Not too long ago, in “Every Broker Has an Achilles Heel,” published in SIOR’s quarterly SIOR Report (Winter 2022),1 I commented on a pending lawsuit Jones Lang LaSalle Brokerage Inc. v. 1441 L Associates LLC. In that first article, I pointed out that when a disgruntled client seeks a broker’s blood, or hopes to defend a commission claim, that client often looks at the license law and specifically at the section on agency and dual agency. In the 1441 L Associates matter, JLL sought an office lease commission in excess of $750,000. JLL had, through different salespersons, represented both landlord and tenant, and claimed that it had properly and timely disclosed its dual agency to the parties in accordance with the DC License Act. The landlord defended the claim, asserting that JLL had failed to use the exact language in the Act and failed to format its disclosure properly, not using either italics, bold print, or underlined language as stated in the Act. The trial judge, sensing that the landlord “was focusing on technical non-compliance rather than actual harm,” nonetheless held that the failure to follow the statute to the letter was fatal to JLL’s claim.
For the record, I stand by that advice: when the legislature gives you a tool to safely address dual agency, you should use it.
My earlier article reminded readers that where the license act in your state offers a form of disclosure and consent to dual agency, it makes good sense to use that form and format, to enjoy the presumption that the disclosure was thorough and complete, and therefore that the parties’ consent is presumed to be informed consent. The value of the presumption is that the other party then bears the burden of rebutting the presumption and showing actual harm. For the record, I stand by that advice: when the legislature gives you a tool to safely address dual agency, you should use it.
The good news is that JLL did not walk away from the adverse trial court decision. To the contrary, JLL appealed to the United States Court of Appeals, District of Columbia Circuit, and very recently, the appellate court reversed the trial court’s denial of JLL’s claim. See Jones Lang LaSalle Brokerage Inc. v. 1441 L Associates LLC, 2023 WL 4378206.2 The better news is that JLL prevailed; and this appellate opinion is a triumph of substance over form. The Appellate Court indicated that while the statutory wording and formatting of the disclosure and consent provided a presumption of sufficiency, it was not necessarily an inflexible or mandatory requirement. If JLL is able to prove (on remand to the trial court), that the landlord had received and understood JLL’s dual agency disclosure and had given its informed consent, then there would be a judgment for JLL in the amount of the contested fee. I am sure that JLL’s counsel will bring information to the court through correspondence, evidence of the landlord’s sophistication and experience, and that it had sophisticated counsel, that the very language in the lease it signed after review by counsel, would suffice for JLL to prove both disclosure and informed consent to dual agency.
With kudos to JLL for its tenacity and the abilities of its counsel, I want to circle back, asking simply: wouldn’t it make sense, then, and now, to use the exact tool the statute offers, in order to avoid a possible defense to dual agency? Wouldn’t it make sense to drill into every broker’s head that dual agency is, while permissible, dangerous? Would it not make sense to require that the managing broker (in every office where dual agency is possible) first review and approve the circumstances and the form of disclosure and consent?
As heartened as I am by the recent reversal of the trial court’s “form over substance” denial of the commission claim, I must speak out, to all managing brokers and sponsored licensees, to get this right the first time. Use the statutory form, use it well and timely, and save yourselves the anguish of protracted (and no doubt expensive) litigation. You still have that Achilles Heel; and in a tough real estate market, you can expect headwinds, if not flat-out resistance and resentment over claims for large commissions. Don’t give the parties to transactions the temptation to shave or eliminate your fee. Do things right the first time. Achilles was slain by that one arrow — don’t let it happen to you.