Court Opinion

ID: 9407482
Source: CourtListenerOpinion
Date Created: 2023-07-07 16:01:09.46546+00
Date Added: 2024-06-11T17:20:38.630783
License: Public Domain

United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 15, 2022                 Decided July 7, 2023

                         No. 22-7046

          JONES LANG LASALLE BROKERAGE, INC.,
                      APPELLANT

                              v.

1441 L ASSOCIATES, LLC, DOING BUSINESS AS 1441 L STREET
                   ASSOCIATES, LLC,
                      APPELLEE

        Appeal from the United States District Court
                for the District of Columbia
                    (No. 1:20-cv-03687)

     Laura H. McNally argued the cause for appellant. With
her on the brief was Michael E. Kenneally.

     Alexander M. Laughlin argued the cause and filed the brief
for appellee.

    Before: SRINIVASAN, Chief Judge, MILLETT, Circuit
Judge, and EDWARDS, Senior Circuit Judge.

    Opinion for the Court filed by Chief Judge SRINIVASAN.
                               2
     SRINIVASAN, Chief Judge: Jones Lang LaSalle Brokerage,
Inc. (JLL) represented both parties to an agreement to lease
property in northwest Washington, D.C. Because dual
representations of that kind pose inherent conflicts of interest,
the District of Columbia’s Brokerage Act required JLL to
obtain the written consent of all clients on both sides.

    JLL’s client on the landlord side of the transaction, 1441 L
Associates, LLC, declined to pay JLL’s commission. JLL then
brought this action to recover the commission. In defending
against the suit, 1441 L argued that JLL, when disclosing its
dual representation, failed to adhere to certain formatting
specifications set out in the Brokerage Act that aim to highlight
such a disclosure.

     The district court granted summary judgment to 1441 L.
In the court’s view, JLL’s failure to meet the formatting
specifications described in the Act when disclosing its dual
representation relieved 1441 L from having to pay JLL’s
commission. We conclude, however, that the Act does not
invariably require adherence to those formatting specifications.
Rather, the specifications go to whether the broker can gain an
optional presumption that it secured the required written
consent for its dual representation. Even without the benefit of
that presumption, a broker can still demonstrate that it obtained
the requisite written consent. We vacate and remand for an
assessment of whether JLL can make that showing in this case.

                               I.

                               A.

    The Brokerage Act seeks to “protect the public against
incompetence, fraud and deception in real estate transactions.”
D.C. Code § 42-1701. Among other things, the Act addresses
“dual representations,” which occur when a real estate broker
                                3
represents parties on both sides of a real estate transaction.
Dual representations pose inherent conflicts of interest
because, when “a broker attempts to act for both sides, he is
confronted with the impossible task of securing for each the
most advantageous bargain possible.” Jenkins v. Strauss, 931
A.2d 1026, 1034 (D.C. 2007) (quotation marks omitted)
(quoting Urb. Invs., Inc. v. Branham, 464 A.2d 93, 96 (D.C.
1983)). A “broker thus may not serve both parties to a
transaction unless, under certain circumstances, the parties
fully and freely have consented to the dual representation.” Id.
(quotation marks omitted) (quoting Urb. Invs., 464 A.2d at 96).

     In accordance with those principles, the Brokerage Act
allows a broker to “act as a dual representative only with the
written consent of all clients to the transaction.” D.C. Code
§ 42-1703(i)(1); see also Jenkins, 931 A.2d at 1033. “Such
written consent . . . shall be presumed to have been given as
against any client who signs a disclosure as provided in this
section.” D.C. Code § 42-1703(i)(1). “Such disclosure,” the
Act’s next provision states, “may be given in combination with
other disclosures or provided with other information, but if so,
the disclosure must be conspicuous, printed in bold lettering,
all capitals, underlined, or within a separate box.” Id.
§ 42-1703(i)(2). The Act then provides that “[a]ny disclosure
which complies substantially in effect” with a model disclosure
form “shall be deemed in compliance with this disclosure
requirement.” Id. The model disclosure form clarifies that a
broker engaged in a dual representation generally “may not
disclose to either client . . . any information that has been given
to the dual representative by the other client within the
confidence and trust of the brokerage relationship,” and
confirms that the clients, “by signing,” “acknowledge their
informed consent to the disclosed dual representation.” Id.
                              4
                             B.

     In June 2016, 1441 L engaged JLL to secure a tenant for
1441 L’s property at 1441 L Street, Northwest, in Washington,
DC. Their exclusive leasing agreement authorized JLL to
“cooperate with cooperating brokers, including representatives
of JLL or its affiliates other than Project Team members.” The
agreement provided that if JLL secured a tenant, 1441 L would
pay JLL a commission based on the lease’s value. The
agreement also incorporated a rider stating that 1441 L
acknowledged receipt from JLL of an “agency disclosure
required by District of Columbia law to be given” to 1441 L by
JLL. J.A. 31 (capitalization altered). That disclosure was
contained in an attachment to the rider, and it “substantially
mirror[ed]” the Brokerage Act’s model form, see Jones Lang
LaSalle Brokerage, Inc. v. 1441 L Assocs., LLC, 597
F. Supp. 3d 64, 70 (D.D.C. 2022) (JLL), but the spaces on the
form for the clients’ and broker’s names and signatures
remained blank.

