Court dismisses property owners' negligence case against real estate agent, orders arbitration in dispute over sale

By Charmaine Little | Jan 10, 2019

NEW ORLEANS – The U.S. District Court for the Eastern District of Louisiana recently granted a motion to dismiss and compel arbitration in a dispute involving the sale of a shopping center in Thibodaux.

The court's decision filed Jan. 2 said the owners of the shopping center, Michael and Andrea Elerath, became dissatisfied with the services from real estate agent Jason Vitorino, who agreed to sell the shopping center, and sued for damages in Louisiana’s 17th Judicial District Court for Lafourche Parish claiming unjust enrichment, negligence and violations of Louisiana’s Unfair Trade Practices Act. Vitorino then removed the lawsuit to district court and filed a motion to dismiss and compel arbitration based on Federal Rule of Civil Procedure 12(b)(6) and the Federal Arbitration Act.

Under the initial agreement, Vitorino was supposed to represent the couple in the sale with a sale price of $2.05 million and Vitorino standing to earn a 5 percent commission when the sale was complete. The agreement also included an arbitration clause and Louisiana choice-of-law provision, court filings said. The Eleraths apparently got upset after Vitorino sold the property for $1.875 million –$130,000 less than the price in the agreement– and requested a $45,374 commission, about 2 percent of the commission compared to 5 percent in the agreement.

The Eleraths argued the arbitration agreement wasn’t official since the parties impacted by it (those who co-own the property) didn’t sign it while Vitorino argued that since Michael Elerath signed it on behalf of the co-owners, they are still subject to arbitration. The plaintiffs also said the agreement is not enforceable because of “relative nullity under Louisiana law,” according to the lawsuit.

The court disagreed with the plaintiffs and said all parties did agree to arbitrate the lawsuit. For starters, a relevant and valid arbitration agreement does exist, and the parties are subject to follow it, the court said. “Here, the non-signatory plaintiffs want to have it both ways,” the court said. “Their shares from the sale of the property by Vitorino long ago flowed into their bank accounts. Even though they technically did not plead a breach of contract claim against Vitorino, that is the essence of what they allege.”

The court added that claiming the agreement as a whole is a relative nullity doesn’t challenge the officiality of the arbitration agreement. Plus, the actual disagreement the lawsuit is based on is within the issues the agreement said should be arbitrated as there aren’t any federal statute or policy issues that would suggest the lawsuit can’t go to arbitration.

Considering this, the court granted the motion to dismiss and compelled arbitration.

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