Jones Lang Lasalle Brokerage, Inc. v. 1441 L Associates, LLC ( 2022 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
JONES LANG LASALLE
BROKERAGE, INC.,
Plaintiff,
Civil Action No. 20-3687 (FYP)
v.
1441 L ASSOCIATES, LLC,
Defendant.
MEMORANDUM OPINION
Plaintiff Jones Lang LaSalle Brokerage, Inc. (“JLL”) and Defendant 1441 L Associates,
LLC, d/b/a 1441 L Street Associates, LLC (“1441 L”) entered into a leasing agreement, under
which JLL secured a tenant for property owned by 1441 L. 1441 L declined to pay JLL the
commission contemplated by the parties’ contract, and JLL filed the instant lawsuit. 1441 L now
moves for summary judgment, arguing that the leasing agreement is void and unenforceable, for
failure to comply with statutory requirements. The Court agrees and will therefore grant 1441
L’s Motion.
BACKGROUND
On June 1, 2016, 1441 L entered into an Exclusive Leasing Agreement (“ELA”) with
JLL. See ECF No. 14-1 (Defendant’s Statement of Undisputed Material Facts), ¶ 1; ECF No.
16-1 (Plaintiff’s Statement of Undisputed Material Facts), ¶ 1; ECF No. 1-3 (Exhibit A,
Exclusive Leasing Agreement). Under the ELA, 1441 L engaged JLL as its exclusive broker for
the purpose of leasing the property at 1441 L Street, N.W., Washington, D.C. (the “Property”), to
third-party tenants. Def. SUMF, ¶ 3; Pl. SUMF, ¶ 3. 1441 L agreed to pay JLL commissions for
any new leases executed by 1441 L with new tenants. See ECF No. 1 (Complaint), ¶ 9;
Exclusive Leasing Agreement.
The ELA provided that JLL “may cooperate with cooperating brokers, including
representatives of JLL . . . in leasing space within the Property.” See Exclusive Leasing
Agreement, ¶ 2.1. Under the ELA, 1441 L would pay JLL and any cooperating broker the
“commissions computed in accordance with the rates as set forth in Schedule A to this
Agreement.” Id. The Compensation Schedule in the ELA set different levels of payment,
depending on whether JLL worked with a cooperating broker. See id., Schedule A. In a
“Transaction with a Cooperating Broker,” JLL would be entitled to a commission of two percent
of the aggregate gross lease value. See id., Schedule A. 1
In July of 2018, JLL secured RGN-Washington DC XXI, LLC (“Regus”) as a tenant for
the Property, and a lease agreement was executed between 1441 L and Regus on July 30, 2018.
Def. SUMF, ¶¶ 6–7; Pl. SUMF, ¶¶ 6–7; ECF No. 14-6 (Regus Lease). JLL represented 1441 L
in executing the Regus Lease, while Kevin Brandt, a cooperating broker employed by JLL,
represented Regus. See Pl. SUMF, ¶¶ 29–31. JLL thus acted in a dual capacity as broker for
both 1441 L and Regus when those parties entered the Regus Lease. Def. SUMF, ¶ 17, Pl.
SUMF, ¶ 17. 2
The Regus Lease provided the following disclaimer regarding JLL’s dual representation:
“Tenant and Landlord understand and agree that [JLL] is representing and acting as the agent for
1
Although the ELA originally covered the period from June 1, 2016, to May 31, 2017, the parties executed
an Amendment on July 9, 2018, that extended the term of the ELA through May 31, 2019. Def. SUMF, ¶ 5; Pl.
SUMF, ¶ 5; ECF No. 1-4 (Ex. B, Amendment to ELA).
2
In connection with the transaction, 1441 L agreed that JLL would receive 100% of the commission
($756,188.26) upon the later of Regus’s occupancy of the premises or payment of rent. Pl. SUMF, ¶ 31. The two
teams within JLL that respectively represented 1441 L and Regus in entering the lease did not share confidential
information about the transaction with each other. Id., ¶ 35.
