MARY ELLEN COSTER WILLIAMS, District Judge.
Plaintiff, The Meyer Group, Ltd. ("Meyer Group"), claims that the Government, through the Postal Regulatory Commission ("PRC") breached an exclusive real estate brokerage agreement ("Agreement") by refusing to recognize Plaintiff as its real estate broker and the "procuring cause of" certain lease transactions. Specifically, Plaintiff claims that PRC improperly failed to request that the landlord pay Plaintiff commissions based on four lease transactions that it procured for PRC, after the termination of its Agreement. Plaintiff seeks $469,516.35 in damages plus interest under the Contract Disputes Act ("CDA").
This matter comes before the Court following a trial on liability and damages. The Court finds that PRC breached the Agreement by failing to recognize Plaintiff as its exclusive broker and procuring cause with respect to two claimed transactions. Specifically, PRC failed to inform the landlord that Meyer Group was the procuring cause of both the Seventh Amendment to the Original Lease and the first Bryan Cave Sublease. JX 27 at 2. Consequently, the landlord failed to pay Meyer Group its agreed-upon commissions. The Court finds that Meyer Group "submitted" the location of the Seventh Amendment to the Original Lease to PRC within the meaning of the Agreement prior to termination and that the Agreement covered this transaction even though it was consummated 655 days after the Agreement was terminated. The Court also finds that Meyer Group "submitted" the location of the fifth floor Bryan Cave sublease to PRC during the life of the Agreement and that the Agreement covered this transaction even though it occurred 412 days after the Agreement was terminated. The Court finds that Meyer Group did not submit the location of the second Bryan Cave sublease to PRC and that the third Bryan Cave sublease was not covered by the Agreement because it occurred 825 days after the Agreement was terminated.
To remedy this breach, the Court awards Plaintiff damages equaling the commissions Plaintiff lost — a 3.5% commission, or $402,185.76, for the Seventh Amendment to the Original Lease, and a 3% commission, or $1,923.75, for the first Bryan Cave sublease, totaling $404,109.51, plus interest calculated pursuant to 41 U.S.C. § 7109(a)(1).
Meyer Group is a licensed real estate brokerage company with its principal place of business in the District of Columbia. JSF ¶ 3. William Meyer, also known as Bill Meyer, is founder, President, and owner of Meyer Group. Tr. 15:19-16:3 (Meyer). James Rayborn worked as a Senior Vice President for Meyer Group. JX 12 at 1. Meyer Group also employed Mekonnen Tekle, who performed lease audits and financial analyses for clients. JX 244 at 6:7-20. Meyer Group typically represents tenants in office lease negotiations. Tr. 16:6-8 (Meyer).
PRC is an independent agency that was known as the Postal Rate Commission until 2006, when the Postal Accountability and Enhancement Act changed the agency's name to the Postal Regulatory Commission. JSF ¶¶ 1-2. PRC's offices are located at 901 New York Ave, NW, Washington, D.C. ("the Building"). JSF ¶ 1. When Meyer Group starting working with PRC in October 2003, its main points of contact were PRC's Secretary and Chief Administrative Officer, Steve Williams, and the Deputy Secretary, Garry Sikora. After Messrs. Williams and Sikora left the agency in 2009, Meyer Group communicated first with Judy Grady, the Assistant Director of Strategic Planning, and then Shoshana Grove, who became Secretary and Chief Administrative Officer in September 2009. Tr. 197:4-25 (Goldway). Ms. Grove reported to Chairman Ruth Goldway, who was a Commissioner of PRC starting in 1998, and became Chairman in 2009. Tr. 196:15-22; 198-14-15 (Goldway).
The landlord for the Building was BP/CRF 901 New York Ave, LLC ("BP/CRF"), and Meyer Group and PRC had communications with employees of Boston Properties ("BP"), a joint venture partner in the ownership of the Building. JSF ¶¶ 6-7. Mr. Gregory Storrs was responsible for leasing vacant office space in the building.
Meyer Group's relationship with PRC began in 2002, when, upon learning PRC was seeking to relocate to new office space in Washington, D.C., Meyer Group began contacting PRC with information about the real estate market. Eventually Meyer Group was interviewed to become PRC's broker. JX 1-4; Tr. 17:18-23 (Meyer). In 2003, before the Agreement was signed, Meyer Group provided services to PRC, including taking PRC employees on building tours, because Mr. Meyer felt that he had a "green light" from PRC that he would be its broker. Tr. 19:11-21; 130:2-10 (Meyer). Mr. Meyer would not have taken PRC employees on tours without an understanding that Meyer Group would be engaged as a broker, because he expected a commission if PRC ended up signing a lease.
After being selected, Meyer Group wrote the exclusive brokerage Agreement, and on October 28, 2003, Mr. Rayborn sent the Agreement to PRC's Deputy Secretary, Mr. Sikora, inviting him to make changes. JX 20 at 1; Tr. 19:11-20:23 (Meyer). PRC did not make any changes to the Agreement. Tr. 20:3-8 (Meyer). Over six months later, on May 5, 2004, the then-Chairman of PRC signed the Agreement. JX 27.
The Agreement, written from the perspective of PRC, provided, in full:
JX 27. (emphasis added). As the underlined text discusses what should occur after the Agreement ends, the parties refer to this text as the "extension clause." The Agreement was signed on May 5, 2004, by Mr. Meyer on behalf of Meyer Group and then-Chairman Omas on behalf of PRC. JSF ¶¶ 4-5.
On April 7, 2005, with Meyer Group's aid, PRC entered into a lease agreement with BP/CRF for approximately 29,102 square feet of rentable office space located at 901 New York Avenue, NW, Washington, D.C. ("Original Lease"). JSF ¶ 10; JX 29. The Original Lease covered the entire second floor of the west tower of the Building and a portion of the second floor of the east tower. JX 29 at 4. The Original Lease specified that the landlord recognized Meyer Group as the broker procuring this lease, and that Meyer Group would receive a commission pursuant to a separate agreement.
