BLOG / 06.01.17 /Jack Malley
Appellate Division Rejects Finder’s Fee Claim
The recent decision issued by the First Department in Multi-Capital Group LLC v. Karasick, et al, 149 A.D.3d 437 (1st Dep’t April 6, 2017) provides a good set of facts to comprehend when a finder’s fee claim is viable. That case concerned the sale of the U.S. Steel Tower Building in Pittsburgh. The plaintiff submitted the winning bid to purchase the building via a letter of intent that included a $348 million purchase price. However, the plaintiff’s principal never actually intended to purchase the building. Rather, he intended to procure investors who would do so.
In July 2007, the plaintiff commenced negotiations with the defendant investors, wherein the plaintiff sought a finder’s fee in exchange for the defendants’ rights to participate in the purchase of the building. The parties attempted to negotiate a finder’s fee agreement. A draft agreement was exchanged setting the fee at $2 million. However, the agreement was never executed, and in January 2008, the defendants’ purchase deal fell through.
In January 2011, three years later, a real estate due diligence professional unaffiliated with the plaintiff approached one of the defendants with a new proposed deal. Negotiations once again commenced, which resulted in a sale contract being entered into on February 10, 2011 by which the defendants purchased the building for $250 million plus $39 million in tenant improvements.
The First Department affirmed the trial court’s decision granting summary judgment to the defendants emphasizing that a finder’s fee agreement was never executed, and that there was no connection between the plaintiff’s contacts with the defendants in 2007-08 and the defendant’s ultimate purchase of the building in 2011. This holding was based on the well-settled rule of law that a finder’s fee claim only has merit if the finder can show that there was some “continuing connection” between the finder’s initial efforts and the transaction that was consummated. Edward Gottlieb, Inc. v. City & Commercial Communications PLC, 200 A.D.2d 395, 399, 606 N.Y.S.2d 148 (1st Dep’t 1994).