G & E Real Estate, Inc. v. Avison Young - Washington, D.C., LLC

Citation: Not availableDocket: Civil Action No. 2014-0418

Court: District Court, District of Columbia; November 30, 2022; Federal District Court

Original Court Document: View Document

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Defendants Bruce B. McNair and David Roehrenbeck's Motion for Summary Judgment has been granted by the Court, concluding that the three remaining counts of G&E Real Estate, Inc.'s complaint fail as a matter of law. The Court had previously held the motion in abeyance pending supplemental briefing and determined that oral argument was unnecessary for resolution. 

The procedural history indicates that G&E Real Estate filed its initial complaint on October 15, 2013, against multiple defendants in the Eastern District of Virginia, alleging improper actions related to a Tenant Representation Agreement with ANSER. Following transfers and amendments to the complaint, the case ultimately involved three remaining claims: breach of contract against McNair, breach of fiduciary duty against McNair, and breach of contract against Roehrenbeck.

The Court noted that after extensive procedural developments, including prior summary judgments and the filing of a Second Amended Complaint, the Defendants were granted leave to file a second summary judgment motion. Plaintiff opposed this motion and submitted a surreply on a contractual issue raised by the Defendants. The Court's analysis relied on the documents related to the motion, confirming that the claims failed even if certain aspects of the Plaintiff's assertions were taken as true.

The litigation involves a plaintiff, a Delaware corporation operating a real estate brokerage in Virginia, and two defendants: McNair and Roehrenbeck, both former employees of the plaintiff's predecessor, Grubb Ellis (G&E). McNair is currently employed by Avison Young, a competitor, and Roehrenbeck works alongside him. G&E filed for Chapter 11 bankruptcy on February 20, 2012, after which BGC Partners, Inc. purchased certain assets of G&E.

McNair's employment with G&E began with a contract on June 16, 2006, which included an 'adequate justification' clause allowing for voluntary termination without noncompete or confidentiality repercussions. McNair renewed this contract on September 1, 2011, which confirmed Roehrenbeck as part of his team. Both individuals provided brokerage services to ANSER under a Tenant Representation Agreement with G&E, which recognized G&E as ANSER's exclusive representative.

The plaintiff alleges McNair conspired with Avison Young to divert ANSER's business, misappropriating G&E’s confidential information in breach of his contract. Following G&E's failure to pay McNair a bonus in January 2012, he invoked the 'adequate justification' clause to terminate his contract and subsequently joined Avison Young with Roehrenbeck, taking confidential information with him. G&E's bankruptcy led to the waiver of its rights to the TRA, resulting in ANSER entering a new agreement with Avison Young on April 11, 2012, which culminated in a lease that generated a commission of $1,224,387.01 paid to Avison Young.

The plaintiff claims entitlement to this commission and seeks damages of at least $600,000 for wrongful payment and $1,600,000 for breaches of fiduciary duty by McNair. The allegations include three theories of liability: breach of contract against McNair, breach of contract against Roehrenbeck, and breach of fiduciary duty against McNair. Summary judgment is deemed appropriate if there is no genuine dispute over material facts, per Fed. R. Civ. P. 56(a).

Disputes that affect the outcome of a lawsuit must be genuine to prevent summary judgment; mere disagreement over facts is insufficient. A genuine dispute requires admissible evidence that allows a reasonable trier of fact to rule for the non-moving party. To establish that a fact cannot be genuinely disputed, a party must provide specific evidence from the record or demonstrate that the opposing party's materials do not negate the existence of a genuine dispute. Conclusory assertions without factual support cannot create a genuine dispute. If a party fails to adequately support or address an assertion of fact, the court may treat that fact as undisputed. The district court is not permitted to make credibility determinations or weigh evidence but must view it favorably for the non-movant. Summary judgment is inappropriate if material facts are in genuine dispute or if undisputed facts allow for divergent inferences. The court's role is to assess whether evidence presents enough disagreement to warrant jury submission or if one party must prevail as a matter of law. The non-movant must do more than show mere doubt regarding material facts; the evidence must be significant enough to warrant a trial.

