United States District Court, Southern District of New York
January 11, 2000
KENNETH D. LAUB & COMPANY, INC., PLAINTIFF
BOARD OF THE STATE TEACHERS RETIREMENT SYSTEM OF OHIO; STATE TEACHERS RETIREMENT SYSTEM OF OHIO, DEFENDANTS.
The opinion of the court was delivered by: Cedarbaum, District Judge.
Plaintiff Kenneth D. Laub ("Laub"), through his business Kenneth D.
Laub & Co., Inc., sues the Board of the State Teachers Retirement System
of Ohio and State Teachers Retirement System of Ohio (collectively
"STRS") for breach of contract. Laub alleges that defendants denied him a
commission for a real estate transaction in violation of the terms of his
agency agreement. Defendants move for summary judgment. For the reasons
discussed below, the motion is granted.
The following facts are undisputed unless otherwise noted.
Kenneth D. Laub & Co., Inc. and its president Kenneth D. Laub are real
estate brokers licensed in New York. In 1988, Laub entered into an
agreement with Two Wall Street West Associates, L.P., the owner of a
building at Two Rector Street in New York City (the "Premises"), granting
Laub the exclusive authority to rent space in the Premises. The agreement
provided that Laub would be paid commissions
for leases Laub procured for the Premises, including lease extensions.
The original term of the agreement expired in 1989 and was renewed and
amended on numerous occasions in subsequent years.
In mid-1993, Laub began negotiations with the City of New York (the
"City") for a renewal of the City's lease for space in the Premises
occupied by the City's Department of Transportation. The City's original
lease was to expire on July 31, 1995.
In December 1994, Laub was informed that ownership of the premises had
been transferred to OTR, an Ohio general partnership. Laub was authorized
to continue all discussions on behalf of OTR with respect to pending
transactions. Laub negotiated many of the terms for a renewal lease and
claims that a "meeting of the minds" was reached in January 1995 on the
essential terms of a lease renewal.
On March 8, 1995, Laub and OTR signed an extension of Laub's agency
contract (the "Agency Agreement"). The Agency Agreement provided that it
would terminate on June 30, 1995, unless terminated earlier by either
party on thirty days' notice. The provisions of the Agency Agreement at
the center of the present dispute are as follows:
No commission shall be earned, due or payable to
[Laub] under this Agreement for any lease not so
entered into within [180 days], whether or not
negotiations are pending on the date this Agreement
expires or is terminated. Landlord shall not delay
negotiations in order to avoid commission payment to
(Laub Aff. Ex. 1 at S 0252.)
On April 20, 1995, OTR gave Laub notice that it was terminating the
Agency Agreement. Accordingly, the agreement terminated thirty days later
on May 20, 1995, and November 16, 1995 became the end of the 180-day
grace period within which Laub was entitled to be paid a commission.
On July 31, 1995, the City's original lease expired. No lease extension
was executed until December 13, 1996, more than a year after the 180-day
grace period had expired.
Laub complains that he was entitled to a commission for the work he
performed in connection with the lease extension. He acknowledges that the
lease extension was not executed until well after the expiration of the
time in which he was entitled to a commission. However, he contends that
defendants intentionally delayed negotiations with the City in order to
avoid paying him a commission and thus breached the Agency Agreement. Had
defendants more vigorously attempted to obtain a lease extension with the
City, Laub argues, an extension would have been executed within the
180-day grace period and he would have received a commission for his
work. Defendants deny these allegations.
Summary judgment is authorized when "the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a
matter of law." Fed.R.Civ.P. 56(c). The judge's role in summary judgment
is not "to weigh the evidence and determine the truth of the matter but
to determine whether there is a genuine issue for trial." Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202
(1986). This requires that the party opposing summary judgment "do more
than simply show that there is some metaphysical doubt as to the material
facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). "[T]he plain language of Rule
56(c) mandates the entry of summary judgment, after adequate time for
discovery and upon motion, against a party who 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).
In order to defeat summary judgment, Laub must present admissible
evidence from which a finder of fact could reasonably conclude that
defendants*fn1 intentionally delayed negotiating a lease extension with
the City in order to avoid paying Laub a commission.*fn2 Laub has
presented no such evidence, and in fact the evidence in the record all
supports the contrary conclusion.
Defendants produce evidence demonstrating that the delay in lease
negotiations was caused not by them but rather by the City. City
representatives testified in their depositions that defendants did not
delay the lease renewal negotiations. Scott Bernstein, the Lease
Negotiator for the City, was responsible for negotiating the business
terms of the lease on behalf of the City. Mr. Bernstein testified that
any delay in negotiating the lease was caused by the City and not by
Q. At any time during the negotiations since your
involvement began with the renewal lease transaction
did you ever come to believe that STRS was delaying
the finalization of that renewal lease transaction?
