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PATRIOT connayatil CASE NUMBER : 4)
Plaintiff, 2007 CV 01268 NS
v. JUDGE MICHAEL L. TUCKER
KETTERING TOWER PATNERS, LLC, DEFENDANT’S MEMORANDUM
Defondant IN SUPPORT OF ITS
, APPLICATION TO VACATE THE
ARBITRATION AWARD
FACTUAL BACKGROUND
In February of 1986, the City of Dayton entered into a Lease Agreement with the
owner of the Kettering Tower for specifically described space on the roof of the Kettering
Tower to place receivers and transmitters for the City’s Computer-Aided
Dispatch/Management Information System. The Lease provided for additional specific
space on the upper floor of the Kettering Tower to be used for the supporting equipment
to operate the transmitters and receivers.
The Lease was amended in 1990 to provide for space on the upper floor to install
additional equipment and to provide for additional utility costs. The Lease was amended
again in 1997 to provide for a cable duct to the basement of the building. The Lease was
amended for a third time in 2002, to again provide additional specific space consisting of
290 rentable square feet of space on the 30" floor of the Kettering Tower to be renovated
by the Lessor at the expense of and according to the specifications of the Lessee, City of
Dayton.In late 2005, near the expiration of the Lease with the City of Dayton, the
Plaintiff, Patriot Communications, LLC, (“Patriot”) approached Kettering Tower
Partners, LLC (“KTP”) and offered services it described to KTP, as the leasing of new
space in or on the roof or building or within the building and to include negotiation of a
renewal or extension of the Lease with the City of Dayton.
Patriot and KTP Entered Into An Agreement to Perform Real Estate
Services
Patriot’s principal owner prepared a “Leasing Agreement Between Kettering
Tower Pariners LLC and Patriot Communications, LLC As Rooftop Leasing Agent.”
This agreement was prepared by Patriot, using language from a real estate leasing
agreement that had previously existed between KTP and its real estate leasing agent, The
Miller Valentine Group. The parties negotiated the details of the “Leasing Agreement”
including the “Leasing Commission” that would be due to Patriot if it were to conclude a
lease agreement with a prospective tenant or negotiate the renewal of an existing lease.
The Leasing Commission negotiated in the Patriot - KTP Leasing Agreement was based
on and in line with the leasing commissions that had been paid to the Miller Valentine
Group. After executing the “Leasing Agreement” Patriot negotiated with the City of
Dayton to continue as a tenant of KTP.
Patriot’s chief operating officer testified at the arbitration hearing that he had
never considered whether it would be necessary for the Company to be licensed as a real
estate broker as required by Sec. 4735.01 of the Revised Code in order to carry out the
duties that the Company had agreed to perform for KTP.ARGUMENT
Real Estate Services In Ohio Are Regulated By R. C. Chapter 4735 And Can
Only Be Provided By A Licensed Real Estate Broker
The experience of Mr. Thomae, the Chief Operating Officer of Patriot, has been
exclusively in the “wireless industry.” Neither he nor Patriot is licensed as a real estate
broker or salesman and Mr. Thomae has had no experience in the real estate business.
Patriot was a start-up company that describes its business model as “helping building
owners manage their relationships with telecommunication providers.” In the arbitration
case, however, Patriot was awarded a “commission” for performing real estate services.
Patriot could have assisted KTP manage its relationships in the “wireless
industry” without violating the provisions of the Ohio statutes regulating real estate
services, Patriot could have licensed a user to place an antenna on KTP’S rooftop if
Patriot had either leased the rooftop from KTP or had the right to control the rooftop
under an agreement with the owner. That is not what Patriot undertook to do on behalf of
KTP. Under the terms of its Leasing Agreement with KTP, Patriot, agreed to provide
real estate leasing service for new space in or on the roof or building or within the
building and to include negotiation of a renewal or extension of existing leases.
It was entirely appropriate for KTP to rely on the representations of Patriot
contained in Section 3.1 of Patriot’s “Leasing Agreement” that appointed Patriot’s as.
KTP’s leasing agent and gave to Patriot the right “to solicit for, procure and produce
tenants who will lease space in the Property.” It was also appropriate for KTP to rely on
the representations contained in Article 3.2 of the Leasing Agreement that provided inpart that: “The authority conferred herein shall apply to the initial leasing of new space in
or on the roof or building or within the building, the negotiation of a new lease with an
existing tenant and the exercise of any option to renew or extend an existing lease with
any such existing tenant, or existing building lease otherwise renewed or extended.”
