Bergstrom sent Mr. the meeting. the Wednesday of Saadeh an outline of the following week, security of guarantees, the deal to include obtaining a substantial 10 Mr. concerns with Stratford University and noted the possibility of taking steps the Saadeh about asking to enhance for personal letter of credit, or having Stratford University improvement take responsibility ("build-out"). (Def.'s Ex. for the 69.) tenant Mr. Saadeh incorporated parts of the comments he received from Mr. and sent to Mr. the comments forward the Bretz information to Dr. and asked that Mr. Richard Shurtz, Bergstrom Bretz the President of Stratford University and to Stratford's brokers at Equis. Ex. 40.) Mr. Saadeh had, however, already copied Mr. (PL's Estey, who in turn forwarded the draft comments to Stratford University. (Pi's Exs. 40, directed by Mr. D. 41.) Mr. Bretz did not send the letters as Saadeh. Breakdown in Stratford Negotiations On Friday, and Mr. March 14, Estey to discuss 2008, the Mr. concerns outlined in the forwarded to the University by Mr. March 17, 2008, Mr. fund the build-out, Saadeh met with Dr. Estey. The 6, comments following Monday, Saadeh requested that Stratford University a change from the terms of the February LOI which provided for $40.00 per square foot in tenant (PL's Exs. Shurtz 45.) In return, Mr. rate from $25.00 per square foot 45.) Mr. improvement. Saadeh would drop the rental to $22.00 per square (PL's Exs. 6, the reasons for Potomac Medical's request foot. Bretz did not do anything to look into for additional securitization of its investment in build-out or to advocate the reasonableness of Mr. Saadeh's position to Stratford. Stratford University and its brokers treated Mr. 11 Saadeh's request that Stratford fund the build-out as February LOI. On March 18, Mr. a rejection of Bretz got Mr. the Saadeh's approval that Potomac Medical was willing to proceed with the February LOI with the change that it would pay $13.00 per square foot towards tenant improvement and the lease rate would be $22.3 0 per square foot. Dovi (PL's Ex. 47.) On March 19, 2008, Mr. concluded the new offer was not acceptable and that Stratford no longer had an interest all in the property. intents (PL's Ex. and purposes, 48.) At that point, for the non-binding February LOI was a dead deal. With the deal dead, on March 25, 2008, Mr. Bretz emailed Mr. Saadeh to confirm he had spoken to a prospective tenant property and sent Mr. On March 25, of the (PL's Ex. proposal day, 49.) to develop a Peacock a copy submission to Potomac 2008, Mr. 2008. On April 2, 2008, Hospital. Peacock completed a draft Mr. the following Peacock emailed Ms. Potomac Hospital a financial analysis for the for lease with Potomac Hospital. On April interest Saadeh forwarded Mr. On March 27, Michele Eckhardt of string, Mr. to be hand delivered to Potomac Hospital March 28, proposal Saadeh an attached proposal. 2008, February LOI for the 2, 2008, discussed the Mr. Peacock, in an email importance of keeping Potomac Hospital's in leasing space Saadeh would honor the Saadeh and Mr. confidential two small deals 12 and affirming that G&E was that Mr. still handling. (PL's Ex. 57.) Both Mr. Saadeh and Mr. Peacock, their efforts to interest Potomac Hospital, did not want publicize the Hospital's potential in in procuring a interest to building as the publication of its interest would unduly attract other brokers with different properties. (Trial Tr., 49, July 9, 2009.) E. End of Grubb & Ellis's Six-Month Lease Consummation Period On April that 15, 2008, Mr. Saadeh emailed Mr. Bretz, stating the Exclusive Agency Agreement had expired in November 2007 and that any registration period would end shortly. 61.) Mr. Saadeh believed that the Exclusive Agency Agreement was a 12-month commitment with a six month any deals "tail" provision whereby successfully consummated within the six months warranted the payment 2009.) (PL's Ex. On April 17, attached letter that of commissions. 2008, Mr. (Trial Tr., 152, July 9, Bretz responded by email with an stated, Grubb and Ellis, at your direction, has continued to market the property until your request for termination of representation on April 15, 2008, this letter shall serve as acknowledgment of termination of the listing. . . . Grubb & Ellis shall be compensated per the terms of the listing agreement if a lease is consummated within six (6) months of the termination of the listing. (PL's Ex. 62 at 1952. Grubb & Ellis failed to acknowledge or discuss the statement made by Mr. Saadeh that the Exclusive Agency Agreement had expired and the registration period was also coming to an end. (PL's Ex. 62.) 