Grubb & Ellis v. Gaedeke Holdings Ltd

CourtCourt of Appeals for the Sixth Circuit
DecidedMarch 30, 2005
Docket04-5198
StatusPublished

This text of Grubb & Ellis v. Gaedeke Holdings Ltd (Grubb & Ellis v. Gaedeke Holdings Ltd) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Grubb & Ellis v. Gaedeke Holdings Ltd, (6th Cir. 2005).

Opinion

RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 File Name: 05a0152p.06

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT _________________

X Plaintiff-Appellant, - GRUBB & ELLIS/CENTENNIAL, INC., - - - No. 04-5198 v. , > GAEDEKE HOLDINGS, LTD. and GAEDEKE LANDERS, - - Defendants-Appellees. - L.L.C.,

- N Appeal from the United States District Court for the Middle District of Tennessee at Nashville. No. 03-00016—Todd J. Campbell, District Judge. Argued: February 4, 2005 Decided and Filed: March 30, 2005 Before: GIBBONS and SUTTON, Circuit Judges; EDGAR, Chief District Judge.* _________________ COUNSEL ARGUED: Gerald D. Neenan, NEAL & HARWELL, Nashville, Tennessee, for Appellant. Todd E. Panther, TUNE, ENTREKIN & WHITE, Nashville, Tennessee, for Appellee. ON BRIEF: Gerald D. Neenan, NEAL & HARWELL, Nashville, Tennessee, for Appellant. Todd E. Panther, TUNE, ENTREKIN & WHITE, Nashville, Tennessee, for Appellee. _________________ OPINION _________________ SUTTON, Circuit Judge. Grubb & Ellis/Centennial, Inc. (Grubb & Ellis) agreed to be Gaedeke Holdings’s exclusive broker in trying to lease the Highland Ridge Tower Office Building (the Tower), a piece of commercial property located in Nashville, Tennessee. The agreement provided that Grubb & Ellis would receive a commission on all leases signed during the term of the agreement, and it provided that Grubb & Ellis would earn a commission on leases signed after the termination of the agreement so long as within ninety days of termination “negotiations continue or resume leading to the execution of a lease with any person or entity” with whom Grubb & Ellis negotiated. JA 17.

* The Honorable R. Allan Edgar, Chief United States District Judge for the Eastern District of Tennessee, sitting by designation.

