Jones Lang Lasalle Brokerage, Inc. v. 1441 L Assocs., LLC

597 F.Supp.3d 64

JONES LANG LASALLE BROKERAGE, INC., Plaintiff,

v.1441 L ASSOCIATES, LLC, Defendant.

Civil Action No. 20-3687 (FYP)

United States District Court, District of Columbia.

Signed March 23, 2022

Matthew Warren Fogleman, The Law Offices of Ronald S. Canter, LLC, Rockville, MD, Thaddeus Harrell, Pro Hac Vice, Hinshaw & Culbertson LLP, Chicago, IL, for Plaintiff.

Alexander McDonald Laughlin, Odin, Feldman & Pittleman, P.C., Reston, VA, for Defendant.

MEMORANDUM OPINION

FLORENCE Y. PAN, United States District Judge

Plaintiff Jones Lang LaSalle Brokerage, Inc. ("JLL") and Defendant 1441 L Associates, LLC, d/b/a 1441 L Street Associates, LLC ("1441 L") entered into a leasing agreement, under which JLL secured a tenant for property owned by 1441 L. 1441 L declined to pay JLL the commission contemplated by the parties’ contract, and JLL filed the instant lawsuit. 1441 L now moves for summary judgment, arguing that the leasing agreement is void and unenforceable, for failure to comply with statutory requirements. The Court agrees and will therefore grant 1441 L's Motion.

BACKGROUND

On June 1, 2016, 1441 L entered into an Exclusive Leasing Agreement ("ELA") with JLL. See ECF No. 14-1 (Defendant's Statement of Undisputed Material Facts), ¶ 1; ECF No. 16-1 (Plaintiff's Statement of Undisputed Material Facts), ¶ 1; ECF No. 1-3 (Exhibit A, Exclusive Leasing Agreement). Under the ELA, 1441 L engaged JLL as its exclusive broker for the purpose of leasing the property at 1441 L Street, N.W., Washington, D.C. (the "Property"), to third-party tenants. Def. SUMF, ¶ 3; Pl. SUMF, ¶ 3. 1441 L agreed to pay JLL commissions for any new leases executed by 1441 L with new tenants. See ECF No. 1 (Complaint), ¶ 9; Exclusive Leasing Agreement.

The ELA provided that JLL "may cooperate with cooperating brokers, including representatives of JLL ... in leasing space within the Property." See Exclusive Leasing Agreement, ¶ 2.1. Under the ELA, 1441 L would pay JLL and any cooperating broker the "commissions computed in accordance with the rates as set forth in Schedule A to this Agreement." Id. The Compensation Schedule in the ELA set different levels of payment, depending on whether JLL worked with a cooperating broker. See id. , Schedule A. In a "Transaction with a Cooperating Broker," JLL would be entitled to a commission of two percent of the aggregate gross lease value. See id. , Schedule A.¹

In July of 2018, JLL secured RGN-Washington DC XXI, LLC ("Regus") as a tenant for the Property, and a lease agreement was executed between 1441 L and Regus on July 30, 2018. Def. SUMF, ¶¶ 6–7; Pl. SUMF, ¶¶ 6–7; ECF No. 14-6 (Regus Lease). JLL represented 1441 L in executing the Regus Lease, while Kevin Brandt, a cooperating broker employed by JLL, represented Regus. See Pl. SUMF, ¶¶ 29–31. JLL thus acted in a dual capacity as broker for both 1441 L and Regus when those parties entered the Regus Lease. Def. SUMF, ¶ 17, Pl. SUMF, ¶ 17.²

The Regus Lease provided the following disclaimer regarding JLL's dual representation: "Tenant and Landlord understand and agree that [JLL] is representing and acting as the agent for both Landlord and Tenant, and both parties authorize and consent to such dual agency and waive any conflict of interest which may arise as a result thereof." See Regus Lease, ¶ 35.

JLL expected payment of a commission under the ELA for its role in brokering the Regus Lease — a total sum of $780,518.35, representing two percent of the aggregate gross lease value. Compl., ¶ 17. When 1441 L did not pay the commission, JLL sent a demand letter to 1441 L on July 14, 2020. Id. , ¶ 21. As of September 23, 2020, JLL alleges that it was owed $832,422.83, a sum that includes interest of 1.5 percent per month on the delinquent payments. Id. , ¶¶ 20, 23. JLL filed the instant suit on December 15, 2020, alleging one count of breach contract, based on 1441 L's failure to pay the commission that is allegedly due under the ELA. Id. , ¶¶ 26–32.