13 On May 16, 2008, Mr. assertion in the April would run from April, Agency Agreement 17 Saadeh wrote attachment a letter that to dispute the the six-month period repeating his position that expired in November 2007. the Exclusive (PL's Ex. 85.) Grubb & Ellis had previously acknowledged the expiration of the Exclusive Agency Agreement. On April 22, 2008, (PL's Ex. 2.) a week after Potomac Medical & Ellis's representation, Mr. Bretz sent Mr. Stratford University was off of the ended Grubb Saadeh notice that financial watch list and that the University had resolved an accreditation issue that was a matter of concern for Mr. Saadeh. (PL's Ex. 69 at 2081.) Stratford University offered to resume negotiations under the same terms of Mr. dead." the February LOI. (PL's Ex. Saadeh responded by stating that, (PL's Ex. 69 at 2081.) Mr. 69 at 2081.) "The old deal is Saadeh rejected the Stratford deal at the previously proposed terms contained in the February LOI. (PL's Ex. 69 at 2081.) No lease between Potomac Medical and Stratford ever came to fruition under those terms. On April 24, that Mr. 2008, at 10:22 a.m., when Stratford learned Saadeh did not consider the terms of the February LOI acceptable, Mr. Estey advised Stratford that time to move on." (PL's Ex. 71.) Mr. it was "definitely Dovi replied that he would send word that Stratford was no longer considering Potomac Medical's property, stating, "I will communicate on this end that 14 there will be no more talk of Emads [sic] location." (PL's Ex. 71.) At that point, Potomac Medical Building The previous day, and Dr. Shurtz Stratford as Hospital. Stratford University no longer considered Mr. (PL's Ex. alternatives April 25, thought Mr. that Mr. Saadeh was to Mr. Flaggert simply using to negotiate a better deal with Potomac 72.) Stratford began to examine other for office space. 2008, for Stratford. Dovi had stated in an email that he leverage to be a viable option (Trial Tr., Bretz notified Mr. 7, July 8, 2009.) On Saadeh that Stratford University had "moved on to another opportunity." (PL's Ex. 75.) Grubb and Ellis made no effort to explore alternative options with Stratford University. Mr. the Equis brokers, or with Mr. Tr., 217, July 7, because he 7, with Dr. 2009.) found Mr. Shurtz, Mr. Saadeh Bretz Bretz did not meet with Dovi. (Trial did not meet with Mr. "difficult." (Trial Tr., Saadeh 215, July 2009.) F. .Resuscitation of On May 6, the Stratford Negotiations 2008, Mr. Peacock emailed Mr. Saadeh and stated, "I think we may be able to resuscitate this deal." 79.) On May 6, 2008, Mr. (PL's Ex. Peacock contacted the brokers for Stratford University asking for Stratford University's returns. (PL's Ex. 79.) From May 9, 15 2008 2007 through May 12, tax 2008, Mr. Peacock provided Mr. to the Stratford deal. Saadeh with financial summaries relating (PL's Exs. 81-82.) preexisting business relationship with Mr. He relied on his Estey to acquire financial information about Stratford University to better inform Mr. Saadeh of 89-90, the University's July 9, proposal 2009.) ("May LOI") financial On May 13, 2008, standing. Mr. to Stratford's brokers (Trial Tr., Peacock emailed a that security deposit from $650,000 to $1,142,307.00. increased the (PL's Ex. 12.) Stratford University accepted the May LOI and the parties eventually entered into a In June 2008, lease. Grubb & Ellis talks with Potomac Medical, and that negotiations and working towards knowledge, knew Stratford University was the parties were a lease. Despite in in this Grubb & Ellis made no attempt to reinsert itself into the negotiations process. A final lease was executed by Potomac Medical and Stratford University on July 14, 2009. contained terms different May LOI (PL's Ex. February LOI (PL's 12) (PL's Ex. 15.) from the May LOI. The final lease (PL's Ex. 12.) The contained terms different from the Ex. 6) . Potomac Medical paid Stratford's broker approximately $475,000 in commissions, commission. (Trial Tr., which reflected a four percent 16, July 8, Studley approximately $261,000 2009.) Potomac Medical paid in commissions, 16 (4%) which reflected a two percent (2%) commission. (Trial Tr., 77, July 9, 2009.) Potomac Medical did not pay Grubb & Ellis a commission. II. STANDARD OF REVIEW A plaintiff alleging breach of contract, quantum meruit must prove each element of its preponderance of Energy Techs., (breach of 857, 860 omitted); 71, *1 the evidence. Inc., 63 contract); (Va. 1950) Cir. Ct. Cir. 113, S. (procuring cause) 115 L. 7, 2006) v. Johns Bros. Cir. Ct. Nusbaum & Co., 2003) 59 S.E.2d (internal citations Plexus Scientific, Apr. (Va. or claim by a See MDM Assocs. Atkinson v. WVC3 Group v. (Va. Va. procuring cause, 2006 Va. (quantum meruit). Cir. LEXIS A party alleging fraud must prove each element of the fraud claim by clear and convincing evidence. S.E.2d 207, 209 (Va. Snead, 441 1994). III. A. See Van Deusen v. ANALYSIS Breach of Contract The Court finds in favor of Defendant on Plaintiff's breach of contract claim because the Exclusive Agency Agreement automatically expired on November 1, and because the February 20, 2008, 2007, by its express terms email and the parties' subsequent conduct did not create a new enforceable agreement since no meeting of the minds occurred. 