2
both Landlord and Tenant, and both parties authorize and consent to such dual agency and waive
any conflict of interest which may arise as a result thereof.” See Regus Lease, ¶ 35.
JLL expected payment of a commission under the ELA for its role in brokering the Regus
Lease — a total sum of $780,518.35, representing two percent of the aggregate gross lease value.
Compl., ¶ 17. When 1441 L did not pay the commission, JLL sent a demand letter to 1441 L on
July 14, 2020. Id., ¶ 21. As of September 23, 2020, JLL alleges that it was owed $832,422.83, a
sum that includes interest of 1.5 percent per month on the delinquent payments. Id., ¶¶ 20, 23.
JLL filed the instant suit on December 15, 2020, alleging one count of breach contract, based on
1441 L’s failure to pay the commission that is allegedly due under the ELA. Id., ¶¶ 26–32.
On October 1, 2021, 1441 L filed a Motion for Summary Judgment, arguing that JLL is
not entitled to payment of the commission under the ELA because JLL failed to comply with
statutory requirements regarding the disclosure of a dual representative. See generally ECF No.
14-1 (Defendant’s Motion). Defendant contends that the defective disclosures regarding dual
representation render the ELA unenforceable. 3
LEGAL STANDARD
Summary judgment is appropriate where “the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” See
Fed. R. Civ. P. 56(a). Summary judgment is properly granted against a party who, “after
adequate time for discovery and upon motion, . . . fails to make a showing sufficient to establish
the existence of an element essential to that party’s case, and on which that party will bear the
burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party
3
Plaintiff filed an Opposition on October 22, 2021, see ECF No. 16 (Plaintiff’s Opposition); and Defendant
filed a Reply on October 28, 2021, see ECF No. 17 (Defendant’s Reply).
3
bears the burden to demonstrate the “absence of a genuine issue of material fact” in dispute, id.
at 323, while the nonmoving party must present specific facts supported by materials in the
record that would be admissible at trial and that could enable a reasonable jury to find in its
favor, see Anderson v. Liberty Lobby, Inc. (“Liberty Lobby”), 477 U.S. 242, 248 (1986).
When faced with a motion for summary judgment, the district court may not make
credibility determinations or weigh the evidence; instead, the evidence must be analyzed in the
light most favorable to the non-movant, with all justifiable inferences drawn in her favor. Id. at
255. If material facts are genuinely in dispute, or undisputed facts are susceptible to divergent
yet justifiable inferences, summary judgment is inappropriate. Moore v. Hartman, 571 F.3d 62,
66 (D.C. Cir. 2009). The district court’s task is to determine “whether the evidence presents a
sufficient disagreement to require submission to a jury or whether it is so one-sided that one
party must prevail as a matter of law.” Liberty Lobby, 477 U.S. at 251–52. In this regard, the
non-movant must “do more than simply show that there is some metaphysical doubt as to the
material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586
(1986) (citation omitted). “If the evidence is merely colorable, or is not significantly probative,
summary judgment may be granted.” Liberty Lobby, 477 U.S. at 249–50 (internal citations
omitted).
ANALYSIS
Applicable statutory provisions impose specific and exacting requirements for disclosing
a broker’s dual representation of both parties to a real estate transaction. 1441 L argues that
JLL’s failure to comply with those statutory requirements renders the ELA void and
unenforceable; and that JLL therefore is not entitled to any commission for brokering the lease
between 1441 L and Regus. The Court agrees.
4
I. The Brokerage Act
Chapter 42 of the D.C. Code pertains to a “Real Estate Broker’s Duties,” and its purpose
is to “protect the public against incompetence, fraud, and deception in real estate transactions.”
D.C. Code § 42-1701 (“Brokerage Act”). Section 1703 enumerates the duties of real estate
brokers, salespersons, and property managers, and provides specific protections and
requirements regarding dual representation. Id. § 42-1703. Courts are especially wary of
brokers acting as dual representatives because of the obvious conflict of interest that such an
arrangement entails. See Urban Investments, Inc. v. Branham, 464 A.2d 93, 96 (D.C. 1983)
(where a broker attempts to act for both sides, “he is confronted with the impossible task of
securing for each the most advantageous bargain possible” (citation omitted)); see also 12 Am.
