Brokers allege companies conspired to eliminate fees; cases focus on supposed striking of secret side deals.

Three high-profile corporations - movie makers Pathe Communications Corp. and MGM Inc. and fast-food chain McDonald's Corp. - have been named as defendants in lawsuits related to claims by Los Angeles-area commercial real estate brokers that they were swindled out of commissions.

Although the suits are unrelated, two of them involve accusations of side deals struck to eliminate brokers' commissions. The plaintiffs in the third suit are seeking payment of a promissory note that they claim was supposed to go in part toward paying a commission.

Two of the suits name Pathe and involve the sale of a building at 6420 Wilshire Blvd. that was to be the headquarters of Pathe Communications Corp. under Giancarlo Parretti. In the third suit, which names McDonald's, a Los Angeles Superior Court jury in March awarded a broker more than $2.4 million for his claim that the fast-food chain owed him a commission on the sale of land for a restaurant near Castaic. That community is located in the northernmost reaches of Los Angeles County, just north of Santa Clarita and just east of Interstate Route 5.

The first suit against Pathe was filed by Century City-based Century West Financial Corp., which claims Century West is owed a commission for its role representing a Pathe affiliate, Renta Properties Inc., in Renta's 1990 purchase of the 6420 Wilshire building for $23.5 million. The suit names as defendants Pathe, Renta, former Pathe attorney and vice president Ted Cohen, The Faulkner Co. commercial real estate brokerage, and real estate investors Richard Ziman and Victor Coleman. The suit claims all of the defendants were in some way responsible for seeing to it that Century West received its commission, and it seeks more that $470,000 in commissions, interest and attorneys' fees.

The second suit against Pathe, which names MGM as a co-defendant, was filed last month by Ziman and Coleman, who owned the 6420 building before selling it to Renta. Ziman and Coleman claim they are owed at $1 million promissory note that Renta agreed to pay as part of the purchase price.

According to attorney David Gernsbacher of Beverly Hills-based Gernsbacher & McGarrigle, Ziman and Coleman had been negotiating a settlement with MGM and Pathe for payment of the promissory note.

But they filed suit because no offer has been made. Their suit contends that, although Ziman and Coleman's deal was with Renta, Pathe is responsible for delivering the promissory note because Pathe was closely involved in the sale negotiations and Pathe controlled Renta, which is now defunct. They also name MGM as "a subsidiary and/or affiliate of Pathe."

According to Gernsbacher, the $1 million promissory note was supposed to go in part to pay Century West's commission. According to the lawsuits, Renta was supposed to pay Ziman and Coleman. Ziman and Coleman, who had hired The Faulkner Co. as their broker to sell the building, were then supposed to pay Faulkner.

And Faulkner was supposed to split the commission with Century West. Gernsbacher said the only commission that was ever paid was a partial commission that Faulkner received on completion of the sale. He said each brokerage was supposed to receive half of its commission when the sale closed and the other half when Renta paid the $1 million promissory note.

Century West's suit claims it didn't receive its commission because of an agreement that Renta made with Ziman and Coleman. It claims Renta "induced and encouraged" Ziman and Coleman not to pay Century West by signing a deal in which Renta agreed that it would take responsibility for any commission claims by Century West it Ziman and Coleman would reduce the sale price by the amount of Century West's commission.

According to Gernsbacher partner Patrick McGarrigle, who provide the Business Journal with a copy of the written agreement regarding the commission, it was a common type of agreement in which one party agrees to be responsible for a broker's commission in return for the other party reducing a price. Despite that agreement, McGarrigle said, Ziman and Coleman would pay Century West the share of the commission that Century West is owed from the promissory note if Pathe would pay Ziman and Coleman the full amount due to them.

According to the Century West suit, Faulkner and Century West reached an oral agreement providing that "the broker's commission of 3 percent of the purchase price of the property would be allocated as follows: Century West, as the buyer's broker, would earn 2 percent and Faulkner, as the seller's brokers, would earn 1 percent. It was further agreed that Faulkner would be the collecting broker and would pay Century West its 2-percent commission."

