A Santa Clara County Superior Court judge has awarded more than $3 million to three South Bay brokers and their brokerage house in association with a soured boom-era land sale for more than $230 million.
Beyond that, the disk drive maker, which has since been sold to another company, is facing pre-judgment interest costs of an estimated $1.4 million and “significant attorneys fees and court costs,” the brokers’ attorney said.
Brokers Eric Fox, Joseph Moriarty and Steven Gregory Davies represented Hitachi’s interests over a more than six-year period beginning in June 2003 when they signed a listing agreement with Hitachi to sell more than 111 acres zoned for housing and retail in South San Jose. The agreement expired in late 2009.
The brokers demanded and the court agreed that they had the right to receive under their listing agreement with Hitachi a percentage of a $30 million non-refundable deposit to Hitachi in association with the land’s sale, which the brokers helped to orchestrate but that was never consummated.
“We are very grateful for the jury’s verdict,” Fox said.
“We earned our commission during our six-and-a-half years of work on the project, which produced wonderful results, taking a property that had been fenced to outsiders, had environmental contamination and dilapidated buildings into what has been a huge moneymaker for Hitachi and what will be a fantastic transit project with retail and housing for the city of San Jose and the entire greater Almaden region.”
“Those are significant accomplishments that everyone can be proud of,” he said.
Moriarty declined comment saying that he would defer to a prepared statement that would be released by Cassidy Turley Commercial Real Estate Services. Davies was outside the country and not available for comment.
Marshall C. Wallace of Allen Matkins Leck Gamble Mallory & Natsis LLP, an attorney for Hitachi, declined comment. Maureen L. Tabari of San Jose’s Smithers Law Firm, another Hitachi attorney, could not be reached for comment.
The Sept. 28 ruling followed a six-week trial, but jury deliberations lasted less than 90 minutes, said Joel Zeldin of San Francisco’s Shartsis Friese LLP law firm, an attorney for Cassidy Turley.
“The difference between this and most brokerage cases was that much more was at stake in terms of dollars and that Hitachi was as recalcitrant as possible,” Zeldin said.
“They have fought every step of the way even to the point of filing a cross complaint against the brokers for fraud and breach of fiduciary duty that was totally baseless and premised on the testimony of a former Hitachi employee who it turned out had fabricated his military service and work experience,” he said. “It was oppressive use of Hitachi’s overwhelming strength and resources.”
The jury voted unanimously against Hitachi’s claims against the brokers, Zeldin said, and the judge in his order said Hitachi would “recover nothing.”
The suit was filed Oct. 7, 2010, in Santa Clara County Superior Court. Hitachi made a single settlement offer for $500,000 in 2009, Zeldin said.
The episode caps a saga that tracks the region’s economic ups and downs from mid-2005 to early 2009 in tandem with the national housing and financial busts. After years of planning and entitlement work—in which the brokers were enmeshed—to transform the Hitachi campus into an urban, mixed-use village, in March 2005 Pleasanton-based homebuilder Signature Properties Inc. with backing from equity partner PCCP LLC agreed to pay Hitachi $237 million for 111.8 acres of the 322-acre industrial campus in South San Jose.
Hitachi undertook millions of dollars in infrastructure work to prepare the site for sale, taking a number of years to execute. During those years, the housing market took a dramatic turn for the worse, and the day before the sale was to be completed in March 2009, Signature informed Hitachi that it did not intend to close escrow, claiming that Hitachi had failed to meet its obligations.
A lawsuit and arbitration between the parties followed. The dispute culminated in the awarding in late in 2010 to Hitachi of $30 million in Signature’s earnest-money deposits made toward the land purchase price as the infrastructure progressed, plus $1.9 million in damages and $3.3 million in attorneys’ fees.
Under the terms of their listing agreement, the brokers were entitled to a percentage of “any deposit that becomes non refundable to [c]lient,” according to court documents. Based on the formulas in the listing agreement, the brokers asked for $3,021,909. That is the exact sum the jury awarded them.
In 2005, Signature had agreed to pay just more than $2 million an acre for the Hitachi property. In July, homebuilder Lennar Corp. agreed to pay $80 million for 40.5 acres at the Hitachi site, just less than $2 million an acre.