Jur. 2d Brokers § 106 (2022) (“As a general rule, a broker does not act in a dual capacity as the
representative of both sides to a negotiation” because a broker “must act solely for the benefit of
the principal . . . and may not undertake to represent an [adverse] interest.”). Because “a broker
is charged with protecting and advancing the principal’s interests, a broker may not serve both
parties to a transaction unless, under certain circumstances, the parties fully and freely have
consented to the dual representation.” Jenkins v. Strauss, 931 A.2d 1026, 1034 (D.C. 2007)
(cleaned up); see Ehlen v. Lewis, 984 F. Supp. 5, 9 (D.D.C. 1997) (“Where a fiduciary acts in his
own interest in dereliction of his beneficiaries’ interest, more than some ‘by the way’ notice is
required.”).
5
The provision of the Brokerage Act that specifically addresses dual representatives, D.C.
Code § 42-1703(i), requires a broker (or “licensee”) 4 to clearly disclose dual representation to the
parties to the transaction (the “clients”), and to obtain the consent of the parties in writing:
(1) A licensee may act as a dual representative only with the written
consent of all clients to the transaction. Such written consent and
disclosure of the brokerage relationship as required by this section
shall be presumed to have been given as against any client who
signs a disclosure as provided in this section.
(2) Such disclosure may be given in combination with other
disclosures or provided with other information, but if so, the
disclosure must be conspicuous, printed in bold lettering, all
capitals, underlined, or within a separate box. Any disclosure
which complies substantially in effect with the following shall be
deemed in compliance with this disclosure requirement.
D.C. Code § 42-1703(i)(1)-(2). The statute then provides a sample form for making the required
disclosures and obtaining consent. Id. The sample form is titled “Disclosure of Dual
Representation.” Id. The form is intended to be signed by the broker’s clients, and states:
The undersigned understands that the foregoing dual representative
may not disclose to either client or such client’s designated
representative any information that has been given to the dual
representative by the other client within the confidence and trust of
the brokerage relationship except for that information which is
otherwise required or permitted by § 42-1755(f), to be disclosed.
The undersigned by signing this notice do hereby acknowledge
their informed consent to the disclosed dual representation by the
licensee.
Id. (“Sample Form”).
4
It is undisputed that JLL is a “licensee” within the meaning of the statute. See D.C. Code § 42-1702(7A);
Def. Mot. at 7; Pl. Opp. at 13.
6
II. 1441 L Did Not Comply with the Brokerage Act
The parties dispute whether JLL complied with the statutory requirements for disclosure
of a dual representative. See generally Def. Mot; Pl. Opp. Defendant 1441 L focuses on
subsection (2) of Section 1703(i), which provides that where a disclosure is “given in
combination with other disclosures or provided with other information,” it must be “conspicuous,
printed in bold lettering, all capitals, underlined, or within a separate box.” D.C. Code § 42-
1703(i)(2). 1441 L argues that the disclosure of JLL’s dual representation in this case did not
comply with the statutory requirements because the disclosure was buried within the Regus
Lease, i.e., “provided with other information,” but it was not bolded, in all capitals, underlined,
or in a separate box. See Def. Mot. at 6. JLL counters that it provided the necessary disclosure
in the Regus Lease, and got “written consent of all clients to the transaction” when the parties
signed the lease. See Pl. Opp. at 10.
Section 35 of the Regus Lease refers to JLL’s dual representation of both parties to the
lease. See Regus Lease. The Section is title “Broker” and states:
Landlord and Tenant each represent and warrant to the other [that] with the
exception of Jones Lang LaSalle (“Broker”) who is acting in a dual capacity
on behalf of both Landlord and Tenant, they have dealt with no broker,
finder or agent in connection with this Lease[.] . . . Landlord shall
compensate Broker a commission attributable to this Lease in accordance
with the terms of a separate written agreement. Tenant and Landlord
understand and agree that the Broker is representing and acting as the agent
for both Landlord and Tenant, and both parties authorize and consent to
such dual agency and waive any conflict of interest which may arise as a
result thereof.
