How Do Courts Determine If the Broker Has Earned a Commission? The Answer Is in The Details

To illustrate the point, let’s contrast the findings in two court actions, both involving celebrities. The first, Sotheby’s v. Donald Deutsch, a television celebrity, (see article here), and Elliman v. Firefly, involving celebrity entertainer, Taylor Swift.

For background on this article, I consulted with New York attorney Justin T. Kelton who wrote an article regarding Douglas Elliman v. Firefly that appeared in the New York Law Journal on February 22, 2019, and Geoffrey Castello, the attorney who represented Sotheby’s in the Deutsch case.

To start with, both brokers were duly licensed in New York, and both the Sotheby’s case and Firefly’s motion to dismiss were brought before courts in New York. In neither case did the broker have a signed contract with the defendant.

In the first case, Sotheby’s won and was awarded a commission in the amount of $1,207,000 plus interest retroactive from October 8, 2010 to October 21, 2014.

On January 24, 2019, the District Court granted Firefly’s motion to dismiss Elliman’s claim of a $1 million commission due. On January 30, 2019 Elliman filed an appeal with the U.S. Circuit Court of Appeals for the Second Circuit. According to Justin T. Kelton, author of the NYLJ article, the results of the appeal may take up to one year or more before the court rules on the appeal.

What were some of the differences? The Sotheby’s case was tried in the New York Supreme Court and the decision was held up by the Appellate Division of the New York Supreme Court and the New York Court of Appeals. The Elliman claim went before the U.S. District Court of the Southern District of New York by request of the Defendant, who was not a resident of the State of New York.

Another difference, in the case of Sotheby’s, they filed suit against the seller. In the Elliman case, Elliman brought an action against the buyer.

In the Sotheby’ case, although no written contract between the broker and seller existed, the court did conclude that there was a contract, at least expressed or implied, between the parties. In the Elliman case, the court concluded there was no contract between the parties, written, oral, or implied, merely an email which did not include terms essential to constitute a legally binding contract. In New York, a contract, unless otherwise required by the New York Statute of Frauds, need not be in writing to be enforceable. An express contract may be written or oral. An implied contract need not be either. It’s based upon conduct between the parties.

In the Sotheby’s case, the broker expected a 4 percent commission, which the court considered below the industry standard. In Elliman, there was no statement regarding the amount of commission, and the court refused to apply the industry standard which may vary depending upon a variety of factors.

In the Sotheby’s case, the court found that the broker was able to demonstrate a chain of events that led to the sale of the property, and therefore, entitled to the commission. In Elliman, the court ruled that the broker merely called the property to the attention of the buyer which was not enough to demonstrate “procuring cause.”

Finally, the defendant first contacted Douglas Elliman in December 2016. After February 2017 there was no further contact between the parties. In October 2017 the defendant bought the property through another broker who was paid a commission. Elliman filed a suit against that broker for “tortious interference” with an existing contract but did not prevail since the court concluded that there was no contract between Elliman and Firefly.

So, what’s the point of this article? Whether a court will find in favor or against a broker making a claim for a commission depends on the details of the transaction. We won’t have the final word on this case until the Circuit Court rules on the appeal.