INDIRA TALWANI, District Judge.
Plaintiff Jones Lang LaSalle New England, LLC ("Jones Lang"), a broker, brought suit seeking a brokerage commission in connection with amendments to a commercial lease between Defendants 350 Waltham Associates, LLC, and 358 Waltham Associates, LLC (collectively, "Waltham Associates"), as landlord, and non-party Foster-Miller, Inc. d/b/a QinetiQ North America ("QinetiQ"), the tenant. Pending before the court are Defendants'
Defendants removed this action from state court in September 2017,
Beginning well after the close of fact discovery and three days before the close of expert discovery, Defendants filed the pending motions.
The following facts are drawn from the summary judgment record.
In 2007, QinetiQ entered into a ten-year lease agreement with Defendants to rent buildings located at 350 Second Avenue and 358 Second Avenue in Waltham, Massachusetts. Pl.'s SOF ¶ 1 [#60]; Defs.' Ex. 4 — 2007 Lease Agreement [#44-4]. The brokers who worked on the agreement were paid a commission of 2% of the total rent, evenly split. Pl.'s SOF ¶ 1 [#60].
In 2015, brokers for Defendants and QinetiQ began negotiating lease renewal.
On March 30, 2016, Jones Lang sent a draft Request for Proposal ("March RFP") to QinetiQ for approval. Pl.'s SOF ¶ 4 [#60]; Defs.' Ex. 7 — March RFP [#44-7]. The RFP included a section titled "Brokerage" that read:
Pl.'s SOF ¶ 4 [#60]. On March 31, 2016, Jones Lang, with the approval of QinetiQ, sent the same RFP to Amadei.
Amadei, Bailey, and corporate representatives from Defendants and QinetiQ met on May 9, 2016.
Around the same time, Jones Lang negotiated a Services and Compensation Agreement ("Services Agreement") with QinetiQ.
On July 22, 2016, Jones Lang emailed Amadei a new RFP ("July RFP") which included the following language in the "Brokerage" section:
Pl.'s SOF ¶ 17 [#60]; Defs.' Ex. 24 — July RFP [#44-24]. Amadei responded on August 3, 2016, with a proposal to split a brokerage fee of $1,000,000 between Amadei's company and Jones Lang. Pl.'s SOF ¶ 21; Defs.' Ex. 25-Aug. 3, 2016 Proposal [#44-25].
QinetiQ began to negotiate directly with Defendants on August 18, 2016, without including the brokers. Pl.'s SOF ¶ 22 [#60]; Defs.' Ex. 1 — Dep. of William Bailey 98:2-98:23 [#44-1]. The negotiations continued throughout August and September. Pl.'s SOF ¶¶ 23, 26-27 [#60].
Defendants sent Jones Lang a proposal on September 21, 2016, which stated that the brokerage commission "shall be paid to [Jones Lang] and RW Holmes (Arthur Amadei) as per the standard for the Waltham/Boston area for renewals." Pl.'s SOF ¶ 30 [#60]; Defs.' Ex. 32 — Sept. 21, 2016 Proposal [#44-32]. Jones Lang did not accept the agreement. Pl.'s SOF ¶ 31 [#60].
On September 28, 2016, Defendants sent to QinetiQ draft Lease Amendments that stated in the "Brokerage" section:
Defendants and QinetiQ executed the Lease Amendments on September 29, 2016. Pl.'s SOF ¶ 62 [#60]; Pl.'s Ex. K-First Amendment to Lease, 350 Second Ave. [#61-11]; Pl.'s Ex. L-First Amendment to Lease, 358 Second Ave. [#61-12]. Each Lease Amendment included brokerage commission language stating that the commission would be "paid as per the standard for a renewal of a lease in the Waltham/Boston Area," and that Defendants agreed to pay the brokers all commissions due to them. Pl.'s Ex. K — First Amendment to Lease, 350 Second Ave. [#61-11]; Pl.'s Ex. L — First Amendment to Lease, 358 Second Ave. [#61-12].
Once the lease amendments were signed, Jones Lang submitted an invoice to Defendants for $880,689.60, representing a brokerage fee of $1.20 per square foot, and stating that Jones Lang believed this to be the standard market commission.
Under Fed. R. Civ. P. 15(a), leave of court is required to amend an answer more than 21 days after service. While leave shall be given freely "when justice so requires," Fed. R. Civ. P. 15(a)(2), the court will not "mindlessly grant every request."
