A. Gary Fieger v. Pitney Bowes Credit Corporation, Pitney Bowes Real Estate Financing Corporation and Prefco Xxii Limited Partnership

Citations: 251 F.3d 386; 2001 U.S. App. LEXIS 11291Docket: 2000

Court: Court of Appeals for the Second Circuit; May 31, 2001; Federal Appellate Court

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A. Gary Fieger appealed a decision from the Southern District of New York, which dismissed his contract and quantum meruit claims against Pitney Bowes Credit Corporation and its subsidiaries, citing Connecticut's real estate broker licensing statute (Conn. Gen. Stat. § 20-325a(a)). Fieger argued that the district court incorrectly applied Connecticut law instead of New York law, which would not bar his claims. He also contended that even if Connecticut law were applicable, his role as a financial advisor exempted him from the statute's constraints. The appellate court affirmed the dismissal of Fieger's contract claim against PREFCO XXII but vacated the dismissal concerning his contract claims against Pitney Bowes and PREFCO, as well as his quantum meruit claim, stating these should be evaluated under New York law. The case was remanded for further proceedings. Fieger operates a financial advising business and became involved with the Swiss Bank Corporation’s (SBC) financing for its new headquarters in Stamford, Connecticut, following SBC's 1996 request for proposals for potential investors.

UBS in New York approached Pitney Bowes in Connecticut to involve them in a financing project without initially disclosing the property's location in Stamford or its ownership by SBC. On April 11, 1997, UBS clarified these details and mentioned Fieger, who had connections at SBC that could facilitate negotiations for Pitney Bowes. Attracted by the potential for a preemptive deal, Pitney Bowes was asked by UBS to prepare a financing term sheet. 

On April 14, Fieger faxed a request for proposal (RFP) from Swiss Bank to UBS, and on April 23, Pitney Bowes sent UBS a financing proposal for the Stamford project. UBS informed Fieger that if financing was completed involving Pitney Bowes and SBC, they would receive an advisory fee of 1% of the 'PREFCO Cost' from the transaction closing. This fee was included in a 2% transaction fee outlined in Pitney Bowes' proposal.

On April 29, UBS sent Fieger a similar letter, adjusting the fee to 0.75% of the 'PREFCO Cost' and increasing the transaction fee to 2.5%. Pitney Bowes asserted that it had not discussed fee payments with Fieger and did not see UBS's April 29 letter until after the lawsuit began. On the same day, PREFCO sent a term sheet to Fieger, indicating that it included fees and expenses of 2.5%, and stated that the term sheet was not a commitment to enter into the transaction. Fieger forwarded the proposal to SBC on April 30. 

On May 6, Pitney Bowes confirmed in a letter to SBC that Fieger was authorized to submit the proposal, but SBC did not act on it before it expired on May 15, 1997. In early June, Fieger updated Pitney Bowes on his communications with SBC.

SBC engaged Merrill Lynch as a financial advisor for its headquarters project, which involved soliciting investment interest through an RFP sent to potential investors, including Pitney Bowes. In June 1997, Merrill Lynch provided confidentiality agreements and equity offering memoranda to potential investors, with A. Gary Fieger receiving this information as he was perceived to be advising Pitney Bowes. Fieger communicated to Pitney Bowes that the essence of the deal remained unchanged despite some criteria adjustments. 

In mid-July 1997, Pitney Bowes submitted a financing proposal to Merrill Lynch, notably without Fieger's involvement, which was more comprehensive than Fieger's previous submission. Subsequently, Pitney Bowes clarified in a letter to Fieger that he was not engaged to represent them in the transaction and requested that he cease any communications implying representation. Fieger responded in September 1997, suggesting that Pitney Bowes's letter aimed to deny his company compensation for their assistance.

Merrill Lynch informed Pitney Bowes in August 1997 that SBC would pursue further negotiations with them, leading to a letter of intent between SBC and Pitney Bowes on September 5, 1997, and a completed sale-leaseback transaction in December 1997. Pitney Bowes maintained that Fieger was not involved in these negotiations. The final agreements included choice-of-law provisions stating they would be governed by Connecticut law. 

