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Authored - NJ Contract Law Update - An Opinion With Many Twists And Turns
Clark Alpert Explores AJR Commercial Realty Inc. v. Bussel Realty Corp.
SEPTEMBER 17, 2012 | Windels Marx - Commercial Litigation

AJR Commercial Realty Inc. v. Bussel Realty Corp., 2012 WL 3166620 (N.J.App.Div. August 7, 2012), is like a short story, with twists and turns making it hard to predict the outcome. The key issue was whose responsibility it was to provide the information in question; the answer, as it turned out, was not at all obvious. AJR is also instructive on the issue of economic duress.

In terms of twists and turns, it may take two readings to make sure that you understand the roles and claims of the plaintiffs and defendants. The plaintiffs were real estate salespeople who had worked for the predecessor of defendant, Bussel Realty Corp. That successorship occurred in a strange, non-linear fashion. Defendant then prepared a 'termination' document to be signed by the former salespeople, who ostensibly were already 'gone' six days earlier. Such an agreement might have been considered no more than a memorialization; and the question of whether consideration was given for that belated document is absent from the Opinion.

In any event, defendants prepared the document and attached a list of "prospects" for which the plaintiffs would be accountable (in terms of commissions), if they proceeded with those prospects on behalf of a new employer. (Although the list was prepared by defendants, later in the Opinion the Court implies--perhaps for compelling reasons unexpressed in the Opinion--that plaintiffs should have volunteered the additional prospect name that led to the controversy.)

Following the termination, the plaintiffs moved on, and did business under a pre-existing entity owned by one of them. A pre-termination customer not listed as a prospect, but who had undeniably been solicited (and shown property) during employment with Bussel's predecessor, was pursued by plaintiffs through their new business; saleable property was found months later; and a closing after that, with an agreed commission. Bussel than promptly surfaced and made a claim to the $424,785 commission. Although the Opinion tells us little about the pleadings, it appears that the litigation concerned who was entitled to that money.

By this point, you would probably be thinking that plaintiffs prevailed, because the agreement was prepared by the defendants and did not list this prospect. Unlike an inappropriately rote construction against the drafter,1 here the defendants (in creating the document) had an opportunity to list any prospect to which they were interested in retaining rights; so that the burden would seem to have been on defendants to list whom they chose, absent some sort of deception by plaintiffs not implied in the early part of the Opinion. Yet the Court held--somewhat surprisingly to this author--that the exclusion of the relevant prospect/customer (who eventually closed after plaintiffs left Bussell's predecessor) constituted a "deliberate [] fail[ure] by plaintiffs to disclose their prior business relationship [i.e., the prospect's identity and dealings2] as a means of thwarting defendants' contractual rights".

Perhaps there were litigated facts, unstated in the Opinion, which explain the strength of this conclusion; opinions not approved for publication sometimes lack great specificity. In any event, the Court felt so strongly about this 'deliberate non-disclosure' that it deemed a ruling for defendants appropriate even if the restrictive covenant binding one of the two plaintiffs was excessive (and if so, presumably unenforceable); this, because the 'non-disclosure' breach by the applicable plaintiff mooted his attack on the limitations imposed by the restrictive covenant.3

The other instructive portion of AJR was its treatment of the plaintiffs' economic duress claim/defense. The Court held that the mere fact that "plaintiffs may have been influenced in their actions by economic concerns" did not constitute economic duress, in the absence of "evidence that such concerns deprived them of their unfettered will" (citations omitted). This conclusion seems unassailable, for numerous reasons4:

  1. the agreement was signed (a) belatedly, and thus without urgency--as well as (b) without any apparent threat or coercion;
  2. "the parties negotiated, at arms length, the key terms in the agreement";
  3. there was considerable 'back-and forth' in terms of mark-ups, drafts, etc.;
  4. "it was plaintiff who initiated this whole process [rather than defendant]"--apocryphal phrasing which presumably meant that the belated meeting that led to the unfortunate agreement was called by the plaintiffs themselves; and
  5. plaintiffs were "sophisticated individuals".

Contact & Legal Disclaimer

Clark Alpert is the author of Guide to New Jersey Contract Law, published by the New Jersey Institute for Continuing Legal Education, originally published in 2007 and updated in November 2011. His updates on New Jersey contract law are based in recent issues and practical methods for addressing similar situations in your practice or business. They are not intended to serve as legal advice. Clark welcomes your questions and comments.

1 Compare this author's article dated April 17, 2012, "Construing Language Against The Drafter".

2 The impression given is that this information was unknown to defendants or their predecessors.

3 The Court's latter conclusion was not accompanied by a specific legal theory.

4 It is also unclear whether plaintiffs could have proven that defendants themselves were the cause of any economic distress. The inability to prove same would have been another defense to duress. (See my May 17, 2012, article, "The Contractual Defense of Duress".)

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