As contemplated by the Agreement, Plaintiff received a commission from the landlord, BP/CRF, for this lease. JSF ¶ 9; JX 28. Meyer Group and the landlord entered into a separate Commission Agreement on March 25, 2005, in anticipation of the signing of the Original Lease. JX 28. This commission was $467,523.64, 4% of the aggregate lease value for the initial 10-year term. JSF ¶ 13. Mr. Meyer also arranged for construction management services to be provided to PRC by Peter Magellan for construction done as part of the move to the Building. JX 14.
Two law firms in the Building, Finnegan Henderson Farabow Garrett & Dunner, LLP ("Finnegan Henderson") and Goodwin Procter, LLP ("Goodwin Procter"), had encumbrances on PRC's leased space. JSF ¶ 15; JX 29 at 53-54. Finnegan Henderson had a right of first offer ("ROFO") on some of PRC's space and Goodwin Procter had a "must-take" in its own lease that required it to take some of PRC's space in 2012. JSF ¶ 15. Finnegan Henderson communicated with Meyer Group regarding removing the ROFO "such that PRC could sign a lease extension in early 2009." The ROFO was actually removed "in early 2012." AJSF ¶¶ 45-46. While the Original Lease's termination date was in 2015, this lease included a provision giving PRC the right to terminate the Original Lease early, effective June 30, 2012. JX 29 at 49. The timing of PRC's termination would have a "ripple effect" on the other tenants' rights and obligations, as well as on PRC's ability to find new office space. JX 206 at 1.
After signing the Original Lease on April 7, 2005, PRC behaved as if Meyer Group was still its real estate broker. On August 17, 2005, PRC and the landlord entered into the first amendment to the Original Lease for additional storage space. JX 32. Mr. Meyer was not asked to assist with this amendment because the storage space agreement was ancillary and not a transaction that warranted his involvement. Tr. 130:15-131-11 (Meyer).
Mr. Meyer continued working with PRC after the storage space amendment. In February 2006, Mr. Meyer presented a market survey of possible alternative spaces to PRC's Messrs. Williams and Sikora, and presented a second market survey at a meeting with them on November 28, 2006. JX 33, 35; Tr. 26:5-27:1 (Meyer). PRC was interested in potentially moving to another office after the expiration or termination of the Original Lease. Mr. Meyer set up a building tour for June 15, 2007 and provided a third market report on October 24, 2007. Tr. 31:18-33:2 (Meyer); JX 47. On June 13, 2007, PRC's Deputy Secretary Sikora emailed other PRC employees, including Mr. Williams and Judy Grady, about the building tour, and referred to Meyer Group as PRC's "real estate broker." JX 43 at 1; Tr. 31:5-17 (Meyer). On October 24, 2007, Meyer Group presented a Mid-Year Office Market Report to PRC and arranged for presentations to PRC's Mr. Williams, Mr. Sikora and former Chairman Blair on November 6, 2007, by four real estate companies about potential properties for PRC to lease. JX 47; JX 48; Tr. 34:3-35:4 (Meyer).
Mr. Meyer's brokerage work on behalf of PRC continued into 2008. On January 23, 2008, PRC's Deputy Secretary Sikora emailed his colleagues, including Ms. Grady, stating that "our broker, Bill Meyer" had informed him that Goodwin Procter might wish to obtain PRC's space sooner than expected, and that Mr. Meyer suggested viewing two new properties. JX 51.
In November 2008, Mr. Meyer learned that the law firm Powell Goldstein was planning to merge with Bryan Cave, potentially making new space in the Building available for PRC to lease. AJSF ¶ 31; JX 55. This space included the entirety of the third floor of the Building, and the east side of the fourth and fifth floors. JX 58 at 2. On November 12, 2008, Mr. Meyer sent an inquiry to Bryan Cave's real estate broker about this space, stating that he represented PRC. AJSF ¶ 35; JX 57; Tr. 40:22-41:22 (Meyer). This exchange was forwarded to PRC's Mr. Sikora. At the end of November 2008, Powell Goldstein's brokers sent Mr. Meyer information about the space. Mr. Meyer forwarded this information to PRC and discussed it with Mr. Sikora. JX 58-59; Tr. 42:3-19 (Meyer). On December 2, 2008, Mr. Meyer lead PRC staff members on a tour of the Powell Goldstein space. JX 60; Tr. 42:20-43:23. Bryan Cave and Powell Goldstein merged on January 1, 2009. AJSF ¶ 37.
In January 2009, Mr. Meyer was invited by Powell Goldstein's brokers to a meeting of brokers who represented different tenants in the Building who were interested in the Powell Goldstein space. JX 61; Tr. 44:5-45:17 (Meyer). The purpose of this meeting was to discuss with Mr. Storrs, the landlord's Vice President, adjusting the various overlapping tenants' expansion rights while facilitating the subletting of Powell Goldstein's space. JX 61. Mr. Meyer was instrumental in setting up the meeting, and the brokers for the various law firms were interested in talking to him because they knew that PRC was looking for new space. Tr. 44:19-45:9 (Meyer). Mr. Meyer gave PRC an update on the meeting results immediately after the meeting occurred.
On February 12, 2009, a broker from CB Richard Ellis ("CBRE") emailed PRC's Mr. Williams and offered floor plans of the Powell Goldstein space for him to review. JX 62. This email informed Mr. Williams that Powell Goldstein was vacating space in the building on the 3rd, 4th and 5th floors.
On February 13, 2009, Powell Goldstein's broker sent Mr. Meyer a proposal for PRC to sublease the third floor area of the Powell Goldstein space, but this proposal did not include the fourth and fifth floors. JX 63. In Powell Goldstein's proposal, Mr. Meyer is referred to as PRC's broker.
In March and April 2009, Mr. Meyer attempted to resolve Goodwin Procter's "must-take" encumbrance on PRC's behalf. This "must-take" required Goodwin Procter to take some of PRC's leased space in 2012. JSF ¶ 15. Mr. Meyer communicated with Goodwin Procter's broker and Mr. Storrs of BP several times about the status of the "must-take" in March and April 2009. JX 68. These emails were forwarded to PRC's Mr. Sikora.
