In June of 2017, a San Diego-based commercial brokerage company opened its doors in Seattle. Hughes Marino announced at the time that it was able to hire away top local talent from CBRE and soon thereafter gave a preview of its fresh new digs on the 25th floor of the Russell Investments Center in Seattle. But CBRE was not happy with the way their brokers departed and decided to sue, alleging that the upstart firm’s new leadership also took proprietary information as it exited. This week, the suit was settled with Hughes Marino proudly proclaiming victory, but CBRE shared the agreement with The Registry, showing that this conclusion is not accurate.
Privately-held Hughes Marino brokerage is owned and managed by a husband-and-wife team of Jason and Shay Hughes. The company focuses on exclusively representing business owners and corporate real estate decision makers, according to the firm’s statement—in brokerage parlance it is a tenant rep shop. Today, the firm has offices in Seattle, San Diego, Orange County, Los Angeles, Inland Empire, San Francisco and Silicon Valley.
It arrived in the Puget Sound region by hiring away two tenant rep brokers from CBRE, Owen Rice, who was given the title of executive vice president, and Gavin Curtis, who became vice president. It touted their “decades of local experience” as one of the reasons they were hired.
Rice is a graduate of the University of Washington. He has been recognized at CBRE for his work, nominated as a 40-Under-40 business leader and boasted a responsibility of managing a real estate portfolio domestically and internationally that exceeded 3 million square feet.
Curtis was brought up in the industry. His father was the co-founder of Washington Partners, a tenant rep brokerage firm that sold a portion of its business to JLL in early 2016. Washington Partners is now organized in a separate entity, and the new company continues to operate with that name.
The two have been partners for years, according to a statement from Hughes Marino, “leading CBRE’s Seattle tenant advisory team, and [knowing] all about the competitive nature of helping companies use office space solutions to recruit and retain the very best talent.”
It seemed from the press release issued by Hughes Marino that the firm nabbed the right two guys. But CBRE saw that the two may have also taken some proprietary information with them, and it quickly sued.
This week, The Registry received a press release from Hughes Marino announcing the end of the suit, and it dramatically proclaimed: “BREAKING NEWS: HUGHES MARINO WINS LAWSUIT AGAINST CBRE.” This was the exact subject line of an email sent to The Registry in the afternoon of March 21st.
The Registry publishes unedited press releases on its web sites in Seattle and the Bay Area. While the purpose of a press release is usually marketing in nature, some of them offer details of real estate transactions that provide valuable information to our readers.
The announcement caught the attention of CBRE corporate communications executives, who immediately responded by offering The Registry a copy of the agreement in order to counter the victorious pronouncements that Hughes Marino made the day before. In reading the agreement, we have concluded that CBRE did not lose a lawsuit, and furthermore, we would like to clarify assertions made by Hughes Marino for the benefit of our readers. As a result, we have decided to change the initial title of the press release issued by Hughes Marino to read “Hughes Marino Settles Lawsuit with CBRE,” which is factual.
There are three main points of the agreement, which I will outline below.
The first one states that CBRE will be reimbursed $125,000 for its attorneys’ fees and costs associated with the litigation. Hughes Marino’s press release states “Hughes Marino owes absolutely no money to CBRE, and none of the defendants will end up having to write a check to CBRE.” Half of this is true with a caveat, and the other half could be true, also with a caveat. Hughes Marino, the company, does not owe money to CBRE, but Rice and Curtis do, and they have to reimburse CBRE either with future commissions, or in the case that these do not cover the full amount of the $125,000 one-time fee by September 30, 2018, they may have to write a check for the balance.
One additional cost that Hughes Marino does not have to pay, but Rice and Curtis do, is the cost of arbitration and forensic work to determine the information they brought with them has successfully been destroyed and/or returned to CBRE.
This brings us to the second point, which states that the defendants, which in this case include Hughes Marino, Owen Rice, Owen Rice Enterprises, the Marital Community of Owen and Jane Doe Rice, and Gavin Curtis, agree to return to CBRE or delete all confidential and proprietary information that belongs to CBRE. A few stipulations here allow the defendants to use some of this information, but only in order to consummate certain pending transactions in order to pay CBRE the $125,000 fee.
There are three categories of pending transaction, which identify the different stages of work in which Rice and Curtis were involved. Some of these have already been fully paid to the pair, others are pending. The list of clients includes companies like McKinsey & Company, Redfin, F5 Networks, BioMed Realty Trust, KIRO Radio, Quest Diagnostics and Holland America.
The third point talks about non-solicitation obligations of Rice and Curtis as it pertains to CBRE’s current clients. This list was not shared with The Registry, presumably because it identifies CBRE’s clients in the market. This stipulation is limited by a “restricted period,” which expires on June 28, 2018.
In the press release Hughes Marino’s CEO, Jason Hughes, asserts that he “…believes CBRE knew the suit was meritless against Hughes Marino from the get-go, and used it as an attempt to give our company a black eye in the community as well as an extortion lever to change the fee distribution on Rice and Curtis’s 35 client transactions in progress.”
Given the stipulations of the agreement, it does not seem evident that CBRE knew that. The company is getting their attorneys’ fees covered, and it is getting their information back from Hughes Marino and enforcing a non-compete provision.
One of the reasons I decided to cover this agreement was because I received an email from a Seattle broker telling me how the press release is making rounds in the community. Most of the readers were wondering why we decided to write such a one-sided piece on the settlement. Few took note that the press release was a marketing document from Hughes Marino, not an article by The Registry, and we were seen as an accomplice in telling this version of the story. But the facts matter, and it’s a small industry, and I was pleased to learn that regardless of the way Hughes Marino characterized the agreement, the industry was well aware of the details and the true outcome of the agreement.
And for those who did not know the details, it would be safe to assume that the two-sides-to-a-coin analogy applies here, as well.