(Emphasis added.) Patriot’s The Standard Rooftop Lease Agreement that was used for
the Agreement with the City of Dayton provides for exclusive use for a term of years of
the same specifically identified space that was contained in previous lease agreements
between the City of Dayton and KTP. It is undisputed that Patriot’s Leasing Agreement
with KTP covers real estate services that can only be provided by an entity that is duly
licensed as a real estate broker under R.C. 4735.10 and that Patriot is seeking a
commission under its Leasing Agreement with KTP.
KTP had the right to rely on Article 3.6 of its “Leasing Agreement” with Patriot
that provides: “Rooftop Broker represents and warrants that it and its salespersons are
fully qualified and licensed, to the extent required by law, to lease real estate and to
perform all obligations assumed by Rooftop Broker hereunder. Rooftop Broker agrees to
comply with all laws now or hereafter in effect with respect to the same.” (Emphasis
added.) Patriot’s Leasing Agreement violates the provisions of Section 4735.01 of the
Ohio Revised Code specifically requiring that any person or entity who for another, and
for compensation, or the expectation of compensation, rents, leases or negotiates the
rental or leasing of any real estate must be a licensed real estate broker. Neither Mr.
Thomae, Patriot’s chief operating officer, nor Patriot is a licensed real estate broker.The Arbitration Award Violates A Dominant Public Policy Determined By
Reference To Statutory Law And Well Defined Legal Precedent And Is In
Violation of R. C. 4735.01.
The arbitration award that the Defendant, Kettering Tower Partners, LLC has
applied to the Court to vacate reads as follows:
“Because Patriot has fulfilled its obligations under the Leasing Agreement, it is
entitled to collect a leasing commission that is “equal to ten percent (10%) of
gross rentals for the applicable term.” (Leasing Agreement, Schedule B). Pursuant
to the Rooftop Agreement, the arbitrator finds that Patriot’s commission shall be
calculated using the initial term of 240 months and a gross rental sum of
$1,858,150.00 for a total commission of $185,815.00.”
A court may not refuse to enforce an arbitration award for violating public policy
unless the public policy at issue is well defined and dominant, being “ascertained ‘by
reference to the laws and legal precedents and not from general considerations of
”
supposed public interests." United Paperworkers, 484 U.S. at 43, quoting Muschany v.
United States (1945), 324 U.S. 49, 66, 65 S. Ct, 442, 89 L. Ed. 744.
The Application to this Court to vacate the arbitration award does not stem from
considerations of supposed public interest. The public policy considerations in the case
before this Court are ascertained by reference to specific statutory law and the legal
precedents interpreting it. R.C. 4735.21 states that “No right of action shall accrue to any
person, partnership, association, or corporation for the collection of compensation for the
performance of the acts mentioned in R.C. 4735.01, without alleging and proving that
such person, partnership, association, or corporation was licensed as a real estate
broker or foreign real estate dealer.” (Emphasis added.) No right of action exists to
obtain fees in violation of this statutory prohibition. The arbitrator’s award violates thispublic policy because Ohio courts have consistently held that an unlicensed broker cannot
avoid the statute's reach by asserting equitable causes of action sounding in promissory
estoppel, quantum merit, or the like. Stanson, Inc. v. McDonald (1946), 147 Ohio St. 191;
The Innovators' Group, Inc. v. Riverside Enterprises, Inc. 1990 Ohio App. LEXIS 398,
Case No. 11725, (2 Dist. Montgomery County) decided February 5, 1990, Landmark
Commer. Realty v. Developers Diversified, 163 F.3d 389.
In the case of Ownbey v. Professional Realty Inc., 2003-Ohio-4949, Case No.
82468 8th District Court of Appeals of Ohio, Cuyahoga County Decided on September
18, 2003 (Attached), Ownbey was not a real estate broker and as a result, R.C. 4735.21
prevented Ownbey from bringing an action against Professional, either by way of
arbitration or a civil lawsuit in common pleas court, to collect the real estate
commission allegedly due. In the case of Group One Realty, Inc., v. Walter M. Minnich,
Court of Appeals, Tenth Appellate District, Franklin County, 1997 Ohio App. LEXIS
2351 (Attached), the Court upheld the denial of the recovery of a commission on the
basis of R. C. 4735.21. Our Second District Court of Appeals in the case of The
Innovators’ Group, Inc., v. Riverside Enterprises Inc. et al., Second Appellate District,
1990 Ohio App. LEXIS 398 (Attached) held that no theory of recovery would support
appellant's claims to relief pursuant to the holding in S.D. Stanson, Inc. v. McDonald
(1946), 147 Ohio St. 191. The Court referred to the observation of the Ohio Supreme
Court that there is no warrant in law for holding that notwithstanding the provisions of
[the Real Estate Brokers’ Statutes], plaintiff can recover.