* * * * A. No, in my time dealing with them I do
not believe that they were delaying the deal. At any
Q. Were there delays in the transaction?
A. Yes, there were . . . they were mostly brought on
by the City of New York.
(Bernstein Dep. at 43.) Furthermore, when asked whether defendants ever
stated a preference to delay the transaction, Mr. Bernstein testified:
A. No. In fact, I would say to the contrary, that they
wanted to get this done, because they were not
getting rent payments.
(Id. at 71.)
Other city negotiators confirmed this view. Jeffrey Kondrat, the
Commissioner of Leasing and Space Design, was Mr. Bernstein's supervisor
and also had knowledge of the lease negotiations. Mr. Kondrat testified
that defendants were anxious to conclude the lease transaction from the
time OTR took over the building in November of 1994. He also testified
that the loss of City staff caused a delay in completing the transaction
and that the City was lax in responding to defendants' communications
concerning the lease. Lisa Stenson, who acted as counsel to the City,
also had first-hand knowledge as to why the lease extension was not
executed by November 16, 1995. Ms. Stenson testified that she did not
believe that defendants did anything to delay the negotiations.*fn3
Furthermore, the specific history of the lease negotiations
demonstrates that defendants not only did not delay negotiations, but
encouraged the City to respond more quickly. The initial attorney for the
City, Elvin Williams, prepared a draft lease agreement dated March 29,
1995 and provided it to defendants. On April 5, 1995, Mr. Bernstein
provided OTR's counsel, Linda Warren, a copy of the draft lease with
instructions to review it and contact Mr. Williams with her comments.
Ms. Warren marked up the draft lease and provided the mark-up to Mr.
Williams on May 16, 1995. However, Mr. Williams did not transmit the
mark-up to Mr. Bernstein until June 8, 1995, a day after Ms. Warren wrote
to Mr. Williams "to confirm that the document is still being reviewed by
[him] and that [he did] not anticipate any major problems in the comments
which have been made [on May 16, 1995]." (Sifre Decl. Ex. 6.) The letter
also advised that "[i]f there is any other reason why you have not
responded to our draft, I would appreciate your letting me know at your
earliest convenience." (Id.) This message was repeated in a letter from
Ms. Warren to Mr. Williams on June 22, which stated that "[w]e are still
awaiting your response." (Sifre Decl. Ex. 7.) Ms. Warren wrote yet
another letter to Mr. Williams on July 26 "reminding you that we are
still awaiting your response to the Lease Extension Agreement for 2
Rector Street sent to you on May 16, 1995. . . . Your immediate attention
to this matter is requested." (Sifre Decl. Ex. 8.) (emphasis added)
All of the evidence in the record indicates that defendants continued
to attempt to advance the lease renewal negotiations. By October 17,
1995, the City had not yet provided a response to Ms. Warren's mark-up.
On October 17, Mr. Bernstein informed Ms. Warren that the City would
submit to her a revised lease draft within a week. Mr. Bernstein also
informed Ms. Warren that the City's policy on lease renewals had recently
changed-the City now preferred to enter into new lease agreements rather
than execute extension agreements. Ms. Warren then wrote to Ms. Stenson,
who had taken over for Mr. Williams, "to inquire as to the status of your
review and comments to the Lease Extension Agreement submitted to your
office last May." (Sifre Decl. Ex. 9.) The letter also stated:
We would be happy to consider all these new changes,
but I must impress upon you our concern over the
length of time involved thus far in getting a response
on the draft we submitted to your office last May. As
you may be aware, the City's lease expired last July
and, according to Scott [Bernstein], the City has no
authority to continue to pay rent on expired
contracts. . . . November 1 is only two weeks away
and, given our past experiences, we feel it is highly
unlikely that this agreement will be executed and
delivered by that date, which means that the landlord
will have missed at least two months payment of rent.
If there is anything at all we can do to expedite this
matter, we would appreciate your letting us know.
(Id.) (emphasis added)
Despite this request, the City did not provide a draft lease proposal
until January 4, 1996. This delay was caused at least in part by the fact
that Ms. Stenson and Mr. Bernstein became involved in other matters "that
were considered more of a priority nature which required our attention."
(Bernstein Dep. at 235.) It was also caused in part by the City's
decision to draft a completely new lease rather than a "16 or 17 page
lease renewal." (Kondrat Dep. at 18.)
