The Lewis Johs commercial trial team of Bryan Lewis and Tara Darling obtained a directed verdict following a week-long trial before Hon. Elizabeth H. Emerson, J.S.C. in the Commercial Division of the Supreme Court of Suffolk County.
The firm’s client, an international real estate brokerage (“Company”), had just acquired several offices in the Hamptons when it was approached by the plaintiff, an up and coming local real estate agent who was eager to get in on the ground floor of the Company’s expansion into the Hamptons market. The Company offered the agent an incentive-laden version of its standard independent contractor agreement in an effort to encourage his aspirations and desire to “grow the brand” in the Hamptons market, and left the door open to increasing plaintiff’s role with the Company by including an “agreement to try to agree” to a more expanded relationship with a profit sharing component if things worked out.
They didn’t. Though the parties initially explored a number of profit-sharing ideas, and even considered the possibility of plaintiff earning an equity stake in a small portion of the Company’s Hampton operations over time, it very quickly became apparent that the relationship would not work in the long term. Just months after joining, the Company was forced to relieve plaintiff of his administrative responsibilities after receiving a number of complaints from other agents and administrative staff in the office and other clashes with Company management. Nonetheless, the Company offered to keep plaintiff on as an agent under the existing incentive-laden agreement.
Plaintiff not only declined, but quit the Company, opened a competing brokerage, and sued the Company. In his suit, plaintiff claimed that the parties’ “agreement to try to agree,” though never consummated, nonetheless made him a de facto partner in the entirety of the Company’s Hamptons business. As a result, plaintiff sought unspecified “millions of dollars” in purported unpaid profits under his partnership and profit sharing theories.
The Court rejected plaintiff’s claim of de facto partnership, and awarded a directed verdict, following Lewis Johs’ cross-examination of the plaintiff. During questioning by Mr. Lewis, plaintiff admitted that he never agreed to share in the alleged partnership’s losses; never received an IRS schedule K-1 or an IRS form 1099; never owned or assisted in the purchase of any of the alleged partnership’s assets; never made a capital contribution or loan to the alleged partnership; never agreed to become jointly liable to creditors; and never shared management and control of the alleged partnership. The Court also noted that there was insufficient evidence of the parties’ intent to form a partnership, and that Real Property Law § 441-b did not permit a licensed real estate salesperson to hold an ownership interest in a licensed real estate brokerage when he was not a broker himself.
A conclusive and hard-fought victory for Lewis Johs’ client.