See Regus Lease, ¶ 35. This provision acknowledges JLL’s “dual capacity” and demonstrates
the clients’ awareness that JLL represented both sides of the real estate transaction; it also
confirms the clients’ consent to the dual agency and waiver of any conflict of interest. Id. But
Section 35 fails to meet the statutory requirements for “disclosure” of dual representation. The
7
purported disclosure is not made on the statutorily approved Sample Form, but rather is located
on page 51 of a 65-page lease. Thus, it is “provided with other information” and it therefore
“must be conspicuous.” See D.C. Code § 42-1703(i)(2). Yet Section 35 of the Regus Lease is
written in the same font size and type as the other sections — it is not “in bold lettering, all
capitals, underlined, or within a separate box.” Id. The purported disclosure does not stand out
from the other sections of the Regus Lease in any way: It thus fails to comply with the
requirements of the Brokerage Act.
Nor does the Regus Lease contain any provision that “complies substantially in effect”
with the Sample Form, which provides an alternative means of meeting the statutory directives.
Id. (“Any disclosure which complies substantially in effect with the following [form] shall be
deemed in compliance with this disclosure requirement.”). The Sample Form requires the broker
to give notice to all parties to the transaction that the “dual representative may not disclose to
either client . . . any information that has been given to the dual representative by the other client
within the confidence and trust of the brokerage relationship . . . .” Id. The Regus Lease
contains no such language. Thus, the Regus Lease plainly did not properly disclose JLL’s dual
representation. 5
The only other place to look for an appropriate disclosure in this case is the ELA, the
leasing agreement between 1441 L and JLL. The last page of the ELA, titled Exhibit 1,
substantially mirrors the Sample From, which was included in the Brokerage Act to facilitate
disclosure and consent concerning a dual representative. See Exclusive Leasing Agreement,
5
1441 L cites Jenkins as support for their position. See Def. Mot. at 9. JLL contends, and the Court agrees,
that the facts of Jenkins are not completely in line with their position, as in Jenkins the dual representation disclosure
was oral, while here, there technically was a written disclosure of dual representation. However, the holding and
underlying policy of Jenkins, namely that dual representation disclosures must follow statutory requirements to
enforce the contract, is relevant to this case.
8
Exhibit 1; see also D.C. Code § 42-1703(i). But that copy of the Sample Form was never signed
— not by 1441 L, JLL, nor Regus. See Def. SUMF, ¶ 16; Pl. SUMF, ¶ 16; see also Def. Mot.
Ex. A (Declaration of J. Scott Ogden, Agent for 1441 L), ¶¶ 20–22 (stating that Exhibit 1 of the
ELA is blank, and 1441 L does not have a signed version of Exhibit 1). Thus, it is undisputed
that the ELA itself also failed to make the proper disclosures. Because neither the ELA nor the
Regus Lease comply with the statutory requirements, there can be no genuine dispute that JLL
was not properly disclosed as a dual representative.
III. JLL Cannot Recover Its Commission
Having established that the Regus Lease and the ELA failed to provide the necessary
disclosures for a dual representative, as required by D.C. Code § 42-1703, the Court must now
determine whether, as a matter of law, JLL can enforce the ELA to recover its commission for
brokering the Regus Lease. 1441 L argues that because neither the ELA nor the Regus Lease
complies with the statute, the ELA is illegal and void. See Def. Mot. at 11. JLL contends that
there is no basis to void the ELA because the parties to the Regus Lease were aware of the dual
representation and consented to it in writing. See Pl. Opp. at 17.
The enforceability of the ELA largely turns on the nature of JLL’s violation of the
Brokerage Act. “‘The general rule is that an illegal contract, made in violation of a statutory
prohibition designed for police or regulatory purposes, is void and confers no right upon the
wrongdoer.’” Perez v. C.R. Calderon Constr., Inc., 221 F. Supp. 3d 115, 154 (D.D.C. 2016)
(quoting Hartman v. Lubar, 133 F.2d 44, 45 (D.C. Cir. 1942)). Thus, contracts made in violation
of a statute “designed to protect the public will usually be considered void and unenforceable.”
