CBRE Asks Court To Throw Out $11.6M Suit Over Dual Representation Disclosure
CBRE has asked a New York judge to dismiss an $11.6M lawsuit it faces from a client accusing the brokerage giant of failing to properly disclose that it represented both sides in a 600K SF leasing transaction deal in Washington, D.C.
In a motion filed Monday, CBRE said the plaintiff in the suit, New York-based investor The 601W Cos., relied on "false claims" in its complaint — specifically, CBRE said it never represented the investor in the sublease deal in question.
CBRE represented The Whittle School & Studios in a 2018 deal for the vacant office building at 4000 Connecticut Ave. NW in D.C. and worked for The 601W Cos. as a property manager and project manager, it acknowledges. But, according to CBRE's court filing, Cushman & Wakefield was the landlord broker in the deal, which eventually went south.
The pandemic crushed the Whittle School's business — it stopped paying rent in 2020, according to court filings, and announced last month it is shutting down for good.
The 601W Cos.' original lawsuit, filed June 30 in New York State Supreme Court, which has since been amended twice with subsequent filings, claimed that CBRE acted as the agent for both the landlord and the subtenant in the sublease deal.
The suit claimed that CBRE violated a D.C. law that specifies how this type of dual representation must be disclosed. It said this violation made the agreement between 601W and CBRE unenforceable, and it asked the judge to compel CBRE to return its commission on the deal, which totaled $11.6M.
Along with the motion to dismiss, CBRE included an exhibit that appears to show a copy of the sublease agreement naming Cushman & Wakefield as the landlord agent. Cushman & Wakefield didn't respond to a request for comment.
CBRE declined to provide additional comment beyond its filings. The 601W Cos. declined to comment on CBRE's response, instead pointing Bisnow to its amended complaint.
The amended complaint appears to change some of the language from the two previous versions of the complaint around CBRE's relationship with 601W and the sublease transaction. But the seven counts on which the lawsuit rests are unchanged, and it still claims that CBRE didn't comply with D.C.'s dual representation disclosure requirement.
"In their first two (verified) complaints, Plaintiffs primarily relied on the false assertion that Defendant CBRE (rather than Cushman & Wakefield) acted as Plaintiffs’ broker in negotiating the Sub-Lease. Plaintiffs have now abandoned that false allegation," CBRE's attorneys wrote in Monday's filing.
CBRE said D.C's dual representation disclosure law doesn't apply in this case because it only represented one side of the sublease transaction, serving as Whittle School's broker. It said that its property management agreement with the landlord didn't require it to report on a would-be tenants' financial condition.
The lawsuit claimed CBRE provided "false and misleading" information about the Whittle School's finances to the landlord and its lenders. And it said CBRE was helping Whittle look to open additional locations despite knowing about financial challenges that would ultimately lead Whittle to stop paying its D.C. rent.
In its response, CBRE said that the landlord knew about Whittle's financial distress three years before filing the suit, and it said the plaintiff didn't make any specific allegations of untrue statements that CBRE provided about the school.
Monday's filing was signed by CBRE's attorneys, Cory Buland and Steven Shepard of Susman Godfrey LLP. The 601W Cos. is being represented in the case by Christopher Sullivan of Nutter McClennen & Fish LLP.
CORRECTION, AUG. 23, 2022, 9:15 A.M. ET: A previous version of this story misstated the address of the 4000 Connecticut Ave. NW building. This story has been updated.