     The team of JLL brokers representing 1441 L eventually
secured a tenant for 1441 L’s property. A separate team of JLL
brokers represented the tenant. In December 2017, some eight
months before finalization of the lease, 1441 L’s managing
member sent to the JLL tenant team a letter confirming that
1441 L would “recognize and compensate [JLL] as the broker
for” its prospective tenant. J.A. 217. 1441 L and the tenant
ultimately executed a twelve-year lease agreement.

     In a provision of that lease agreement entitled “Broker,”
1441 L and its tenant:          memorialized that JLL was
“representing and acting as the agent for both Landlord and
Tenant”; “authorize[d] and consent[ed] to such dual agency”;
and “waive[d] any conflict of interest which may arise as a
result thereof.” J.A. 114. Following execution of the lease
                               5
agreement, JLL sought payment of its commission from
1441 L, but 1441 L refused to pay the full amount.

                               C.

    JLL then filed this action against 1441 L. It asserted a
single claim for breach of contract under District of Columbia
law and sought payment of more than $750,000 in allegedly
unpaid commissions.

     The district court granted 1441 L’s motion for summary
judgment. The court accepted 1441 L’s contention that JLL
could not enforce 1441 L’s contractual promise to pay a
commission because JLL had not disclosed its dual
representation in the format set forth in section 42-1703(i)(2)
of the Brokerage Act. See JLL, 597 F. Supp. 3d at 68–72. That
provision speaks of a disclosure that is “conspicuous, printed
in bold lettering, all capitals, underlined, or within a separate
box.” D.C. Code § 42-1703(i)(2).

    JLL timely brought this appeal.

                               II.

     We review de novo the district court’s order granting
summary judgment. Jeffries v. Barr, 965 F.3d 843, 859 (D.C.
Cir. 2020). Because this case involves interpretation of the
D.C. Code, we “aim ‘to achieve the same outcome we believe
would result if the District of Columbia Court of Appeals
considered this case.’” United States v. Johnson, 4 F.4th 116,
120 (D.C. Cir. 2021) (quoting Novak v. Cap. Mgmt. & Dev.
Corp., 452 F.3d 902, 907 (D.C. Cir. 2006)).

    Section 42-1703(i) of the Brokerage Act addresses dual
representations.     It authorizes “[d]isclosed” dual
representations under certain conditions. See D.C. Code
                               6
§ 42-1703(i) (entitled     “Disclosed    dual . . . representation
authorized”).

     The provision centrally at issue in this appeal is section
42-1703(i)(2). It states in pertinent part: “Such disclosure may
be given in combination with other disclosures or provided
with other information, but if so, the disclosure must be
conspicuous, printed in bold lettering, all capitals, underlined,
or within a separate box.” Id. § 42-1703(i)(2). For ease of
reference, we will refer to the phrase “conspicuous, printed in
bold lettering, all capitals, underlined, or within a separate
box,” id., as the “formatting specifications.” And we will refer
to a disclosure “given in combination with other disclosures or
provided with other information,” id., as a “non-standalone”
disclosure. Under the terms of section 42-1703(i)(2), its
formatting specifications apply only to non-standalone
disclosures.

     Here, 1441 L contends that JLL disclosed its dual
representation in a non-standalone disclosure but that the
disclosure did not meet the formatting specifications—i.e., it
was not “conspicuous, printed in bold lettering, all capitals,
underlined, or within a separate box.” Id. The question we
face is whether the Act invariably requires adherence to those
formatting specifications whenever a broker discloses a dual
representation in a non-standalone disclosure. If so, JLL
necessarily failed to comply with the Act. If not—that is, if a
broker disclosing a dual representation in a non-standalone
disclosure can still meet the Act’s requirements even without
adhering to the formatting specifications—JLL might have
complied with the Act, thereby retaining the ability to enforce
its entitlement to a commission.

   We conclude that the latter interpretation is correct. To see
why, it is necessary to examine section 42-1703(i)(2)’s
                                7
description of the formatting specifications in the context of the
neighboring provisions. The statute contains an intricate set of
interrelated provisions, whose meaning and import may not
immediately leap off the page.

    Section 42-1703(i) provides, in relevant part:

         § 42-1703. Duties of real estate brokers, salespersons,
         and property managers. . . .