See Truitt v. Miller, 407 A.2d 1073, 1079 (D.C. 1979). “In deciding whether a party can enforce
an agreement in spite of his failure to [obtain a license, to register or to comply with a similar
9
requirement], courts distinguish between requirements that have a regulatory purpose and those
that do not.” Restatement (Second) of Contracts § 181 cmt. b (1981). A requirement “that has a
regulatory purpose may be regarded as sufficiently substantial to preclude enforcement, while
the policy behind one that is merely designed to raise revenue will not be.” Id. Courts have
voided contracts based on the violation of a variety of statutes and regulations designed to
protect the public. See, e.g., Capitol Constr. Co. v. Plaza West Coop. Ass’n, Inc., 604 A.2d 428,
430 (D.C. 1992) (determining that contractor license requirements are meant to protect the public
and a contractor who accepted payments when unlicensed in violation of the regulations could
not enforce contract); Family Constr. v. D.C. Dep’t of Consumer & Regulatory Affairs, 484 A.2d
250, 254 (D.C. 1984) (finding that the Consumer Credit Retail Regulations were designed for the
protection of the public, and failure to register in violation of the regulations thus rendered a
sales contract void); Fields v. Hunter, 368 A.2d 1156, 1159 (D.C. 1977) (holding that a
regulation prohibiting the sale of liquor on credit was enacted to protect the public interest, and
therefore, a liquor store owner was not entitled to money owed for liquor sold on credit in
violation of the regulation).
The Brokerage Act, previously known as the “Real Estate Licensure Act,” 6 was passed to
“protect the public against incompetence, fraud and deception in real estate transactions.” D.C.
Code § 42-1701. The Act applies to “licensees,” which are defined as real estate brokers,
salespersons, and property managers; and it imposes specific duties on such licensees. Id. §§ 42-
1702(7A), 42-1703. In particular, the act enumerates the obligations of licensees engaged by
sellers, id. § 42-1703(a); licensees engaged by buyers, id. § 42-1703(b); licensees engaged by
landlords to lease property, id. § 42-1703(c); licensees engaged by tenants, id. § 42-1703(d); and
6
The District of Columbia Real Estate Licensure Act was previously codified at D.C. Code §§ 45-1921, et
seq.
10
licensees engaged to manage real estate, id. § 42-1703(e). The Act requires the disclosure of a
brokerage relationship and establishes specific rules for the disclosure of a dual-representation
relationship. Id. §§ 42-1703(h), (i).
As previously discussed, the provisions in the Brokerage Act pertaining to dual
representation are particularly detailed and exacting. The legislature even saw fit to enumerate
the acceptable means of making disclosures of such arrangements visually prominent, specifying
that such disclosures should be “printed in bold lettering, all capitals, underlined, or within a
separate box.” Id. § 42-1703(i)(2). This reflects a recognition by lawmakers that dual
representation is inherently suspect, due to the broker’s inescapable conflict of interest in
representing opposing parties to a transaction. See supra Section I; see also D.C. Code § 42-
1703(c)(1)(B) (“licensee engaged by a landlord shall . . . [p]romote the interests of the
landlord.”); § 42-1703(d)(1)(B) (“licensee engaged by a tenant shall . . . [p]romote the interests
of the tenant.”). 7 To guard against “fraud and deception,” the Brokerage Act thus regulates dual-
representation arrangements by requiring both clear disclosure of the broker’s allegiance to both
sides, and written consent by the clients. Id. § 42-1703(i). There is no doubt that the statutory
requirements at issue are designed to protect the public and have a “regulatory purpose.” See
Restatement (Second) of Contracts § 181; see also Remsen Partners, Ltd. v. Stephen A. Goldberg
Co., 755 A.2d 412, 419 (D.C. 2000) (“[T]he Brokerage Act is obviously regulatory in purpose
and intended to protect the public.”). As a result, a failure to comply with the dual-
7
The Brokerage Act lays out duties for licensees engaged by a tenant, which include performing “in
accordance with the terms of the brokerage relationship” and promoting “the interests of the tenant.” Id. § 42-
1703(d). Promoting the interests of the tenant includes a duty to (1) seek a “lease at a price with terms acceptable to
the tenant;” (2) present “all written offers or counteroffers to and from the tenant;” and (3) disclose to the tenant
“material facts related to the property or concerning the transaction of which the licensee has actual knowledge.” Id.
