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How to Prove a "Finder's Fee" Case Under New York Law


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1/1/2016
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I admit it. I enjoy it when the law works the way it should, and sticks it to a defendant that reneges on his word, and breaches his contract wherein he agreed to pay the plaintiff a percentage of his profit on the purchase and sale of a property. And that is exactly what happened in Futersak v. Perl. In a very detailed and well-written opinion,Nassau County trial judge Ira Warshawsky upheld the parties' written agreement, and rejected the defendant's contention that Futersak's claim should be dismissed on the grounds that he was not a licensed real estate broker, in contravention of Section 442-d of the Real Property Law. More importantly, for the purposes of this article, the Court set out a blueprint for how finders are distinguished from brokers, and what a finder must prove in order to collect his finder's fee under New York law. Following are the pertinent parts of the Court's opinion: "[N]ew York courts distinguish between finders and brokers. Finders find potential buyers or sellers, stimulate interest and bring parties together, while brokers bring the parties to an agreement on particular terms (Train v. Ardshiel Associates, Inc., 635 F Supp. 274, 279 [SDNY 1986]) ... "Finders must demonstrate that the final deal which was carried through flowed directly from his introduction of the matter to be entitled to collect his fee (Seckendorff v. Halsey, Stuart & Co., 234 AD 61, 71 [1st Dept 1931], rev'd on other grounds 259 NY 353 [1932]; cf. Bendell v. De Dominicis, 251 NY 305, 311 [1929] [brokerage commissions ordinarily become due when the broker produces to his principal a party ready, willing and able to purchase on the terms of sale authorized or accepted by such principal]). While a finder may be entitled to his fee in a special business situation for merely introducing and bringing the parties together to conduct their own negotiations, if that is his agreement with his principal, a licensed real estate broker, however, cannot recover unless he brings the parties to an agreement (Lehman v. Arlen Operating Co., 54 Misc 2d 372, 375 [Sup Ct, NY County 1967])." Returning to the facts of this particular case, it does not seem that the Court struggled to reach its decision in the least, stating: "The written agreement between the parties, and drafted by Defendant, explicitly refers to Plaintiff being compensated in the role of a finder. There is nothing in the agreement explicit or implied that Futersak was an agent of Defendants in the actual or functional meaning of that term and relationship. Futersak had no explicit or implied power to bind Defendants. He did not have the power to negotiate the transaction. Futersak did not have the power to do anything except find and introduce prospects." A final word of caution is in order here: Futersak won because he had a written contract. As noted in the Court's opinion, "New York's Statute of Frauds applies to finders and their agreements to provide finding services, which means that finders must memorialize their agreements to find in writing to be enforceable (General Obligations Law 5-701 [a] [10])."



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