In January 1999, Fieger initiated a breach-of-contract lawsuit in New York State Supreme Court, later removed to the Southern District of New York, claiming $1,365,000 in unpaid commission, which he argued was owed from the $182 million paid by Pitney Bowes for the acquisition of the SBC Stamford property.

Defendant PREFCO XXII Limited Partnership is alleged to have taken over the financial obligations of PBCC and PREFCO to pay the Swiss Bank Corporation for acquiring Stamford realty interests, which included transactional fees up to 2.5%, of which 0.75% was intended for the plaintiff, Fieger. Fieger has asserted a quantum meruit claim, claiming he provided services expecting compensation valued at $1.82 million (1% of the purchase price for the property), plus interest. The defendants contended Fieger's claims were barred since he was not a licensed real estate broker in Connecticut and was not the 'procuring cause' of the transaction. The district court granted the defendants' motion for summary judgment, applying Connecticut law, which prohibits unlicensed individuals from recovering real estate fees. Fieger's appeal includes both his contract and quantum meruit claims, arguing that he had an agreement with Pitney Bowes and PREFCO, as outlined in a letter from UBS, which committed to pay him a fee upon completion of the deal. He asserts that his fees were due after the sale-leaseback agreement was finalized in December 1997. Fieger also claims a third-party beneficiary status regarding the December 1997 agreement, alleging PREFCO XXII agreed to cover the fees owed to him. Defendants reject any binding agreement with Fieger and assert that his efforts did not lead to the sale-leaseback agreement's completion. The Court of Appeals will review the district court's choice of law and summary judgment decision de novo to ensure proper application of substantive law and to check for any genuine issues of material fact.

A federal trial court exercising diversity jurisdiction must apply the law of the forum state, which is New York in this case, to determine the choice-of-law. The initial step is to identify whether there is an actual conflict of laws; New York will only forgo a choice-of-law analysis if no conflict exists. In relation to Fieger's claims, the December 1997 financing contract contains a Connecticut choice-of-law provision, while an April 29th letter lacks such reference. New York law mandates enforcement of an express choice-of-law provision unless fraud or public policy violations are present, and Connecticut law similarly recognizes such provisions made in good faith. Since there are no allegations of fraud or public policy violations, Connecticut law governs the contract claim against PREFCO XXII.

For the contract claims against Pitney Bowes and PREFCO, and the quantum meruit claim against all defendants, the laws of New York and Connecticut must be compared for conflicts. Both states require real estate brokers to be licensed to claim commissions; however, Fieger was only licensed in New York. This results in a conflict: New York permits his claims, while Connecticut does not. Thus, New York's choice-of-law principles must be applied. 

New York employs distinct choice-of-law analyses for contract and tort claims. The contract analysis applies to the claims against Pitney Bowes and PREFCO. For the quantum meruit claim, New York law categorizes it as a quasi-contract claim, which is based on implied contracts. Fieger's claim for a commission payment, arising from the benefit conferred by his business advice, aligns more closely with contract principles. Consequently, New York's contract choice-of-law analysis will also apply to Fieger's quantum meruit claim.

The court employs a 'center of gravity' or 'grouping of contacts' analysis to determine which state has the most significant relationship to a transaction and the parties involved. This approach, grounded in the Second Restatement of Conflict of Laws, considers multiple factors, including the places of negotiation and performance, the location of the subject matter, and the domicile or business location of the contracting parties, alongside the traditional factor of the place of contracting. New York, recognized as an international financial center, underscores the importance of ensuring payment for services rendered within the state, particularly for licensed professionals.

The district court's conflict-of-law analysis was primarily based on the principle that contracts concerning land title transfers are governed by the law of the land's location, particularly when the validity of the conveyance is at stake. However, New York courts acknowledge the strong governmental interest in regulating real estate brokers, emphasizing the state's role in overseeing the real estate profession to eliminate incompetent agents.