On October 1, 2021, 1441 L filed a Motion for Summary Judgment, arguing that JLL is not entitled to payment of the commission under the ELA because JLL failed to comply with statutory requirements regarding the disclosure of a dual representative. See generally ECF No. 14-1 (Defendant's Motion). Defendant contends that the defective disclosures regarding dual representation render the ELA unenforceable.³

LEGAL STANDARD

Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." See Fed. R. Civ. P. 56(a). Summary judgment is properly granted against a party who, "after adequate time for discovery and upon motion, ... fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party bears the burden to demonstrate the "absence of a genuine issue of material fact" in dispute, id. at 323, 106 S.Ct. 2548, while the nonmoving party must present specific facts supported by materials in the record that would be admissible at trial and that could enable a reasonable jury to find in its favor, see Anderson v. Liberty Lobby, Inc. ("Liberty Lobby "), 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

When faced with a motion for summary judgment, the district court may not make credibility determinations or weigh the evidence; instead, the evidence must be analyzed in the light most favorable to the non-movant, with all justifiable inferences drawn in her favor. Id. at 255, 106 S.Ct. 2505. If material facts are genuinely in dispute, or undisputed facts are susceptible to divergent yet justifiable inferences, summary judgment is inappropriate. Moore v. Hartman , 571 F.3d 62, 66 (D.C. Cir. 2009). The district court's task is to determine "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Liberty Lobby , 477 U.S. at 251–52, 106 S.Ct. 2505. In this regard, the non-movant must "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation omitted). "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Liberty Lobby , 477 U.S. at 249–50, 106 S.Ct. 2505 (internal citations omitted).

ANALYSIS

Applicable statutory provisions impose specific and exacting requirements for disclosing a broker's dual representation of both parties to a real estate transaction. 1441 L argues that JLL's failure to comply with those statutory requirements renders the ELA void and unenforceable; and that JLL therefore is not entitled to any commission for brokering the lease between 1441 L and Regus. The Court agrees.

I. The Brokerage Act

Chapter 42 of the D.C. Code pertains to a "Real Estate Broker's Duties," and its purpose is to "protect the public against incompetence, fraud, and deception in real estate transactions."

D.C. Code § 42-1701 ("Brokerage Act"). Section 1703 enumerates the duties of real estate brokers, salespersons, and property managers, and provides specific protections and requirements regarding dual representation. Id. § 42-1703. Courts are especially wary of brokers acting as dual representatives because of the obvious conflict of interest that such an arrangement entails. See Urban Investments, Inc. v. Branham , 464 A.2d 93, 96 (D.C. 1983) (where a broker attempts to act for both sides, "he is confronted with the impossible task of securing for each the most advantageous bargain possible" (citation omitted)); see also 12 Am. Jur. 2d Brokers § 106 (2022) ("As a general rule, a broker does not act in a dual capacity as the representative of both sides to a negotiation" because a broker "must act solely for the benefit of the principal ... and may not undertake to represent an [adverse] interest."). Because "a broker is charged with protecting and advancing the principal's interests, a broker may not serve both parties to a transaction unless, under certain circumstances, the parties fully and freely have consented to the dual representation." Jenkins v. Strauss , 931 A.2d 1026, 1034 (D.C. 2007) (cleaned up); see Ehlen v. Lewis , 984 F. Supp. 5, 9 (D.D.C. 1997) ("Where a fiduciary acts in his own interest in dereliction of his beneficiaries’ interest, more than some ‘by the way’ notice is required.").

The provision of the Brokerage Act that specifically addresses dual representatives, D.C. Code § 42-1703(i), requires a broker (or "licensee")⁴ to clearly disclose dual representation to the parties to the transaction (the "clients"), and to obtain the consent of the parties in writing:

(1) A licensee may act as a dual representative only with the written consent of all clients to the transaction. Such written consent and disclosure of the brokerage relationship as required by this section shall be presumed to have been given as against any client who signs a disclosure as provided in this section.

(2) Such disclosure may be given in combination with other disclosures or provided with other information, but if so, the disclosure must be conspicuous, printed in bold lettering, all capitals, underlined, or within a separate box. Any disclosure which complies substantially in effect with the following shall be deemed in compliance with this disclosure requirement.

D.C. Code § 42-1703(i)(1)-(2). The statute then provides a sample form for making the required disclosures and obtaining consent. Id. The sample form is titled "Disclosure of Dual Representation." Id. The form is intended to be signed by the broker's clients, and states:

The undersigned understands that the foregoing dual representative may not

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