Defrauding agents. Illegal telemarketing. Encouraging breach of contract. Stealing trade secrets from rival firms. These are just some of the allegations leveled against Compass so far this year.
The brokerage, which went public in April, is involved in nearly a dozen active lawsuits dating as far back as 2014. In the majority of these cases, Compass finds itself playing defense. Plaintiffs include local rivals, former agents, concerned citizens and a housing watchdog group. Several cases, both active and settled, are related to the firm’s recruitment tactics.
In a Compass-initiated suit, the defendant is the Real Estate Board of New York, which Compass accuses of conspiring with rival firms Corcoran and Douglas Elliman to “thwart” its business in New York City. The brokerage also sued California-based single-family home developer Hector Krauss — whose alleged transgressions are unclear — late last year, though a Compass rep says that suit has been dismissed.
The jurisdictions of the cases filed in the past three years are varied, but the charges are similar, with many coming from firms in New York and California, where Compass has been aggressively working to gain market share.
Though most cases were settled (with the exception of Realogy’s explosive suit), lawsuits regarding Compass’ recruitment efforts were brought by Douglas Elliman, Brown Harris Stevens, Modern Spaces, Elegran, Zephyr and Hamptons-based Saunders & Associates between 2015 and 2019. Four active cases filed this year alone level similar charges against the brokerage.
To George Hay, a professor at Cornell Law School and former director of economic policy in the U.S. Department of Justice’s Antitrust Division, the long history of legal skirmishes indicates that Compass has a business model “that injured existing Realtors,” adding that it is “odd” how nearly every case has ultimately resulted in a settlement.
“Nobody actually waits to let the court decide,” Hay said. To put everyone out of their misery, “hopefully one of these lawsuits will go to trial.”
Compass declined to comment.
Corporate finance expert David Trainer said a laundry list of legal battles is a concern for investors due to both the cost of proceedings and the underlying question of whether the business model is viable.
“No one wants a business that’s saddled with a lot of litigation,” he said.
Here’s a look at the core issues in 20 cases Compass has been involved in over the past three years pertaining to its business practices.
The Agency v. Compass
Beverly Hills, CA | 2021
Mauricio Umansky’s firm is suing in federal court, claiming that Compass’ efforts to stop its former executive Rainy Hake Austin (now the Agency’s president) from recruiting Compass agents were illegal. The Agency also argues that Austin did no wrong.
REAL New York v. Lyndsey Casagrande and Kenny Fung
New York, NY | 2021
REAL New York is demanding $900,000 from its former agents, saying they continued to use leads and confidential information from company files after jumping to Compass. They also allegedly persuaded four other agents to make the move to Compass with them. Compass is not named as a defendant.
Christie’s International Real Estate Northern New Jersey v. Compass
Bergen County, NJ | 2021
The complaint, filed by a Christie’s International Real Estate affiliate, accuses Compass of soliciting a team of four agents and unlawfully encouraging them to breach their existing contracts.
Howard Hanna v. Compass
Allegheny County, PA | 2021
Just before Compass went public, the Pennsylvania-based brokerage Howard Hanna alleged that Compass took a “no-holds-barred approach” to poach three agents, encouraging them to breach their contracts and bring trade secrets and listings with them when they left.
Lisa and Todd Sheppard v. Compass
Sonoma County, CA | 2021
The husband-and-wife “Team Shep” filed a complaint seeking class action status, alleging that Compass defrauds its agents out of millions in commission dollars by misrepresenting splits and stock options. They’re seeking $10 million in damages.
Valley Partners Real Estate v. Compass
Lehigh County, PA | 2021
The Better Homes and Gardens Real Estate affiliate sued its former managing partner and commercial division head, Carl Billera, for breach of contract and attempting to recruit other agents to move to Compass. Compass was named as a defendant the same day it went public.
J. Gregory Maffei v. Compass
Los Angeles, CA | 2021
Maffei, a former Compass agent, filed his complaint seeking class action status, accusing Compass of recruiting him with “bait-and-switch” tactics and hollow promises and then pressuring agents to invest their commission dollars into the Agent Equity program. He sought $10 million in damages and reimbursement for unpaid commission and expenses. The parties settled in May.
