Verdict Against Brokerage Reinstated

A federal appellate court has considered whether the evidence supported a jury verdict against a brokerage for its role in negotiations for a commercial building.

George Stinson and Ed Lewis (collectively, “Owners”) owned a building which contained a large nightclub called “The Connection of Nashville”. In 2003, George Alexander (“Salesperson”) of Cyre-Leike, Inc. (“Brokerage”) approached the Owners on behalf of William Deshields (“Deshields”) about Deshields’s interest in purchasing the property. No agreement was reached.

Later that year, the Salesperson again contacted the Owners about Deshields’s interest in purchasing the property. One of the Owners and Deshields negotiated a purchase price for the property, with Deshields agreeing to pay the Salesperson’s commission. The Owners’ attorney drafted the purchase documents and included in the purchase agreement a provision requiring Deshields to make an earnest money deposit. The Owners signed the contract, and the agreement was sent to Deshields for his signature.

Upon receipt of the contract, Deshields crossed out the earnest money provision in the contract because one of the Owners had told Deshields that such a deposit was not necessary. After receiving the revised contract, the Owners’ attorney called the Salesperson about the crossed out earnest money provision, and the Salesperson explained that one of the Owners had told Deshields earnest money was not important to him. After the attorney verified that this was true, the parties began preparing for the transaction’s closing.

Deshields did not attend the closing, and the next day the Salesperson claimed that there was never a valid agreement between the parties because the crossed out language regarding the earnest money was never initialed by both parties. The Owners filed a lawsuit against Deshields and the Brokerage, alleging breach of contract against Deshields and breach of common law and statutory duties against the Brokerage. The case went to trial, and a jury found in favor of the Owners, awarding them $193,419.60 from Deshields and $128,946.40 from the Brokerage. Following the verdict, the trial court entered judgment in favor of the Brokerage and Deshields, determining that the evidence did not support the award. The Owners appealed.

The United States Court of Appeals for the Sixth Circuit reversed the trial court and reinstated the jury verdict. The issue before the court was whether there was sufficient evidence to support the jury’s conclusion that the parties had entered into a contract. Tennessee law requires a “meeting of the minds” in order for there to be a valid contract. In order to demonstrate a meeting of the minds, a party’s acceptance of the contract must mirror the terms of the offer. Therefore, when the acceptance varies the terms of the original offer, it is deemed a counteroffer and a rejection of the earlier offer. Acceptance of a contract’s terms can be demonstrated by the behavior of the parties.

The court found that a jury could reasonably conclude that the behavior of the parties demonstrated that the Owners had accepted Deshields’s counteroffer. The Owners’ attorney’s testimony at trial that he had confirmed with one of the Owners that an earnest money deposit was not required and also the Salesperson had reassured the attorney that Deshields was proceeding with the transaction. The court found that this evidence could support the jury’s conclusion that there was a meeting of the minds and thus a contract between the parties. Therefore, the court reversed the trial court and reinstated the jury verdict in favor of the Owners.

Stinson v. Crye-Leike, Inc., No. 05-6297, 2006 WL 2918816 (6^th Cir. Oct. 11, 2006).