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Listing broker did not breach any duty to potential buyer when another buyer represented by listing office outbids buyer for property
A broker listed a commercial property owned by the Federal Deposit Insurance Corporation (FDIC). A potential buyer was interested in the site as a new location for her photo studio. The potential buyer submitted a bid on the property, as did another buyer who was represented by the listing office. Both offers were below the price the FDIC was willing to accept. The FDIC gave both buyers the same counteroffer.
Both bidders submitted revised offers, and the FDIC accepted the listing office buyer's bid, which was closest to its counteroffer. The losing bidder complained to the FDIC alleging unfairness because the successful bidder was represented by the listing office. The FDIC responded by rescinding the contract and telling both bidders to submit one more final bid. Both bidders submitted new bids and the FDIC again accepted the bid from the listing office's bidder, and the transaction closed.
The unsuccessful bidder filed a counterclaim in a defamation action filed by the listing broker alleging that the listing broker committed negligent misrepresentation by not fully informing the unsuccessful bidder about the specific procedures of the FDIC bidding process. The unsuccessful bidder contended that she was disadvantaged because her competitor had the benefit of advice and counsel from the listing office.
The court of appeals rejected the bidder's claims. The court noted that she had every opportunity to submit the best offer she cared to make. The court also noted that the bid accepted by the FDIC was all cash without any contingencies, while the complaining bidder's offer contained contingencies. The court concluded that the listing office's assistance to the other bidder was not the reason the complaining bidder failed to acquire the property.
This case is another in a trend where courts are declining to impose any duty upon a broker to disclose information about the status of negotiations, or the negotiating process, to persons to whom the broker does not owe any fiduciary duty. 694 So.2d 1006 (La. 1997).
Please note that the comments and opinions contained herein are not to be construed to be legal advice by the author, Victor O. Schinnerer & Company, Inc., or the CNA/Schinnerer errors and omissions insurance program.
This information is made available to you for your risk management program. No action should be based on this information without appropriate advice from legal counsel and a review of currently applicable statutory and case law.
This article from the Risk Management Reporter was written by Robert D. Butters of the law firm of Arnstein & Lehr, which concentrates in the representation and defense of real estate brokers and agents.
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