Mr. Meyer arranged a tour of a property at 455 Massachusetts Ave, NW on May 29, 2009, for PRC. JX 70-71; Tr. 49:8-50:5 (Meyer). This tour was rescheduled to June 16, 2009. JX 73. PRC's Ms. Grady then reached out to Mr. Meyer and asked him to schedule another tour of this building for then-Chairman Blair on June 30, 2009. JX 75. On June 19, 2009, Ms. Grady sent an email inviting several PRC staff members to the June 30, 2009 tour, including Ruth Goldway, who became Chairman in August 2009. JX 79. In this email, Ms. Grady referred to Mr. Meyer as "PRC's real estate broker."
On July 2, 2009, Mr. Williams retired as Secretary and Chief Administrative Officer from PRC and Mr. Sikora left within a very short time thereafter. JX 72 at 2;Tr. 51:9-13 (Meyer). These departures lead to a new appointee, Ms. Goldway, becoming Chairman of PRC in August 2009, and Ms. Grove assuming Mr. Williams' position as Secretary and Chief Administrative Officer in September 2009. JSF ¶¶ 16-17. When PRC hired Ms. Grove as Secretary and Chief Administrative Officer in September 2009, she was tasked with reviewing all of PRC's contracts for various services. Tr. 207:18-24 (Goldway). Chairman Goldway testified that Ms. Grove informed her that PRC's records were "in dismal shape, and that there were very few records for contractual services that we were under." Tr. 209:11-18 (Goldway). In a similar vein, Ms. Grove testified that all of PRC's files were paper files and not well organized. Tr. 386:2-7 (Grove).
Ms. Grove had no knowledge of the Agreement and was concerned that PRC had previously entered contracts that "either weren't efficient or weren't well-managed." Tr. 388:1-11 (Grove). Ms. Grove testified that Ms. Grady, who was one of the few original PRC employees remaining, did not tell her that Meyer Group was PRC's real estate broker.
On September 1, 2009, PRC's Chief Counsel, Michael Ravnitzky, forwarded an email to Chairman Goldway that he had received from Meyer Group's Mr. Rayborn about a possible property tour. Tr. 204:4-5 (Goldway); JX 89. The subject line of this email was "meeting with real estate broker."
Mr. Meyer did not consider his meetings with Ms. Grove and Chairman Goldway, or the services that he provided, to be an interview or marketing attempt, but instead part of his continuing responsibility as PRC's broker.
Also in September 2009, Ms. Grove met with a representative of CBRE brokerage who dropped by unannounced. Tr. 142:11-21 (Grove).
Mr. Meyer met with Ms. Grove on November 24, 2009. JX 97; 99. In preparation for this meeting, Mr. Meyer offered to perform a lease audit for PRC free of charge. JX 97. Meyer Group did perform a lease audit, which is dated December 8, 2009. JX 106.
Previously, PRC had been having plumbing issues in the Commissioners' bathrooms and in December 2009, temperature issues arose. JX 115 at 4; JX 113; Tr. 153:23-155:24 (Grove); JX 121; Tr. 159:12-160:6. Mr. Meyer received a call from Ms. Grove at 7:30 a.m. on December 11, 2009, about the temperature issues. JX 115 at 2. Mr. Meyer received emails from Ms. Grove and Ms. DeRosa regarding these issues and forwarded them to Mr. Magellan, who had previously provided construction services for PRC. Mr. Magellan sent a long email back stating that Ms. Grove "has the propensity to blow things out of proportion and only tell her side of the story."
For his part, Mr. Meyer was confused as to why he was being called on to address facilities issues, but as an exclusive real estate broker, he did work for clients on an ongoing basis and felt that as PRC's real estate broker, he should contact Mr. Magellan about the problems. Tr. 63:13-64:19 (Meyer). Mr. Meyer also communicated with Mr. Storrs, the landlord's Vice President, about PRC's frustration regarding facilities issues and continued following up into January 2010. JX 125-130. Neither Chairman Goldway nor Ms. Grove found Mr. Meyer useful in resolving these concerns. Ms. Grove testified that she called upon Mr. Meyer due to his work on the Original Lease and because she thought he was trying to win their business. Tr. 151:10-152:3 (Grove).
Ms. Grove also asked Mr. Meyer for help with locating space. Tr. 146:3-14 (Grove). In an email dated December 31, 2009, she told Mr. Meyer that they needed to "discuss exploring other lease options beginning in January." JX 124. This request was made after Mr. Meyer forwarded to Ms. Grove an update from the landlord about the plumbing situation.
On January 7, 2010, Mr. Storrs of BP sent Mr. Meyer a proposal for the extension of PRC's lease term. JX 131; Tr. 68:15-23. The proposal expressly named PRC as Mr. Meyer's client and contained a provision that PRC's broker would receive a commission if the extension were executed:
JX 131. This proposal was for the same space that eventually became the subject of the Seventh Amendment to the Original Lease — 29,102 square feet on the second floor east and west tower of 901 New York Ave, NW — a transaction at issue here.
Mr. Meyer forwarded this proposal to Ms. Grove and suggested they meet and discuss it. JX 131 at 1. Ms. Grove testified that she did not respond to the proposal because she had not asked for it. Tr. 402:1-10 (Grove). Nonetheless, Ms. Grove continued to meet with Mr. Meyer, and on January 12, 2010, requested that they sit down and lay out a schedule for further building tours. JX 139. Ms. Grove could not explain why she did not tell Mr. Meyer to stop holding himself out as PRC's broker if she was merely giving him a trial and was not "sold" on him. Tr. 167:7-168:12 (Grove). The Court finds that while Ms. Grove was unaware of the Agreement, she accepted services from Mr. Meyer knowing that the landlord of 901 New York Ave, NW, BP, considered Mr. Meyer to be PRC's broker and that Mr. Meyer expected to receive a commission if he secured a lease in BP's building for PRC.
On January 14, 2010, and January 15, 2010, Mr. Meyer and Ms. Grove met to prepare for tours of seven buildings with other PRC staff, including Chairman Goldway. JX 142-143; Tr. 70:25-71:17 (Meyer); Tr. 170:6-174:8 (Grove). Meyer Group also provided PRC with a market survey. JX 145. These tours occurred on January 20, 2010, and Mr. Meyer followed up with Ms. Grove on January 30, 2010, by emailing and requesting to meet with Ms. Grove to review the properties that they had visited. JX 145, 151; Tr. 74:21-76:15 (Meyer); Tr. 175:3-21 (Grove). Chairman Goldway was not satisfied with the options and information presented by Mr. Meyer and testified that she "was never impressed with the ability of [Meyer Group] to explain the situation we were in or the likelihood that we could sort out the lease." Tr. 360:3-18 (Goldway).
