Whose Commission Is It? Savills Broker Battle Heats Up As Legal Filings Fly

Real estate service provider Savills has gotten pulled into an escalating battle between two brokers over a commission potentially worth hundreds of thousands of dollars.

The tug of war over who deserves what portion of a commission when one broker leaves a company for a rival could set a precedent for such cases industry-wide, experts said. It is also an unusually detailed look at how compensation is decided at some of the nation's largest brokerages, which regularly exchange talent in an increasingly competitive landscape.

The case centers around Savills' San Diego team and has involved multiple legal filings and responses, none of which appear to be letting up anytime soon.

Both sides agree that in February, broker Christopher Musgjerd filed a lawsuit against another broker working out of the San Diego office, Robert McGriff. Musgjerd, who worked there until late 2019, alleges that he had teamed up with McGriff and that together, they’d worked on an $850K lease deal for Carlsbad-based Alphatec Spine Inc.

Both sides also agree that before the Alphatec deal closed in December 2019, Musgjerd left Savills and took a job at rival firm Cresa. In court documents, Musgjerd said that per his employment agreement, he gave Savills a list of in-progress deals that he had worked on so that he could get his share of the commission on those deals if they closed within six months after he moved on. 

All the facts now in dispute begin after that point. Musgjerd alleges that after the agreement with Alphatec was finalized, he did not get the money he was entitled to and that the commission that should have gone to him instead went to McGriff, who is still a Savills employee. Musgjerd also alleges that he and McGriff had their own agreement in place to work together and share commissions. 

In opposing legal filings, Savills argues that both brokers are bound by contracts agreeing to arbitration in the event of a legal dispute, and has filed papers hoping to force the case back into that arena. In May, Savills filed a federal petition in the U.S. District Court for the Southern District of California to force Musgjerd to drop his suit and instead solve the dispute through internal arbitration.

“The arbitration rules are intended to be an efficient, economical, equitable, and private resolution of any sharing percentage dispute involving Savills and its salespersons,” the company said in its federal filing. 

Savills has also countered that regardless of the deal outcome, any dispute that Musgjerd has with the company should be decided by arbitrators. In their petition, Savills claimed that both McGriff and Musgjerd had signed employment contracts that mandated arbitration agreements in instances like these. Savills argued that allowing Musgjerd to avoid arbitration could potentially create a cascade of pitfalls for the company and its workers.

"Musgjerd’s attempts to circumvent the Arbitration Rules threatens to upend this process for Savills and its more than 500 salespersons throughout the United States, exposing all those salespersons to costly and lengthy litigation, delaying resolution and payment of compensation, jeopardizing client relationships (with clients being potentially required to provide documents and testimony) and exposing Savills’s internal compensation matters to the public and competitors," Savills' petition said. 

U.S. District Judge Michael M. Anello ultimately granted a motion by Musgjerd to dismiss Savills’ petition and declined to rule on the case to compel arbitration, finding instead that the court lacked subject matter jurisdiction over the case. Anello added that while McGriff and Musgjerd were both named as respondents in the petition, McGriff and Savills were clearly on the same side after McGriff filed papers in court saying he wasn't opposed to the arbitration and was still a Savills employee.

"Together, these facts strongly suggest that McGriff’s interests coincide with Petitioner in relation to the purpose of this action, namely whether to compel arbitration," the judge said. 

McGriff did not respond to a request for comment. McGriff’s lawyer, Vincent Bartolotta Jr., said that he expects to file a response and a cross-complaint as soon as Friday, but maintained that his client's former partner had already been well-compensated. "[Musgjerd] got more than he was owed," Bartolotta said.

A representative for Savills told Bisnow it does not comment on pending litigation.

The case also raises questions around how commissions are divvied up once one or more brokers leaves a company mid-deal for a rival firm or similar territory coverage. Musgjerd's attorney told Bisnow that the case is a bellwether for how companies treat brokers and raises larger questions about arbitrating conflicts.

"Savills alleged treatment of a former broker Mr. Musgjerd is not good for the real estate industry and, in my opinion, creates a terrible environment and a disincentive for brokers to want to bring business in the door when Savills is going to turn around and not live up to their end of the deal," said George Rikos, the attorney representing Musgjerd.   

The nature of the commercial real estate business creates a lot of ambiguity where the conditions are ripe for disputes, The Real Deal found in 2018. The publication also said most of the larger firms require those disagreements to be settled via in-house arbitration, making an accurate count of those types of issues difficult.

"While brokers and managers told The Real Deal that the number of commissions disputes represents just a fraction of the thousands of deals inked every year, the stakes are high enough that when they do occur, both sides usually dig in," the publication said.

Prevalent in many employment contracts for decades, arbitration has more recently been criticized for keeping important conflicts within companies — including cases of harassment and discrimination — because its proceedings are private. Multiple studies have found that arbitration processes favor employers, as they are the ones that have set the terms of the arbitration procedures and hire the facilitators.

“Research has found that employees are less likely to win arbitration cases and they recover lower damages in mandatory employment arbitration than in the courts,” the Economic Policy Institute wrote in 2018. 

Generally speaking, employers prefer arbitration because it presents an opportunity to resolve issues quicker and for less money than a jury trial, said Thomas Lenz, a lecturer in law at the USC Gould School of Law and an experienced labor and employment lawyer who is not involved in the case. Employees and their advocates see it differently.

"It's a take-it-or-leave-it deal: Either they take that arbitration agreement as presented, without the ability to negotiate, or they don't work in that place," said Lenz of non-union workplaces.

As for now, the legal filings in the case continue flying. Musgjerd’s Superior Court lawsuit originally only named McGriff, but it was amended in mid-September to add Savills as a defendant. Savills has not yet filed a response to Musgjerd’s complaint, the official court records portal for the San Diego Superior Court shows.  

Musgjerd argues that Savills breached the employment agreement that it had with both men, and includes allegations of fraud on McGriff’s part. Musgjerd also claims he is owed at least $90K from the Alphatec deal, but said that is a figure that is still fluid, because he still doesn't know how much the final commission totaled.

Musgjerd says that he continued to work on the deal even after he was no longer employed by Savills in an attempt to close it and get his portion of the commission, whatever that may be. He said this week that he feels that work has been uncompensated, while his former brokerage and partner have already seen benefits from the Alphatec deal. 

"Simply because I left the firm, they have chosen to not make substantial commission payments due me, when, in fact, Savills has been paid," Musgjerd told Bisnow.