The suit says a later memorandum from Pathe confirmed that commissions would be 1 percent to the Faulkner Co. and 2 percent to Century West.

Whether the agreement was oral or in writing may not be relevant, however. According to the attorney for Century West, Henry T. Heuer of Beverly Hills-based Prince & Heuer, the California Supreme Court ruled in a 1975 case that "going around the broker and thus cutting him out of his earned commission" is illegal, even when no written contract exists. Heuer said the same principle applied in the McDonald's case, where, coincidentally, he represented another broker claiming he was cut out of a commission.

Gernsbacher said Pathe is responsible for payment of the promissory note because the purchase of the 6420 Wilshire building was funded by Credit Lyonnais, the French bank that was the lender for former Pathe Communications chief Giancarlo Parretti.

But a attorney for both Pathe and MGM, Susan DeWitt of the downtown Los Angeles firm of White & Case, said the Ziman and Coleman suit is "baseless." She said the suit "is merely an attempt to pick money out of the deepest pockets the two could find." DeWitt said Ziman and Coleman "never had any contractual relationship with MGM or Pathe."

Neither Ziman and Coleman's suit nor the Century West suit, both filed in Los Angeles County Superior Court, has been heard yet. Gernsbacher said the Siman-Coleman suit is set to go to trial in October.

Meanwhile, the building at the center of the legal storm has been resold after going into foreclosure after Renta defaulted on its mortgage. According to title documents, the amount of unpaid debt totaled $17.2 million when Chicago-based Republic Savings Bank repossessed the building in 1991. Republic sold the building to Petersen Publishing Co. in February 1992 for $16 million.

In the suit involving McDonald's, a Los Angeles Superior Court jury awarded broker Clifford E. Parver, an independent commercial broker, $463,480 for commissions and interest, plus $2 million in punitive damages.

Parver's attorney, Heuer, said the dispute involved the purchase by McDonald's of a $3.1 million parcel next to Interstate Route 5 at Lake Hughes Road in Castaic.

According to Heuer, Parver had worked with McDonald's as a site locator for approximately eight and a half years and, when Parver was asked to find a site near Castaic, he introduced the restaurant chain to the owner of the land, Newhall Land & Farming Co.

He said that when final negotiations neared, McDonald's told Parver to cease contact with Newhall because the McDonald's corporate real estate department would take over from there. McDonald's assured Parver his commission would be paid, Heuer said.

Heuer said McDonald's then assured Newhall that McDonald's would pay the commission if Newhall lowered the price of the property, even though Newhall had already offered Parver a commission and was prepared to pay it. "Newhall agreed to lower its price in return for the McDonald's commitment to pay the broker's commission," Heuer said.

But during escrow, McDonald's and Newhall "executed a secret side agreement regarding the broker's commission that excluded the broker from escrow," Huer said. After escrow closed, "McDonald's refused to pay the broker the commission that he had earned on the transaction," he said.

He said the jury's decision in favor of Parver is a further endorsement of the principle outlined in the 1975 California Supreme Court ruling that "the law will not permit the buyer and the seller to escape liability to the broker for his justly earned commission."

Added Heuer, "Merely because the relationship between the seller and the broker had not yet ripened into a formal, written contract is of no moment.... The broker only had an oral agreement with McDonald's that his fee would be paid, and offer of a commission by the seller, Newhall. He did not have a binding written commission agreement with the seller or the buyer."

Marlee Lauffer, a spokeswoman for Newhall Land & Farming Co., said the company had no comment on the matter because it was being handled by McDonald's. An attorney representing McDonald's, John Ward of downtown Los Angeles-based Walker, Wright, Tyler & Ward, said his firm has filed a motion for a new trial with the judge who heard the case. Ward said that, if the motion is denied, McDonald's probably will appeal the case.