The Real Deal New York

Urban Compass sued by Citi Habitats, hit with restraining order

Lawsuit claims upstart firm stole trade secrets by accessing rival's database

August 13, 2014 06:22PM
By E.B. Solomont

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From left: Citi Habitats' Gary Malin and Urban Compass' Robert Reffkin and Ori Allon

From left: Citi Habitats’ Gary Malin and Urban Compass’ Robert Reffkin and Ori Allon

This story was initially published yesterday at 8:15 p.m. It has been updated with the court’s ruling on the order below.

Following a lawsuit filed by real estate brokerage Citi Habitats, which accused rival Urban Compass of hacking into its proprietary listings database, a judge has granted a restraining order against the tech startup, preventing it from accessing the database. But the court did not grant Citi Habitats’ request that the court halt Urban Compass’ own software development — which Citi Habitats argued may improperly utilize data gleaned from its system.

The ruling, by Judge Jeffrey Oing, came on the same day that Citi Habitats sued Urban Compass — the second time Urban Compass was hit with a lawsuit in two months accusing the startup of stealing trade secrets.

In a lawsuit filed Tuesday, Citi Habitats claims its proprietary listing database was accessed from computers at Urban Compass’ offices. The suit, filed in New York State Supreme Court, seeks unspecified damages and a restraining order, and it demands and a temporary restraining order preventing Urban Compass from using data gleaned from Citi Habitats’ database. The suit also demands the court halt Urban Compass’ development of its own listing system and force the tech startup to conduct a forensic investigation of computers belonging to 31 Urban Compass employees, including some former top-producing agents at Citi Habitats, and members of Urban Compass’ software development team.

In addition to granting the restraining order, the judge on Tuesday approved an expedited discovery process — a step that will allow Citi Habitats to ascertain what information, if any, Urban Compass had gleaned from its database. But he did not say Urban Compass must stop its software development. “I don’t believe in stunting creativity,” Oing said, according to a transcript of the hearing obtained by The Real Deal. “What I believe [is] if they want to go ahead and continue to develop it, they will develop it at their own risk.”

Citi Habitats’ proprietary listing system, known as the Listing Exchange Apartment Rentals (LEAR) system, is comprised of more than 12,000 listings and contains proprietary data regarding landlords, sellers and rental history, according to the suit.

In addition to using the LEAR system to target potential clients, the suit alleges that Urban Compass has used the system to develop its own listing database and further, to poach Citi Habitats agents.

“Given the many sales professionals that Urban Compass has recently poached from Citi Habitats, it may well be that Urban Compass reviewed the listing portfolio of each agent on the LEAR system before selecting whom to approach,” Gary Malin, president of Citi Habitats, said in an affidavit.

In particular, former executive vice president Gordon Golub is now Urban Compass’ Chief Residential Real Estate Officer. Others include Jason Saft, who worked with Golub for nine years, and Steve Halpern and Udi Eliasi. This week, brokers Scott Hustis and Mark Jovanovic joined Urban Compass from the Corcoran Group, which like Citi Habitats is a subsidiary of parent company Realogy. 

According to the suit, Citi Habitats discovered that individuals at the tech startup accessed its database on at least 25 occasions. Based on an analysis of recorded login attempts, Citi Habitats identified several unauthorized logins that came from computers sharing an IP address with computers at Urban Compass’ office. In the suit, Citi Habitats said whoever accessed the database used login credentials assigned to current Citi Habitats agents, who said their passwords must have been compromised.

Urban Compass put out a sponsored Facebook post decrying the lawsuit

Urban Compass put out a sponsored Facebook post decrying the lawsuit

On Wednesday, a spokesperson for Urban Compass said the company was pleased with the outcome of Tuesday’s hearing.

Previously, the company sent TRD a statement — which it also advertised via a sponsored post on Facebook — claiming that it was “disappointed to learn that Citi Habitats/Realogy has decided to initiate legal action in a transparent attempt to intimidate, and stifle competition from Urban Compass. We recognize that they may be upset given that over 30 of their agents and employees have joined Urban Compass, but we do not believe that resorting to baseless litigation is the answer.”

In a letter sent to Citi Habitats’ attorney that was dated August 7, Urban Compass said it “expressly denies all of the allegations made by Citi Habitats.”

Last month, Urban Compass was sued by entrepreneur Avi Dorfman, who alleged the company used his proprietary software and real estate expertise to build its product, only to elbow him out of the business, as TRD previously reported.

According to the suit, Urban Compass was to give Dorfman, founder of now-defunct real estate startups RentJolt and iRent, a stake in the company and buy RentJolt. Negotiations fell apart, the suit alleges, and Urban Compass CEO Robert Reffkin “simply took those trade secrets” and disposed of Dorfman. “Without Dorman’s input in the early stages of the company, Urban Compass never would have been in a position to grow at the speed and size it did.”

At the time, Urban Compass told TRD it did not believe the claim had merit.