Defendants' position is further supported by the fact that the
negotiations took more than an aditional year after November 16, 1995 to
reach completion. If OTR were attempting to avoid paying Laub a
commission, it would not have made sense for them to continue to delay
negotiations past that point. Laub presents no evidence contradicting any
of these facts. Instead, he relies on numerous forms of circumstantial
evidence which he claims create an issue of fact. Laub first points out
that he was shut out of negotiations with the City by Mr. Sisson of
STRS. Specifically, Mr. Sisson ceased communicating with Laub in early
April 1995 and instructed the City as early as March 1995 not to deal with
Laub further. Mr. Sisson also failed to communicate with the City in May
and June of 1995. These facts, Laub argues, demonstrate that OTR acted in
bad faith and intended to delay lease negotiations.
However, even if Laub's allegations that he was shut out of the
negotiating process are true, they do not contradict defendants'
substantial evidence that they did not delay negotiations. Laub had no
right to participate in the negotiations once he was terminated. Indeed,
even if he was shut out shortly before his termination, defendants
provide ample evidence that they had legitimate business reasons to do
so,*fn4 and Laub presents no evidence that his involvment in the
negotiations would have led to their timely conclusion. Finally, Laub
presents no evidence demonstrating that Mr. Sisson was in fact unavailable
to the City during the period cited. More importantly, even if there were
such evidence, there is no evidence that the City needed to speak to Mr.
Sisson or that his unavailability resulted in any delay. In fact,
defendants' evidence all indicates that Ms. Warren had taken the lead on
negotiations with the City.
Laub next argues that defendants failed to "aggressively pursue" lease
renewal negotiations because no eviction proceedings were initiated
against the City once its original lease expired. This claim is deficient
for a number of reasons. First, the Agency Agreement only required that
OTR not delay negotiations, not that it pursue any extreme measure
available to force the City into a lease before 180 days expired.
Second, the decision not to institute such proceedings was well within
OTR's business judgment. Had OTR chosen to evict the City, it risked
losing an important tenant. Laub himself acknowledges that OTR "had a
hugs incentive to act to the contrary" and that the City "clearly had
plenty of options to go to other buildings where they had existing space."
(Laub Dep. at 67, 72.) Third, and most importantly, Laub presents no
evidence that if OTR had instituted such proceedings the City would have
signed a lease renewal at all, let alone before November 16, 1995. Laub's
assertion that an extension would have been executed by this date is
Laub next points to an alleged statement by Matthew Valanich of STRS,
whom Laub believes was Mr. Sisson's successor, that "OTR and Defendants
may have delayed the City's renewal lease transaction in order to avoid
paying KDLC a commission." (Laub. Aff. ¶ 25.) However, there is no
evidence demonstrating that such a statement was made. Laub was asked
during his deposition whether Vulanich made such a statement to him, and
Laub responded "Mr. Vulanich never said such a thing." (Laub. Dep. at
66.) Furthermore, a letter from Laub to his attorney in which he
describes his conversation with Vulanich only says that "Mr. Vulanich
stated that he recognizes that the contract may represent a method of
avoiding payment to Laub." (Laub.Aff.Ex. 17.) Even if Mr. Vulanich made
such a statement, it is merely an accurate desctiption of the
terms of the Agency Agreement, not an admission that defendants delayed
negotiations to avoid paying Laub his commission.
Finally, Laub cites a number of New York cases for the proposition that
a broker who performs brokerage services and is the procuring cause of a
transaction is entitled to a commission even if the transaction closes
after the brokerage agreement itself has terminated.*fn5 However,
parties to a brokerage contract may alter this rule by agreement. See Levy
v. Lacey, 22 N.Y.2d 271, 274, 239 N.E.2d 378, 380, 292 N.Y.S.2d 455, 457
(1968) ("the parties to a brokerage agreement are free to add whatever
conditions they may wish to their agreement"); Thompson McKinnon
Securities Inc. v. Cioccolanti, 161 A.D.2d 523, 524, 555 N.Y.S.2d 792,
793-94 (1st Dep't 1990). The explicit provision in the Agency Agreement
limiting Laub's commission to leases executed within 180 days of his
termination is such an agreement replacing this background rule. Laub
bargained away his "procuring cause" rights under New York lay, and
cannot seek now to assert those rights. Unless he can prove that
defendants intentionally delayed lease negotiations to avoid paying him
his fee, the unambiguous terms of the Agency Agreement prevent him from
receiving a commission.
Neither the evidence discussed above nor any other evidence Laub
submits raises a genuine issue of disputed fact that defendants
intentionally delayed negotiations to avoid paying Laub a commission.
Consequently, under the terms of the Agency Agreement, Laub is entitled
to no commission for the lease renewal that was eventually executed and
his suit for breach of contract must be dismissed. See Brass v. American
Film Technologies, Inc., 987 f.2d 142, 148 (2d Cir. 1993) ("[w]here the
language is plain and unambiguous, a court may construe the contract and
grant summary judgment") (citation omitted).
For the reasons discussed above, defendants' motion for summary
judgment is granted.