1 No. 04-5198 Grubb & Ellis v. Gaedeke Holdings Ltd, et al. Page 2

Barry Smith, a broker for Grubb & Ellis, served as Gaedeke’s primary brokerage agent and in the fall of 2001 was in negotiations with Bridgestone/Firestone, a potential tenant of the Tower. When Smith left Grubb & Ellis in December 2001, Gaedeke terminated its agreement with Grubb & Ellis. Nine months later, Gaedeke signed a lease agreement with Bridgestone, prompting Grubb & Ellis to seek a commission under the terms of the brokerage contract. The district court rejected the claim, concluding that Tennessee common law required Grubb & Ellis to show that it was the “procuring cause” of the lease and that this tenet of Tennessee law trumped any contrary terms in the brokerage contract, including the continuation-of-negotiations-within-90-days-of-termination provision. In our view, Tennessee law places no such constraint on the rights of contracting parties to determine when a commission is or is not due under a brokerage agreement, and accordingly we reverse. I. On March 29, 2001, Gaedeke signed an exclusive-brokerage agreement with Grubb & Ellis to lease the Tower, one of several pieces of commercial property owned by Gaedeke in Nashville’s Highland Ridge Office Park. Among other provisions, the agreement contained the following terms: 6. Agreement to Refer Offers and Inquiries. On and after the effective date hereof, and thereafter during the term of this Agreement, [Gaedeke] agrees to refer to [Grubb & Ellis] any and all offers and inquiries by prospective tenants . . . and [Grubb & Ellis] agrees to diligently investigate and develop such offers or inquiries, to canvass, solicit and otherwise employ its best efforts and services to lease space in the Building. 7. Owner’s Reservation to Preempt Broker. [Gaedeke] reserves the right to preempt [Grubb & Ellis] and deal directly with a Tenant with the understanding that should [Gaedeke] exercise said right the commission otherwise payable under this Agreement will be payable. 8. Broker’s Commission. 8.1 In consideration of this authorization and [Grubb & Ellis’s] agreement to professionally use its best efforts to lease space in the Building, [Gaedeke] agrees to pay [Grubb & Ellis] a leasing commission . . . . Any commissions payable beyond ten (10) years must be agreed to in writing by [Gaedeke]. 8.4 [Gaedeke] further agrees to pay [Grubb & Ellis] a commission . . . if, within ninety calendar days (90) after the expiration of the termination of the Term the property is leased to, or negotiations continue or resume leading to the execution of a lease with any person or entity with whom [Grubb & Ellis] has negotiated (either directly or through another broker or agent) or to whom the Property has been submitted prior to expiration or termination of the Term. [Grubb & Ellis] agrees to submit a list of such persons or entities to [Gaedeke] not later than fifteen (15) calendar days following the expiration of the Term. JA 15–18. In October 2001, Bridgestone, which had been a tenant of other buildings in the Highland Ridge Office Park since 1994, made a proposal to Gaedeke to rent space in the Tower. In accordance with Section 6 of the agreement, Gaedeke referred the inquiry to Barry Smith. Later that No. 04-5198 Grubb & Ellis v. Gaedeke Holdings Ltd, et al. Page 3

month, Bridgestone broker Joseph Cherry contacted Gaedeke about the proposal and requested that Gaedeke negotiate directly with Bridgestone due to their pre-existing relationship. Gaedeke agreed to the request and informed Smith that Gaedeke would be exercising its right under Section 7 of the agreement to negotiate directly with Bridgestone but that Gaedeke would need Smith to work “behind the scenes” to bring the deal to a conclusion. JA 155. On November 19, 2001, Cherry sent Gaedeke a lease proposal contemplating that Bridgestone would (1) lease 140,000 square feet of space in the Tower and (2) renew and expand its existing space in other parts of the Highland Ridge Office Park. Gaedeke claims that it forwarded this information to Smith for his “input and assistance,” JA 156, an assertion that Grubb & Ellis does not contradict. On November 30, 2001, Smith told Gaedeke that he planned to leave Grubb & Ellis effective December 6, 2001. Gaedeke expressed interest in continuing to use Smith as its broker, provided that he either became associated with a national brokerage firm or was willing to work for Gaedeke directly. However, according to Gaedeke, Smith became difficult to reach and failed to return numerous phone calls and e-mails over the course of the next month or so. Throughout this period of time, Gaedeke continued to negotiate with Bridgestone directly. On January 3, 2002, Gaedeke sent a letter to Grubb & Ellis exercising its right to terminate the agreement with 30 days’ written notice. In response to the notice and in accordance with Section 8.4 of the agreement, Grubb & Ellis sent Gaedeke a letter listing all individuals and entities with whom it had negotiated in its efforts to lease the Tower property. The list included Bridgestone. The termination became effective on February 3, 2002. At this point in the chronology, the parties part ways over what happened next. According to Gaedeke, negotiations between Gaedeke and Bridgestone regarding the two-pronged lease proposal ended on March 20, 2002. And the 90-day period during which negotiations must have resumed in order for Grubb & Ellis to obtain a commission ended on May 3, 2002. It was not until May 15, 2002, that Gaedeke resumed negotiations with Bridgestone. And the new negotiations, which proposed that Bridgestone would lease just 65,000 square feet in the Tower and sublease additional space in the Tower from Gaedeke’s largest tenant, the Tennessee Valley Authority, “took on a materially different character [from] the negotiations that had occurred up until that point.” Gaedeke Br. at 18. Not until September 6, 2002, did Gaedeke and Bridgestone sign a lease agreement for the Tower on these new terms.

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