On February 25, 2010, another meeting between PRC and Meyer Group occurred that involved a presentation of a building located at 10th and G Streets, NW, a property that, according to Mr. Tekle of Meyer Group, Ms. Grove had been asking about. JX 161.
On March 2, 2010, Mr. Meyer and Mr. Storrs, representing the landlord, discussed the January 7, 2010 lease extension proposal covering the 29,102 square feet in the east and west towers, including PRC's desire for a longer lease term and tenant improvement funds to fix the plumbing issues. JX 162. This discussion took place after Mr. Meyer had conversations with PRC about BP's January 7, 2010 lease extension proposal. Tr. 81:13-20 (Meyer).
In an email to other BP employees, dated March 3, 2010, Mr. Storrs noted that a proposal had been sent to PRC and that he had talked with Mr. Meyer, who had indicated that PRC wanted a longer term and requested that the landlord pay to fix the plumbing system. JX 162. Mr. Storrs stated that he would ask Mr. Meyer to send a formal written counterproposal.
On March 26, 2010, Mr. Tekle emailed Mr. Meyer to discuss items to put in the counterproposal.
Mr. Storrs acknowledged that negotiations for the Seventh Amendment to the Original Lease began in 2009, when Mr. Meyer was representing PRC, that he was interacting with Mr. Meyer as PRC's broker for the lease extension, and that he understood that Mr. Meyer expected a commission out of the deal.
Ms. Grove met with a representative of CBRE brokerage who dropped by unannounced in September 2009. Tr. 142:11-21 (Grove). The exact date PRC hired CBRE is not in the record, but at some point before terminating Meyer Group, Chairman Goldway, Ms. Grove, and the director of PRC's Office of General Counsel had a meeting with a representative from CBRE and were very impressed. Tr. 366:6-20 (Goldway). In a March 26, 2010 email, Mr. Storrs informed other BP employees that he had run into a CBRE broker at the "GWCAR Awards," who mentioned that he had been hired by PRC to represent them going forward. JX 171. Mr. Storrs stated that this was "[g]ood news," although the CBRE broker "may try even harder than Bill to move them."
On March 29, 2010, three days after Meyer Group created the draft counterproposal for the lease extension for PRC in the building, Ms. Grove terminated the Agreement in an email:
JX 172.
The next day, on March 30, 2010, Mr. Meyer called Ms. Grove and informed her that under the Agreement, PRC was obligated to work with Meyer Group post-termination for properties that Meyer Group had submitted. Tr. 83:14-84:9 (Meyer). This was the first time Ms. Grove became aware of the Agreement. Tr. 405:1-5. Mr. Meyer sent Ms. Grove a copy of the Agreement, and on March 31, 2010, Ms. Grove responded that her March 29, 2010 email served as written notification that PRC was terminating "any and all representation agreements we may have with Meyer Group." JX 176.
On April 6, 2010, Mr. Meyer faxed Ms. Grove a list of properties he felt had been previously submitted to PRC during the term of the Agreement ("protective list"). JX 182; Tr. 84:12-24 (Meyer). This list included the Building and 25 other properties, which were listed on the market survey Meyer Group had given to PRC during the January 14, 2010 meeting. Although Mr. Meyer attempted to communicate further with PRC about the Building, PRC made clear that it did not think Meyer Group was entitled to any further compensation. JX 197 at 2.
On March 31, 2010, in an email to other brokers representing tenants in the Building, Goodwin Procter's broker discussed lease negotiations between BP and PRC and stated:
JX 179. According to Mr. Storrs, the change in "brokerage representation, for PRC in 2010, delayed [PRC's] ability to respond to any proposals we had issued. It was my understanding that they had terminated their agreement with The Meyer Group and had engaged CBRE as their broker. And until that process was complete, they could not — weren't willing to engage in any further negotiations." JX 243 at 22:4-13.
On November 15, 2010, CBRE presented a proposal on behalf of PRC for the second floor premises, the site of the Original Lease, to Mr. Storrs. JX 201 at 1. CBRE worked with BP on behalf of PRC and on April 1, 2011, a year and two days after Meyer Group's brokerage agreement had been terminated, BP/CRF sent a counterproposal to PRC via CBRE. JX 205 at 1. Mr. Storrs stated that this counterproposal was coming "[a]t long last."
On May 25, 2011, roughly a year and two months after Meyer Group's Agreement was terminated, PRC and BP/CRF signed a letter of intent to extend the term of the Original Lease through August 31, 2022. JX 208. This letter of intent stated that the premises would remain as 29,102 square feet "representing the entire second (2
Although the May 25, 2011 letter of intent stated that the landlord was required to prepare a lease amendment, the Original Lease was not amended until January 13, 2012, over seven months later. The letter of intent and the January 13, 2012 amendment are similar; the only differences are the addition of contract boilerplate and detail to the key terms. This delay in executing the Seventh Amendment to the Original Lease after the letter of intent was not due to changes to the substance of the lease extension described in the May 25, 2011 letter of intent, or negotiation between BP, CBRE and PRC. Rather, this delay was due to the need to resolve the "must-take" and "ROFO" encumbrances of the law firms, as well as PRC's slow pace, and the need to have the amendment approved by BP's lender. JX 243 at 24:10-14, 26:7-20. Chairman Goldway had to contact someone she knew at BP to ask BP to focus on completing the lease extension.
PRC did not sign a written agreement with CBRE engaging CBRE as its broker until over a year after PRC terminated Meyer Group — August 5, 2011 — after the letter of intent was signed. JX 215. This agreement authorized CBRE to "exclusively assist and represent PRC in any new lease or lease extension/lease restructuring discussions . . . ."
The agreement between PRC and CBRE also contained an indemnification provision, which stated:
JX 215 at 2-3.