17 1. Breach of Exclusive Agency Agreement The Court finds that Defendant did not breach the Agency Agreement because the Agreement was not renewed in the required manner and therefore expired on November 1, A contract is creates Doe, 431 S.E.2d 289, citations omitted). looks to the "four corners" the parties' Amoco Oil Co., Cas. "A court 487 Ins. to do a particular thing." 292, (Va. 1993) (internal To determine a contract's terms, interpret Transp. 2007. "an agreement between two or more persons that an obligation to do or not Buchanan v. Exclusive of the agreement intentions. F. Supp. Co., 650 is not at to construe or Double Diamond Props., 2d 737, S.E.2d a court 744 699, (E.D. 702 Va. (Va. 2007); LLC v. Heron v. 2007). liberty to rewrite a contract simply because a contract may appear to reach an unfair result." v. Yourshaw, 448 S.E.2d 884, citations omitted). in its the terms, terms of {Va. Ct. App. of agreement the parties are S.E.2d 762, 764 (internal and the to be determined from court may not obligation not found in the agreement itself. 450 1994) Where the agreement is plain and unambiguous the rights the 888 Rogers (Va. Ct. App. 1994) impose Jones v. (internal an Jones, citations omitted). Here, the Court expired on November finds 1, was to continue in full that 2007. the By its Exclusive Agency Agreement express force and effect 18 terms, the Agreement through October 31, 2007, Ex. unless 1, renewed in writing prior K 9.) to its The Agreement stated that it was mutual written agreement." (PL's Ex. 1, fl parties mutually agreed to extend it expiration date. Furthermore, because Mr. Bretz 2007, unless In fact, purported to extend 2008. testified that the parties Mr. Saadeh, after email expired. (PL's Ex. the parties did not enter into until July 14, ended. the was executed on February 20, the Agreement addition, the only written instrument the Agreement, 2008, (PL's Ex. Plaintiff the the six-month lease never executed a written extension prior to the November 1, expiration date. the the Agreement 2007, consummation period expired on May 1, however, 1, Therefore, in writing prior to the automatically expired on November 1, trial, {PL's "renewable upon 9.) Agreement automatically expired on November At expiration. 3 that and attachment 2008, at 2007, from nearly four months 1576.) In the Stratford lease over two months after the six-month period 15.) argued at agreed to an extension, trial but that the parties had verbally Plaintiff identified no contract modification that allowed a verbal extension to substitute for the written extension expressly required under the Agreement. Furthermore, Plaintiff presented no evidence indicating that the parties had even discussed such a modification. As such, the Court finds that Defendant could not have breached the Exclusive 19 Agency Agreement because 2. Breach of The Court finds it expired on November 1, 2007. a New Enforceable Agreement that Defendant did not breach a new enforceable agreement because neither the February 20, 2008, email nor the parties subsequent conduct operated to create a new agreement. To create a acceptance, with valuable consideration. Inns, 269 Inc., enforceable, S.E.2d 838, constituting the (Va. 844 there (Va. must be an offer and Montagna v. 1980). Holiday To be valid and a contract must be certain and the minds of the parties must meet 87 contract 1914). in mutual agreement on every material phase agreement. Belmont v. S.E. 81, the parties must wholly meet, "The minds of McAllister, not partially meet. The agreement must be The unity of concordance must be reached by the parties, the imposed by the where 455 assent {Va. court. is 1977) Here, as wanting." (internal to that no contract for two (2) A court the is integral, 81 no oracle Dickerson v. written agreement. fractional. Conklin, 235 S.E.2d 4 50, citations omitted). February 20, 2008, email, First, the Court the minds 2 at 1384.) On October 5, a follow-up email On January finds occurred the parties never executed a signed, 2007, Ms. Padgett sent Mr. Saadeh an extension letter to sign via overnight mail. Ex. not to divine assent formed because no meeting of reasons. not 31, 2008, Ms. Padgett sent (PL's Mr. Saadeh which again asked him to sign an extension 20 letter. (PL's Ex. 2 at letter drafted by Grubb letter and attached Ex. 3 at "Here's this 1577.) it email hours at Mr. email. 2008, email stated, . ." (Pl.'s stated, "please accept to extend Grubb and Ellis stating, listing Mr. Bretz "One small detail. The attached wasn't." responded by [C]ould you sign (Def.'s Ex. That Saadeh and asked him to amend the "please accept . 2008, Saadeh never signed the extension. Bretz emailed Mr. agreement February 20, (emphasis added). the extension please[?] 2236.) the the Stratford University transaction." 