Brokerage Savors Big Court Victory Over a Goliath : Litigation: The $9.2-million verdict against Dallas-based Trammell Crow Co., buyer of the Fluor Corp. headquarters, gladdens the heart of Bill Lee, founder of Lee & Associates.
For most commercial real estate brokers, the fascination comes in doing the bigger deal.
But for Bill Lee, founding partner of Lee & Associates, moving up has often meant frustration. The medium-size brokerage that carries his name does not have the clout and reputation of larger competitors, often leaving him out of the blockbuster transactions.
So it is with glee that Lee savors his firm’s $9.2-million court victory last week against Trammell Crow Co., the Dallas-based commercial developer and management company. The judgment means more than money to Lee.
“There are a lot of people who will be captured by a broker involved in a $340-million deal,” he said in an interview Monday.
The deal, which occurred five years and one month ago, involved the closing of one of the county’s largest commercial real estate deals. Trammell Crow bought the former Fluor Corp. headquarters in Irvine. Lee claimed that his firm had brought the parties together and demanded a $9-million commission. Crow and Fluor resisted.
After a trial that lasted five months, an Orange County Superior Court jury ruled in favor of Lee & Associates. The jury awarded the brokerage a $6-million fee. With interest and damages, Lee & Associates stands to pocket $9.2 million.
“We had a lot at stake,” Lee said. “There’s the embarrassment of being wrong, then there’s the impact that being wrong has on your business life.”
While the case is not the first in which a broker has sued for commission, it is the largest such dispute in Orange County. The names of the firms involved made it highly visible. Lee said he received 35 calls from fellow brokers congratulating the firm.
Trammell Crow is expected to appeal the judgment.
Lee did not personally have a financial stake in the outcome of the case. The big financial winners were the five partners who were running the Orange office of Lee & Associates in 1985: Chuck Witters, John Earnhart, Paul Earnhart, Doug Himes and Mike Martin.
But Lee, the spokesman for the company, which is organized as a series of partnerships with no corporate office, said the victory should boost the reputation of the firm in the eyes of the commercial real estate community.
It has not always been a highly visible brokerage. Lee feels that the firm’s image as a small player may have prompted Trammell Crow partners to ignore its pleas for the $9-million share of the proceeds from the sale of Fluor’s signature building.
“I’m not so sure the major (brokerage) firms would’ve found themselves in the same position,” Lee said. “Maybe they viewed us as somebody who couldn’t sustain the fight.”
Lee & Associates opened its doors in El Toro in 1979 and had four locations when the Orange partnership--which has since moved to Santa Ana--decided to sue Fluor and Trammell Crow. Fluor, the huge Irvine-based engineering and construction firm, was later dropped from the suit.
The brokerage has grown in the last 18 months to eight offices and now has doubled the number of its sales associates from 100 to 200 and partners from 40 to 79. And it has expanded beyond Orange County into San Diego, Los Angeles, San Bernardino and Riverside counties. Five new offices are planned within the next three years, four of them in Los Angeles County.
A new office of Lee & Associates opens when a core of three to five experienced brokers can raise at least $250,000 to start business. The company’s other partners can invest and receive 6% of the gross revenue of the new partnership each year. Each office divides its profits at the end of the year among its partners.
Sales associates join an office with the understanding that they can be voted in as a partner at the end of three years.
Lee said the company’s structure, which allows brokers to become owners in the firm, is the reason why it is expanding now during tough economic times. A larger competitor, Grubb & Ellis, announced late last week that it would lay off 400 people nationwide.
“In a market like this, there are brokerage companies that are cutting commissions to stay profitable,” he said. “They are cutting support. Brokers are looking around to see what alternatives are available.”
Lee, 48, is known as a broker who does well in a declining marketplace.
“The key is in discerning what will pay you and what won’t,” he said. “You really have to know who’s got money to buy and who has a real need to move into a big space. It’s knowing the market. Also, in a tough marketplace, you’ve got to make sure you’re working on as many deals as possible because a certain percentage won’t happen, won’t get financing.”
Lee has just returned to a daily commute to the firm’s new City of Industry office after five years of working from an office in his Newport Beach home. He decided to work from home when his daughter was born and to coach his three boys in basketball.
A former guard for basketball teams in three Southern California colleges, Lee has a degree in physical education and taught at St. Monica’s High School in Santa Monica before becoming a salesman for 3M Corp. Three years later, in 1970, he entered real estate. For two years in the mid-1970s, he was the top salesman for the Newport Beach office of Grubb & Ellis.
By working from the City of Industry office, Lee said, he is hoping to add to the push to move the firm into Los Angeles. He foresees the firm’s expanding to other cities and competing with the likes of a Cushman & Wakefield, Grubb & Ellis and Coldwell Banker.
He hopes the recent suit will change the way his company is perceived.
“I don’t think a broker wants to be labeled as a litigant, but at the same time, I know a broker doesn’t want to be labeled as someone who can be intimidated into accepting less than what had been agreed to,” Lee said.
