From left, Terrance Hunt, Shane Ozment and Chris Cowan. (BizSense file photos)
Three Denver multifamily brokers suing over a non-compete clause say in court documents that they were “betrayed” and “hoodwinked” by their onetime business partners — and that their former employer enforcing the clause helped make it happen.
Ten months into a legal battle with Newmark, where they worked from 2014 to last May, brokers Terrance Hunt, Shane Ozment and Chris Cowan have asked a judge in New York to allow them to sue the company for aiding and abetting a breach of fiduciary duty.
The three brokers had a 1 percent ownership stake in Apartment Realty Advisors of Colorado (ARA) when it was purchased by Newmark in 2014.
As part of that deal, the men signed a purchase agreement containing a non-compete clause, which stated that, if the brokers left Newmark before working for the company for seven years, they would not be able to compete with the company for two years. After seven years, the non-compete period would drop to one year.
Hunt, Ozment and Cowan worked for Newmark for six-and-a-half years, marketing development sites and large apartment complexes, some of which sold for nine figures.
Last May, the trio jumped from Newmark to its rival CBRE, and were quickly sued by Newmark, which sought to enforce the non-compete clause. Newmark has said CBRE paid the men signing bonuses worth hundreds of thousands of dollars, as well as millions in “upfront forgivable loans” intended to defray anticipated legal costs.
In July, a judge overseeing the litigation in New York, where Newmark is headquartered, ordered Hunt, Ozment and Cowan to follow a modified version of the non-compete clause. He issued a preliminary injunction stating that they could not compete with Newmark for one year, specifically in Colorado. The three brokers appealed the injunction, but lost that appeal in December.
Since then, the case has continued at the lower trial court stage, where the parties have been engaging in discovery. And in filings last month, the brokers said that emails they’ve obtained through that process show that the existence of the non-compete clause was “fraudulently concealed” from them leading up to the 2014 acquisition.
In 2018, Terrance Hunt and Shane Ozment brokered the $108 million sale of the 341-unit apartment complex at 801 S. Cherry St. in Glendale to Chicago-based AMLI Residential.
Hunt, Ozment and Cowan say they weren’t involved in negotiations surrounding the acquisition. That was handled, they say, by John “Jack” Box, Jeff Hawks and Doug Andrews, who owned the majority of ARA. Box was also an executive at Newmark, having joined the firm as part of an acquisition involving a different firm he led, Frederick Ross Co.
The three brokers argue that the majority parties had a “duty to reasonably disclose to defendants all material terms” related to the sale to Newmark. But the brokers say they didn’t learn of the non-compete clause until five years after the deal closed.
In the February filings, the brokers argue that Box, Hawks and Andrews were worried that Hunt, Ozment and Cowan wouldn’t agree to the non-compete clause, and that Newmark made clear it was willing to pay millions more for the company if they did.
“Put simply, Newmark wanted full control over defendants — who were among the highest-producing brokers in the Denver region — and Newmark was unwilling to take ‘no’ for an answer,” the brokers’ counterclaim reads.
So the brokers say Box, Hawks and Andrews misled them with a “shell game of overlapping, and conflicting contracts.”
The brokers say they transferred their 1 percent ownership stakes to a holding company, then each signed “services agreements,” essentially individual employment contracts in which they agreed to work for Newmark for five years, and refrain from soliciting certain clients for six months after they left.
The brokers say that Newmark executive Kevin McCabe explained the five-year contract restrictions before they could even review the document, and that he said the six-month restrictions “would be legally unenforceable in Colorado.”
The brokers say that, after signing the services agreement, they thought their role in the transaction was done. But weeks later, Box, Hawks and Andrews told them they would also have to sign the purchase agreement.
In 2017, Terrance Hunt, Shane Ozment, Chris Cowan and two others brokered the $141.5 million sale of the Steele Creek apartment complex at 3222 E. 1st Ave. in Cherry Creek.
The brokers say none of the ARA majority owners, and no one with Newmark, highlighted the fact that page 60 of the purchase agreement contained a non-compete clause vastly different from the restrictions laid out in the services agreement.
The brokers say that, when they were asked to sign the agreement, they were provided only with the signature page. They claim that, when Hunt asked why that was the case, Box responded: “I’m going to be cavalier enough to tell you to just go ahead and sign the contract” because it’s a “great deal for everyone.”
“The majority-share partners and Newmark concealed from defendants that the restrictive covenants presented in the services agreement were nothing but misdirection because those restrictions are entirely subsumed by the draconian, two-year post-employment purchase agreement restrictions now at issue in this case,” the brokers say in a filing.
In its response to the brokers’ proposed counterclaim, however, Newmark noted that Hunt, Ozment and Cowan had been provided a copy of the purchase agreement containing the non-compete clause by email prior to being asked to sign it. Newmark has previously said the men were responsible for reviewing anything they signed.
Newmark also claims the judge should reject the counterclaim because the statute of limitations has long passed.
The brokers say in their filings that they didn’t realize the specifics of the non-compete clause until five years later in 2019, when they entered into contract negotiations with Newmark and were told they would be sued if they left.
The men jumped ship to CBRE two years later.
“Having been betrayed by their former partners, defendants were left with an untenable choice: work at Newmark for the rest of their careers on terms dictated by Newmark or take employment elsewhere and face the possibility that Newmark might derail their careers by sidelining them from the industry,” the filing states. “Ultimately, after years of obfuscation, defendants chose the latter.”
Newmark, unsurprisingly, sees what happens differently.
“Defendants carefully planned for their exit, spending months negotiating a deal with the competitor that ensured they would receive millions of dollars and a guarantee of job security in the event a court held them to their obligations, as this court did, following a comprehensive injunction hearing last summer,” the firm said in its March 3 filing.