              (i) Disclosed dual or designated representation
              authorized. —

                   (1) A licensee may act as a dual
                   representative only with the written consent
                   of all clients to the transaction. Such written
                   consent and disclosure of the brokerage
                   relationship as required by this section shall
                   be presumed to have been given as against
                   any client who signs a disclosure as provided
                   in this section.

                   (2) Such disclosure may be given in
                   combination with other disclosures or
                   provided with other information, but if so,
                   the disclosure must be conspicuous, printed
                   in bold lettering, all capitals, underlined, or
                   within a separate box. Any disclosure which
                   complies substantially in effect with the
                   following [model disclosure form] shall be
                   deemed in compliance with this disclosure
                   requirement:       [model disclosure form
                   provisions]

Id. § 42-1703(i)(1)–(2).
                               8
     The first subsection, section 42-1703(i)(1), establishes the
Brokerage Act’s basic requirement with respect to dual
representations: that a broker “may act as a dual representative
only with the written consent of all clients to the transaction.”
Id. § 42-1703(i)(1).      That written consent requirement
necessarily encompasses an associated disclosure obligation: a
would-be dual representative could not obtain a client’s written
consent to a dual representation without disclosing the dual
representation to which the client consents. Hence the title of
section 42-1703(i):         “Disclosed dual or designated
representation authorized.” Id. § 42-1703(i) (emphasis added).
(A “designated representation” is a specific way of
implementing a dual representation as described later in section
42-1703(i). See id. § 42-1703(i)(5)–(6).) In accordance with
the recognition that consent to a dual representation necessarily
requires disclosure of the dual representation, the District of
Columbia Court of Appeals has observed that the Act may
require a broker to provide “written notice” of a dual
representation to ensure that a client’s consent is “truly
informed.” Jenkins, 931 A.2d at 1034.

     After the first sentence of section 42-1703(i)(1) sets out
the written consent requirement, the provision’s second
sentence adds: “Such written consent and disclosure of the
brokerage relationship as required by this section shall be
presumed to have been given as against any client who signs a
disclosure as provided in this section.”             D.C. Code
§ 42-1703(i)(1) (emphasis added). The Act thus does not
categorically require a broker involved in a dual representation
to obtain a signed “disclosure as provided in this section” from
all clients. Instead, obtaining such a signed disclosure from a
client establishes only a presumption that the written consent
requirement has been satisfied with respect to that client.
                                9
     The ensuing provision is section 42-1703(i)(2), the
provision centrally at issue in this appeal. Its initial sentence,
using the language we have seen, elaborates as follows on the
preceding provision’s establishment of a presumption of
written consent “against any client who signs a disclosure as
provided in this section”: “Such disclosure may be given in
combination with other disclosures or provided with other
information, but if so, the disclosure must be conspicuous,
printed in bold lettering, all capitals, underlined, or within a
separate box.” Id. § 42-1703(i)(2).

      Understood in the context of the immediately preceding
sentence, then, the “disclosure” addressed by that language—
i.e., the disclosure introduced by the words “[s]uch disclosure”
at the outset of the provision, id.—is the signed “disclosure as
provided in this section” that gives rise to the presumption of
written consent, id. § 42-1703(i)(1). In that light, the
formatting specifications set out in section 42-1703(i)(2)
pertain to that disclosure and to triggering that presumption.
And because the formatting specifications go only to triggering
the presumption, nothing in section 42-1703(i)(2) mandates
adherence to the formatting specifications when a broker does
not seek to take advantage of the presumption. Rather, a broker
can satisfy the Act’s baseline requirement of written consent to
a dual representation (along with the necessarily-associated
disclosure obligation) despite its nonadherence to the
formatting specifications.

     In short, section 42-1703(i)(1) gives a broker disclosing a
dual representation on a non-standalone basis an incentive to
obtain from each client a signed disclosure meeting the
formatting specifications. But the choice whether to do so is
left to the broker. The broker can opt to obtain a signed
disclosure sufficient to trigger the presumption from all, some,
or none of its clients involved. If the broker establishes the
                               10
presumption with respect to a particular client, it can ease its
burden of proving in future proceedings that it obtained “truly
informed” consent to the dual representation from that client.
See Jenkins, 931 A.2d at 1034; see also id. (broker must
“disclose fully the dual nature of the relationship” to enable
“full[] and free[]” consent to a dual representation (quotation
marks omitted) (quoting Urb. Invs., 464 A.2d at 96)). But the
Act allows for the possibility that a broker that fails to adhere
to the formatting specifications—and thus fails to trigger the
presumption—can still satisfy the Act’s obligation to obtain
written (and informed) consent to a dual representation.

