SAC Capital Management and Macklowe Properties win summary judgment on breach of contract claims by real estate broker

Client(s) S.A.C. Capital Management, Inc., S.A.C. Capital Management, LLC, and S.A.C. Advisors, LLC, Macklowe Properties, LLC

Jones Day won summary judgment on behalf of its clients, S.A.C. Capital Management, Inc., S.A.C. Capital Management, LLC, S.A.C. Advisors, LLC ("SAC"), and Macklowe Properties, Inc. and related Macklowe entities ("Macklowe").

Real estate broker Rosenhaus Real Estate, LLC ("Rosenhaus Real Estate") brought an action in New York County Supreme Court against SAC and Macklowe to recover a brokerage commission in connection with two leases for several floors of space in a Madison Avenue building. Rosenhaus Real Estate asserted that, as SAC’s broker, it had procured SAC’s leases and that SAC had frustrated the broker’s performance to avoid paying the brokerage commission. The trial court dismissed on the pleadings all causes of action other than those for breach of contract. Defendants moved for summary judgment after the close of discovery on the remaining causes of action against them. The trial court granted Macklowe’s motion, on the ground that Rosenhaus Real Estate had no binding contract with the building agent, and denied SAC’s motion.

SAC appealed. In reversing the lower court’s order, the First Department ruled that Rosenhaus Real Estate was SAC’s “exclusive agent” and, as such, SAC had the right to deal directly with Macklowe and, to earn a brokerage commission, Rosenhaus Real Estate had to establish a “direct and proximate link” between its efforts and the executed leases. The appellate court held that Rosenhaus Real Estate did not procure the terms of the leases under this standard. Rosenhaus Real Estate's “alleged creation of an amicable atmosphere that led to the negotiations between its principal and the building’s managing agent and owner is insufficient to demonstrate that plaintiff was the procuring cause of the deal.” The court further held that SAC did not, as a matter of law, act in bad faith because at the time SAC stepped in to negotiate the leases on its own behalf—a year and a half before the deals were eventually consummated—Rosenhaus Real Estate’s efforts were not “plainly and evidently approaching success.”

Rosenhaus Real Estate, LLC v. SAC Capital Management, Inc., Index; 601012/09 (1st Dept. 2014)