UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


STEPHEN A. GOLDBERG

v.

REMSEN PRT LTD


98-7022a

D.C. Cir. 1999


*	*	*


Williams, Circuit Judge: Pursuant to a 1992 Letter Agree- ment, the
Stephen A. Goldberg Company ("the Goldberg  Company" or the "Company")
retained Remsen, a New York- based financial consulting services
corporation, to serve as a  financial advisor to the Company. The goal
was to arrange a  $122 million "securitized" refinancing of various
Maryland  and Virginia apartment complexes managed by the Goldberg 
Company and owned by limited partnerships controlled by  Stephen
Goldberg. According to the record securitized fi- nancing is a method
of raising money by creating marketable  securities from an
income-producing asset. See also Steven  L. Schwarcz, The Alchemy of
Asset Securitization, 1 Stan.  J.L. Bus. & Fin. 133, 133 n.1 (1994).
Here the parties used a  mortgage loan as the asset, transferred the
loan to a trust  fund, and then sold ownership interests in the trust
fund to  investors. In consideration for Remsen's services, the 
Goldberg Company agreed to pay Remsen a one-percent  contingent fee on
completion of the financing, as well as  various post-closing


The financing was successfully completed in January of  1993. The
Goldberg Company made the agreed payments  until sometime in 1994. It
then stopped making payments on  the balance of the post-closing fees,
although it continued to  make them on the closing fees and on the
first-year consult- ing fees until January 1997.


In November 1996 the Goldberg Company filed this com- plaint against
Remsen in the Superior Court of the District of  Columbia, seeking a
declaratory judgment that the parties'  agreement was void and
unenforceable because Remsen was  not licensed as a real estate
broker, as required by the  District of Columbia Real Estate Licensure
Act of 1982, D.C.  Code ss 45-1921, et seq. (the "Brokerage Act"). The
 Goldberg Company also sought damages and rescission of the  parties'
agreement for alleged fraud and misrepresentation.  Remsen removed the
case to the United States district court 


on the basis of diversity. It also filed a counterclaim against  the
Goldberg Company and a third party complaint against  Stephen
Goldberg, alleging breach of contract by both of  them. The district
court granted summary judgment for the  Goldberg Company, holding that
the agreement was unen- forceable and void because the Brokerage Act
was applicable  to the transaction. Since the district court held that
the  Letter Agreement was void and unenforceable, it did not  reach
the merits of Remsen's counterclaim. The district  court also,
entirely on the basis of the Brokerage Act viola- tion, ordered Remsen
to return all the money that the  Company had paid under the Letter
Agreement ($1,078,045).


We affirm the district court's holding that the agreement  was not
enforceable. On the issue of recovery, we find  ourselves in enough
doubt about the course of District of  Columbia law that we certify
the question to its Court of  Appeals.


* * *


The Brokerage Act imposes a licensing requirement on  those engaging in
real estate brokerage activities. D.C. Code  s 45-1926(a). Individuals
conducting real estate brokerage  services without licenses may not
"bring or maintain any  action in the courts of the District for the
collection of  compensation" for any such services. Id. s 45-1926(c).
At  the time of this transaction Remsen was not licensed as a real 
estate broker under the Act, and the Goldberg Company  contends that
this renders the Letter Agreement void and  unenforceable.


Remsen's first argument on appeal is that as applied in this  case the
Brokerage Act violates the commerce clause. But  since Remsen never
argued that question before the district  court, we decline to hear it
for the first time on appeal. See  Boehner v. Anderson, 30 F.3d 156,
162 (D.C. Cir. 1994).  Remsen also contends that New York rather than
D.C. law  governs the enforcement of the agreement, and that under 
New York law Remsen was not required to be licensed as a  real estate
broker to perform the services required by the 


Agreement. Finally, Remsen insists that even if we find D.C.  law
applies to this transaction, its services should not be  construed as
"brokerage" services under that law.


In resolving the conflict of laws issue the district court  found that
Remsen's activities were illegal under both New  York and D.C. law, so
that there was a "false conflict." Thus  it applied D.C. law. Remsen
contests the "false conflict"  analysis. New York real estate
licensure law, Remsen con- tends, does not cover the kind of services
rendered by  Remsen. We do not decide the issue, since we hold that
even  if the conflict is not false, D.C. law would apply.


