Share
A federal appellate court has considered a brokerage’s lawsuit against a former salesperson for commissions collected by the salesperson after he left the brokerage.
Tony Sekulovski (“Salesperson”) has a real estate salesperson’s license. In 1999, he became associated with Marcus & Millichap Real Estate Investment Services, Inc. (“Brokerage”) and its Ohio subsidiary. The Salesperson executed an agreement with the Brokerage’s Ohio subsidiary and in the agreement he agreed to abide by the terms of the Brokerage’s “Independent Contractor Policy Manual” (“Manual”).
Among other things, the Manual specified the commission splits between the Brokerage and its salespeople. The Manual set a sales volume target for salespeople, allowing the salesperson to keep a larger portion of the commission after the target was met. The Manual also had a formula setting forth how salespeople would split commissions between themselves if more than one salesperson worked on a transaction.
In 2005, the Salesperson terminated his relationship with the Brokerage’s Ohio subsidiary and began working with the Brokerage’s Illinois subsidiary. Mark Luttner (“Luttner”) also moved from the Ohio to the Illinois subsidiary at the same time, and the two began an informal partnership at the Brokerage’s Illinois office. No new written agreement between the Brokerage and the Salesperson was entered into at this time.
In 2006, the Salesperson and Luttner cooperated and split commissions throughout the year until September, when the Salesperson reached maximum commission percentage. Thereafter, the Salesperson began claiming the entire split commission percentage and Luttner claimed no portion of the commissions for the remainder of the year.
The Salesperson claimed that his relationship with Luttner had deteriorated and so they were no longer working together on transactions. However, the Brokerage alleged that the Salesperson paid a portion of his commissions to Luttner, allowing them both to retain a greater percentage of the commission from the Brokerage.
The Salesperson resigned from the Brokerage in 2007. The parties could not agree on how to divide the commissions for pending transactions, so the Salesperson told the title companies to pay him the commissions rather than the Brokerage and he also brought some ongoing transactions with him over to a new brokerage firm.
The Brokerage filed a lawsuit, claiming that the Salesperson had violated the terms of the Manual by claiming the full commissions for pending transactions and also misrepresenting the work he did on certain transactions. The Salesperson filed counterclaims against the Brokerage, alleging breach of contract and statutory wage claims. The trial court dismissed the wage claims, and a jury ruled in the Brokerage’s favor on all of the other counts, including fraud in by maintaining that Luttner hadn’t worked on certain transactions. The Salesperson appealed.
The United States Court of Appeals for the Seventh Circuit affirmed the jury verdict. The Salesperson’s main argument was that since he never agreed to the terms of the Manual when he moved to the Illinois office, he was not bound by terms of the Manual; however, he also claimed the parties had an oral agreement on a compensation schedule consistent with the Manual. The court found the Salesperson’s argument was inconsistent, claiming on one hand to follow the terms of the Manual for compensation but then rejecting its application elsewhere. The court ruled the Manual governed the relationship of the parties.
The Salesperson challenged the trial court’s ruling that the Salesperson was an independent contractor and therefore could not use the state’s wage laws to claim the commissions. The court found that the evidence supported the trial court’s ruling, as the Salesperson identified himself as an independent contractor in his own court pleadings and only sought identification as an employee when it might benefit him. In addition, the state’s wage law would not benefit him since he was not owed any commissions by the Brokerage. Therefore, the court affirmed this ruling.
The Salesperson also sought a new trial, claiming that there was insufficient evidence for the jury to reach its verdict. A court will only grant a new trial if the evidence could not support a jury’s verdict. The court found the evidence was sufficient, and so rejected this challenge to the verdict as well, affirming the trial court.
Marcus & Millichap Inv. Services of Chicago, Inc. v. Sekulovski, 639 F.3d 301 (7th Cir. 2011).