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Farthing v. Coco Beach Resort Management, LLC

United States Court of Appeals, First Circuit

July 21, 2017

H. LEE FARTHING, Plaintiff, Appellant,
v.
COCO BEACH RESORT MANAGEMENT, LLC, Defendant, Appellee, JOHN DOE, INC., Defendant.

         APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO [Hon. Camille L. Vélez-Rivé, U.S. Magistrate Judge]

          Richard Schell-Asad and Troncoso & Schell on brief for appellant.

          Alejandro Suárez Vincenty, Hugo Rodríguez Díaz, and Rodríguez & Rodríguez, PSC on brief for appellee.

          Before Lynch, Thompson, and Kayatta, Circuit Judges.

          LYNCH, Circuit Judge.

         H. Lee Farthing, a South Carolina resident, brought this diversity suit against Coco Beach Resort Management, LLC ("Coco Beach"), a Puerto Rico company that employed Farthing for just over three months on a one-year contract as its "Marketing and Sales Director." Farthing alleges that Coco Beach breached his employment agreement by unilaterally terminating it early. He seeks damages to compensate him for unpaid base salary and anticipated commissions on real estate sales that Farthing alleges were imminent when Coco Beach fired him.

         The court below granted Coco Beach's motion for summary judgment, holding that the employment agreement was void as against public policy because Puerto Rico law requires a person working as a real estate broker to have a license. It is undisputed that Farthing had no such license before or after he was employed, and that no term of the employment agreement required him to have such a license.

         We vacate and remand. Summary judgment was entered in error because issues of law and issues of material fact remain in dispute. It is disputed whether Coco Beach was aware that Farthing did not have a broker's license at any relevant time, including when the agreement was signed, and it is disputed whether at least some of the work Farthing performed and was intended to perform was permissible without a broker's license. It was error to hold on summary judgment that Farthing has no viable claim against Coco Beach for breach of contract.

         I.

         We briefly review the relevant background, highlighting along the way the facts that remain in dispute.

         Under Puerto Rico law, it is a misdemeanor to "engage[] in the profession of real estate broker . . . without the corresponding license." P.R. Laws Ann. tit. 20, § 3057(a). "Real estate broker" is defined by statute as

[a] natural person who holds a license to practice the profession . . . and acts as intermediary, through the payment or the promise of payment of any compensation previously and mutually agreed upon between the parties that contract to execute in Puerto Rico a sales transaction, promise of sale, purchase or sale option, exchange, lease, auction, property management, or in the offering, promotion, or negotiation of the terms of all sales, sales options, promise of sale, lease management, or exchange of real property located in or outside of the Commonwealth of Puerto Rico.

Id. § 3025(g).[1] The parties agree that Farthing, at all relevant times, has lacked the license required to work as a real estate broker in Puerto Rico.

         Farthing alleges that, in the past, he was employed in South Carolina as a "real estate broker with an expertise in 'high end' or 'luxury resorts.'" On March 24, 2016, he signed a one-year employment agreement with Coco Beach; the agreement had no early termination clause and no requirement that Farthing obtain a Puerto Rico real estate broker's license. Farthing, in a sworn affidavit, alleges that Coco Beach's president knew when he hired Farthing that Farthing was not a licensed real estate broker in Puerto Rico and that he "specifically told [Farthing] that under Puerto Rico's law [Farthing] did not need a real estate license, as [Farthing] would be an employee of Coco Beach selling [Coco Beach's own] property." Coco Beach disputes that allegation and maintains that it ...


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