Robert Freedman is the former director of multimedia communications at NAR.
Large Verdict Against Brokerage
A commercial brokerage's interference with a developer's contracts proves costly.
October 1, 2011
SJW Prop. Commerce Inc. v. Southwest Pinnacle Properties Inc., 328 S.W.3d 121; Texas Court of Appeals
A Court of Appeals in Texas affirmed the award of extensive damages against a commercial brokerage for significantly interfering with a developer’s contracts and breaching its fiduciary duty to the developer.
The developer had asked the brokerage to help him find an anchor tenant for a planned big-box retail development, informally known as the Trenton Project. The developer and the brokerage already had an existing relationship; the brokerage had served as listing broker for another retail project of the developer’s.
The developer brought in another brokerage to assemble parcels of land for the Trenton Project. That second brokerage secured sales contracts from all the owners except one. But the first brokerage never disclosed to the developer that it had negotiated a deal with the hold-out owner to buy the property. As time passed and the project failed to get underway, the owners of the other properties cancelled their sales contracts.
The developer accused the brokerage of tortiously interfering with his contracts and damaging his reputation, and he withheld commissions from the other project on which the brokerage served as listing agent.
The brokerage sued the developer for the unpaid commissions, and the developer countersued for tortious interference with a contract, fraud, breach of contract, and breach of fiduciary duty. The jury awarded the brokerage $165,000 in lost commissions, and awarded the developer $700,000 in damages for the Trenton Project and another $2 million in punitive damages. Both parties appealed.
The appeals court upheld the large damage awards, saying the brokerage showed malice toward the developer.