Between June and December 2011, PRC and the landlord signed a set of five lease amendments that extended the Original Lease's termination date, in order to allow PRC to remain in the space until it executed the agreement extending the Original Lease. JX 210, 221-222, 224, 227. In November 2011, CBRE reported that according to Mr. Storrs, the Finnegan Henderson encumbrance was taken care of, but BP had been waiting for three weeks to hear about the Goodwin Procter "must-take" and expected results shortly. JX 223. After that, BP needed to get approval from its lender, JP Morgan.
The Seventh Amendment to the Original Lease covered the same space PRC was occupying and extended the term of the Original Lease to August 31, 2022. It also provided PRC with a construction allowance and a right of first offer on space on the 2nd floor and lists PRC's broker as CBRE.
During this time period, between May 15, 2011, and July 1, 2012, PRC also signed three subleases with Bryan Cave. The first sublease was signed on May 15, 2011, and was for 1,500 square feet on the fifth floor of the east tower of the Building. JSF ¶ 18; JX 207. The rental period ended on June 30, 2012. This sublease specifically provided that CBRE would receive a 3% commission paid by Bryan Cave and that PRC and Bryan Cave had not dealt with any other brokers other than Bryan Cave's broker, Jones Lang LaSalle ("JLL"), and CBRE. JX 207 at 12. Bryan Cave and PRC agreed to indemnify each other against claims "arising out of any dealings had by the indemnifying party with any broker other than JLL and CBRE."
The second Bryan Cave sublease was an amendment to the first sublease, and was signed on August 16, 2011. JSF ¶ 23; JX 220. The second Bryan Cave sublease gave PRC short-term (from August 16, 2011 to October 31, 2011) "swing space" on the fourth floor of the east side of the Building. JX 220. The second Bryan Cave sublease contained a similar indemnification provision, but stated that "[n]o commissions shall be payable in connection with this First Amendment."
Besides negotiating with BP regarding BP's April 1, 2011 counterproposal and the May 25, 2011 letter of intent for the Seventh Amendment to the Original lease, and the Bryan Cave subleases, CBRE performed additional real estate brokerage work for PRC. CBRE represented PRC regarding the series of lease amendments that extended the Original Lease to accommodate PRC until the Seventh Amendment could be signed. Tr. 407:11-18 (Grove). CBRE also showed PRC additional properties.
Plaintiff's expert at trial was David Ellis Kaplan, the founder of Strategic Realty Advisors. Tr. 214:10-24 (Kaplan). Mr. Kaplan is an attorney and a licensed real estate broker in Washington, D.C., Maryland, and Virginia.
According to Mr. Kaplan, after a broker has been terminated by the tenant, the brokerage agreement's extension clause would permit the broker to receive a commission on a transaction he submitted for a reasonable period of time. Mr. Kaplan defined such a reasonable period of time as the duration of the balance of the initial lease term, plus a year or two thereafter.
Mr. Kaplan testified that typically, the landlord or landlord's agent pays the tenant's broker's commission, which is calculated as a percentage of the gross value of the lease over the entire lease term.
On cross-examination, Mr. Kaplan stated that the language in the Agreement was typical in the real estate industry. However, he acknowledged that the Agreement was the only agreement he had seen over the course of his 29-year career that paired very broad "submitted" language with no stated temporal limitation governing how long after termination a commission could be received for work done pre-termination.
Defendant's expert, James Warkentin, has been a real estate broker for 45 years and holds the exclusive Counselor of Real Estate designation from the National Association of Realtors. Tr. 424:24-425:15 (Warkentin). Mr. Warkentin is currently licensed in Virginia and was formerly licensed in Washington, D.C. and Maryland.
Mr. Warkentin's area of specialty is residential real estate and commercial investment work.
After conducting voir dire, Plaintiff objected to Mr. Warkentin's qualification as an expert, arguing that he had "no stated experience in commercial lease transactions in the District of Columbia . . . ."
Based upon Mr. Warkentin's candor, demeanor, and longstanding experience in local real estate, and his repeated teaching of a seminar on creating agreements, as well as the apparent difficulty in retaining opposing experts in this arena, the Court determined it would be helpful to hear Mr. Warkentin's views. Ultimately, the Court admitted Mr. Warkentin as an expert in commercial real estate brokerage agreements and representation in the Washington, D.C. metropolitan area.
Mr. Warkentin testified that a month-to-month exclusive commercial real estate brokerage agreement that "goes on forever" would be an abusive agreement and that District of Columbia regulations impose a 90-day termination date, in a scenario where no termination date is set forth in such an agreement.
Mr. Warkentin also discussed how brokerage is a risk-filled business and that each broker decides how much risk to take on.
Mr. Kaplan and Mr. Warkentin agreed on certain issues. Mr. Warkentin agreed with Mr. Kaplan's report that each of the leased spaces in the Building was submitted to PRC "as that term is commonly used in the context of real estate brokerage agreements."
The Court has jurisdiction over this case. The Tucker Act provides, in relevant part, that "[t]he Court of Federal Claims shall have jurisdiction to render judgment upon any claim by or against, or dispute with, a contractor arising under section 10(a)(1) of the Contract Disputes Act of 1978, including a dispute concerning termination of a contract . . . ." 28 U.S.C. § 1491(a)(2) (2012).
Defendant moves to strike Plaintiff's Exhibit 2, a memorandum to "files" from "R.A. Oliver" of PRC dated October 2, 2009. PX 2.
Defendant argues that this exhibit is hearsay and is not admissible based on Ms. Grove's testimony. Def. Mot. to Strike 3. Plaintiff counters that the memorandum itself states that Mr. Oliver was a PRC representative and it qualifies as the statement of a party opponent. Pl. Opp'n to Mot. to Strike 2-3.
Federal Rule of Evidence ("FRE") 801 defines hearsay as a statement made by a declarant that is not made while testifying at the current trial or hearing and is introduced for the truth of the matter asserted in the statement. Fed. R. Evid. 801(c). An opposing party's statement is not hearsay and is defined in FRE 801(d)(2) as a statement "offered against an opposing party" and:
As a representative of PRC, any statements made by Mr. Oliver are covered by Rule 801(d)(2)(D). In order to be admissible under Rule 801(d)(2)(D), the statement must be offered against a party and be "made by the party's agent or servant concerning a matter within the scope of the agency or employment, made during the existence of the relationship."
