Vertical World, Inc., v. Colliers Int'l Property Consultants, Inc.: Broker's Failure to Inform Client About Available Space Could Result in Liability for Negligence

A Washington appellate court considered whether a brokerage could be negligent for failing to promptly inform a client about a commercial property available for lease which met the client's criteria.

Vertical World, Inc. ("Tenant") operated indoor rock climbing gyms. In 1996, Quadrant, owner of a space leased by the Tenant, informed the Tenant that it wanted to buyout the remainder of the Tenant's lease. The buyout was successfully negotiated by the parties, and the Tenant was to vacate the space by April 1, 1997. The Tenant hired Renee Ray, a commercial leasing specialist at Colliers Real Estate Services ("Brokerage"), to find suitable space into which the Tenant could move its operations. Ray began to look for suitable space for the Tenant in July 1996.

Jack Lothrop ("Owner") owned a warehouse in Seattle which met the criteria sought by the Tenant. In September 1996, the Owner began to evict his current tenant because the tenant owed him back rent, but eventually stopped the eviction proceedings. However, the Owner at that time listed the property with Gordon Fouts ("Listing Broker"), a broker with CNMI, which shared office space with the Brokerage. The Owner did not inform the Listing Broker the date when the warehouse would be available for leasing, but after the listing agreement was signed, the Listing Broker placed a "For Lease" sign on the front of the property and began showing the warehouse to prospective tenants. The Listing Broker did not inform any of the prospective tenants who testified at trial that the space wouldn't be available immediately for leasing.

On January 30, 1997, Ray and the Listing Broker discussed, for the first time, the availability of the warehouse. After this meeting, Ray notified the Tenant about the availability of the space and the parties successfully completed lease negotiations. The Tenant took possession of the space on March 4, 1997, but was not able to open its gym in the warehouse until June 15, 1997, due to construction which was necessary to convert the space into a gym. The Tenant brought a lawsuit against the Brokerage for negligence, breach of contract, breach of fiduciary duty, and violations of the state's consumer protection laws, claiming damages from the resulting delays and expenses incurred by the Brokerage's failure to promptly inform the Tenant about the availability of the warehouse. During the pretrial proceedings, the Owner filed a sworn affidavit stating that he would not have entered into a lease prior to January 30, 1997. Based on the affidavit, the trial court entered judgment in favor of the Brokerage. The Tenant appealed.

The Court of Appeals of Washington, Division 1, reversed the trial court and sent the case back to the trial court for further proceedings. The Tenant argued that it was improper for the trial court to have ruled on whether the Owner would have entered into a lease at an earlier time because there was conflicting evidence before the trial court, such as the Owner's retention of the Listing Broker, the Listing Broker's placement of a sign on the property, and the Listing Broker showing the property to prospective tenants. Also, the Tenant argued that there was testimony in the Owner's deposition which conflicted with his affidavit. Thus, the Tenant argued that these were issues of fact which should have been resolved by a jury.

The court agreed with the Tenant. To be liable for negligence, the court stated that a party must show that the allegedly negligent party was the cause of the harm suffered by the other party. Causation is an issue for the jury to resolve, unless the facts are undisputed. The court ruled that the facts were in dispute here, and so a jury needed to decide whether the Brokerage was negligent in not informing the Tenant about the availability of the warehouse for over four months. Thus, the case was sent back to the trial court for further proceedings.

Vertical World, Inc., v. Colliers Int'l Property Consultants, Inc., 101 Wash. App. 1080, 2000 WL 1144980 (Wash. Ct. App. Aug. 14, 2000). [Note: This opinion was not published in an official reporter and therefore should not be cited as authority. Please consult counsel before relying on this opinion.]