1577) later, signing Saadeh drafted his own the attachment letter as our intent 3 Mr. instead of to the February 20, the extension," (Pl.'s Ex. However, & Ellis, Although the agreement throughout read 1384.) this (Def.'s Saadeh never amended the letter as an extension of Ex. 31 at language. 147) A (emphasis letter 29 at evening, language Mr. to the listing added). stating Mr. future intent does not create a presently enforceable agreement. Second, the parties never agreed on all of terms governing their new relationship. match the precise S.E.2d 3, 7 (Va. terms of the offer. 1957) . If the material An acceptance has to See Smith v. there are differences Farrell, then the response is a counteroffer and a rejection of the offer, creates no contract because there to every material 410 S.E.2d 928,931 term. (Va. See 1991); which is no meeting of the minds Chang v. First Colonial Sav. as Bank, Virginia Hardwood Lumber Co. 21 98 v. Hughes, 124 S.E.2d 283, Brewery Co., 70 S.E. 285 485, Plaintiff argued at (Va. 487 1924); (Va. trial Gibney & Co. v. Arlington 1911). that the February 20, 2008, email and attachment adopted the terms of the original Exclusive Agency- Agreement, were not in agreement on all aspects of but the parties their brokerage relationship. "You remember the concerns Bretz replied stating, a date I have." Saadeh stated in the email, (PL's Ex. 3 "I understand the concerns. for that discussion." concerns, Mr. (Def.'s although unspecified, Ex. 29 at at 1576.) We 2236.) Mr. should set These must have arisen from the parties relationship originally created by the Exclusive Agency Agreement. Yet it is clear that at least remained a source of concern for Mr. nor Mr. some of Saadeh. the terms Neither Mr. Bretz Saadeh testified that a meeting ever took place to address the concerns or that the concerns were actually resolved. At trial, the parties did not agree as to precisely which terms the parties had mutually agreed upon and which terms were the source of outstanding concern. 2008, As such, the February 20, email did not create an enforceable agreement because no meeting of the minds occurred as to all of the material terms. Hardwood Lumber Co., 124 Virginia S.E.2d at 285. Plaintiff's claim for breach of an oral contract fails for similar reasons. Plaintiff failed to establish at trial that the parties mutually agreed that Defendant would pay Plaintiff 22 commissions even if Plaintiff was not the procuring cause of a lease. Plaintiff's breach of one contract claim appears for promissory estoppel. liable for breach of Plaintiff seeks instead to be to hold Defendant contract based on Defendant's unilateral representations and conduct. However, Virginia does not recognize promissory estoppel as an affirmative cause of action. W.J. Schafer Assocs. 1997). of v. As a result, Cordant, the Court contract claim because because no meeting of Inc., finds 493 S.E.2d 512, 516 (Va. for Defendant on the breach the original Agreement expired and the minds occurred to create a new enforceable agreement. B. Procuring Cause The Court finds in favor of Defendant on Plaintiff's procuring cause claim because there was a break in continuity in Plaintiff's services and because Stratford University was not ready to proceed with the after Plaintiff transaction on Defendant's terms until had already ceased work on the deal. Under Virginia law "a real estate broker is cause of a sale when it has events which, 'originated or caused a series of without break in their continuity, accomplishment of the prime object of usually, to procure the owner's terms." the procuring [its] a purchaser ready, Shalimar Dev., 23 Inc. result employment, willing and able v. FDIC, 515 in the which is, to buy on S.E.2d 120, 123 (Va. Real 1999) (quoting Edmonds Estate Servs., added). 377 v. Coldwell S.E.2d 443, 445 1989)) (emphasis Any break in the string of continuous events precludes a broker from being the procuring cause of The Fourth Circuit requires that a the (Va. Banker Residential the sale. "procuring cause" Id. at 123. broker meet following conditions: It is not enough that the broker has devoted his time, labor, or money to the interest of his principal, as unsuccessful efforts, however meritorious, afford no ground of action. And it matters not that after his failure and the termination of his agency what he has done proves of use and benefit to the principal. ... He may have introduced to each other parties who otherwise would never have met; he may have created impressions which under later and more favorable circumstances naturally lead to and materially assist in the consummation of a sale; he may have planted the very seed from which others reaped the harvest; but all that gives him no claim. It was part of his risk that, failing himself, not successful in fulfilling his obligation, others might be left to some extent to avail themselves of the fruit of his labor. To entitle a broker to commissions upon a sale or transaction which is actually consummated, the primary, Tahir Erk v. 1944) he must show that his efforts and services were proximate, and procuring cause thereof, Glenn L. Martin Co., 143 F.2d 232, 236 (4th Cir. (emphasis added). Here, the Court finds that Plaintiff's procuring cause claim fails because there was a break in continuity and because Stratford was not ready to proceed with the transaction on Defendant's terms until after the break in continuity occurred. 