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Network 1 Financial Securities, Inc. v. Sumo Development Company, Inc.

A-2459-02T3 (N.J. Super. App. Div. 2004) (Unpublished)

BROKERS; COMMISSIONS—A broker that is to earn a commission by bringing someone to invest in an entity holding an option to buy a particular piece of property is not entitled to a commission from such a prospective investor when the prospective investor goes behind everyone’s back and buys the property itself.

A golf course company had an option to purchase a property. It agreed to pay a commission to a securities broker if it produced an investor who was willing to invest a certain amount toward purchase of the property. The broker brought a real estate developer to the project, but the developer decided to buy the property directly even though the option was still in force.

The broker filed suit, claiming that the developer interfered with the brokerage agreement it had for the property. The lower court found no evidence of a deal and the Appellate Division affirmed.

The evidence only showed that the broker might have had an existing deal. A complaint based on tortious interference must allege facts that show a protectable right, such as a prospective economic or contractual relationship. Although the right may not equate with that found in an enforceable contract, there still must be allegations of fact giving rise to some “reasonable expectation of economic advantage.” A complaint must show at least that one was in pursuit of business and must allege facts showing that the interference was done intentionally and with malice.

The lower court opined that the broker had a prospective economic or contractual relationship with the golf course company, satisfying the first element of the cause of action. Then the lower court defined malice “to mean that the harm was inflicted intentionally and without justification or excuse.” This test requires proof that the interference consisted of either inducing or otherwise causing a third person not to enter into or continue the prospective relation, or preventing the other from acquiring or continuing the prospective relationship. The only relationship the broker had was with the golf course company. The developer did nothing to interfere with that relationship. It simply chose to pursue acquiring the property directly, a course of action it never agreed to avoid. Even though this act was intentional, the lower court held that it could not be characterized as malicious. When parties have not entered into a contract, either party is at liberty to withdraw its consent and end negotiations. That was the case here. The action of the broker introducing the developer to the property was irrelevant because it was not done to earn a real estate commission.

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