In a diversity case a federal court follows the choice-of-law  rules of
the jurisdiction in which it sits. Gray v. Grain  Dealers Mutual Ins.
Co., 871 F.2d 1128, 1129 (D.C. Cir. 1989).  The District states that
(in the absence of an effective choice  of law by the parties1) it
uses "a constructive blending" of the  "governmental interest
analysis" and the "most significant  relationship test," the latter as
expressed in the Restatement  (Second) of Conflict of Laws s 188
(1988). Hercules & Co.,  Ltd. v. Shama Restaurant Corp., 566 A.2d 31,
41 n.18 (D.C.  1989); see also Ideal Electronic Security Co. v. Int'l
Fidelity  Ins. Co., 129 F.3d 143, 148 (D.C. Cir. 1997) (stating that 
District applies s 188 for contracts cases). But the Restate- ment
itself notes that for certain types of contracts, including  those for
services (as here), "it is considered possible to state  with respect
to each that ... a particular contact plays an  especially important
role." Restatement, Ch. 8, Topic 1, Title  B, "Introductory Note."
There does not appear to be an  established hierarchy in the
application of these concepts.  See Kermit Roosevelt III, "The Myth of
Choice of Law:  Rethinking Conflicts," 98 Mich. L. Rev. ___, ___
(1999) (not- ing "dizzying number of factors" made relevant by
Restate- ment with little hint as to their relative weight). In any 
event, for the reasons developed below we find the results  somewhat
inconclusive by all methods, and ultimately follow a 




__________

n 1 Remsen invokes a later loan agreement with a choice of law  clause,
but of course this does not govern the earlier Letter  Agreement in
dispute here.


method the District has used to break a tie between its own  law and
that of another jurisdiction--namely the efficiency of  using its


For the validity of a service contract, the Restatement  assigns
presumptive weight to the place where the services  are to be
rendered, see Restatement s 196, reasoning that  this is most likely
both to accord with the assumptions of the  parties and to allow
control by the state with the greatest  interest. But this factor does
not point with certainty. Sev- eral Remsen employees spent weeks in
the District gathering  data and dealing with other professionals
working on the  transaction, but Remsen also reviewed and analyzed the


The five factors named in s 188 as determinants of a  "significant
relationship" are: (1) the place of contracting; (2)  the place of
negotiation; (3) the place of performance; (4) the  location of the
contract's subject matter; and (5) the domicile,  residence,
nationality, place of incorporation and place of  business of the
parties. Id. s 188. Place of performance  (#3) we have already


The other factors--taken without any prioritization--do  little to
help. One, the place of negotiation (#2), points to the  District. The
subject matter of the contract (#4), real prop- erty in Virginia and
Maryland, points to neither New York  nor the District, and neither
party is urging the application of  the laws of Virginia or Maryland.
The place of contracting  (#1) is uncertain. It is undisputed that
Goldberg signed the  agreement in the District, while Remsen signed it
in New  York. But the parties disagree as to where the last signa-
ture--the last act necessary to make the agreement bind-
ing--occurred. In any event, under the Restatement the  place of
contracting standing alone is typically viewed as  rather
insignificant, especially when it was fortuitous. Id.  s 188, cmt. e;
Finance America Corp. v. Moyler, 494 A.2d  926, 929 (D.C. 1985). And
the parties' places of business are  divided: while the Goldberg
Company is a District corpora- tion and Mr. Goldberg maintains his


Remsen is a Delaware corporation with offices in New York  but
operating around the country.


In s 188, the Restatement itself states that where place of 
negotiation and performance coincide, that place should gen- erally
control, s 188(3), noting in the comment that the state  with those
contacts "will usually be the state that has the  greatest interest in
the determination of issues arising under  the contract." Id. cmt. f.
As we've said, the place of  negotiation points to the District, and
the place of perfor- mance is equivocal. The District, however,
inquires indepen- dently into which jurisdiction has the greatest
interest in the  subject. See, e.g., District of Columbia Insurance
Guaranty  Association v. Blair, 565 A.2d 564, 568 (D.C. 1989);
Hercules  & Co., 566 A.2d at 41 n.18; Kaiser-Georgetown Community 
Health Plan, Inc. v. Stutsman, 491 A.2d 502, 509 (D.C. Cir.  1985);
Fowler v. A & A Co., 262 A.2d 344, 348 (D.C. 1970).  Here, the purpose
of the brokerage statutes in both New  York and the District is to
protect those who enter into  agreement with unlicensed real estate
brokers. See Gal- breath-Ruffin Corp. v. 40th & 3rd Corp., 19 N.Y.2d
354, 362- 63 (1967); D.C. Code s 45-1921. We have assumed that 
District law (if applicable) covers this transaction and New  York law
(if applicable) does not; if true, this presumably  reflects a
judgment by the District that interests in such  protection outweigh
the various costs (administration, denial  of recovery for services as
to which protection was completely  unnecessary, etc.), and a New York
judgment that the bal- ance falls the other way. It is not apparent
how New York's  hypothesized preference for non-regulation is any less
frus- trated by subjecting this transaction (with its activities
divid- ed roughly equally between the District and New York) to 
District law than the District's interest in protection is  thwarted




__________

n 2 The above analysis makes the assumption that legislation is 
intended to advance the public interest. On the more somber  public
choice view of the world, the phrasing is different: the two 
jurisdictions' differing outcomes would be ascribed to differences in 
the political power brought to bear by the prospective winners and 
losers under the alternative rules. The ultimate conclusion would 


off, we think that the District would most probably apply its  own
rule. See Kaiser-Georgetown, 491 A.2d at 509 n.10  (observing that
when the interests of both jurisdictions are  equally weighty,
efficiency concerns tilt the balance in favor  of applying the law of
the forum state, presumably because  the forum courts have more
experience with their own law).