In scenarios involving real estate where title challenges are absent, the property's situs is considered among various significant contacts in the conflict-of-law analysis, rather than being determinative. The district court's reliance on the situs rule was noted, yet it recognized that other factors could influence the choice of law. In the referenced case of Madison Realty v. Neiss, the court determined that Florida law applied for a New York broker's claim for commission on a Florida property sale, as Florida had a more substantial connection to the transaction than New York.

In *Rosenberg, Rosenberg, P.C. v. Hoffman*, the New York Appellate Division determined that New York law applied to a real estate broker's commission claim related to financing a New Jersey condominium because the broker's work occurred in New York. The court emphasized New York's interest in ensuring its licensed brokers are compensated for contracts initiated and executed within the state. The district court also dismissed reliance on *Advance Realty Associates, Inc. v. First Bank National Association*, where a similar interests analysis concluded that New York had the primary interest due to the broker's New York location and the negotiations occurring primarily in New York. Additionally, cases from other jurisdictions support the idea that the situs of real estate is but one of multiple factors in an interests analysis. The Supreme Court, in *Selover, Bates. Co. v. Walsh*, rejected the notion that Colorado law should apply to a contract regarding property in Colorado, arguing that the contract was personal and did not directly affect the land. The court referenced *Polson v. Stewart*, which asserted that while states have authority over property within their borders, the law governing personal covenants cannot be dictated solely by the location of the property.

A real estate brokerage contract is typically viewed as a personal services contract rather than one that conveys an interest in land, as established in Coldwell Banker Co. v. Karlock. In conflict-of-law analyses, the situs of the property is one of several factors considered, as shown in cases like Dorothy K. Winston Co. v. Town Heights Dev. Inc., which determined that a Florida broker could earn a commission for a sale in Florida even under D.C. law. The district court in the current case determined that Connecticut had primary contacts due to the property’s location, the defendants being Connecticut corporations, and the final agreement being made in Connecticut. However, this analysis overly emphasized the final transaction rather than Fieger's services, which were primarily conducted in New York. Fieger's negotiations with major financial entities occurred in New York, supported by correspondence from these companies to his New York office. While some communication extended into Connecticut, it was UBS that initiated contact with Pitney Bowes there. The defendants, operating nationally, should expect their activities to be evaluated under laws from states beyond Connecticut.

New York has a more significant interest in the contractual relationship between Fieger and the defendants, leading to the application of New York law for the contract and quantum meruit claims against Pitney Bowes and PREFCO. Connecticut law stipulates that unlicensed individuals cannot pursue legal action for commissions or payments related to real estate services performed after October 1, 1971. Effective October 1, 1995, Connecticut's real estate licensing statute mandates that any action regarding such services requires a written contract that meets specific criteria, including signatures from both the broker and the client. The definition of a real estate broker under Connecticut law encompasses various entities that engage in real estate transactions for compensation. A dispute has arisen regarding the applicability of Section 20-325a(a) to Fieger's claims, with Fieger asserting he acted as a financial advisor rather than a broker, while defendants contend that his services fall under the licensing statute, thereby precluding his claim for commissions due to his lack of a valid Connecticut real estate license during the relevant timeframe.

Connecticut courts have rarely examined Section 20-325a(a) regarding claims from buyers' brokers or financial advisors, with no guidance from the Connecticut Supreme Court. In the absence of such authority, federal courts must predict state court decisions based on existing lower court rulings. Intermediate appellate court decisions are significant unless contradicted by compelling evidence suggesting otherwise. 

Two Connecticut cases illustrate the application of Section 20-325a(a) in barring unlicensed brokers from claiming commissions. In *Wilder Group, Inc. v. Byers*, the court ruled against an unlicensed broker seeking commission based on a co-brokerage agreement, stating that the broker engaged in activities requiring a license by negotiating property sales. The plaintiff's argument that Section 20-325a(a) did not apply to co-brokerage agreements was countered by the court’s interpretation that subsection (a) prohibits commissions for all unlicensed individuals, regardless of the agreement type. The court emphasized that subsection (a) broadly restricts unlicensed brokerage activities, unlike subsection (b), which pertains specifically to licensed brokers and listing agreements. Thus, Section 20-325a(a) encompasses a wider range of activities than subsection (b).