     In arguing that the Act requires a broker giving a non-
standalone disclosure of a dual representation to adhere to the
formatting specifications in all circumstances—not just when
seeking to invoke the presumption—1441 L emphasizes that
section 42-1703(i)(1) speaks of both “written consent and
disclosure of the brokerage relationship as [being] required by
this section.” D.C. Code § 42-1703(i)(1) (emphasis added).
The apparent idea is that, if that “disclosure” is “required”
regardless of the presumption, then compliance with the later
language stating that a non-standalone “disclosure must be
conspicuous, printed in bold lettering,” etc., id.
§ 42-1703(i)(2), must also be required regardless of the
presumption. In other words, the argument goes, the
formatting specifications must be met whenever a broker gives
a non-standalone disclosure of dual representation, not just
when the broker seeks to make use of the presumption.

     That argument, though, mistakenly assumes that the
“disclosure of the brokerage relationship” mentioned in section
42-1703(i)(1) concerns the same disclosure as the “disclosure
[that] must be conspicuous” mentioned in section
42-1703(i)(2). In fact, they are different.
                                11
     The “disclosure of the brokerage relationship” mentioned
in section 42-1703(i)(1) refers to a distinct disclosure
obligation set forth in the immediately preceding subsection,
section 42-1703(h). Indeed, that subsection is entitled
“Disclosure of brokerage relationship,” id. § 42-1703(h),
precisely paralleling the “disclosure of the brokerage
relationship” mentioned in section 42-1703(i)(1).            The
“[d]isclosure of brokerage relationship” required by section
42-1703(h)—and referenced in section 42-1703(i)(1)—applies
to brokerage relationships generally, not just dual
representations, and calls for disclosures to any non-clients
with whom a broker discusses a property.                See id.
§ 42-1703(h)(1)–(2). The terms of section 42-1703(h) also
reinforce the link between the disclosure it addresses and the
“disclosure of the brokerage relationship” later mentioned in
section 42-1703(i)(1) by expressly cross-referencing the latter
subsection. See id. § 42-1703(h)(1) (“Further, except as
provided in subsection (i) of this section, such disclosure shall
be made in writing at the earliest practical time . . . .”
(emphasis added)).

     The relationship between the various provisions plays out
in the following way. As an initial matter, a broker must
always advise any potential client about their prospective
brokerage relationship. See id. § 42-1703(f). And when
discussing specific property with a non-client prospective
buyer or seller, the broker must disclose to the non-client its
brokerage relationship with a party to the transaction. See id.
§ 42-1703(h)(1); see also id. § 42-1703(h)(2) (similar
obligation in case of non-client prospective landlord or tenant).
If the broker ultimately forms brokerage relationships with
clients on both sides of the transaction, it must disclose its dual
representation to all clients and obtain their written consent to
the dual representation. See id. § 42-1703(i)(1). A client’s
signature on the latter disclosure—labeled a “disclosure of dual
                               12
representation” in the model disclosure form, id.
§ 42-1703(i)(2)      (capitalization      altered)—establishes
presumptions that both the “written consent” required for dual
representations by section 42-1703(i)(1) and the “disclosure of
the brokerage relationship” more broadly required by section
42-1703(h) “have been given as against” that client, id.
§ 42-1703(i)(1). (The latter presumption would be relevant if
the broker discussed the property with a now-client before the
representation began, which would have implicated section
42-1703(h)’s disclosure obligation.)

     The upshot of all of this is that, contrary to 1441 L’s
argument, the formatting specifications described in section
42-1703(i)(2) pertain not to the broadly applicable “disclosure
of the brokerage relationship” referenced in section
42-1703(i)(1) and required by section 42-1703(h), but instead
to the more particularized disclosure of dual representation
that, if signed, triggers the presumption set out in section
42-1703(i)(1). See id. Because the formatting specifications
accordingly go only to the presumption, noncompliance with
them, even if rendering the presumption unavailable, does not
necessarily mean noncompliance with the Act. And because
the district court’s decision was grounded in an opposite
understanding—that JLL’s noncompliance with the formatting
specifications when disclosing its dual representation
necessarily demonstrated JLL’s noncompliance with the Act—
we must vacate the court’s grant of summary judgment and
remand for further proceedings.

      On remand, JLL will have the opportunity to show that,
even if it failed to adhere to the formatting specifications and
thus failed to qualify for the presumption of written consent, it
still fulfilled the written consent requirement by obtaining
1441 L’s “truly informed” written consent to the dual
representation following “full[]” disclosure of “the dual nature
                               13
of the relationship.” Jenkins, 931 A.2d at 1034; see D.C. Code
§ 42-1703(n) (leaving “common law of agency relative to
brokerage relationships in real estate transactions” unabrogated
when it is consistent with the Act); Urb. Invs., 464 A.2d at 96
(collecting cases). The district court can also address, if
necessary, the proper remedy for any failure by JLL to comply
with the Act.

                       *   *   *    *   *

     For the foregoing reasons, we vacate the district court’s
order granting summary judgment to 1441 L and remand for
further proceedings consistent with this opinion.

                                                    So ordered.