Hanks v. Anderson

District Court, D. Utah·Decided October 18, 2023·No. 2:19-cv-00999·Unknown

Opinion

THE UNITED STATES DISTRICT COURT DISTRICT OF UTAH

NATHAN W. HANKS and REALSOURCE MEMORANDUM DECISION AND EQUITY SERVICES, LLC, ORDER GRANTING [288] REALSOURCE’S MOTION FOR Plaintiffs/Counterclaim Defendants, SUMMARY JUDGMENT AGAINST MICHAEL HOWARD’S v. AFFIRMATIVE CLAIMS

MICHAEL S. ANDERSON; AKA Case No. 2:19-cv-00999-DBB-DAO PARTNERS, LC; KENT ANDERSON; and MICHAEL HOWARD, District Judge David Barlow

Defendants/Crossclaim Plaintiffs.

v.

MICHAEL S. ANDERSON,

Crossclaim Defendant,

REALSOURCE BROKERAGE SERVICES, L.C.; REALSOURCE PROPERTIES, LLC; and DOES 1–100,

Third-Party Defendants,

REALSOURCE RESIDENTIAL, LLC,

Additional Counterclaim Defendant.

The matter before the court is Plaintiffs Nathan Hanks (“Mr. Hanks”) and RealSource Equity Services, LLC (“RS Equity”); Third-Party Defendants RealSource Brokerage Services, L.C. (“RS Brokerage”) and RealSource Properties, LLC (“RS Properties”); and Additional Counterclaim Defendant RealSource Residential, LLC’s (collectively “RealSource”) Motion for Summary Judgment Against Michael Howard’s Affirmative Claims.1 RealSource seeks summary judgment against Defendant Michael Howard’s (“Mr. Howard”) counterclaims.2 For the reasons below, the court grants RealSource’s motion.3 BACKGROUND RealSource is a conglomeration of three entities: RS Brokerage, RS Equity, and RS Properties. Michael S. Anderson (“Mike Anderson”) founded RS Brokerage in 1989.4 Mr. Hanks and Mike Anderson started RS Equity around 2002.5 RS Equity’s purpose is to attract investors to raise equity and buy property.6 Mr. Hanks and Mike Anderson jointly own RS Properties.7 Mr. Howard has held a Utah real estate license since 2004.8 He has never been licensed as a broker.9 In January 2011, Mr. Howard started working for RealSource as a real estate agent

and an independent contractor.10 He joined RS Equity’s acquisitions team as an “acquisitions specialist.”11 As such, he had the following tasks: “[f]ind [and] locate properties, underwrite them, present them to the team[,] . . . pursue . . . letter[s] of intent, . . . purchase the

1 Mot. for Summ. J. Against Michael Howard’s Affirmative Claims (“Mot. Summ. J.”), ECF No. 288, filed July 13, 2023. 2 The Misappropriation of Trade Secrets counterclaim applies only to Kent Anderson (“Mr. Anderson”). Second Am. Countercl. ¶¶ 128–34, ECF No. 219, filed Feb. 24, 2023. 3 Having reviewed the briefing and relevant law, the court finds oral argument unnecessary. See DUCivR 7-1(g). 4 Dep. of Nathan Hanks (“Hanks Dep.”) 27:14–15, ECF No. 288-3. Initially, the company received referral commissions from brokers as part of a buying tour circuit. Id. at 120:6–14. When RealSource later stopped going on buying tours, id. at 241:2–4, RS Brokerage’s importance lessened, id. at 119:20–22 (RS Brokerage now does “[v]ery little.”). 5 Id. at 30:15–25. 6 Id. at 30:24–31:6. 7 Id. at 94:8–16. 8 Dep. of Michael Howard (“Howard Dep.”) 12:14–13:6, ECF No. 288-2. 9 Id. at 12:21–22. 10 Id. at 13:17–20, 19:24–20:3; Hanks Dep. 32:25–33:5. Mr. Anderson was also a real estate agent/independent contractor who worked for RealSource from 2002 to 2019. Dep. of Kent Anderson 33:3–4, 90:19, 98:12–18, ECF No. 288-4. 11 Howard Dep. 25:14–20. property . . . [,] [s]tay in contract negotiations and facilitate the contract negotiations[,] . . . [a]nd then once [the property is] closed, [stay] involved in due diligence.”12 Mike Anderson served as the principal broker during Mr. Howard’s time at RealSource.13 For compensation, Mr. Howard understood that RealSource would pay him “money up front at closing, ongoing revenue, and money on the back end when [property was] sold or refinanced.”14 Yet no agreement between Mr. Howard and Mr. Hanks or RealSource was ever formalized in a written employment or independent contractor agreement.15 Mr. Howard instead avers he had a verbal agreement16 or “understanding”17 with Mr. Hanks. At one point, Mr. Howard complained to RealSource’s chief financial officer (“CFO”)18 about “why isn’t [the agreement] formalized and why don’t we have a clear understanding of what to expect when these properties happen.”19 The CFO said: “Don’t worry; Nate will be fair.”20 Later, Mr. Howard