From left, Terrance Hunt, Shane Ozment and Chris Cowan. (BizSense file photos)
Three Denver multifamily brokers suing over a non-compete clause say in court documents that they were “betrayed” and “hoodwinked” by their onetime business partners — and that their former employer enforcing the clause helped make it happen.
Ten months into a legal battle with Newmark, where they worked from 2014 to last May, brokers Terrance Hunt, Shane Ozment and Chris Cowan have asked a judge in New York to allow them to sue the company for aiding and abetting a breach of fiduciary duty.
The three brokers had a 1 percent ownership stake in Apartment Realty Advisors of Colorado (ARA) when it was purchased by Newmark in 2014.
As part of that deal, the men signed a purchase agreement containing a non-compete clause, which stated that, if the brokers left Newmark before working for the company for seven years, they would not be able to compete with the company for two years. After seven years, the non-compete period would drop to one year.
Hunt, Ozment and Cowan worked for Newmark for six-and-a-half years, marketing development sites and large apartment complexes, some of which sold for nine figures.
Last May, the trio jumped from Newmark to its rival CBRE, and were quickly sued by Newmark, which sought to enforce the non-compete clause. Newmark has said CBRE paid the men signing bonuses worth hundreds of thousands of dollars, as well as millions in “upfront forgivable loans” intended to defray anticipated legal costs.
In July, a judge overseeing the litigation in New York, where Newmark is headquartered, ordered Hunt, Ozment and Cowan to follow a modified version of the non-compete clause. He issued a preliminary injunction stating that they could not compete with Newmark for one year, specifically in Colorado. The three brokers appealed the injunction, but lost that appeal in December.
Since then, the case has continued at the lower trial court stage, where the parties have been engaging in discovery. And in filings last month, the brokers said that emails they’ve obtained through that process show that the existence of the non-compete clause was “fraudulently concealed” from them leading up to the 2014 acquisition.
In 2018, Terrance Hunt and Shane Ozment brokered the $108 million sale of the 341-unit apartment complex at 801 S. Cherry St. in Glendale to Chicago-based AMLI Residential.
Hunt, Ozment and Cowan say they weren’t involved in negotiations surrounding the acquisition. That was handled, they say, by John “Jack” Box, Jeff Hawks and Doug Andrews, who owned the majority of ARA. Box was also an executive at Newmark, having joined the firm as part of an acquisition involving a different firm he led, Frederick Ross Co.
The three brokers argue that the majority parties had a “duty to reasonably disclose to defendants all material terms” related to the sale to Newmark. But the brokers say they didn’t learn of the non-compete clause until five years after the deal closed.
In the February filings, the brokers argue that Box, Hawks and Andrews were worried that Hunt, Ozment and Cowan wouldn’t agree to the non-compete clause, and that Newmark made clear it was willing to pay millions more for the company if they did.
“Put simply, Newmark wanted full control over defendants — who were among the highest-producing brokers in the Denver region — and Newmark was unwilling to take ‘no’ for an answer,” the brokers’ counterclaim reads.
So the brokers say Box, Hawks and Andrews misled them with a “shell game of overlapping, and conflicting contracts.”
The brokers say they transferred their 1 percent ownership stakes to a holding company, then each signed “services agreements,” essentially individual employment contracts in which they agreed to work for Newmark for five years, and refrain from soliciting certain clients for six months after they left.
The brokers say that Newmark executive Kevin McCabe explained the five-year contract restrictions before they could even review the document, and that he said the six-month restrictions “would be legally unenforceable in Colorado.”
The brokers say that, after signing the services agreement, they thought their role in the transaction was done. But weeks later, Box, Hawks and Andrews told them they would also have to sign the purchase agreement.
In 2017, Terrance Hunt, Shane Ozment, Chris Cowan and two others brokered the $141.5 million sale of the Steele Creek apartment complex at 3222 E. 1st Ave. in Cherry Creek.
The brokers say none of the ARA majority owners, and no one with Newmark, highlighted the fact that page 60 of the purchase agreement contained a non-compete clause vastly different from the restrictions laid out in the services agreement.
The brokers say that, when they were asked to sign the agreement, they were provided only with the signature page. They claim that, when Hunt asked why that was the case, Box responded: “I’m going to be cavalier enough to tell you to just go ahead and sign the contract” because it’s a “great deal for everyone.”
“The majority-share partners and Newmark concealed from defendants that the restrictive covenants presented in the services agreement were nothing but misdirection because those restrictions are entirely subsumed by the draconian, two-year post-employment purchase agreement restrictions now at issue in this case,” the brokers say in a filing.
In its response to the brokers’ proposed counterclaim, however, Newmark noted that Hunt, Ozment and Cowan had been provided a copy of the purchase agreement containing the non-compete clause by email prior to being asked to sign it. Newmark has previously said the men were responsible for reviewing anything they signed.
Newmark also claims the judge should reject the counterclaim because the statute of limitations has long passed.
The brokers say in their filings that they didn’t realize the specifics of the non-compete clause until five years later in 2019, when they entered into contract negotiations with Newmark and were told they would be sued if they left.
The men jumped ship to CBRE two years later.
“Having been betrayed by their former partners, defendants were left with an untenable choice: work at Newmark for the rest of their careers on terms dictated by Newmark or take employment elsewhere and face the possibility that Newmark might derail their careers by sidelining them from the industry,” the filing states. “Ultimately, after years of obfuscation, defendants chose the latter.”
Newmark, unsurprisingly, sees what happens differently.
“Defendants carefully planned for their exit, spending months negotiating a deal with the competitor that ensured they would receive millions of dollars and a guarantee of job security in the event a court held them to their obligations, as this court did, following a comprehensive injunction hearing last summer,” the firm said in its March 3 filing.