This is a highly unusual case. A Government agency entered into an exclusive real estate brokerage agreement without negotiating the Agreement or changing one word of the broker's proposed contractual language. As a result, the Agreement at issue contains language quite favorable to Meyer Group. Nonetheless, as the parties acknowledge, the Agreement is a binding contract.
When the United States is a party to a contract, the Court still applies the general rules of contract construction applicable in the commercial area.
Courts seek an interpretation of a contract that gives effect to all its terms and leaves no provision meaningless.
At the outset, Defendant offers a strained argument that the language of the Agreement demonstrates that its purpose was for a single lease and commission and that it terminated upon the signing of the Original Lease in April 2005. Def. Post-Trial Br. 71-74. This would mean that Meyer Group is not entitled to any commissions beyond that it already received for securing the initial lease. Defendant focuses on the Agreement's use of the singular and points to references in the Agreement it asserts demonstrate that the Agreement was for a single transaction — the Agreement's use of the words "a lease" twice, "the lease" twice, "a location," "the commission," "its commission," "in the said transaction," and "a lease agreement" obligating the landlord to pay "a commission" in "the lease agreement."
Plaintiff counters that under its plain meaning, after the initial 12-month term, the Agreement continued on a month-to-month basis and did not automatically terminate after the signing of the Original Lease. Pl. Post-Trial Br. 52. Plaintiff also highlights language in the Agreement that contemplates an ongoing relationship and focuses on Mr. Kaplan's testimony that brokerage agreements define their duration by their own terms, and do not typically terminate upon the signing of a lease.
In this Court's view, the unambiguous language of the Agreement provides that this contract was effective for 12 months and then continued month-to-month until terminated in writing. JX 27. Rather than defining duration as Defendant suggests in terms of the number of transactions or leases Meyer Group was retained to procure, the Agreement defined duration in terms of time. Defendant's position that the Agreement terminated automatically on April 7, 2005, when the Original Lease was signed, conflicts with the Agreement's clear continuation language and would make the written termination notice requirement meaningless. While the Agreement refers to "transaction," "lease," etc. several times in the singular, the termination provision does not state that the Agreement would terminate upon completion of a single transaction, and the Court will not read such a limitation into the text. The use of the singular "lease" or "transaction" throughout the Agreement does not create an otherwise unmentioned restriction that this Agreement would only cover a single lease transaction.
Defendant's attempt to impose this single-transaction limitation as the linchpin of the Agreement is at odds with the overarching premise of this exclusive real estate brokerage agreement. The key obligations PRC undertook were to advise the landlord of Meyer Group's representation of PRC "before entering in to
In addition, the extension clause specified that Meyer Group could, as PRC's exclusive broker, work to secure other future lease transactions for PRC prior to termination of the Agreement. In this clause, PRC expressly agreed:
JX 27 at 2.
This provision would clearly contradict Defendant's proposed construction that the Agreement abruptly ended upon consummation of a single initial lease. Furthermore, Meyer Group promised to "use its best efforts to secure a location or
In sum, the language of the Agreement indicates that this relationship between PRC and Meyer Group would be ongoing after the initial lease was signed. This interpretation gives effect to all parts of the Agreement. The Court concludes as a matter of law that the Agreement did not terminate upon execution of the Original Lease in April 2005, but continued to be in effect until PRC terminated the Agreement on March 29, 2010.
Defendant argues that it is contrary to law for the Agreement to define Meyer Group as the procuring cause because it would be a "fabrication" for the Court to recognize Meyer Group as the procuring cause based upon its submission of property when CBRE was the real procuring cause. Def. Post-Trial Reply Br. 30.
Additionally, even after PRC's management changed, Meyer Group performed the following tasks as PRC's exclusive real estate broker:
Defendant brushes aside the Agreement PRC signed and cites cases holding that a broker must be the procuring cause of a transaction in order to obtain a commission from it. Def. Post-Trial Br. 90-91; Def. Post-Trial Reply Br. 29. However, it is settled law that when a brokerage agreement sets forth what actions a broker must take to be entitled to a commission, the terms of that agreement override any procuring cause analysis. In
The Agreement required PRC to recognize Meyer Group as its exclusive broker and procuring cause "with respect to any prospective locations that have been submitted by [Meyer Group] during the term of this agreement." JX 27 at 2.
Mr. Kaplan defined submission as:
Tr. 235:7-12 (Kaplan). In his testimony, Mr. Kaplan further stated that in his view and, he thought, industry-wide, "when you talk about a building submitted or presented to a tenant, it — or a property, it refers to the building, it doesn't necessarily mean that you have to show them that particular space."
Based on the evidence in this case, Meyer Group submitted the location in the Seventh Amendment to the Original Lease to PRC. Meyer Group made PRC aware of the option of extending its lease and did additional work on the lease extension. Specifically, Meyer Group:
The Bryan Cave subleases were for space on the fourth and fifth floors of the Building. JSF ¶¶ 18, 23, 27.
On June 16, 2009, Mr. Meyer emailed a Powell Goldstein broker stating, "I met with the Postal Regulatory folks. Can you carve out a small suite somewhere for sublease?" JX 74 at 1. Mr. Meyer also sent an email to a CBRE broker that he "needed a small suite for my client the Postal Regulatory Commission. 1,500-2000 feet. Right away. Know of anything else in the area of 901 new york let me know." JX 77. The purpose of this search was to find space for PRC's Inspector General's office. JX 78 at 1.
On June 29, 2009, Mr. Meyer emailed PRC's Ms. Grady stating "[t]here is space that Brian [sic] Cave is willing to subdivide for you upstairs." JX 81 at 2. Mr. Meyer then sent Ms. Grady a diagram of the fifth floor east tower of 901 New York, Ave, NW and noted that he had circled the location Bryan Cave was willing to subdivide. JX 82. On June 30, 2009, Mr. Meyer emailed Bryan Cave's broker and asked "[i]s there a way for the Postal Regulatory people to see the proposed space today. Maybe around noontime.?" JX 83. A tour of this space may have taken place on July 1, 2009, as the record contains emails between Ms. Grady, Mr. Meyer, and the Bryan Cave broker arranging a time to meet, and ending with Mr. Meyer asking Ms. Grady if she connected with the Bryan Cave broker.
