CBRE, Inc. v. Pace Gallery of N.Y., Inc.

• Decision Date: 30 March 2021
• Docket Number: 1:17-cv-02452-ALC-SN
• Parties: CBRE, INC., Plaintiff, v. THE PACE GALLERY OF NEW YORK, INC. and THE PACE GALLERY LLC, D/B/A PACE GALLERY, Defendants.
• Court: U.S. District Court — Southern District of New York

CBRE, INC., Plaintiff, v. THE PACE GALLERY OF NEW YORK, INC. and THE PACE GALLERY LLC, D/B/A PACE GALLERY, Defendants.

1:17-cv-02452-ALC-SN

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

March 30, 2021

ORDER

ANDREW L. CARTER, JR., District Judge:

The Court now considers a motion for partial summary judgment by Plaintiff CBRE Inc. and a motion for summary judgment by Defendants, the Pace Gallery of New York, Inc. and the Pace Gallery, LLC, doing business as Pace Gallery, (together "Pace"). For the reasons that follow, CBRE's motion is GRANTED in part and DENIED in part and Pace's motion is DENIED.

Factual Background

This matter arises from a real estate transaction by which Pace leased gallery space in New York City's Chelsea neighborhood. CBRE contends it is due a commission on this transaction by virtue of an exclusive right to lease contract entered by CBRE and Pace in March 2014. Pace disagrees that CBRE is due such a commission, arguing that the March 2014 contract was not binding on the parties, does not provide an exclusive right to lease, and that CBRE failed to perform under the contract. Pace further argues that CBRE breached various duties to Pace by providing information about the Chelsea real estate market to Lisa Weinberg, one of the owners of Wenat Realty Associates ("Wenat"), a non-party that was and is Pace's landlord, and counterparty to Pace in the at-issue transaction.

CBRE is a Delaware corporation authorized to do business in the State of New York with its principal place of business in Los Angeles, California. ECF No. 200 ¶ 1.The Pace Gallery of New York, Inc. is a New York corporation. The Pace Gallery LLC is a New York limited liability company that runs several art galleries. ECF No. 200 ¶ 2-3. Together, Defendants Pace Gallery of New York, Inc. and Pace Gallery LLC operate as "Pace Gallery". ECF No. 200 ¶ 4.

Around February 2014, Pace occupied the entirety of a building located at 534 West 25^th Street, New York, NY pursuant to a lease with Wenat, the owner of the building. ECF No. 200 ¶ 5. Wenat is 50% owned by Samuel Weinberg and 50% by his children, Andrew and Lisa Weinberg. ECF 200 ¶ 7. With the lease at 534 West 25^th Street set to expire in April 2015, ECF No. 200 ¶ 6, Christopher Harnden, Pace's Chief Operating Officer, and Marc Gilcher, Pace's Chief Executive Officer, were considering options for gallery sites, ECF No. 200 ¶ 13. Stuart Siegel, a licensed New York real estate broker working at CBRE, began discussing possible options with Harnden, ECF No. 200 ¶¶ 15-17.

March 2014 Agreement

On March 12, 2014, Siegel sent a proposed agreement to Harnden "pursuant to which CBRE would be given the 'exclusive right' 'to find, negotiate, and secure premises as per [Pace's] requirements, which may include a transaction at [Pace's] current premises". ECF No. 200 ¶ 18. Upon reviewing the draft agreement, Harnden emailed Siegel that he would like to exclude the subleasing of Pace's premises at 32 East 57^th St because it was already the subject of an agreement with another broker, non-party Cushman Wakefield. ECF No. 200 ¶ 21. CBRE implemented this change and sent Pace an updated contract. ECF No. 200 ¶ 22. As revised and executed, the March 2014 Agreement states:

1. This letter ("agreement") shall confirm that Pace Gallery, and your designees, successors and assigns ("you") hereby grants CBRE, Inc. ("CBRE") the exclusive right to find, negotiate and secure premises as per your requirements which specifically excludes your current premises at 32 East 57th Street, which is currently being marketed for sublease. You shall refer all inquiries to us, regardless of the source and all interactions with outside parties (brokers, landlords and agents) related to this requirement will be conducted through us with participation by you.

2. CBRE will facilitate and conduct all aspects of the space evaluation, selection and negotiation strategy based upon our agreed strategy, and we will offer advice and guidance as appropriate. All business and legal decisions will be made solely by you, and binding agreements will be executed and delivered solely by you.

3. CBRE agrees to look to the owner or lessor for our commissions, provided you honor your exclusivity obligation and shall cooperate with us in obtaining a written agreement confirming same, and you agree that such payment of our commissions by another shall not affect your agreement to act exclusively through us. Notwithstanding the foregoing, if [sic] the event that you decide to renew your lease or take additional premises at 534 West 25th Street and your landlord refuses to make an agreement to pay us a full market commission, you will pay us a full market commission when the transaction is consummated.