Subsection (a) of Section 20-325a imposes a broad prohibition on fee-recovery lawsuits from individuals engaged in unlicensed brokerage activities, barring any claims requiring a valid Connecticut broker's license. This prohibition encompasses all forms of unlicensed brokerage work, including acting as a non-listing co-broker. In contrast, subsection (b) applies specifically to licensed brokers whose listing agreements do not comply with its requirements. The interpretation aligns with the statute's intent and excludes cases that limit subsection (b)'s scope from affecting subsection (a). The Wilder court affirmed that unlicensed individuals cannot pursue lawsuits for brokerage activities that necessitate a Connecticut broker's license.

In Gagnon v. Shiller, unlicensed plaintiffs claimed a consulting fee for property acquisition. The court ruled that their activities constituted brokerage work, which required a license, leading to the dismissal of their complaint based on Section 20-325a(a). While Section 20-325a(a) generally bars unlicensed brokers from claiming real estate commissions, some Connecticut courts have made exceptions for employee compensation claims between brokers and their employees, distinguishing these from commission payments.

Section 20-325a does not apply to a former employee of a real estate brokerage seeking a commission share under an employment agreement, as exceptions exist when claims are based on contracts outside agreements between sellers and purchasers. Fieger's claim does not qualify for this exception since he seeks payment from the purchasers rather than from another broker for a commission already paid. The Connecticut Supreme Court would likely affirm the district court's view that Fieger's actions fall under real estate activities and that his claim resembles those in previous cases where Section 20-325a barred claims, such as Wilder and Gagnon. Fieger's involvement as an intermediary in the sale and leaseback of the Stamford headquarters does not meet the court-created exceptions to Section 20-325a, leading to the conclusion that his contract claim against PREFCO XXII is barred due to his lack of a real estate broker's license in Connecticut. However, Fieger's quantum meruit and contract claims against Pitney Bowes and PREFCO remain viable under New York law, where the defendants argue he is not entitled to a commission because he was not the procuring cause of the transaction. The district court did not address this defense due to its ruling based on Connecticut law. Under New York law, a broker must demonstrate licensure, an express or implied contract with the payer, and that they were the procuring cause of the sale to state a valid claim for a commission.

To establish a quantum meruit claim in New York, a plaintiff must demonstrate that the defendant was enriched at the plaintiff's expense and that equity demands compensation. For brokers seeking a commission, it is essential to show they were the procuring cause of a sale. Relevant case law supports the notion that a broker is entitled to compensation if they are the procuring cause of a transaction. A plaintiff must provide evidence of significant contributions to the deal's success to justify reimbursement. If a broker did not negotiate directly but facilitated initial connections, they must still demonstrate a proximate link to the transaction's completion. Whether a party acted as a broker or procuring cause is a factual determination for a factfinder. In the current case, conflicting evidence exists regarding the plaintiff's role in a transaction with SBC, with both sides presenting valid claims about their involvement. Thus, the district court must allow a factfinder to resolve these discrepancies.

A factfinder must assess whether a plaintiff's engagement in an initial real estate development proposal, which was never realized, qualifies the plaintiff for a commission on a subsequent, similar proposal that was completed. The court dismissed the defendants' other arguments as meritless and upheld the district court's judgment regarding the plaintiff's contract claim against PREFCO XXII. However, it vacated and remanded the judgment concerning the plaintiff's contract claims against Pitney Bowes and PREFCO, as well as the quantum meruit claim. 

The application of New York law to one claim and Connecticut law to another is permissible under the doctrine of depecage, allowing different legal systems to govern specific issues within the same transaction. The excerpt also references the amendment of Connecticut General Statute 20-325a, which may adversely affect real estate brokers, enabling property owners to contest claims based on the broker's licensing status. The ruling notes that the statute could lead to unintended consequences, where an owner could exploit the law to dismiss claims from unlicensed brokers, even after accepting their services without objection. The court expressed concern that the statute's scope may extend beyond protecting unsophisticated consumers, contrary to its intended purpose as articulated during legislative hearings.