As of last month, Urban Compass was valued at $360 million, having raised more than $70 million in funding to date. In July, it raised $40 million — this only a year after raising $25 million from investors such as Salesforce’s Marc Benioff and Condé Nast parent Advance Publications. American Express CEO Kenneth Chenault invested in the Series B round, joining repeat investors Joshua Kushner’s Thrive Capital, .406 Ventures and Founders Fund.

Since launching in May 2013, the firm has hired top-producing brokers from other firms, such as Leonard Steinberg and Hervé Senequier from Douglas Elliman, who brought over about $250 million worth of listings with them. Others who have joined the tech startup include Sofia Song, StreetEasy’s former vice president of research; Jay Glazer, formerly of Warburg Realty; Tinnie Chan Sassano, formerly of Town Residential, and Stribling & Associates’ James Cox Jr. and Frank Giordano.

A spokesperson for Citi Habitats said the brokerage does not comment on litigation matters, and said the filing speaks for itself.

  • shawn

    I love Urban Compass!!! go get them boys!!

  • Matt H.

    urban compass will win

  • Observer

    It’s amazing that Realogy (which owns Citi Habitats and Corcoran) are so scared of Urban Compass that they want to try and intimidate them like this. Clearly it won’t work. Look at the market value growth of companies that sue and companies that get sued (Google, Facebook, JP Morgan), and it will be clear who is going to win over the long run.

    • Char4Dew

      They actually lost a few key people to UC.
      I think that may be it in a nut shell.

  • NYC broker

    The President of Citi Habitiats comment makes no sense. Why would Urban Compass need to look at Citi Habitats database to see which Citi Habitats agents have the most listings for recruiting. This information comes through OLR and the RLS. Every listing is on their database and it’s very easy to download all the listings in XL and sort by agent to see who has the most listings at each firm. The fact that the President of Citi Habitats doesn’t know this is a reflection of why it’s a company that can’t keep it’s own people.

    • john

      Not true. Citi has many CLE’s AKA pocket listings.

      • BedStuyWhiteGuy

        Ha that doesn’t play so well with the media

  • JC

    I worked at citi for 8 years and left (before the mass exits). The fact is that citi is a sinking ship. There is no reason to give half your commission to a company which is solely known as the former largest rental company. Hard to do sales. Why pay 6pct at citi as am owner when you can go to a boutique firm and pay less or Elliman for same rate? It became impossible to do business. Plus the management overall is awful and Gary has no idea what goes on in the day to day operations of offices. The managers have turned into nasty deal hungry people afraid to lose their jobs. Offices are closing. It’s not urban compass, it’s citi habitats. When will you realize this Gary? It’s already too late. Churn and burn those new agents at 35pct splits and run on fumes. Citi was good place to be in early 2000′s to get experience and move on.

    • Char4Dew

      What management. They are manged?

    • GM

      After 8 years and still on a 50% split? You must not have been doing business. The first commission increase is at $140k gross.

      • JC

        Majority on 50%. Mine was higher. Anyway, 140k gross for 55% is laughable. Another large team just left Citi today….open your eyes.

  • Dino BBQ

    “Given the many sales professionals that Urban Compass has recently poached from Citi Habitats, it may well be that Urban Compass reviewed the listing portfolio of each agent on the LEAR system before selecting whom to approach,” Gary Malin, president of Citi Habitats (HAHAHHAHHAHAHAHAHA GARY are you serious with that comment? You must live under a rock. Have you heard of RLS? Streeteasy.com? This can’t be the leadership of Citi Habitats right now. It’s ok if you’re a dinosaur manager at BHS or Elliman, but the President of CH can’t be publishing stupid comments like that to the public. EMBARRASSING!

  • Jeff

    Urban Compass is clearly doing something right

  • BedStuyWhiteGuy

    I would be thoroughly embarrassed if I worked for Citi Habitats.

    • Justsayin

      Well on the flip side the fact that UC has to hack into CH database gives you a sense of what their internal listing system must look like. Probably pretty thin

      • B.M

        UC obviously did not hack into their systems… from what I hear they have the best IT people over here

        • Justsayin

          Exactly which is why they were able to do it. Having good technology and having lots of listings are 2 different things. And apparently there is solid proof it happened. We’ll see what happens. Interesting.

          • B.M

            Actually, it doesn’t look like there is a solid proof

          • L

            Bottom line is some agent logged in because CH NEVER disabled their access (go cry to your IT dept). NO need to steal data, it’s OUT THERE why steal? Duh. I’m embarrassed for CH.

          • accurate info

            They do actually have solid proof. They did disable the former agents. Somehow UC agent(s) were given at least 1 username and password for CH database and it was accessed a ton of times. And B.M. if you are an agent you should know that many of the multitudes of landlord accounts aren’t “OUT THERE.” What would be the reason for needing to sift through CH database over and over? I don’t think you’d see the opposite happening because there is no need. Clearly UC was accessing it to find open listing accounts or active listings they didn’t have. It’s a crappy thing to do. Not sure why anyone would side with them if this is true.