The Court addresses three key issues. First, it evaluates the Plaintiff's standing, which is based on a contract, the 'Assignment of Claims.' The Court acknowledges that this Assignment allows recovery of a commission under a breach-of-contract theory but denies recovery for breach of fiduciary duty, as the latter claim arose post-bankruptcy and thus could not be purchased by BGC from the G&E bankruptcy estate. Second, while the Plaintiff has standing to pursue the breach-of-contract claim, it fails legally since it cannot demonstrate that any breach by Defendants caused G&E to lose the commission. Finally, the Plaintiff requests permission to file a third amended complaint, fearing it may lack standing on the breach-of-contract theory. The Court denies this request to amend, citing judicial economy after eight years of litigation, and rules in favor of the Defendants.

Plaintiff asserts a breach-of-contract claim against McNair and Roehrenbeck, countering Defendants' argument that Plaintiff lacks standing due to G&E's failure to assume their employment contracts in bankruptcy. Plaintiff relies on an assignment of rights to damages from these claims, raising the question of whether G&E held such rights at the time of assignment, which hinges on when the claims accrued.

The Court emphasizes that the G&E bankruptcy estate can only assign what it owns, which is limited to claims that accrued before the bankruptcy filing. Federal courts look to state law to determine claim accrual, and in this case, the District of Columbia's law is applied due to the jurisdiction's significant relationship to the dispute. The Court evaluates four factors to establish this relationship: the location of the injury (District of Columbia), the location of the conduct causing the injury (both Virginia and D.C.), the parties' residences and business locations (predominantly D.C.), and the center of their relationship (D.C.).

Under D.C. law, a breach-of-contract claim accrues at the time of breach. McNair's contract imposed fiduciary duties to G&E and required him to assign all rights related to real estate opportunities to G&E. Roehrenbeck's contract prohibited misuse of G&E's confidential information and mandated compliance with G&E's Employee Handbook, which forbade potential conflicts of interest.

Plaintiff alleges that McNair breached his contract by attempting to divert the ANSER transaction to Avison Young in April 2011, and that Roehrenbeck breached his contract on February 10, 2012, by stealing confidential information related to the ANSER client. These claims arose before G&E filed for bankruptcy on February 20, 2012, making them part of G&E's bankruptcy estate, which BGC purchased through an Asset Purchase Agreement. 

Defendants contend that Plaintiff cannot pursue these claims because BGC only assigned rights related to the TRA, not claims to the Commission. They reference a prior ruling which stated that executory contracts can be assumed, assigned, or rejected during bankruptcy, noting that the TRA was still executory at the time of G&E's bankruptcy. Plaintiff argues that their claims are based on the assigned right to the Commission rather than the TRA, and this argument is supported by the Assignment of Claim Agreement.

Under New York law, the Assignment explicitly conveys all rights to the Commission and the TRA to Plaintiff. The contract’s plain language indicates that the Assigned Matter encompasses both the Commission and the TRA, meaning that inability to recover under the TRA does not negate the rights to the Commission.

Regarding the breach of fiduciary duty claim, Defendants assert that it did not accrue until after the bankruptcy petition was filed. Under D.C. law, a breach of fiduciary duty claim arises when the beneficiary suffers an injury or the fiduciary profits. Therefore, if Plaintiff's claim to the Commission is based on a breach of fiduciary duty, it is deemed unsuccessful.

McNair's employment with G&E may have imposed a fiduciary duty, but he did not divert business to Avison Young or receive the Commission until June 2012, post-bankruptcy filing by G&E, which means G&E's claim arose after the bankruptcy petition. Consequently, the Assignment of Claim could not transfer any rights to the Plaintiff, rendering the fiduciary-duty claim legally insufficient.