Under the assumption that District law applies, Remsen  first argues
that its services here are not the services of a  real estate broker
under the District's Brokerage Act, stress- ing especially the
securitization aspect of the transaction.  The statute includes among
real estate brokers anyone who  "negotiates a loan secured by a
mortgage, deed of trust, or  other encumbrance on real property." D.C.
Code  s 45-1926(b)(1)(B). Because the refinancing funds ultimately 
came from the buyers of the securities (interests in the trust 
holding the mortgage), Remsen says this is inapplicable. But  that
fact does little to undermine the proposition that a  mortgage was
indisputably a component of the transaction.  Remsen has made no claim
that the services can be disaggre- gated in some way that would allow
it to recover for services  that are truly distinct from brokering the
mortgage, so we  need not address that possibility.


Remsen also argues that it was only an "advisor." The  trouble is that
Remsen's activities look very much like those  of a broker. It
introduced the Goldberg Company to the  investment bank that
ultimately provided the funds for the  refinancing of the properties,
participated actively in the  negotiations between the investment bank
and the Goldberg  Company over the terms of the transaction, and
received  payment for its services based on the amount of the loan.
All  of these efforts culminated in a loan to the Goldberg Compa- ny
that was secured by a mortgage on its apartment proper- ties. In all
this the case is quite similar to RDP Development  Corp. v. Schwartz,
657 A.2d 301, 305-07 (D.C. 1995), where,  despite a party's
identification of its role as that of "consul- tant," the court found
that its participation in negotiations for 




__________

n in essence be the same--that either choice will cause roughly 
equivalent frustration of one or the other of the two polities.


lease of property and receipt of a commission based on the  lease's
value were the services of a real estate broker under  the statute.


Remsen's final statutory theory is that one who negotiates  a mortgage
can be included in the Act's definition of a real  estate broker only
if the transaction included a transfer of  real estate (apart from
such as might be thought to inhere in  creation of the mortgage
itself). Although the D.C. statute is  indeed confusing, its structure
precludes Remsen's argument.  The licensure provision itself contains
a definition of who is a  real estate broker:


For the purposes of this chapter, a person will be  performing as a
real estate broker if:


(A) The person accepts a fee, commission, or other  valuable
consideration for exchanging, buying, selling,  renting, or leasing
real estate or businesses;


(B) The person negotiates a loan secured by a mort- gage, deed of
trust, or other encumbrance on real  property or a business; or


C The person is engaged in any activity specified  by s 45-1922(12).


D.C. Code s 45-1926(b)(1). Remsen rests its case on one of  the
provisions cross-referenced in subsection (C) above:


(12) The term "real estate broker" means any person,  firm,
association, partnership ... which:


(A) For a fee, commission, or other valuable consid- eration, lists for
sale, or sells, exchanges, purchases,  rents, or leases real property.
A real estate broker  may collect or offer to collect rent or income
for the  use of real estate, or negotiate a loan secured by a 
mortgage, deed of trust, or other encumbrance upon  the transfer of
real estate.


Id. s 45-1922(12) (emphasis added). The emphasized lan- guage of this
subsection presumably could not include a  mortgage unaccompanied by a
real estate transfer (apart  from creation of the mortgage).


But s 45-1922(12) is just one of three clauses defining the  coverage
of s 45-1926(b). And s 45-1926(b)(1)(B), which  covers those who
negotiate a loan secured by a mortgage,  conspicuously lacks the
qualifying language. Thus the stat- ute covers Remsen's activities.


There remains the issue of the remedy. The statute itself  bars "any
action in the courts of the District for the collection  of
compensation for any services performed in that [real  estate broker]
capacity." D.C. Code s 45-1926(c). So Rem- sen cannot recover unpaid
portions of its fee. But the district  court also ordered Remsen to
pay back to the Goldberg  Company the portion of the fee already