24 1. The of Break in Continuity Court events finds that the break in continuity caused by Plaintiff prevents procuring cause of Plaintiff the Stratford lease. in the from being the Virginia law recognizes that a break in continuity defeats a procuring cause Shalimar, more 515 S.E.2d at than one broker 123 is the claim. (internal citations omitted). See Where involved, [t]he broker who of series customer first directed the attention to the property may relax his efforts, with the result that a second broker may step in and by efficient and persistent work induce the customer to buy. Thus the efforts of the second broker are procuring cause of the broker this is one of the business. Atkinson, Here, 59 S.E.2d at 861-62 Plaintiff did more 2008, stated that, "Stratford is of Mr. the the inevitable than relax its that, (PL's Ex. Saadeh an email which ready to move 2081.) "[t]he old deal is dead," about Stratford's financials. 25, 2008, Mr. Bretz emailed Mr. Mr. forward under the [the terms February Saadeh responded by stating and continued to express concerns (PL's Ex. 69 at 2081.) Saadeh and stated that has moved on to another opportunity." Bretz made no attempt it to secure a lease with Stratford. Bretz sent Mr. 69 at first risks of efforts; the previously agreed upon letter of intent LOI]." - the To (internal citations omitted). completely ceased its attempts On April 23, sale. to meet with Mr. 25 (PL's Ex. Dovi, On April "Stratford 75.) Mr. the Equis brokers, or Mr. Saadeh after Mr. (Trial Tr., not make 2008, 217, Saadeh stated July 7, 2009.) further attempts because Mr. considerations." a (Trial Tr., 215, 25, dead. deal after April landlord" 25, and because "willing or open to make any July 7, the Court that Plaintiff gave up on the April was testified that he did the "difficult Saadeh was not the deal Bretz to negotiate Saadeh was he believed that Mr. Mr. that 2009.) It is clear to Stratford deal after 2008. It was Mr. Peacock's efforts after Plaintiff gave up that resuscitated the Stratford deal and led to the consummated lease. Resuscitate is defined as House Webster-s College Dictionary Stratford negotiations, testified at trial learned that (Trial Tr., "to revive Mr. 1126 from apparent death." (2d ed. 2000) . Peacock did just that. to Mr. the Peacock that he met with the Stratford brokers and their primary issue was with the 85, As Random July 9, 2009.) security deposit. He also met with Mr. Saadeh on several occasions to address his stated concerns regarding the financial aspects of the deal and the sufficiency and level of securitization. (Trial Tr., met with the parties 85-87, July 9, 2009). Mr. Peacock face-to-face as opposed to relying on email communications because he found "communication much more effective in a face-to-face environment to get to the root of a problem." (Trial Tr., 87, July 9, 2009.) He further testified that he relied on his preexisting business relationship with Mr. 26 Estey to acquire to better financial inform Mr. standing. Saadeh of (Trial Tr., LOI negotiated by Mr. of the February LOI acceptable, deposit. information about 89-90, (Trial Tr., the occurred, cause of 2. As 84-85, such, the July 9, lease Stratford Ready. Finally, that were not part ultimately found the 2009.) if not security In fact, for Mr. Court finds the & Ellis and Able from being at the procuring to Proceed on Potomac the procuring Stratford lease because Stratford University was not transaction on Defendant's terms until after Plaintiff ceased work on the able Peacock's Terms ready to proceed with the commissions, the parties that a break in continuity The Court also finds that Plaintiff was not cause of the May lease. Willing, Medical's 2009.) financial decision to cease work on the thus preventing Grubb the 9, form and amount of following Plaintiff's transaction. July Peacock proposed terms would not have consummated a efforts the University's and that both parties including Stratford University transaction. a broker must produce a tenant to proceed on the owner's terms. To receive ready, willing and See Shalimar, 515 S.E.2d 123. At trial Plaintiff argued that Stratford University was always prepared to go ultimately did so. through with the lease because Plaintiff also argued that, Saadeh's bad faith efforts to stall 27 the deal, but the it for Mr. lease would have been consummated under Court is the terms of the February