    • GM

      You live in BedStuy. Enough said

      • BedStuyWhiteGuy

        ATTN: GARY MALIN CITI HABITATS YOU ARE HEREBY ORDERED TO APPEAR IN COURT TO ANSWER CHARGES OF RACISM BECAUSE OUR MONKEYS HAVE DETERMINED REMARKS MADE FROM A CITI HABITATS IP ADDRESS VIOLATE US FEDERAL ACT 87:3653:476 THE FAIR HOUSING ACT AND CONSTITUTE STEERING AND BLOCKBUSTING. THERE IS CLEARLY A CULTURAL, SYSTEMIC CONSPIRACY GOING ON AT CITI HABITATS AGAINST BLACK PEOPLE DUE TO DISPARAGING REMARKS ABOUT THE LOVELY HISTORIC NEIGHBORHOOD OF BEDFORD STUYVESANT. KEEP KEEPING IT CLASSY, SEE YOU IN COURT.

  • Tinkerbelle

    Agents are leaving Citihabitats because it is a horrible place to work. Nightmare managers, bad management from the top down. As other posters have said you don’t need to go into LEAR to see who has which listings. The agents listed were people who were taken care of by Gordon so without Gordon they were nothing. So they followed him. Instead of looking within and trying to fix things internally, they grasp at external events. You have 2 people at the top who have no interaction with the agents. They have bad managers who have NO SKILLS. There are so many problems at both Corcoran and CH, neither are the companies that the original owners left. They are shells of the original companies. Urban Compass??? What RE company has more IT people than agents? Not sure what the draw is there? At the end of the day…RE is about relationships both with your customers and with your agents. If no relationship is there, it just dies.

    • Peter Pan

      Only about relationships with customers. Does not matter whether you are with Oxford Property Group or BHS.

    • Char4Dew

      Gary Turned his back on a lot of good people, he suddenly became CEO and his head got really big, not smart.

  • SirHarjiSingh

    hahah whenever someone starts winning, they’re competition starts suing….

    • L

      UC should be happy for all the FREE publicity.

  • Brkr in the know

    Gary’s quote makes sense if UC wants agents who have relationships with open accounts. that wouldn’t be on the RLS. The agents at UC who still have friends at CH may have used the friends’ log ins. maybe some heads are going to roll?

  • missknowitall

    Being that this is a Realogy/NRT company, they must have some merit to this. I highly doubt they would be in some litigation for a “baseless lawsuit”. In any case, anyone who is experienced in NY real estate knows there are many listings not available in the OLR or Streeteasy or whatever sites – this is one of the reasons NYC is unique. It’s not surprising that UC agents are accessing CH’s database. Even I’ve heard they have shit for a database at UC. I will watch to see what happens.

  • Patrick Woo

    Feels like most of these comments are from people that work at Urban Compass

  • TruthSeeker

    Urban Compass agents accessing Citi’s database seems pretty logical to me – as I’ve heard from UC employees that they have no real database at all – funny for a firm that prides itself on being a “tech leader,” no?

  • Char4Dew

    This is actually funny. City Habitat started with a truck load of agents from a firm name J.I. Sopher that was purchased by Douglas Elliman… The did not have one trade secret…LOL

    In fact not one firm has a secret that the next firm does not have, the only thing they have to protect i their list of buyers and sellers. But TRADE SECRETS…That is funny,

  • Town is next for Gary?

    Citi Habitats is sinking, lost a ton of agents and market share. Urban Compass is rising quicky. Gary needs to blame someone right?

  • Sun0flalaland

    Anyone who can read a log file can tell very easily if someone from a UC IP address is accessing the CH database; you can see every connection ever made. It doesn’t sound like a hack as much as unauthorized access using ID’s that were either never shut down properly or stolen from former CH colleagues. That would be very easy to prove in court, although imho it’s likely rogue agents or managers rather than a conspiracy from the top.

  • Jonathan Doe

    I had the misfortune of working at this greedy, ruthless start-up so I can give you the details that everyone is squirming for. They are getting lots of investor funding so they have now started to offer base salaries and high commission splits to top sales agents from Corcoran, Halstead, and Elliman (that’s the secret!). Once they nab (steal) these agents they drop other agents that are making less (example: their original hardworking rental agents). They are basically ruthless users and each month they crank out their excel spread sheets and fire a bunch of their agents to make room for their new cash cows.

  • Jonathan Doe

    I had the misfortune of working at this greedy, ruthless start-up so I can give you the details that everyone is squirming for. They are getting lots of investor funding so they have now started to offer base salaries and high commission splits to top sales agents from Corcoran, Halstead, and Elliman (that’s the secret!). Once they nab (steal) these agents they drop other agents that are making less (example: their original hardworking rental agents). They are basically ruthless users and each month they crank out their excel spread sheets and fire a bunch of their agents to make room for their new cash cows.

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