Jury Adds $1 Million in Punitive Damages in Lee & Assoc. Case

An Orange County Superior Court jury Thursday levied punitive damages of $1 million against four partners of Trammell Crow Co. for fraudulently cutting a local brokerage out of a commission in the purchase of an Irvine office building in 1985.

The award came a day after the jury ruled that the Irvine-based partnership should pay $6 million to Lee & Associates for fraudulently denying the Orange County broker a commission from the $340-million sale of Fluor Corp.’s headquarters.

With interest, the total award to Lee will be $9.2 million.

“This underscores the relationship of brokers and developers in the Orange County community,” said Rick Fahrney, an attorney for Lee & Associates. “Basically, it says that when you have a relationship that is about to ripen into an agreement, to interfere with that is wrongful, and you run the risk of being sued.”

Fluor, the Irvine-based engineering and construction firm, originally was a defendant in the case, but was dropped on Oct. 19. The company said Superior Court Judge Marvin G. Weeks ruled that “Fluor had no liability whatsoever for any commissions or damages which may be awarded in the case.”

Attorneys for the Trammell Crow partners--William Lane Jr., Thomas A. Bailey, Joel C. Peterson and J. McDonald Williams--quickly left the court and did not comment on the verdict. However, Fahrney said he expected the partners would appeal the hotly contested case.

The case, which has dragged on for five years, has been closely watched because of the prestige of the firms involved, the large sums involved and the potential it had to redefine brokers’ rights.

Lee contended that it was representing Fluor when the company decided to sell its headquarters because of financial pressures in late 1984. Lee contacted Trammell Crow as a potential buyer and the partners of the Dallas-based office builder expressed interest.

The Trammell Crow executives negotiated the sale directly with Fluor and agreed to acquire the building and land for $340 million in 1985. Lee demanded a commission of $9 million. But Trammell Crow offered only $2.5 million and later withdrew that amount when Fluor said it had no written or oral deal with Lee.

After several months of testimony, the jury deliberated three days before deciding Wednesday that Trammell Crow had interfered with Lee’s relationship with Fluor. The jury said that the Trammell Crow partners had acted with “fraud and malice” in the transaction, thereby paving the way for an award of punitive damages.

The jury heard nearly four hours of evidence Thursday about the net worth of four Trammell Crow partners. The public and press were barred from the proceedings.

The damages--$250,000 for each partner--were levied individually instead of against Trammell Crow as a corporation because the company is organized as a series of partnerships. Nine jurors voted in favor of the damages, three against.

Fahrney said that Lee’s biggest regret over the case is its lost relationship with Fluor. “It was a very close one,” he said.