LOI. unpersuaded by Plaintiff's arguments for two The (2) reasons. First, with the although Stratford was willing and able lease, negotiated the Stratford was it was not transaction. not Mr. Dovi concerned about in the February LOI. the form of (Trial Tr., testified that instead provide a 8, 2009.) the nature Mr. letter of Peacock and extent the 127, but Peacock testified at trial that transaction because security deposit July 8, Stratford understood require a cash security deposit, through after Mr. so until ready to proceed with the it was further ready to do to go 2009.) the as Mr. credit. (Trial Tr., 123 & 127, of the risk that Mr. Saadeh faced by 85, 9, 2009.) through these discussions, (Trial Tr., the Mr. Peacock also he was able security deposit as 85-87, July testified that he discussed with Stratford (Trial Tr., the to that Stratford preferred to facility to a university instead of a medical the amount of Dovi February LOI leasing the July stated July 9, 2009.) tenant. testified that, to negotiate the form and reflected in the May LOI. The initial form and amount of security deposit prevented Stratford from being ready to proceed with the and Mr. transaction until after Plaintiff ceased work Peacock negotiated new terms Second, even if for the security deposit. Stratford had been ready with the February LOI, to move forward Defendant's decision to modify its terms 28 did not reflect ultimate will faith. authority about The is at all principal, lease of Mr. the owner, under what lease or sell property. power or bad Mr. terms As Saadeh was entitled to set financially weak, Mr. Saadeh in business, He became even more strength because of 161-64, July 9, 2009.) Stratford because, needs. (Trial Tr., entitled to change concerns. The as He the also despite the it the ultimate for the sale Stratford was fact (Trial Tr., it that it 162, Stratford's risky to July 9, financial {Trial Tr., lease to had unique build-out 2009.) leasing terms it the university had an thought July 9, terms that he received. a university, 85-86, the concerned about the D&B report the Potomac Medical's that interim CFO and no accounting program. 2009.) always what price thought and questioned why, did millions of dollars and at is Brokers may advise but times with the owner. property. Saadeh, Mr. Saadeh was in order to alleviate these February LOI was a non-binding agreement to agree and the parties understood that neither was obligated until had executed a lease. Saadeh's decision to reject the terms of For that reason, Mr. they the February LOI given the risk involved and the prospective tenant was not made in bad faith. As such, the Court finds in favor of Defendant on the procuring cause claim. 29 C. Quantum Meruit The Court finds in meruit claim because it favor of Plaintiff rendered were of value. meruit, Defendant on failed to prove (2) it (1) the defendant knew of that was being conferred; that and (3) that the services inequitable for the defendant conferred a benefit on or appreciated a benefit the defendant accepted or retained the benefit under circumstances that render it to retain the benefit without paying for its value. T & M Elec. v. 403, Ct. Under quantum meruit, 405-406 (Va. Cir. quantum To prevail on a claim for quantum a plaintiff must prove that the plaintiff; Plaintiff's 2006). Prologis Trust, 70 Va. Cir. a plaintiff is only entitled to recover the reasonable value of its services performed. (2009). Recovery, on the defendant, performed. then, but See Ricks Hendrickson v. Here, See Mongold v. is Woods, 278 Va. 196, 203 not measured by the benefit conferred rather by the actual value of the services v. (Va. Meredith, Grubb & Ellis Sumler, 19 170 S.E. is S.E.2d 602, 605 889, 891 (Va. 1942); 1933) . not entitled to recover under quantum meruit because there was no evidence presented at trial that the services actually rendered by Grubb & Ellis were of any value. As discussed above, the Stratford lease. Grubb & Ellis was not the procuring cause of Consequently, to commissions and therefore is Grubb & Ellis is not entitled limited to recovery of of the services it rendered to Potomac Medical. 30 the value The very nature of the commercial real estate broker-principal precludes an implied contract claim here. into this relationship with Mr. Ellis serving as Saadeh, a lease. such costs imply such terms here where payment contemplated by the parties. other & Ellis entered The owner, Mr. for time spent and marketing costs because the owner never agreed to pay Ellis posted listings Grubb Saadeh contingent upon Grubb & the procuring cause of is not liable relationship Mr. and the for these Bretz law will not services was never testified that Grubb & for Potomac Medical Center on CoStar and listing services, created marketing materials, an email advertising system. {Trial Tr., 51-53, and set up July 7, 2009.) He also testified that Grubb & Ellis provided Mr. Saadeh with weekly reports of 53, listing inquiries. (Trial Tr., 2009.) But brokers often perform this type of work; showing that the work performed had value of Furthermore, witnesses, July 7, there was no itself. Grubb and Ellis did not present any expert produce any evidence of the services at trial, independent value of its or identify any documents in its exhibit list that establish such value or give the Court the proper basis estimating the value of the services it performed. As such, for the Court finds in favor of Defendant on the quantum meruit claim. 