As Meyer Group specifically presented PRC with the option of subleasing Bryan Cave space in the 5
However, there is no indication in the record that Meyer Group introduced or otherwise submitted the fourth floor swing space to PRC beyond touring these spaces in December 2008.
The case of
Here, as in
Even though the Agreement was in effect through March 29, 2010, and Meyer Group "submitted" both the Seventh Amendment to the Original Lease location to PRC and the fifth floor location of the first and third Bryan Cave subleases, there is another potential legal impediment to awarding Meyer Group damages for the Seventh Amendment to the Original Lease and the first Bryan Cave fifth-floor sublease — these transactions were not effected until well over a year after the Agreement was terminated. The Seventh Amendment was not executed until January 13, 2012 — 655 days, or one year and nine months, after Meyer Group's Agreement was terminated, and the first Bryan Cave fifth floor sublease was executed on May 15, 2011 — 412 days, or one year and 47 days, after termination. The delay in the consummation of these transactions presents a thorny legal issue, even with contract language as favorable as what Meyer Group wrote for itself with PRC's full acquiescence.
The Agreement provided no time limit on how long the broker would be entitled to a commission for properties he had submitted before the Agreement was terminated. In other words, theoretically, Meyer Group could be entitled to a commission no matter when a lease was eventually executed even if it were years after a property was submitted. The law does not favor such indefinite contract provisions, and, as precedent dictates and the experts here agree, the Court is forced to impose a "reasonable" term.
The Extension Clause provides:
JX 27 at 2.
Defendant argues that D.C. Code § 42-1703(g)(2) governs the Agreement and imposes a 90-day limitation to the extension clause, that the extension clause is ambiguous and must be construed against the drafter, Meyer Group, and that if this District of Columbia 90-day limitation does not apply, a reasonable time of 6 to 12 months must be used. Def. Post-Trial Br. 79, 83-90. The Court addresses these arguments in turn.
Defendant argues that D.C. Code § 42-1703(g)(2) limits the extension clause to 90 days because the Agreement does not specify a termination date.
D.C. Code § 42-1703(g) states:
D.C. Code § 42-1703(g) (2012).
The D.C. Code does not govern this situation.
Defendant argues that the Court should adopt its construction of the extension clause because "[t]he application of PRC's commitment in perpetuity to its broker relationship with Meyer Group is ambiguous." Def. Post-Trial Br. 89. Defendant thus urges the Court to employ the doctrine of
The Federal Circuit addressed a similar issue in
The Court must determine whether the extension clause should be read to entitle Meyer Group to commissions for the first Bryan Cave sublease, entered into 412 days after the Agreement was terminated, and the Seventh Amendment to the Original lease, entered into 655 days after the Agreement was terminated. Plaintiff argues that the extension clause continues through the termination date of the original lease and for a year or two thereafter, based on Mr. Kaplan's testimony. On the other hand, Defendant argues that a 6-12 month period after termination is reasonable.
The Federal Circuit has held that in the absence of an express time provision in a contract, it is common for courts to imply a reasonable time.
Mr. Storrs testified that after PRC signed the letter of intent, BP had to move the Goodwin Proctor "must-take" to the fourth floor and that was when the "bulk of the work took place." JX 243 at 56:9-17. Mr. Storrs stated that it was a similar scenario for the Finnegan Henderson ROFO.
Mr. Warkentin also stated that there were situations when even a two-year extension period could be reasonable. Tr. 465:15-466:5 (Warkentin). Here, had third-party involvement not prevented the signing of the Seventh Amendment to the Original Lease until January 13, 2012, the evidence suggests that the lease extension would have been signed in May or June 2011, — only two to three months outside a 12-month period. Similarly, the first Bryan Cave sublease for the fifth floor that Meyer Group had submitted to PRC was signed within a reasonable timeframe after termination of the Agreement — one year and 47 days.
However, the third and final Bryan Cave sublease was not executed within a reasonable time after Meyer Group's Agreement was terminated on March 29, 2010. This third sublease, which amended the lease period and rent terms for the fifth-floor sublease, was not signed until July 1, 2012, 825 days after PRC terminated the Agreement and nearly seven months after the signing of the Seventh Amendment to the Original Lease. JSF ¶ 27. This transaction arose from the need to extend the final date of the first Bryan Cave sublease from June 30, 2012 to March 29, 2015. Unlike the Seventh Amendment to the Original Lease, this sublease extension was executed well beyond even two years after the Agreement was terminated. There is no evidence that this transaction, like the Seventh Amendment to the Original Lease, had been initiated earlier, but was delayed due to external factors, and was similar to a proposal Meyer Group had been negotiating. Nor has Plaintiff established that the need to extend this Bryan Cave sublease was on the horizon before the Agreement was terminated.
The Court finds that a 3.5% commission is appropriate for the Seventh Amendment to the Original Lease as that was the market rate in Washington, D.C. in January 2012, when that amendment was signed. The Court recognizes that Mr. Meyer testified that he received a 4% commission on the Original Lease in 2005, and that 4% "still [was]" the market rate. Tr. 23:19-21 (Meyer). Similarly, Meyer Group's expert, Mr. Kaplan, testified that in 2012, 3% to 4% was "more common," with the market moving toward 4%. Tr. 229:9-15.
There is little information in the record as to the market rate for commissions in May 2011, when the first Bryan Cave sublease was signed. However, the first sublease itself stated that CBRE would receive a 3% commission, which is probative evidence of what the parties were willing to accept as a market rate in this timeframe. Therefore, the Court uses a 3% market rate for the commission for the first Bryan Cave sublease for the fifth floor.
Defendant argues that Meyer Group cannot recover damages from PRC because the Agreement states that the landlord generally assumes the responsibility of paying the commission to the broker. Def. Post-Trial Br. 99. Defendant thus asserts that Meyer Group's sole remedy is a declaratory judgment "requiring PRC to inform the landlord that Meyer Group should be recognized as PRC's exclusive broker, pursuant to the terms of the agreement, for certain disputed transactions," and then Meyer Group must negotiate separately with the landlord.