Defendants seek to amend their answer for two purposes: 1) to add an affirmative defense of fraud; and 2) to bring counterclaims against Plaintiff alleging fraud. Defs. Mot. to Amend 13 [#32]. Defendants state that they did not learn of the facts that they contend give rise to their additional claims and defense until November 1, 2018.
Accepting for the purposes of this motion that Defendants did not learn the facts on which they rely until November 1, 2018, the motion is still untimely. Despite fact discovery closing on November 5, 2018, Defendants acted with no haste. Defendants did not raise the issue at the December 2018 status conference. When the parties moved jointly on February 5, 2019, to extend expert witness depositions until March 11, 2019,
Even if Defendants' motion had been timely, the amendment is futile. Defendants allege that Jones Lang committed fraud by misrepresenting in the March RFP provided to Defendants that QinetiQ "required Landlord to enter into a separate agreement with Broker, under which Landlord agrees to pay a real estate commission equal to a $1.00 per square foot per year of lease term, or partial year, at the time of Lease execution for all premises," when QinetiQ had no such requirement. Defendants assert further that having made this misrepresentation, Jones Lang had a duty to disclose its subsequent Services Agreement with QinetiQ, and QinetiQ's statement to Jones Lang that lease renewal was not a "commissionable event." Mot. to Amend Answer to Assert Counterclaims 14-15 [#32].
In order to establish fraud in the inducement of a contract, however, a party must show that the allegedly false statement was material to its decision to execute the contract.
Nor can Defendants show how the statement in the March RFP was material to the Lease Amendments signed by Defendants and QinetiQ in September. The record indicates that the parties engaged in arms-length negotiations driven by the desire to win cost concessions from the other side. Over six months of negotiations, Defendants consistently rejected Jones Lang and QinetiQ's proposals, and proposed multiple alternatives of their own.
In sum, Defendants'
Defendants'
Defendants' assertion that their claims against QinetiQ are "derivative" claims is also misplaced. A "derivative" claim under Rule 14 must not only be a related claim but must be "derivatively based on the original plaintiff's claim."
Here, however, Defendants are not alleging that QinetiQ is potentially liable for the claims Jones Lang has brought against Defendants. Instead, Defendants are asserting independent claims of fraud in the inducement of a contract. While the amount of damages at issue may turn on whether Jones Lang prevails on its claims against Defendants, liability based on QinetiQ's alleged fraud is not a derivative claim.
Finally, Defendants are not prejudiced by the denial of their motion. The claims that Defendants seek to bring — independent claims alleging QinetiQ induced Defendants into entering a contract through fraud — are not compulsory counterclaims that will be lost if not asserted here.
Accordingly, Defendants'
Summary judgment is appropriate only if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The court views the evidence in the light most favorable to the non-moving party and resolves any disputes of material fact in their favor.
The moving party is responsible for identifying those portions of the record which it believes demonstrate the absence of a genuine issue of material fact.
Jones Lang brought seven claims against Defendants: 1) a claim seeking declaratory judgment that Defendants owed a brokerage commission to Jones Lang at the time of contract formation (Count I); 2) Breach of Contract (Count II); 3) Breach of Contract to a Third-Party Beneficiary (Count III); 4) Breach of Covenant of Good Faith and Fair Dealing (Count IV); 5) Quantum Meruit (Count V); 6) Account Annexed (Count VI); and Violations of M.G.L. c. 93A, § 11 (Count VII). Defendants seek summary judgment as to all counts.
The parties do not dispute that, if the brokerage commission clauses in the Lease Amendments between Defendants and QinetiQ are enforceable, Jones Lang was an intended third-party beneficiary. Restatement (Second) of Contracts § 302 ("a beneficiary of a promise is an intended beneficiary if recognition of a right to performance is appropriate to effectuate the intention and . . . (a) the performance of the promise will satisfy an obligation of the promise to pay money to the beneficiary"). As an intended third-party beneficiary, Jones Lang has standing to enforce performance under the contract and to enforce the implied covenant of good faith and fair dealing.
Defendants argue first that the court should enter summary judgment for Defendants as to Plaintiff's contract-based claims because the brokerage commission clause of the lease amendments were induced by fraud. Defendants base their fraud argument on the same alleged conduct raised in their Motion to Amend. The court has found Defendants' attempt to add an affirmative defense of fraud futile, and for these same reasons, Defendants' motion for summary judgment on the grounds of fraud in the inducement is DENIED.
