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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: June 13, 2021

Broker Not Entitled to Commission Because it was not the Procuring Cause of the Sale

On May 20, 2021, the First Department issued a decision Capin & Assoc., Inc. v. Herskovitz, 2021 NY Slip Op. 03249, holding that a broker was not entitled to a commission because it was not the procuring cause of a sale, explaining:

Plaintiff and defendants LLCs never entered into any explicit written or oral brokerage agreement concerning the sale of 11 buildings in Bronx, New York. Therefore, plaintiff’s breach of contract claim was properly dismissed.

To be entitled to a commission under an implied contract theory, the broker must be a procuring cause of the ultimate transaction. Here, the record demonstrates a lack of causal connection between plaintiff’s efforts and the final transaction. Plaintiff sent the LLCs’ principal Isaac Herskovitz financial documents regarding the buildings, informed Herskovitz about an offer from another buyer which had been accepted by seller but was still in negotiations regarding the brokerage fee, and arranged and walked Herskovitz through the properties along with a business manager for seller. Despite those actions. Neither Herskovitz nor the LLCs made any offer for the buildings through plaintiff, and plaintiff did not carry on any negotiations with seller on their behalf. In December 2013, plaintiff informed Herskovitz that the buildings were no longer for sale, which was the last contact between the parties prior to the consummated sale. Shortly thereafter, Herskovitz was contacted by another brokerage firm regarding the buildings. Herskovitz and the LLCs used the other brokerage firm to make an offer, enter into negotiations, conduct due diligence, and close the transaction. Accordingly, plaintiff was not the procuring cause of the sale, and thus, plaintiff’s claim for implied contract was properly dismissed.

Because plaintiff was not the procuring cause of the sale, its claims for quantum meruit and unjust enrichment also fail. There is no evidence Herskovitz and defendant LLCs acted in bad faith.

(Internal quotations and citations omitted).

We frequently litigate disputes over the purchase and sale of commercial property. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you are involved in a dispute regarding a commercial real estate transaction.

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