31 D. Fraudulent Inducement Finally, fraudulent the Court inducement failed to prove that and Concealment finds in favor of Defendant on the and concealment claim because it reasonably relied on any purported misrepresentations made by Defendant or that commissions as damages. 1) 2) of a material intentionally and knowingly, 4) reliance by the part misled, and 6) Here, Bryant v. the Court Peckinpaugh, finds it is entitled to In Virginia the elements of fraud are: a false representation, misled. Plaintiff that with intent fact, 3) made to mislead, 5) resulting damage to the party 400 S.E.2d 201, Plaintiff 203 failed to prove (Va. 1991). its fraudulent inducement and concealment claim for the following three (3) reasons: 1) Plaintiff did not prove a false representation of a material fact; 2) Plaintiff did not reasonably rely on Defendant's alleged misrepresentations; and 3) Plaintiff did not prove that it was entitled to commissions as damages. 1. False Representation of a Material The Court finds that Plaintiff Fact failed to prove a false representation of a material fact because Plaintiff did not prove that Defendant had no intention of extending the Exclusive Agency Agreement at the time that he purportedly promised Plaintiff an extension. "Because fraud must present or a preexisting fact, involve a misrepresentation of a fraud ordinarily cannot be 32 predicated on unfulfilled promises events." 2008) SuperValu, Inc. v. or statements Johnson, (internal citations omitted). 666 S.E.2d 335, the defendant had no intention of the time the promise was made. v. McDevitt St. Here, Bovis, Inc., the promise at that he but 9, that he was 2009.) He however, the told Mr. 348 Metro. (Va. that Defendant Auth. 1998). fraudulently to continue work on the Stratford transaction by promising to extend the failed to prove, (Va. the promise at Richmond. S.E.2d 344, Plaintiff argued at trial induced Plaintiff 342 a plaintiff must prove upholding See id.; 507 future To prevail on an actual fraud claim based on unfulfilled promises, that regarding time Bretz Exclusive Agency Agreement. that Defendant did not intend to honor that it was made. that he was Mr. Saadeh testified thinking about an extension, "considering his options." testified that he was decision because some of Plaintiff (Trial Tr., taking his time 145, July to reach a the promises made by Grubb & Ellis that led him to initially choose it as his exclusive broker never came to fruition. (Trial Tr., finds that Mr. 147-49, July, 9, 2009.) The Court Saadeh's indecision does not indicate that he never intended to uphold any purported promises he made to Plaintiff. As such, the Court finds that there was no misrepresentation of a material fact. 33 2. Reasonable The Court Reliance finds that Plaintiff did not any oral misrepresentations made by Mr. continued to provide its Saadeh never produced a Agreement. To prove reasonably rely on Saadeh because services with full knowledge signed extension of fraud, (Va. 1993). Continental A plaintiff that Mr. the Exclusive Agency a plaintiff must demonstrate right to reasonably rely on the misrepresentation. Delaware v. Plaintiff Cellular Corp., 437 the Metrocall S.E.2d 189, of 193-94 cannot prove reasonable reliance where such reliance contradicts the express terms of the contract. Foremost Guar. Cir. 1990) Corp. ("there v. [can] Meritor Sav. Plaintiff 910 F.2d 118, 126 (4th be no reasonable reliance in the face of plainly contradictory contractual Here, Bank, See language."). failed to prove that it continued to provide its brokerage services in reasonable reliance on Defendant's assurance of receiving a signed extension. Plaintiff knew that the original Agreement had already expired before the parties executed any purported extension. As discussed above, the Exclusive Agency Agreement was valid through October 31, unless renewed by mutual written agreement. Some Mr. three months later, on January, 31, Saadeh an email acknowledging that agreement year." for Potomac Medical (PL's Ex. 2 at 1384.) (PL's Ex. 2008, Ms. 2007, 1 % Padgett sent w[t]he original listing Center expired in October of After the expiration of the 34 9.) this Exclusive Agency Agreement, between the parties. from Mr. Saadeh on February 2008. Plaintiff Plaintiff several (PL's Ex. sophisticated brokerage work on the hopes 