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A federal court has decided whether an attorney is entitled to receive a brokerage commission for bringing the successful bidder to a bankruptcy auction.
Sunrise Suites Hotel & Casino and RV Park (“Properties”) filed a Chapter 11 business reorganization under the federal Bankruptcy Code. Eventually, the bankruptcy court ordered an auction for the Properties, with the bankruptcy court appointing Eric Nelson Auctioneering (“Auctioneer”) to conduct the auction. Pursuant to an order of the bankruptcy court, the Auctioneer offered to pay a cooperating commission to “licensed brokers” who brought a prospect to the auction who purchased the Properties, so long as the following conditions were satisfied: the broker must accompany the prospect to the Properties’ open house; execute a broker registration letter; accompany the prospect to the auction and register the prospect at the auction; and close escrow. The auction was set to take place on January 26, 2000.
On January 24th, investor Carl Icahn (“Investor”) retained attorney Harry Weiss of Harry M. Weiss & Associates (“Attorney”) to represent the Investor in the bidding at the auction. Due to his notoriety, the Investor wished to remain anonymous. The Attorney spoke with the Auctioneer, informing the Auctioneer he would participate in the auction on behalf of an unnamed client. The Auctioneer then gave the Attorney a packet of information about the Properties and how the auction would be conducted, including the conditions that a broker needed to satisfy in order to collect a cooperative commission.
On January 26th, the auction was held. The Attorney only partially completed the registration form, leaving blank the sections concerning his eligibility for receiving a commission. The Attorney made the winning bid at the auction. Following the auction, the Auctioneer refused to pay the Attorney the cooperative commission. The Attorney filed a motion with the bankruptcy court which made a variety of allegations against the Auctioneer, based on the Auctioneer's failure to pay a cooperative fee to him. The bankruptcy court ruled in favor of the Auctioneer, and the Attorney appealed.
The United States District Court, District of Nevada, affirmed the rulings of the bankruptcy court. The court first considered the Attorney’s breach of contract allegations. In general, a contract can only be formed by the acceptance of an offer. A unilateral contract, like the cooperative commission offer, can only be accepted by fulfilling the terms of the offer. The court ruled that the Attorney had not fulfilled the terms of the offer, and therefore could not claim breach of contract. The Attorney had not satisfied the four-step registration process, and therefore had failed to satisfy the terms of the Auctioneer’s unilateral offer. Thus, there was no contract and so the Attorney could not claim breach of contract.
Next, the court briefly considered and dismissed the remainder of the Attorney’s arguments. The court rejected the Attorney’s argument that the Auctioneer had orally waived the conditions for commission payment in discussions between the two parties. Since the conditions for commission payment were ordered by the bankruptcy court, these conditions could not be waived by anyone except the bankruptcy court, which did not happen here. The court also rejected the Attorney’s breach of fiduciary of duty allegations for two reasons: first, the Attorney was not the buyer or seller of the Properties; and second, the Auctioneer fulfilled any duty it owed to the Attorney when it gave him the information about how the auction would be conducted. Therefore, the court affirmed the rulings of the bankruptcy court in favor of the Auctioneer.
Harry M. Weiss & Assoc. v. Eric Nelson Auctioneering (In re Sunrise Suites, Inc.), 266 B.R. 895 (D. Nev. 2001).