Legal Update 2020
Instructor: John Henderson
Affiliate Broker Can't Sue for Commission, Whatever It's Called
Miller v. Crescent Homes Tennessee, 2018 U.S. Dist. LEXIS 169393 (M.D. Tenn., Oct. 1, 2018) (2018)
United States District Court for the Middle District of Tennessee, Nashville Division
Facts: An associate broker for a real estate firm alleged that she negotiated and worked extensively toward a builder’s purchase of build-ready properties. Instead of paying a commission on the purchases, the builder entered into a listing agreement with the firm for the homes to be constructed. The affiliate broker alleged that she performed work on behalf of the builder on all phases of the development and construction of the homes, but the builder unilaterally informed the firm that it no longer wanted the affiliate broker to act as listing agent. The affiliate broker sued the builder, alleging that her particularized knowledge of the market was a trade secret under the Tennessee Uniform Trade Secrets Act (“TUTSA”) and that the misappropriation of her expertise enabled the builder to successfully acquire, construct, and market the subdivision. She also claimed that she was entitled to recover in quantum meruit for the value of her services.
Issue: Can the affiliated broker sue the builder?
Held: No. Case dismissed. The affiliate broker lacked standing to sue the firm’s client. The real estate license laws define an affiliate broker as any person engaged under contract by or on behalf of a licensed broker to participate in any activity included in the definition of a “broker” for which any form of commission or other valuable consideration is received or expected [Tenn. Code Ann.§ 62-13-102(3) and (4)]. Under Tennessee court precedents, an affiliate broker is under the direction and control of a licensed broker, is “engaged by the broker to do his bidding,” and has no right to maintain an action in his or her own name against the broker’s client for a commission. Regardless of how the civil complaint was characterized (TUTSA, quantum meruit, etc.), the affiliate broker was claiming compensation for services she rendered on behalf of the brokerage firm under the listing agreement with the builder.