Once an injured party establishes a breach of an enforceable contract, that party has a right to damages unless the breach caused no loss or the party cannot prove a loss. RESTATEMENT (SECOND) OF CONTRACTS § 346 (1981). Expectation damages are measured by "(a) the loss in the value to him of the other part's performance caused by its failure or deficiency, plus (b) any other loss, including incidental or consequential loss, caused by the breach, less (c) any cost or other loss that he has avoided by not having to perform."
To recover expectancy damages for a breach of contract, a plaintiff must establish that (1) the damages were caused by the breach; (2) the damages were reasonably foreseeable at the time the contract was entered into; and (3) the measure of damages are reasonably certain.
Plaintiff has the burden of proving that its damages resulted from PRC's breach of the Agreement. The Court must determine which legal standard to apply in assessing causation, as it has discretion to choose from the "but for" or "substantial factor" standard.
Here, the Court will apply the "but-for" standard, as Meyer Group does not assert that any factor other than PRC's breach prevented it from receiving commissions on the Seventh Amendment to the Original Lease and the first Bryan Cave fifth floor sublease. In this case, PRC's breach was the "but-for" cause of Meyer Group's damages. PRC breached the Agreement by failing to recognize Meyer Group as its exclusive real estate broker and procuring cause for the Seventh Amendment to the Original Lease and the first Bryan Cave fifth floor sublease.
Foreseeability means that "the injury actually suffered must be one of a kind that the defendant had reason to foresee and of an amount that is not beyond the bounds of reasonable prediction."
In this case, the Agreement specifically required PRC to "cooperate and work with The Meyer Group, Ltd. in its efforts to obtain its commission," to "inform the landlord" of Meyer Group's representation of PRC before PRC entered into any lease agreement, and to make the landlord undertake an obligation to pay Meyer Group a commission, "in accordance with a typical market rate," as a condition of entering into a lease agreement. JX 27 at 2. These terms make clear that at the time of contracting, if PRC failed to recognize Meyer Group as its exclusive broker and procuring cause for submitted transactions after the termination of the Agreement, Meyer Group would suffer the loss of market-rate commissions. Indeed, the conduct of the parties when the Original Lease was signed confirms this understanding, as Meyer Group received its commission and the Original Lease contained a provision recognizing Meyer Group as the broker. JX 29 at 43.
A plaintiff must show damages with reasonable certainty. While it is the plaintiff's burden to prove damages, "where responsibility for damage is clear, it is not essential that the amount thereof be ascertainable with absolute exactness or mathematical precision: `It is enough if the evidence adduced is sufficient to enable a court or jury to make a fair and reasonable approximation.'"
There was no evidence at trial as to the total gross aggregate lease value of the Seventh Amendment to the Original Lease.
Plaintiff filed this supplemental brief on December 12, 2014, and notes that Mr. Meyer defined the term "gross aggregate lease value" as
Tr. 23:8-18 (Meyer). Plaintiff also quotes Mr. Meyer defining a triple net lease as
Tr. 21:23-22:5 (Meyer).
Plaintiff's assertion that the total gross value of the lease was $11,491,021.71 appears to be derived from an email of Mr. Storrs dated January 4, 2012. JX 230. Plaintiff relies on this email in its supplemental brief to prove what a 4% commission on the Seventh Amendment to the Original Lease would be. Pl. Suppl. Br. 2. In this email to a JP Morgan employee, Mr. Storrs discussed the amount of CBRE's commission and stated that a 4% commission would be $459,640.87 and that a 3.5% commission with the second payment discounted by 8% would be $352,220.94. JX 230. Plaintiff thus seems to have worked backwards from the $459,640.87 quoted in Mr. Storrs' email to arrive at the $11,491,021.71 gross aggregate lease value amount in its post-trial brief, as $459,640.87 is 4% of $11,491,021.71.
In its response to Plaintiff's supplemental brief, Defendant argues that Plaintiff did not provide any explanation about how the gross aggregate lease value was calculated and that Mr. Storrs' email merely represents his "then-existing view on the value of a four-percent commission" and "establishes neither the aggregate lease value nor the gross-up." Def. Suppl. Br. 2. Defendant further argues that Mr. Meyer's testimony proves that further inputs are needed to calculate the gross aggregate lease value.
Mr. Storrs, as an employee of the landlord, had the values of the different rent structures and add-ons on hand in order to calculate a 4% commission. Mr. Storrs had no reason to exaggerate his calculation, as his company would be paying the commission and needed the lender's approval. As Mr. Storrs' email provides a value for a 4% commission, the Court can make a "fair and reasonable" determination of what a 3.5% commission would be. As such, Plaintiff has proved damages to a reasonable certainty.
The number used in Mr. Storrs' email, $459,640.87, is 4% of $11,491,021.75. Using $11,491,021.75 as the gross aggregate lease value yields a 3.5% 2012 market rate commission of $402,185.76. Therefore, the Court awards Plaintiff damages of $402,185.76 on the Seventh Amendment to the Original Lease.
Both parties agree that the first Bryan Cave sublease was not a triple-net lease and simply consisted of $4,750 in monthly rent and 13.5 months of rent. This amounts to a total lease value of $64,125,
1. The Clerk of Court is directed to enter judgment in favor of Plaintiff in the amount of $404,109.51, plus interest calculated from May 3, 2012, pursuant to 41 U.S.C. § 7109(a)(1) (2012).
2. Defendant's motion to strike Plaintiff's Exhibit 2 is
Additional findings of fact are in the discussion. The Court uses "PX" to cite Plaintiff's exhibits, "JX" to cite joint exhbits, and "Tr." to cite testimony. At trial, Plaintiff called William Meyer, Shoshana Grove, and Chairman Ruth Goldway as fact witnesses, and David Ellis Kaplan as an expert witness. Defendant called Chairman Goldway and Ms. Grove as fact witnesses, and James Warkentin as an expert witness.
Upon review of the record, the Court ordered Plaintiff to file a supplemental brief "setting forth with citations to the record, the total gross aggregate lease value for the Seventh Amendment to the Original Lease . . ., and an explanation of how such values were calculated." Plaintiff filed this supplemental brief on November 26, 2014, and Defendant filed a response on January 5, 2015.
A: I would say that we were looking for a path forward, and that at that time, our determination was that — that Bill was not the best to serve our needs. Tr. 190: 7-11 (Grove).
Tr. 372:11-373:7 (Goldway).