Media Serv. Group, Inc., v. Bay Cities Communications, Inc.: Court Rules Broker Is Procuring Cause Despite Not Participating in Sale Negotiations

A federal appeals court has ruled that a broker can recover under an unjust enrichment theory because the broker was the procuring cause of the sale, even though the broker did not participate in any of the negotiations for the sale of the property.

Media Services Group, Inc., ("Broker") markets radio and television stations that are for sale. In 1995, Bay Cities Communications, Inc. ("Seller") listed a radio station ("Property") it owned in Destin, Florida, for sale with the Broker. After the listing agreement expired, the Broker continued to market the Property, with the assistance of the Seller. In 1996, the Broker alerted Root Communications ("Buyer") that the Property was for sale, and arranged for representatives of the Buyer to tour the Property. The Broker continued to periodically inform the Buyer about the availability of the Property.

In late 1996, the Broker informed the Seller that he had located a buyer for the Property, Hochman Communications, Inc. The Seller accepted Hochman's offer, but Hochman had trouble obtaining financing. In June 1997, the Buyer made an offer to buy the Property, based on information it received from the Broker that Hochman was about to close the transaction. The Seller entered into negotiations with the Buyer, excluding the Broker from these negotiations. During negotiations, the Broker sent a letter to the Seller stating that it was concerned that it was being left out of the negotiations. The Buyer purchased the Property in August 1997, and the Seller refused to pay the Broker a commission. The Broker filed a lawsuit, and the trial court awarded the Broker damages on a theory of unjust enrichment. The Seller appealed.

The United States Court of Appeals, Eleventh Circuit, affirmed the trial court's decision. The court considered the Seller's arguments that Florida law prohibited the Broker from recovering its commission because the Broker did not participate in the sale negotiations and that Florida law does not allow recovery of a broker's commission under an unjust enrichment theory. To recover under unjust enrichment, a party must show: that a benefit was bestowed upon another party; that the party knew of the benefit he/she had received; that the party retained this benefit; and that it would be unfair for the party to retain this benefit without compensating the party who bestowed it.

The court rejected the Seller's argument and ruled that recovery can be made under an unjust enrichment theory if a party can show either the existence of an implied contract or that the party was the procuring cause of the sale. Under Florida law, a broker is considered the procuring cause of the sale if the broker brings the parties to the transaction together and participated in the negotiations leading to the sale. The broker can still be the procuring cause without participating in the negotiations if it is excluded from the negotiations. Here, the court ruled that evidence showed that the Seller conducted negotiations without the presence of the Broker who brought them together. The court stated that the Seller can not now argue that the Broker is not entitled to recover a commission because it did not participate in the negotiations, when the Seller conducted these negotiations in secret. Therefore, the court ruled that the Broker was the procuring cause of the sale. The court also stated that the evidence demonstrated that this sale was the result of the Broker's efforts, as the Broker introduced the parties and provided the Buyer with information about the Property periodically. Therefore, the trial court's decision was affirmed.

Media Serv. Group, Inc., v. Bay Cities Communications, Inc., 237 F.3d 1326 (11th Cir. 2001).

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