In addressing the breach of contract claim, the Defendants assert that they had 'Adequate Justification' under McNair's contract to terminate his employment due to G&E's failure to pay a required retention bonus in January 2012. Under D.C. law, the court interprets the contract's plain meaning, which includes bonuses as part of compensation. McNair's termination therefore aligns with the contract's provisions.

The Plaintiff contends that McNair's prior material breach prevents him from claiming 'Adequate Justification.' However, a relevant case (Ashcraft, Gerel v. Coady) established that a material breach by one party does not absolve the other from fulfilling their contractual obligations. Since G&E continued to employ McNair, it could not disregard its duty to pay the bonus, justifying McNair's termination.

Additionally, the Plaintiff claims McNair was required to allow G&E a 60-day cure period before terminating for 'Adequate Justification.' This argument fails as the contract's provisions include multiple independent events allowing termination without a cure period for certain breaches.

The 'Adequate Justification' provisions grant rights to the McNair Team, including exemptions from G&E's non-compete clause and trade secret provisions concerning current and former clients. However, these exemptions do not apply to ANSER, as it was not a current or former client of the McNair team and its business was developed through G&E's efforts outside the McNair team.

The employment contract does not include any provisions that protect the McNair Team from liability for breaches committed during their employment at G&E. Consequently, any attempts by the McNair Team to appropriate ANSER's business prior to McNair's termination in January 2012 can be pursued under a breach-of-contract claim by the Plaintiff. The Plaintiff's arguments regarding Adequate Justification lack relevance to the Commission and therefore do not provide standing, particularly concerning confidential Grubb, Ellis documents and the solicitation of G&E employees.

The Assignment of Claim only allows recovery of the Commission, not additional damages. Defendants assert that G&E's material breach of the TRA serves as an intervening cause that disrupts the establishment of proximate causation, which is necessary for recovering damages under breach of contract. Proximate cause is defined as the direct cause of an injury, uninterrupted by an intervening cause. The timeline reveals that Defendants' actions to misappropriate ANSER business commenced before G&E's bankruptcy filing, and following their termination with G&E, they commenced employment with Avison Young.

Defendants are entitled to the Commission as a measure of damages, but G&E's bankruptcy on February 20, 2012, where it failed to assume the TRA, constitutes a material breach. This breach acts as an intervening cause that negates the direct link between Defendants' contractual breaches and the loss of the Commission. The case of FCE Benefit Administrators, Inc. v. George Washington University is cited to demonstrate that, although the agent breached their contract, the employer's switch to a different insurer was the primary cause of losses, limiting the insurer's damages to nominal amounts. Similarly, G&E's breach of the TRA is deemed the decisive factor that undermines its claims, as it forfeited its rights to the Commission through this breach. The Plaintiff fails to adequately address this key issue.

The Court determined that although the Defendants' breach of contract may have caused some harm, G&E's actions were an intervening cause that ultimately sealed the loss of the Commission. Consequently, the Defendants' breach did not proximately cause G&E's loss, negating any recovery for the Commission under the Assignment of Claims. The Plaintiff lacks standing to pursue a breach-of-contract claim since it cannot demonstrate that the breach directly caused the loss of the Commission. Counts I and II of the Plaintiff's Second Amended Complaint were therefore dismissed as a matter of law.

The Plaintiff also sought leave to file a supplemental pleading related to a new assignment of claims but this would only pertain to its fiduciary-duty theory. Under Federal Rule of Civil Procedure 15(d), the Court can permit a supplemental pleading if it does not cause undue delay or prejudice to other parties. However, the Court found that various factors, including undue delay and the potential for prejudice to the Defendants, weighed against granting this request. The Plaintiff delayed until surreply to introduce new documents, which could have been included earlier, indicating a lack of diligence. Given that the case is nearing resolution and has been ongoing for nearly nine years, the Court denied the Plaintiff's motion to supplement.

In conclusion, the Court granted the Defendants' Motion for Summary Judgment, dismissed Count III due to lack of standing, and ruled in favor of the Defendants on Counts I and II. An appropriate order will follow this Memorandum Opinion.