| ICSC Legal Database - Cases | Monday, February 22, 1999 05:05 PM |
| Citation: |
| Ross-Berger Companies. Inc. v. Equitable Life Assurance Society of the United States, 872 F.2d 1331 (7th Cir. |
| Issue: |
| Whether broker is precluded from invoking collateral estoppel to prevent landlord, in action against landlord to |
| recover commission earned by procuring tenant, from relitigating issue of whether a valid lease existed between |
| Facts: |
| In December 1981 Combined Network, Inc. retained Plaintiff to procure office space for it. In mid-December |
| Plaintiff met with Defendant's leasing agent, an event that ultimately led to Combined signing a draft lease on |
| February 5, 1982, as well as paying first month's rent. Leasing agent thereupon informed Combined that |
| Defendant's formal approval was still required; that approval was denied in March, and Combined then sued |
| Defendant for breach. A jury found Defendant liable for breach, a finding affirmed on appeal by the present court. |
| On September 29, 1987, Plaintiff filed a summary judgment motion on its claim for broker's commission, which |
| was referred to a magistrate by the district court. Plaintiff argued that doctrine of collateral estoppel precluded |
| from relitigating two issues decided against it in the earlier litigation, that is, that leasing agent was indeed |
| Defendant's agent and that a valid lease agreement existed between Combined and Defendant. Defendant |
| proposed four arguments against giving collateral estoppel effect to the earlier litigation, all of which were |
| rejected by the magistrate, who then concluded that Plaintiff, as procurring broker for the transaction, was |
| commission. The district court adopted the magistrate's recommendation that Plaintiff's summary judgment |
| Holding: |
| Affirmed. On appeal, Defendant has not raised any arguments that were not adequately addressed by the |
| magistrate. Defendant first argues that since Plaintiff itself could not have used equitable estoppel to prove the |
| existence of the lease (which Defendant says Combined did in the earlier litigation), Plaintiff cannot rely on |
| collateral estoppel to prevent relitigation of the issue of whether a lease existed. This is fallacious, because in |
| the earlier litigation equitable estoppel was used only to avoid the Statute of Frauds bar to the enforcement of a |
| valid contract; the existence of a valid lease agreement between Combined and Defendant was established not |
| through equitable estoppel but through the operation of agency law. The validity of the lease was a crucial issue |
| fully litigated in the earlier proceedings; thus, the application of collateral estoppel in this case to prevent |
| relitigation is appropriate. Defendant's second argument is that the district court's application of offensive |
| collateral estoppel contravenes Parklane Hosiery's "mandatory rule" precluding use of offensive collateral |
| estoppel where the plaintiff could easily have joined the earlier action. However, Plaintiff's failure to participate in |
| the earlier litigation does not show that it had adopted a "wait and see" attitude in order to elude the binding |
| force of an initial resolution of a simple issue. Additionally, the use of offensive collateral estoppel against |
| Defendant is in no way unfair to it here. Defendant's third argument, that the earlier litigation should not be given |
| collateral estoppel effect because the judgment was infected by jury prejudice, is wholly without merit, no |
| evidence having been presented in support of that assertion. Defendant lastly argues that the district court in the |
| earlier litigation inaccurately instructed the jury as to the level of proof needed to establish the elements of |
| equitable estoppel. This is irrelevant, since the primary issue Plaintiff seeks to prevent Defendant from |
| relitigating (the existence of a valid lease) was not established through equitable estoppel in the earlier action. |
| Defendant's appeal is frivolous: Defendant presents in this case the same (meritless) arguments against the |
| application of collateral estoppel that the magistrate had rejected, when it could not have had a reasonable |
| expectation that the same arguments would prevail here. |
| Classification 1: |
| Landlord and Tenant |
| 01292 - Legal Update - Winter 1989 |
|