emailed Mr. Hanks and the CFO. He stated: “I’m a little confused about our compensation understanding. I say ‘understanding’ because we don’t have a compensation agreement. It’s subject to discretion and adjustment on each and every property.”21

12 Id. at 28:25–29:1–6. 13 Id. at 24:23–25:3. 14 Id. at 23:8–16, 89:4–7. 15 Id. at 20:10–21:20, 22:7–9 (“[I]t was never formalized. There was no direct agreement on what we would get when these things closed. It’s subjective.” (emphasis added)). 16 Howard Dep. 89:15–21 (“Q. Do you have any writing that says you’re entitled to that? Any contract or e-mails that say you’re entitled to that? A. Just the agreement Nate and I had. Q. And that was verbal, as you’ve described it, correct? A. That’s correct.”). 17 Id. at 45:11–15; Email from Mike Howard (July 7, 2016), Ex. B, ECF No. 312-1, at 2. 18 Hanks Dep. 187:20–25. 19 Howard Dep. 21:5–8. 20 Id. at 21:8–9. 21 Id. at 45:11–15; Email from Mike Howard 2. Despite the uncertainty, Mr. Howard avers he was to receive compensation when properties closed.22 But he expressed concern about these payments. After Mr. Howard got $2,000 for a 2012 property closure, he asked Mr. Hanks: “Am I doing it wrong? I mean, if so, I’ve got to go, because this isn’t working.”23 Mr. Hanks responded that RealSource “needed the money in the company and that [RealSource] w[ould] make it right at some point.”24 Mr. Howard stopped working for RealSource in 2019.25 He asserts RealSource owes him unpaid compensation based on the agreement with Mr. Hanks.26 Specifically, he claims damages calculated “on an average of what we were paid at each property, when we were being paid, at 6 percent minimum, always, . . . and 11 percent on the properties I brought to the table.”27 On September 4, 2020, Kent Anderson (“Mr. Anderson”) and Mr. Howard filed their counterclaims against RealSource.28 On January 10, 2023, RealSource moved for summary

judgment on Mr. Anderson’s counterclaims.29 The court granted judgment to RealSource.30 Then

22 Howard Dep. 20:16–23 (Pinehurst property closing); Email from Kelly Randall (Aug. 15, 2018), ECF No. 303-2 (Jackson Branch property sale); Howard Dep. 33:7–23 (Q: “And you’re talking about on the closing?” A: “[Y]es, on the initial fees from purchasing the property. I got paid on all of those or most of them.”); see Howard Dep. 42:8–12 (“Q. What agreement do you have with RealSource that entitles you to this $2.3 million you’ve alleged in . . . your counterclaim? A. The agreement we lived under the whole time I was there: the three revenue streams for the team up front, ongoing revenue from operations, and back end, either from refinance or sale. Those are the revenue streams we agreed on.”); Howard Dep. 89:15–18 (“Q. Do you have any writing that says you’re entitled to that? Any contract or e-mails that say you’re entitled to that? A. Just the agreement [Mr. Hanks] and I had.”). Mr. Howard clarifies that the three revenue streams were “earned based on the closing of the property[.]” Howard Dep. 89:10–14. 23 Howard Dep. 20:16–21:5. 24 Id. at 21:2–3. 25 Id. at 74:16–18. 26 Id. at 89:4–24 (“No. What I’m saying is, when a property is closed, we have three sources of income on properties that would close: up front, ongoing revenue, and the back end. That’s what I’m saying.”); see id. at 42:8–12. 27 Id. at 88:3–18. 28 ECF No. 72. Mr. Anderson and Mr. Howard filed an amendment on January 27, 2022. See Am. Countercl., ECF No. 168. On February 24, 2023, the pair filed their Second Amended Counterclaim. See ECF No. 219. 29 ECF No. 208. 30 Mem. Decision & Order Granting Summ. J. (“Order Granting Summ. J.”), ECF No. 279.

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