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GRUBB & ELLIS COMPANY v. HUNTINGTON HOFFMAN

December 1, 2010

GRUBB & ELLIS COMPANY, PLAINTIFF,
v.
HUNTINGTON HOFFMAN, LLC DEFENDANT.



The opinion of the court was delivered by: Judge Joan H. Lefkow

OPINION AND ORDER

Grubb & Ellis Company ("Grubb & Ellis") filed a two-count complaint against Huntington Hoffman, LLC ("Huntington") seeking payment of commission fees that relate to the leasing of real property owned by Huntington.*fn1 Huntington has moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(7) on the grounds that Grubb & Ellis failed to join HSA Commercial, Inc. ("HSA") as required by Rule 19. In the alternative, Huntington requests that the court order HSA to be joined as either a party plaintiff or a party defendant. For the following reasons, Huntington's motion [#11] is denied.

BACKGROUND*fn2

Huntington is the owner of real property located at 1600 Algonquin Road in Hoffman Estates, Illinois. On November 2, 2006, Huntington and Grubb & Ellis entered into a written agreement that gave Grubb & Ellis the exclusive right to lease or sublease the property from November 15, 2006 through May 15, 2007. Compl. Ex. A. The agreement contains a Commission Schedule that provides that Grubb & Ellis will receive a commission of 6% of the total value of the initial leaseterm, limited to the first fifteen years. Id. at 2. One half of the leasing commission is due upon execution of the lease and one half is due upon the first payment of rent. Id. The Commission Schedule further states that "[i]n the occurrence when the lessee is represented by a broker other than the listing broker(s), then the project salesperson(s) and the non-project salesperson(s) will share the 6% commission per the terms of a separate commission agreement." Id. After the leasing agreement expired in May of 2007, Grubb & Ellis continued to market the property with Huntington's encouragement and authorization.

The parties entered into a second exclusive leasing agreement in July of 2007. Compl. Ex. B. The second agreement granted Grubb & Ellis the exclusive right to lease the property from July 23, 2007 through January 31, 2008. Id. at 1. Like the first agreement, the second agreement includes a Commission Schedule that provides that Grubb & Ellis will receive a 6% commission and that the commission will be shared if another broker represents the lessee. Id. at 2.

Sometime in August of 2007, Grubb & Ellis entered into a co-brokerage agreement with HSA. Marschall Aff. ¶ 5; Pl.'s Resp. Ex. 2.*fn3 The brokerage agreement provides, in relevant part, that "[i]n the event that Tenant or a related entity should execute a lease, Grubb & Ellis will pay or cause the Owner of the property to pay a commission to HSA in the amount equal to three percent (3%) of the lease rate of the initial term, limited to 15 years. Commission shall be paid 50% upon lease execution and 50% upon the earlier of rent commencement or the tenant opening for business." Pl.'s Resp. Ex. 2.

In September of 2007, National City Bank ("National City") gave Grubb & Ellis a letter of intent to lease a portion of Huntington's property. National City provided a revised letter of intent in January of 2008.*fn4 After the second leasing agreement expired that same month, Huntington encouraged and authorized Grubb & Ellis to assist in negotiating a lease with National City and led Grubb & Ellis to believe that it would receive a commission if National City signed the lease.

National City entered into a lease with Huntington in October of 2008 and began to pay rent to Huntington in March of 2010. In the lease between National City and Huntington, both parties represented that HSA, rather than Grubb & Ellis, was the real estate broker that assisted in procuring the lease. Specifically, Section 16.16 of the lease, titled "No Broker," states: "Landlord and Tenant represent and warrant that they have not dealt with any real estate agent or broker in connection with this transaction except HSA Commercial, Inc. whose fees shall be paid by Landlord pursuant to a separate agreement; and each party agrees to indemnify and save the other harmless from and against all liability, damage, loss, cost and expense incurred by reason of the indemnitor's breach of said representation and warranty." Pl.'s Resp. Ex. 3, at 19.*fn5

In January of 2010, before National City started paying rent for the property, HSA sent an invoice to Grubb & Ellis demanding payment in the amount of $63,574.22. This amount equals 3% of the total value of the first fifteen years of National City's initial lease term. The invoice asserts that Grubb & Ellis must pay $31,787.11 upon receipt of the invoice and $31,787.11 upon rent commencement. Pl.'s Resp. Ex. 4. HSA sent a similar invoice to Huntington on February 1, 2010. HSA's invoice to Huntington states that Huntington must pay $31,787.11upon receipt of the invoice and $31,787.11 upon rent commencement. Def.'s Reply Ex. 1. On February 10, 2010, HSA asserted a commercial real estate broker lien against Huntington's property. Def.'s Mot. to Dismiss Ex. 1. The lien asserts that Huntington "made a written contract . . . with [HSA] for the purposes of leasing an interest in the [Hoffman Estates property]" and that HSA is entitled to a commission of $63,574.22 pursuant to this contract. Id.

¶¶ 2--5.*fn6

Grubb & Ellis, for its part, alleges that Huntington was required to pay Grubb & Ellis $63,574.22 in October 2008, when National City signed the lease, and $63,574.22 in March of 2010, when rent payments commenced. Grubb & Ellis alleges that Huntington was required to pay the commission based on the existence of a contract implied in fact (Count I of the complaint) or, in the alternative, because application of the doctrine of quantum meruit warrants payment of the commission (Count II).

LEGAL STANDARD

The court conducts a two-step analysis in determining whether a complaint must be dismissed for failure to join a party as required by Rule 19. First, the court determines whether the party is a "required" party under Rule 19(a). Askew v. Sheriff of Cook County, Ill., 568 F.3d 632, 635 (7th Cir. 2009). Rule 19(a) provides that an absent party "must" be joined if joinder is feasible and (1) the court cannot afford complete relief among the existing parties in the party's absence, (2) the absent party's ability to protect an interest relating to the subject of the action will be impaired, or (3) an existing party would be subject to a substantial risk of multiple or inconsistent obligations if the absent party is not joined. Fed. R. Civ. P. 19(a)(1)(A)--(B). Second, if the court determines that the party meets the criteria set forth in Rule 19(a)(1) but that joinder is not feasible, it must consider whether, under Rule 19(b), "equity and good conscience" require that the litigation should proceed without the absent party. Davis Cos. v. Emerald Casino, Inc., 268 F.3d 477, 481 (7th Cir. 2001) (citing Thomas v. United States, 189 F.3d 662, 667 (7th Cir. 1999)); see also Askew, 568 F.3d at 635. The court will consider the prejudice to the existing parties, the adequacy of a judgment that would be rendered without the absent party, and whether the plaintiff would have an adequate remedy if the action were dismissed. Fed. R. Civ. P. 19(b)(1)--(4). "If there is no way to structure a judgment in the absence of the party that will protect both the party's rights and the rights of the existing litigants, the unavailable party is regarded as 'indispensable' and the action is subject to dismissal . . . under Federal Rule of Civil Procedure 12(b)(7)." Davis Cos., 268 F.3d at 481 (quoting Thomas, 189 F.3d at 667). The moving party has the burden of showing failure to join a required and indispensable party. See, e.g., Rotec Indus., Inc. v. Aecon Group, Inc., 436 F. Supp. 2d 931, 933 (N.D. Ill. 2006); Hous.

Auth. Risk Retention Group, Inc. v. Chicago Hous. Auth., No. 02 C 4474, 2002 WL 22299353, at *1 ...


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