Defendants next argue that the brokerage commission clause is not binding because there was no meeting of the minds, or mutual assent, as to the meaning of the clause.
In order for a contract to be legally binding, there must be evidence that the parties reached a "meeting of the minds" as to the essential terms at issue.
Defendants point to Plaintiff's own statements, near the end of the negotiation period, seeking more clarity as to what the "standard" commission was for the Waltham/Boston area. Defs.' Mot. for Summary Judgment 14 (citing Ex. 39 — Emails from William Bailey [#44-39] and Ex. 44 — Further Emails from William Bailey [#44-44]). The question, however, is not whether there was a meeting of the minds between Defendants and Plaintiff, who is neither a party to the lease amendments nor the party that negotiated the final language, but between Defendants and QinetiQ.
Defendants argue further that there is in fact no standard commission rate for Boston/Waltham and offer their expert's report to show the lack of such a standard. Pl.'s SOF ¶ 39 [#60]; Nahigian Aff. [#45].
In response, Plaintiff contends that there is a standard for the Boston/Waltham area and offers its own expert's report stating that the standard rate for the chosen area is $1.20 per square foot per year of the lease. Pl.'s SOF ¶ 39 [#60] (citing Defs.' Ex. 47 — Invoice [#44-47], Pl.'s Ex. O — Webster Collins Deposition [#61-17], and Pl.'s Ex. P — Plaintiff's Expert Report [#61-18]).
The court need not proceed further as Defendants have not met their burden under Fed. R. Civ. P. 56(a). Whether there is a standard rate for the Boston/Waltham area is a disputed question of fact for the jury.
Accordingly, Plaintiff's contract claims move forward.
Plaintiff's remaining claims also all rely on a threshold determination about the validity of the brokerage commission clause, and so summary judgment is not appropriate at this time.
First, Plaintiff has alleged in Count VII that Defendants engaged in unfair practices in violation of M. G. L. c. 93A, § 11A. In order to prevail on a claim under M. G. L. c. 93A, a plaintiff must show (1) that the defendant engaged in an unfair method of competition or committed an unfair or deceptive act or practice, as defined by M. G. L. c. 93A, § 2, or the regulations promulgated thereunder; (2) a loss of money or property suffered as a result; and (3) a causal connection between the loss suffered and the defendant's unfair or deceptive method, act, or practice.
Defendants argue that there was no deceptive practices as it consistently rejected Jones Lang's brokerage commission proposals and that Jones Lang and QinetiQ were responsible for the delay in resolving the commission issue. Defs.' Mem. in Support of Mot. for Summary Judgment 15-16 [#43].
However, Defendants drafted the language in question, proposing a brokerage commission based on a "standard" rate. Defs.' Ex. 37 — Sept. 28, 2016 Proposal [#44-37]; Pl.'s SOF ¶ 33 [#60]. If a jury finds that there is a "standard" rate, it is unlikely that Plaintiff will have any further basis for proceeding on the 93A claim. But if the jury agrees with Defendants that there is no "standard" rate, and finds further that Defendants sought to reach an agreement on the lease amendment without paying the brokerage commission by proposing a term that Defendants viewed as unenforceable, there may be a violation of § 93A. Again, there are material disputes of fact, and Defendants are not entitled to summary judgment as to this claim.
Similarly, as an intended third-party beneficiary, Jones Lang may assert that Defendants breached the implied covenant of good faith and fair dealing,
Finally, Plaintiff's common law tort claims for quantum meruit and account annexed are alternative grounds requiring Defendants to pay a commission even if there is no binding contract.
Defendants argue that no reasonable jury could find for Jones Lang on the quantum meruit claim because Jones Lang did not perform any services for Defendants. In order to prove a quantum meruit claim, a plaintiff must show 1) that it conferred a measurable benefit upon the defendants; 2) that the claimant reasonably expected compensation from the defendants; and 3) the defendants accept the benefit with the knowledge of claimant's reasonable expectations.
This case is similar to
In considering this question, the terms of the lease amendments may be considered.
As to the account annexed claim, Plaintiff needs to show that there was an implied contract between the parties to pay Plaintiff if it did the work according to the contract.
Accordingly, for the previously discussed reasons, Defendants'
IT IS SO ORDERED.