§ 42-1703(d)(1)(B). Duties additionally include maintaining confidentiality of all “personal and financial
information,” and exercising “ordinary care.” Id. §§ 42-1703(d)(1)(C)-(D). Parallel provisions applicable to
licensees engaged by landlords to lease property are contained in section 42-1703(c).
11
representation rules of the Brokerage Act renders an agreement unenforceable. See Stephen A.
Goldberg Co. v. Remsen Partners, Ltd., 170 F.3d 191, 193 (D.C. Cir. 1999) (affirming a finding
that an agreement was unenforceable because it was entered into in violation of the Brokerage
Act requirement that real estate brokers be licensed); Hartman, 133 F.3d at 45 (a violation of a
“statutory prohibition designed for . . . regulatory purposes, is void and confers no right upon the
wrongdoer”); see also Frey v. Fraser Yachts, 29 F.3d 1153, 1156 (7th Cir. 1994) (“If a broker
fails to disclose his dual representation . . . he forfeits his commission.”).
Here, there is no dispute that JLL acted as a dual representative with respect to the
signing of the Regus Lease: JLL represented both 1441 L as the landlord, and Regus as the
tenant. JLL seeks a commission for its role in that transaction, relying on its leasing agreement
with 1441 L, the ELA. But as discussed, supra Section II, neither the Regus Lease nor the ELA
contained the necessary disclosures of JLL’s dual representation, and neither 1441 L nor Regus
provided proper, written consent. Because such requirements are regulatory in nature and
designed to protect the public, JLL cannot enforce the ELA to recover a commission for
brokering the Regus Lease. See Truitt, 407 A.2d at 1079 (contracts made in violation of a statute
“designed to protect the public will usually be considered void and unenforceable”). 8
JLL argues that there is no basis for invalidating the ELA because JLL disclosed the dual
representation and secured a waiver from its clients: According to JLL, 1441 L and Regus are
sophisticated, licensed actors in the real estate market, who understood and consented to the dual
representation. See Pl. Opp. at 17. JLL’s framing of the facts is accurate. The record does
8
JLL attempts to distinguish the facts of Sturdza v. United Arab Emirates, 11 A.3d 251 (D.C. 2011), a case
that 1441 L cites for the proposition that JLL cannot recover under the ELA. See Pl. Opp. at 15–17. The Court
agrees that the facts of this case are distinguishable, as there is no unlicensed contractor as there was in Sturdza. But
the policy underlying the holding in Sturdza — that contracts made in violation of statutes designed to protect the
public are voidable — is still applicable to this case. See Sturdza, 11 A.2d at 257.
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reflect that the parties to the Regus Lease were on actual notice of JLL’s dual representation, and
that they consented to the arrangement. Indeed, it appears that 1441 L is taking advantage of
JLL’s technical non-compliance with the law to avoid paying a commission that JLL rightfully
earned. Nevertheless, the Brokerage Act requires adherence to the strict disclosure-and-consent
provisions related to dual representation, for all the reasons previously discussed. And JLL
admits that it, too, is a sophisticated and experienced real estate broker, see id.: JLL should have
been aware of its obligations under the Brokerage Act. JLL does not identify any authority to
support the enforcement of an agreement that does not comply with the rules of dual
representation, and the Court is not aware of any such authority. The Court therefore concludes
that there is no genuine dispute that the ELA is void and unenforceable as to JLL’s claimed
commission from brokering the Regus Lease.
CONCLUSION
For the foregoing reasons, the Court will grant 1441 L’s Motion for Summary Judgment.
A separate Order will issue this day.
____________________________
FLORENCE Y. PAN
United States District Judge
Date: March 23, 2022
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