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Jury Verdict for Firm’s Client in Dispute Over Six-figure Brokerage Commission

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Jon Friedmann recently represented a manufacturing company and its owner in a contract dispute with a broker. The broker was hired to sell the manufacturing company’s assets and our clients were later sued by the broker who argued he was entitled to a commission under the terms of the contract. The owner maintained the broker was not entitled to a commission under the terms of the brokerage contract. The one-week jury trial resulted in a dismissal of all claims against our client after two hours of deliberation.

Background
The firm’s client, the owner of a manufacturing company, entered into a contract with a broker who specialized in the sale of closely-held New England businesses. The owner specified he wanted to net $3 million from the sale of the business.

Almost a year after the contract was signed, the broker approached the owner with an offer from an interested party. The offer was comprised of a purchase price of $2.5 million to be paid at closing, an additional $125,000 to be paid within 90 days of closing if the business’ inventory was sold, and a sliding percentage of gross sales for two years if the company’s sales exceeded set targets. The proposal was put into writing, but it was not signed by the interested party and no deposit was put down. In addition, the time within which the offer needed to be accepted was left blank.

After reviewing the offer, the broker sent a counter-proposal to the interested party and included the manufacturer’s first quarter earnings and a letter explaining why sales were down. Although the broker discussed the terms of the counter-proposal with the owner, the owner never reviewed or approved the letter that “explained” why sales were down and did not sign the counter-proposal. When the owner discovered the misstatements in the broker’s letter, he requested that the broker rescind the counter-proposal.

Several weeks later, the owner asked the broker to reissue the counter-proposal to the interested party. The broker told the owner he would not represent him until the owner paid him $100,000. The owner refused to pay the broker and the broker filed suit against the owner and the manufacturing company alleging, among other things, breach of contract, negligent misrepresentation, fraud, and violation of the Massachusetts Consumer Protection Act. G.L. c. 93A, which would entitle the broker to triple damages. The exposure for the firm’s client was in excess of $800,000.

Result
After three years of litigation, the matter was tried before a jury. All counts were submitted to the jury to render a verdict, however, the Court indicated the jury’s finding on the 93A claim would be a non-binding, advisory opinion and the Court would reserve final determination of the 93A claim. The jury found in favor of the owner on all counts and determined there was no offer by the interested party that would entitle the broker to a commission under the brokerage contract or at all. The firm’s client, therefore, did not owe a commission fee to the broker. The jury also found in the owner’s favor on the 93A claim. The Court adopted the jury’s advisory opinion with respect to the 93A claim, ruled there was no basis for liability, and ordered the broker could not recover any damages from the owner.