Intellectual Property | Real Estate | Technology | Software

How to sue the broker, Realtor or third party that interferes with your real estate transaction

Nov 8th, 2015 | By | Category: Real Estate Litigation

Attorney Steve’s Commission College – Interference with Contractual Relationships and Prospective Business Advantage!

Real estate lawyer theoris to recover a commission

Introduction

When you are working hard on a deal as a real estate broker or agent (whether it be a real estate deal, lease, commercial transaction, etc.) you want to get paid for your efforts.  Especially when you are the “procuring cause” of the transaction. But what happens when a third party comes in and interferes with you and your client, or alters the terms of the transaction, or worse yet steals and hijacks your Client?  What recourse do you have?  This blog discusses this important commission dispute legal issue, which can also often times lead to either a BRE complaint or a Realtor Board Ethics Hearing.

Duty of Realtors to not interfere with exclusive agency

A Realtor must respect the exclusive agency relationship of another broker. This is built into the N.A.R. Code of Ethics.  Article 16 states:

Article 16 REALTORS® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other REALTORS® have with clients.

According to N.A.R. interference with exclusive agency is unethical.

This is a common issue that comes up in a commission dispute and this is an issue that can lead to an ethics complaint and hearing.

Tortious interference with contract

Another thing we see is a tortious interference with an existing contractual relationship.  This may arise, for example, where a broker or Realtor has an exclusive listing agreement and Broker#2 has knowledge of the representation and intentionally interferes.  This is an issue that can land the brokerage into a Superior Court.  Here is the California jury instruction that outlines the elements a Plaintiff would have to prove to win on this cause of action.

California Civil Jury Instructions (CACI) 2201. – Intentional Interference With Contractual Relations

[Name of plaintiff] claims that [name of defendant] intentionally interfered with the contract between [him/her/it] and [name of third party].

To establish this claim, [name of plaintiff] must prove all of the following:

1. That there was a contract between [name of plaintiff] and [name of third party];

2. That [name of defendant] knew of the contract;

3. That [name of defendant] intended to disrupt the performance of this contract;

4. That [name of defendant]’s conduct prevented performance or made performance more expensive or difficult;

5. That [name of plaintiff] was harmed; and

6. That [name of defendant]’s conduct was a substantial factor in causing [name of plaintiff]’s harm.

As the Court noted in one case:

“It has long been held that a stranger to a contract may be liable in tort for intentionally interfering with the performance of the contract……The elements which a plaintiff must plead to state the cause of action for intentional interference with contractual relations are:
(1) a valid contract between plaintiff and a third party;
(2) defendant’s knowledge of this contract;
(3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship;
(4) actual breach or disruption of the contractual relationship; and (5) resulting damage. See Farmers Ins. Exchange v. State of California (1985) 175 Cal.App.3d 494, 506, 221 Cal.Rptr. 225.

What is the purpose of the law?

As noted in Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118:
The tort of interference with prospective economic advantage protects the same interest in stable economic relationships as does the tort of interference with contract, though interference with prospective advantage does not require proof of a legally binding contract. (Buckaloo v. Johnson, supra, 14 Cal.3d 815, 823, 122 Cal.Rptr. 745, 537 P.2d 865.).  The chief practical distinction between interference with contract and interference with prospective economic advantage is that a broader range of privilege to interfere is recognized when the relationship or economic advantage interfered with is only prospective. (Environmental Planning and Information Council v. Superior Court (1984) 36 Cal.3d 188, 194, 203 Cal.Rptr. 127, 680 P.2d 1086; Buckaloo v. Johnson, supra, 14 Cal.3d at p. 823, fn. 6, 122 Cal.Rptr. 745, 537 P.2d 865.)

If you think these elements are met, contact us using the contact form below.  Please make sure to leave your phone number!!

Wrongfully inducing breach of contract

This is another separate tort that might be alleged by itself, or with the other torts on this page.  You can find the jury instructions under CACI 220o for inducing breach of contract.  Here they are for your review.

Inducing Breach of Contract [Name of plaintiff] claims that [name of defendant] intentionally caused [name of third party] to breach [his/her/its] contract with [name of plaintiff].