ECF No. 157-1 at 1. Harnden reviewed, approved, and, on March 18, 2014, finalized the agreement (the "March 2014 Agreement"). ECF No. 200 ¶ 23. CBRE countersigned the March 2014 Agreement on March 18 or 19, 2014. ECF No. 200 ¶ 28. Siegel has testified that he mailed a countersigned copy of the March 2014 Agreement to Pace. ECF No. 200 ¶ 30. However, Pace contends that it did not receive a copy, and suggests Siegel's testimony that he sent it lacks credibility. Id.

Pace indicates that it, rather than CBRE, will negotiate with the Weinbergs

From and after March 18, 2014, Siegel worked with Harnden to provide assistance with alternatives to entering a lease at 534 West 25^th Street. ECF 200 ¶ 84. Siegel also provided comps¹ and other similar information. ECF No. 200 at ¶ 85. However, Pace negotiated directly with Wenatregarding the possibility that Pace would enter a lease for a New Building to be built at 534 West 25^th Street (the "New Building"), where Pace's existing lease was. ECF No. 200 ¶ 78. Pace informed Siegel that Pace had conducted and would continue to conduct all negotiations with Sam Weinberg regarding the New Building. ECF No. 213 ¶ 386.

Pace never solicited or expected assistance from Siegel with the Wenat negotiations. ECF No. 200 ¶ 79. However, the record indicates that CBRE provided some support in the background. For example, in November 2014, as part of the ongoing negotiation between Pace and Wenat regarding leasing the New Building, Wenat made an offer of $6.5m rent per year. ECF No. 200 ¶ 64. Glimcher thought that "sound[ed] like a lot of money". ECF No. 200 ¶ 64. By email Harnden stated, in part: "I will run this by my broker [i.e. Siegel] for [a] reality check and to start gathering comps. But I'm curious as to how Sam will justify such a high rent." ECF No. 200 ¶ 65.

October 2014 Request for "Comps" from Weinberg

On October 1, 2014, Lisa Weinberg emailed Siegel seeking information about the West Chelsea real estate market. ECF No. 200 ¶ 52. Specifically, she stated that:

Hi Stu. I believe you have spoken with my father Sam in the past along with Alan Weisman. I am trying to get some color on the market in west Chelsea near where we own property (mary boone, hasted hunt, pace). I would love some comps if you have the time to collect them for me? Please let me know and I will forward my specific parameters. Thank you in advance for your help!

ECF No. 190-23 at 2. Siegel replied: "Sure, let me know what you are looking for." ECF No. 190-2 at 1. Lisa Weinberg replied:

Great thank you. I need to get an idea of what the market is from 19th to 29th streets, 10th to 11th avenues. Ground floor retail space as well as office space. Any size. What has been rented and what is available? And what is your feeling on where the market is heading over there? I really appreciate this help- thanks stu.

ECF No. 190-23 at 1. Siegel replied: "Attached are some recent comps .......We are asking $70-$85sf at 511 West 25th Street. Asking is $135sf at 541 W 25th St ...." ECF No. 190-24 at 1. The email attached a table with 14 tenants, the buildings where they lease space, and information about the terms of the leases. ECF No. 190-24 at 2. Lisa Weinberg replied: "541 w 25^th is ground floor". ECF No. 200 ¶ 55. Siegel replied: "Yes ..... right opposite you ...." ECF No. 200 ¶ 55.

On October 9, 2014, Lisa Weinberg sent Siegel an additional email. It stated:

Hi stu. Is it possible for you to run a costar report for me with exact pricing per foot etc on the area of comps I asked you for? I really need to get a handle on the market there for our future development - not for our own office space search. Any and all specific info you can provide would be greatly appreciated, thank you.

ECF No. 190-25 at 1. On October 17, 2014, Siegel replied: "Hi Lisa, Sorry, I forgot to send this....." ECF No. 19-26 at 1. That email attached reports regarding spaces leased in the Chelsea neighborhood. Id.

November 2014 Agreement between Pace and CBRE

In November 2014, Pace retained CBRE pursuant to another agreement. On November 5, 2014, another CBRE broker, Paul Walker, sent Harnden an email stating: "Attached please find an agreement to sublease the entire 6^th and 8^th floors at 32 East 57^th Street". ECF No. 200 ¶ 70. The November 2014 agreement has the subject line: "Disposition of Entire 6^th & 8^th Floors - 32 East 57^th Street (the 'Premises') and/or Acquisition of Space". ECF No. 200 ¶ 69. In addition to terms related to subleasing 32 East 57^th Street, the November 2014 Agreement contains terms that appear to contemplate Pace acquiring a lease on a new space.

The November 2014 Agreement states, in relevant part:

You and your affiliates, designees, successors and assigns ("you" or "Client") grant to CBRE, Inc. ("CBRE", "we" or "us"), during the length of this agreement, the exclusiveright . . . (b) to find, negotiate and secure premises as per your requirements, which may include a transaction at the Premises, in accordance with the following terms and conditions: . . .

B1. CBRE will facilitate and conduct all aspects of the space evaluation, selection and negotiation process based upon our agreed strategy, and we will offer advice and guidance as appropriate. All

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