Patriot performed a service and the service has value that can be determined. The
case now before this Court is not about Patriot’s right to compensation for performing a
8 ip P iSservice. This case is about Patriot’s right to a real estate commission under an agreement
to provide real estate services for which it is not properly licensed as a real estate broker
and for which it has not right of action. Section 4735.21 of the Revised Code, and the
case law interpreting it, specifically prohibits any person or entity from pursuing a
cause of action for the collection of compensation for acting on behalf of another in
leasing or negotiating the provisions of a lease of real estate. Patriot is prohibited by
Ohio law from pursuing compensation through litigation or arbitration for leasing or
negotiating for the leasing of real estate for KTP. This Court has both the authority and
the obligation pursuant to R.C. 2711.10 to vacate the arbitration award when the
arbitrators exceed their power. Patriot may have the right to compensation for the
services it performed but it clearly can not successfully claim compensation under its
Leasing Agreement with KTP.
This Case Is Not A Precedent For The Wireless Industry
The “wireless industry” avoids the statutory licensing requirements of the real
estate industry because there is no conveyance of an interest in real estate and the process
is accomplished through a license agreement that does not provide for control of specific
real estate. The licensing concept can be utilized for a high rise build that can be used to
erect an antenna without authorizing the service provider to act as an agent for the real
estate owner in providing real estate services.
Patriot’s legal approach to helping KTP with its relationships with
telecommunication providers was legally flawed and violated the statutory provisions
applicable to real estate services. Patriot never sought legal advice about the Agreementit prepared and signed with KTP and was unaware of the need to be licensed for the
activities that Patriot undertook on behalf of KTP. (R. Pg 88,89 Ln 3)
The Award of Attorney’s Fees By The Arbitrator Was Derived From The
Language Of An Agreement To Provide Legal Services That Is
Unenforceable As A Matter Of Law.
It is well settled that there is no right to recover attorney fees, excepting various
statutory provisions for the award of attorney fees, or an agreement of the parties
regarding the recovery of attorney fees. In the case now before the Court the arbitrator’s
award of attomey fees is based upon Article 4 of the October 6, 2005, Leasing
Agreement between KTP and Patriot. The award is improper because it emanates from
an unenforceable Leasing Agreement that clearly violates a statutory prohibition on
engaging in leasing activities without a license.
The Nature Of The Leasing Agreement Between KTP And Patriot Is
Relevant In Determining Whether It Is An Enforceable Agreement
The Plaintiff, Patriot, claims that the arbitrator concludes that the Agreement
between KTP and the City Of Dayton is in the nature of a license and not a lease and
therefore the Agreement to provide Leasing Services between Patriot and KTP is
enforceable as a compensation agreement for licensing services. That is not what the
arbitrator decided. The arbitrator’s decision is as follows:
“Because Patriot has fulfilled its obligations under the Leasing Agreement, it is
entitled to collect a leasing commission that is “equal to ten percent (10%) of
gross rentals for the applicable term.” (Leasing Agreement, Schedule B). Pursuant
to the Rooftop Agreement, the arbitrator finds that Patriot’s commission shall be
calculated using the initial term of 240 months and a gross rental sum of
$1,858,150.00 for a total commission of $185,815.00.”The Authority Of The Arbitrator Can Be Raised At Any Time Before During
Or After The Commencement Of The Proceedings
Lack of jurisdiction of an arbitrator or arbitration panel may be raised at any stage
of the proceedings, although not previously asserted, including raising the issue for the
first time on appeal. Teramar Corporation, Stakich Appellant, v. Rodier Corporation,
Appellee, 40 Ohio App.3d 39; 531 N. E. 2d 721, (1987).
CONCLUSION
The nature of the relationship between the City of Dayton and KTP has been and
continues to be controlled by a lease. The Agreement negotiated by Patriot conveys
specific real estate to the City of Dayton for a term of years. Patriot obtained renewal of
a lease between the owners of the Kettering Tower and the City of Dayton that was in
place for more than 20 years and is not a licensed real estate broker and therefore not
entitled to a commission in violation of the statutory prohibition. It is appropriate for this
Court to vacale the arbitration award of a Commission which is based on an
Ralph A. Skilken, J¥. Hf
Attorney for Respondent
1500 Kettering Tower
Dayton, Ohio 45423-1001
Telephone: 937-223-5050
E-mail: _ralphskilken@goodcounse].com
unenforceable Agreement to provide real estate leasing services.
Certificate of Service
I certify that I have served on Timothy G. Pepper, Faruki Ireland & Cox PLL, Attorneys
for Plaintiff, 500 Courthouse Plaza, S W, Dayton, Ohio 45402 a copy of this
Memorandum on this 26th day of March, 2007.
Ralph A. Silken oe
Attorney for Defendant