To establish this claim, [name of plaintiff] must prove all of the following:

1. That there was a contract between [name of plaintiff] and [name of third party];

2. That [name of defendant] knew of the contract;

3. That [name of defendant] intended to cause [name of third party] to breach the contract;

4. That [name of defendant]’s conduct caused [name of third party] to breach the contract;

5. That [name of plaintiff] was harmed; and

6. That [name of defendant]’s conduct was a substantial factor in causing [name of plaintiff]’s harm.

Interference with prospective business advantage

Sometimes another party (such as a commercial real estate lawyer or other broker or agent) may cutoff your right to be the procuring cause in a transaction.  One example of this would be that you are showing a large industrial or office building to a buyer, and they want the property.  They ask you to get the deal done.  They also tell you they want you to work with their real estate lawyer who will be making sure all the paperwork is proper being that it is such a big deal.  Then, instead of helping the deal go down, the attorney interferes with the deal and convinces the buyers they don’t need to deal with the agent anymore.   The attorney might say “just save yourself the money you don’t need the broker.”  In this type of circumstance (which requires a close look at the facts of the transaction) the law firm may be found to have interfered with the prospective business advantage and literally “cut the agent out of the deal.”  This could easily be found to be tortious in the eyes of the law and the commercial real estate firm might be held liable for the full amount of the lost commission.

Here are the California jury instructions for interference with business advantage (CACI 2202):

2202. Intentional Interference With Prospective Economic Relations:

[Name of plaintiff] claims that [name of defendant] intentionally interfered with an economic relationship between [him/her/it] and [name of third party] that probably would have resulted in an economic benefit to [name of plaintiff]. To establish this claim, [name of plaintiff] must prove all of the following:

1. That [name of plaintiff] and [name of third party] were in an economic relationship that probably would have resulted in an economic benefit to [name of plaintiff];

2. That [name of defendant] knew of the relationship;

3. That [name of defendant] intended to disrupt the relationship;

4. That [name of defendant] engaged in wrongful conduct through [insert grounds for wrongfulness, e.g., misrepresentation, fraud, violation of statute];

5. That the relationship was disrupted;

6. That [name of plaintiff] was harmed; and

7. That [name of defendant]’s wrongful conduct was a substantial factor in causing [name of plaintiff]’s harm.

As you can probably tell, the Plaintiff will bear the BURDEN OF PROOF to show these elements, and each of them.

Duty not to take actions that disrupt the transaction

If you are a broker, even if you believe you have a right to a commission as procuring cause agent, you still need to be careful not to take action that injures your (former) client.  Do not breach contracts or encourage others to breach contracts and do not interfere with a prospective business advantage without first consulting a real estate law firm and weighing your risks and rewards.

Contact a California real estate law firm

Contact us if you are involved in any of the following:

  1.  Real estate commission dispute
  2. Ethics dispute (NAR code of ethics)
  3. C.A.R. interboard mediation
  4. Local Realtor Board Association
  5. BRE complaints & investigations
  6. DBO complaints & investigations
  7. Real estate mediation and arbitration
  8. State and federal litigation

Contact us at 877-276-5084 to discuss our low flat rate fees, hourly fees and possible contingency fee cases for some cases.  You can leave your name and phone number below to have one of our real estate attorneys contact you, normally within the hour.

[contact_form]

The following two tabs change content below.
We are a business and civil litigation firm with a focus on copyright infringement cases involving illegal movie downloads (torrent cases such as London Has Fallen, ME2 Productions and Malibu Media defense), software audits (ex. Microsoft audits, SPLA, Autodesk audit notification letter, Siemens PLM defense, SIIA, Adobe and Business Software Alliance defense) and other software vendors threatening piracy and infringement. We also handle cases involving internet law, anti-SLAPP, media law, right of publicity, trademarks & domain name infringement, and we have a niche practice area handling California BRE licensing disputes, accusations, subpoena response, statement of issues and investigations. We have offices in San Francisco, Beverly Hills, Newport Beach, San Diego & Phoenix, Arizona and accept federal copyright and trademark cases nationwide. All content on our website is general legal information only and not a substitute for legal advice, and should not be relied upon. Decisions to hire counsel should not be based on advertising alone. Blogs, videos and podcasts are authored by Steve Vondran, Esq. unless otherwise noted. We can be reached at (877) 276-5084.

Latest posts by Vondran Legal - Civil Litigation firm handling Software audits, Copyright Infringement, Internet law, and general Business & Real Estate law (see all)

Comments are closed.