Real Estate Broker Forfeits Commission Due to Breach of Fiduciary Duty

Real Estate Broker Loses Six Figure Commission

Broker Forfeits Six Figure Commission Concealment, Misrepresentation (Fraud) and Breach of Fiduciary Duty

Watch the video about this extraordinary case! After seller fired real estate broker, broker sued seller for six figure commission over sale of multi-million dollar Newport Beach home. Before hiring a new broker and agent, Seller was told by broker that the listing agreements had been cancelled. At binding arbitration, arbitrator ruled against broker, finding that broker committed fraud, concealment, and breach of fiduciary duty. The broker then had to forfeit his commission and was also required to pay over $100,000 in attorney’s fees to seller.

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My name is Gregory Brown and I have been a business and trial lawyer for over 30 years. I want to tell you about one of our cases. The case involved the sale of a multi-million-dollar home in Orange County. We were hired by the Seller of the property to represent her in a suit filed by her former broker seeking a six-figure commission, after the Seller had fired the broker and hired another broker who ultimately sold the property. The case was tried in a binding arbitration pursuant to the listing agreement entered into between the parties. Our client entered into a listing agreement with the 1st broker to sell the subject property. After a breakdown in the parties’ relationship, our client fired the broker and requested that the listing agreement, and the broker’s right to a sales commission therein, was cancelled. Relying on false representations by the broker that the listing agreement had been cancelled, our client proceeded to sell the property with another broker. After the sale closed, the former broker asserted a claim for a six-figure commission in connection with sale, and filed an action against our client for breach of the listing agreement and quantum meruit (a topic of another video). A real estate agent owes his or her client a fiduciary duty which includes an obligation to disclose to their clients all facts within their knowledge that are material to the real estate transaction. Under agency law, a real estate agent’s breach of fiduciary duty involving intentional disloyalty, bad faith or fraud may forfeit the right to a commission, even for properly performed services – which is what we had here. At arbitration, we presented evidence establishing that, although contractually entitled to a commission under the listing agreement, the former broker breached his fiduciary duty to our client by engaging in multiple acts of fraud, and thereby forfeited any commission under the agreement. We were further able to establish a total lack of credibility for the broker’s claims, cross-examination causing the broker to change his own sworn statements over 2 days of testimony, the broker claiming, incredibly, on the eve of closing arguments that our client never asked to cancel the listing agreement. The arbitrator ruled in favor of our client on all claims, finding that the former broker breached his fiduciary duty to our client by failing to disclose that he had not cancelled the parties’ listing agreement, and thus forfeited any right to a sales commission. Our client also recovered all attorneys fees and costs (around $100k) incurred in defending the case. We at B&C are proud to have helped secure this significant and personal win for our client. For more information on this topic, or if you have other business-related legal issues or disputes, call us today at 714.505.3000 or email us at inquiries@bc-llp.com.