But we are most uncertain whether the District would  allow recovery of
fees already paid to Remsen, in the absence  of evidence that Goldberg
in any way failed to receive the  services contracted for, or some
other lack of equity. It is  true that District courts have often
allowed restitution for  money paid to unlicensed persons when such
persons are  required by law to have occupational or business
licenses.  See Truitt v. Miller, 407 A.2d 1073, 1079 (D.C. 1979);
Miller  v. Peoples Contractors, Ltd., 257 A.2d 476, 476-77 (D.C.
1969);  Rubin v. Douglas, 59 A.2d 690, 691 (D.C. 1948). But in all 
such circumstances, the courts have found in statutory lan- guage or
legislative history reasons that indicate that fulfill- ment of the
purpose of the law called for allowing recoup- ment. See Rubin v.
Douglas, 59 A.2d at 691. In Rubin, the  statute that explicitly
prohibited the unlicensed practice of  healing arts also provided
criminal sanctions for violators;  indeed the defendant had pleaded
guilty to criminal charges  based on the prohibition. 59 A.2d at 691.
At least in part  moved by the statute's extremely zealous hostility
to such  unauthorized practice, the court found that allowing recoup-
ment would be appropriate. Id. And both Miller and Truitt  involved a
regulation that "prohibited" any advance payments  to an unlicensed
contractor under a home improvement con- tract. See Truitt, 407 A.2d
at 1078; Miller, 257 A.2d at 477.  The court held in both cases that
allowing the unlicensed  contractor to retain advance payments would


contravention of the regulation. See Truitt, 407 A.2d at 1079; 
Miller, 237 A.2d at 477.


Here the statutory language explicitly bars unlicensed bro- kers from
bringing actions for recovery, but is silent as to  whether
individuals in the plaintiffs' position are entitled to  recover money
already paid. As a general principle, more is  required to impel a
court to action than to convince it to leave  matters where they are.
As Justice Cardozo wrote while on  the New York Court of Appeals:


The law may at times refuse to aid a wrongdoer in  getting that which
good conscience permits him to re- ceive; it will not for that reason
aid another in taking  away from him that which good conscience
entitles him  to retain.


Schank v. Schuchman, 212 N.Y. 352, 359, 106 N.E. 127, 129  (1914). This
seems appropriate, as use of the courts gener- ates costs for
society.


It is thus not surprising to find that other jurisdictions  generally
reject any automatic recovery rule. See "Recovery  Back of Money Paid
to Unlicensed Person Required by Law  to Have Occupational License or
Permit to Make Contract,"  74 A.L.R.3d 637 s 2 (1977 & 1998 Supp.). A
recent Maryland  decision, quoting Cardozo, reasons that the case for
recovery  of amounts paid is a function "of the strength of the public
 policy involved together with the degree of violation of that  policy
under the facts of the case." Citaramanis v. Hallo- well, 613 A.2d
964, 971-72 (Md. 1992).


The purpose of the statute of course is to protect the public  from
"incompetence, fraud, and deception in real estate trans- actions."
RDP Development Corp., 657 A.2d at 304. The  statute's explicit remedy
has a strong tendency to achieve this  goal--in the prophylactic sense
of creating a sharp incentive  to register. It seems doubtful if many
will willfully launch  themselves into real estate brokering without a
license when  they face complete inability to sue to enforce their
contracts.  The only obvious exception would be fly-by-night outfits
from  whom affirmative recovery would in any event be unlikely. 


Here, although there are undeveloped claims of fraud and 
misrepresentation (which may independently justify a recov- ery by
Goldberg as a matter of contract law), the summary  judgment record
contains no evidence supporting recovery  other than the Brokerage Act
violation itself. Nor, of course,  is there any indication that
Goldberg is an unsophisticated  investor of the sort the statute was
evidently intended to  protect. Accordingly, we do not see how
Goldberg can be  entitled to recoup past payments by virtue of the
Brokerage  Act except under a view that recovery is completely
automat- ic. Yet, as District law has allowed automatic recovery under
 comparable (albeit readily distingushed) statutes, we are un- certain
what course the District will take. We note that an  unpublished
Superior Court decision, Marmac Investment  Co. v. Wolpe, No. 96-2858
(D.C. Superior Court, Nov. 24,  1997), not citable to us under our
rule, D.C. Cir. Rule 28(c);  see also D.C. Court of Appeals Rule 28(h)
(which our rule  makes pertinent), has rejected automatic recoupment
and is  now on appeal. See Marmac, appeal No. 97cv2016 pending. 
Accordingly, we certify to the District of Columbia Court of  Appeals


Where a party has performed brokerage services cov- ered by the
District of Columbia Brokerage Act's prohi- bition of use of the
District's courts for recovery of  compensation, D.C. Code s
45-1926(c), under what cir- cumstances will the District of Columbia
courts order the  party performing the services to disgorge


This court's opinion, together with copies of the briefs  submitted on
appeal, are transmitted herewith to the District  of Columbia Court of
Appeals.


* * *


We affirm the district court's decision that Remsen's ser- vices are
covered by the District Brokerage Statute and that  Remsen is barred
from enforcing the Letter Agreement. On  receipt of a response to the
certified question, this court will 


address the issue of the return to the Goldberg Company of  fees
already paid.


So ordered.