38 Vir. PL's Ex. 26 1408.) & Ellis, continued to provide services Grubb yet at & Ellis could have continued instead to work See 370 signed, Cir. Ct. 1996) in the business selling of businesses to better job of protecting stay its the the . .it Inc. claims to renew a ". relies on commissions in (broker's listing agreement denied because brokering ceased Virginia Business Exchange, (Va. a written agreement. for commission based on allegation of a promise of through Grubb it would receive a Cir. extension from October 2007 1384; business, its own risk. existed letter of signed extension, transaction but that one day Mathews, at Potomac Medical. It did so at v. 2 agreement requested a occasions never received a on behalf of no brokerage is plaintiff which is in business. It interests here."). and which should have done a Grubb & Ellis's decision to continue work despite the absence of a signed written agreement was a risk that it took, constitute reasonable reliance. but that risk does not Therefore, the Court finds Plaintiff's reliance was unreasonable. 35 that 3. Damages Even if Defendant did make finds that Grubb & Ellis commissions as damages. false representations, failed to prove an entitlement To recover under a on the defendant's material misrepresentations. 385 omitted). S.E.2d 898, 903 (Va. 1985) The usual remedy for fraud is A Plaintiff may, however, a reliance See Murray v. (internal citations to restore the injured party to the position it held prior to the 904. to fraud claim, plaintiff must prove damages caused by his detrimental Hadid, the Court fraud. See id. at recover prospective profits upon a showing that he is entitled to those profits as damages. See id. 550 (Va. (citing Manss-Owens Co. 1921)). "%It is well are not recoverable v. settled that in any case would have been any profits. Hamilton & Dotson, Here, 178 the Court damages for two (2) Owens & Son, finds it . .'" Id. 780 (Va. that Plaintiff reasons. First, . . prospective profits is uncertain that 777, S.E. . if . 105 S.E.2d 543, there (quoting Sinclair v. 1935)). fails to prove Plaintiff asserts its that it is entitled to commissions as damages because Defendant falsely represented that Plaintiff would receive commissions continued work on the Stratford transaction. if it As mentioned above, Plaintiff was not the procuring cause of a lease and therefore is not entitled to commissions as damages. 36 Second, evidence of other than commissions, fraud damages plaintiff need not prove show sufficient to make facts 413 omitted). assign in its its 1992) any value, list The Court finds Plaintiff's claims. that Defendant IV. in on Plaintiff's breach of See Goldstein v. its services, agreement. subsequent Second, did not did not produce establish such value. fraud damages. on in identify any Plaintiff's As In such, the fraud claim. Defendant the Court finds on all four (4) of in favor of Defendant contract claim because the Exclusive Agency Agreement automatically expired on November 1, the parties' citations CONCLUSION favor of First, factfinder (internal and did not failed to prove in favor of the it must did not present any expert to the value of exhibit Grubb & Ellis finds its damages. (Va. Although the its damages, to permit initial disclosure a value, discovery evidence of in 349-50 Grubb and Ellis to testify as documents entitled to. the exact amount of S.E.2d 347, Here, is and circumstances witnesses Court it a reasonable estimate of Kaestner, short, that Plaintiff presented no 2007, and conduct did not create a new enforceable the Court finds in favor of Defendant on Plaintiff's procuring cause claim because a break in the continuity of Plaintiff's services occurred and Stratford was not prepared to proceed on Potomac Medical's 37 terms until after the break in continuity. Defendant on Third, Plaintiff's failed to prove that the Plaintiff's fraud claim because the Court that Defendant never because and because Plaintiff ORDERED that favor of claim because Plaintiff in favor of Plaintiff Defendant on failed to prove at intended to extend the brokerage for Plaintiff to rely on contained in a signed written agreement; failed to prove Therefore, it is that it is entitled to hereby a VERDICT IS ENTERED in favor of Defendant Potomac Medical Building, Company's breach of and finds it was unreasonable any representations not recover damages. in the services it actually performed were of Fourth, agreement; finds quantum meruit any value. trial Court LLC, contract, on Plaintiff Grubb & Ellis procuring cause, quantum meruit, fraud claims. The Court will enter a separate Federal Rule of Civil Procedure 58 Amended Judgment Order. The Clerk is directed to forward a copy of this Order to counsel. Entered this r I day of September, 2009. Alexandria, 09/ Virginia A ^H /09 Gerald Bruce Lee I United States District Judge 38
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