David Kaznecki v. Compass
Palm Beach County, FL | 2021
The Florida resident filed a case seeking class action status over alleged illegal telemarketing, saying he received a wave of unsolicited calls from Compass agents and robocalls from the company early this year. The parties settled in April.
Housing Rights Initiative v. Compass, Corcoran et al.
New York, NY | 2021
A housing watchdog group filed a suit accusing 88 landlords and residential brokerages, including Compass, of discriminating against prospective tenants trying to use Section 8 housing vouchers. The case is ongoing.
Compass v. REBNY
New York, NY | 2021
Compass filed an antitrust suit against the Real Estate Board of New York in federal court, accusing the trade group of conspiring with major rivals Douglas Elliman and the Corcoran Group to “thwart” Compass’ New York City business starting in 2018 by altering a local policy that governs how agents share listings. (Elliman and Corcoran aren’t defendants in the case.) REBNY fined Compass $250,000 in January for repeatedly violating the policy and is asking the court to throw out the complaint.
S3G Technology v. Compass
San Antonio, TX | 2020
A California-based technology company sued in federal court in September, claiming Compass’ app violated two of its patents for a computerized system that runs on Android and iOS devices. S3G filed similar claims against other brokerages, and the case was dismissed two months later.
Compass Concierge v. Hector Krauss
Martinez, CA | 2020
Compass’ bridge lending program filed a suit against single-family developer Hector Krauss late last year. The nature of the dispute is not clear, because the complaint was not publicly filed. A representative for Compass said the suit has been dismissed.
Stuart Venner v. Compass
New York, NY | 2020
The Boerum Hill landlord sued Compass, saying it asked for a break on rent and then walked away from its lease at 384 Atlantic Avenue. The brokerage allegedly told Venner it was “reducing its real world footprint” and consolidating its Brooklyn space. The case was ultimately dismissed.
Compass v. David Fink
East Hampton, NY | 2020
The brokerage sued the landlord of its East Hampton office for “improperly” sending it a notice of default. Fink, for his part, claimed Compass’ letter of credit didn’t comply with the terms of its lease. The parties settled in May.
Elegran v. Compass and Zino Angelides
New York, NY | 2019
The lead-gen brokerage claimed its former agent Angelides and three other agents took more than $2 million worth of data on over 6,300 clients to Compass. The case was settled in early 2020.
Zillow Group v. Compass
Seattle, WA | 2019
The Seattle-based listings giant filed two lawsuits against Compass in April 2019, alleging the brokerage poached three technology executives who took confidential company data with them when they left. The suits were settled July 10, the same day the Realogy suit was filed.
Realogy v. Compass
New York, NY | 2019
The parent company of Corcoran, Sotheby’s International Realty and Coldwell Banker accused Compass of attempting price fixing, “illicit” business practices and “predatory” poaching. In January, Compass countersued for defamation and spreading false information that hindered its growth. The case is ongoing.
Advice Personnel v. Compass
New York, NY | 2019
Salvatore Saccoccio’s recruitment firm sued to recover an unpaid $45,000 fee for allegedly referring Andrea Vardaro to be Compass’ vice president of financial planning and analysis, a role she held for just over a year. The case was settled last year.
Raymond Mahlberg v. Compass
Miami-Dade County, FL | 2019
The Miami resident filed a class action suit alleging that Compass violated the Americans with Disabilities Act by not making its digital presence accessible to the visually impaired. The case was settled in early 2020.
Avi Dorfman v. Compass
New York, NY | 2014
Two years into Compass’ life, tech entrepreneur Avi Dorfman sued the brokerage, claiming Compass was built off a concept he and CEO Robert Reffkin developed together and that Reffkin reneged on an agreement that he would get a job and a stake in the firm. Reffkin claims Dorfman refused the offer for a job at a hedge fund. The suit is ongoing.
The post A closer look at Compass’ trail of litigation over its business tactics appeared first on The Real Deal Los Angeles.
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