Some brokerages want the Elliman-Raveis poaching case to set a precedent. Here’s why it won’t

Experts say “run of the mill” agent grabbing isn’t going to stop

New York /
Jun.June 26, 2017 07:00 AM
 

UPDATED: Monday, June 26 at 8:50 a.m. In 2015, Lisa Theiss, then a sales manager at Douglas Elliman’s Armonk office in Westchester, began what a lawsuit describes as “sowing the seeds of discontent.”

The plan she was hatching, according to court documents, was to “decimate” the Elliman office. She was accused of secretly working from deep within Elliman to lure away top producing agents to William Raveis Real Estate.

A court last week upheld Elliman’s claim that William Raveis colluded with Theiss, and ordered the brokerage to pay $5 million in damages.

Residential brokerage chiefs could be forgiven for seeing this as stark warning for the industry. Rampant agent poaching in recent years has resulted in angry firms firing off dozens of “breach of contract” lawsuits against rivals. “Not even a week or a month goes by when a lot of your top brokers are not being enticed or solicited to the point where I consider it to be harassment. It’s very distasteful. There’s no decorum,” said Town Residential CEO Andrew Heiberger. “This case and this decision should be applauded — it’s a loud warning shot to other firms that solely rely on poaching to recruit or staff and to fill their desks.”

But lawyers told The Real Deal any firm hoping the ruling against Raveis TRData LogoTINY in Armonk signals a paradigm shift may be sorely disappointed. This particular case, lawyers said, was unusual because it accused a broker of scheming to lure agents away and breaching her fiduciary duty as an employee.

“I don’t think this case is bellweather case,” said Terrence Oved, an attorney with Oved & Oved LLP. “I don’t think that it will be a wake up call. Very significant facts dominate this decision.”

Brokerages across the industry have had lawyers on speed dial as they attempt to keep their grip on cash-cow agents and listings. Though far from being the only target, Compass often finds itself in the litigation firing line. In October, Elliman sued Compass and its president Leonard Steinberg, alleging they plotted to steal agents and contracts. In 2015, Brown Harris Stevens sued Ed Reale for breaching a noncompete and heading to Compass. That same year, Hamptons firm Saunders & Associates sued Meg Salem and Compass for stealing listings. She was terminated from Compass days later.

Many cases — such as the Citi Habitats’ 2014 suit against Compass for stealing trade secrets and the Corcoran Group’s accusations in 2015 that Compass “brazenly” stole agents — settle out of court. But Elliman fought its case against William Raveis in Armonk until the bitter end, including taking the matter to trial.

William Raveis’ Bill Raveis declined comment, but earlier this week he told TRD that disagreed “with all aspects of the jury’s decision,” and said his firm would “vigorously be pursuing [an] appeal.”

Lawyers said that agents’ movement between firms generally hinges on the fact that they are independent contractors. However, they all agreed that while competitive recruiting is a core part of the industry, it doesn’t mean there aren’t rules and regulations.

In many cases, firms spar over accusations that agents are breaching noncompete agreements by jumping ship. That’s not what happened in Armonk.

The suit alleged that she poached 10 agents, including four “top producers” from her former firm and lured them to Raveis’ newly opened office across the street. She is accused of holding “clandestine meetings” with fellow agents and planning a “synchronized” resignation of the brokers.

“This person has got caught going over the top of what you’re allowed to do,” said Bran Noonan, an employment lawyer at Akerman LLP. (Disclosure: Noonan is the husband of TRD editor Jill Noonan.)

While the William Raveis case had a specific set of facts, according to Noonan, the ruling does highlight that, even though companies can poach and employees can leave, there are still guidelines about what’s legal. “They crossed lines,” he said.

“The facts are so outrageous…. even for the cutthroat brokerage business for New York City,” said Oved, adding that he does not think this case will be cited in future poaching suits. “[Brokerages] will take notice. It affects what they do…. [but] this case doesn’t create any more precedent.”

Steven Czik, of Czik Law, echoed his sentiments, saying that “basic, standard, run-of-the mill poaching will continue….. they might be a little more careful maybe.”

That extra caution, said Stuart Berg of Kurzman Eisenberg Corbin & Lever, may have to come in the form of noncompete, non-solicitation and non-disparagement agreements. The industry as a whole has been lax about making sure proper agreements are in place, according to Berg, and with the city’s brokerage industry now more competitive than ever, firms are vulnerable to excessive litigation.

While he said the case lays the groundwork for what agents can and cannot do when leaving a job, “it’s not going to chill the market on agents moving…. brokers will still leave when they are offered a better deal.”

Correction: A prior version of this article inaccurately stated that Andrew Heiberger had sued over agent poaching.


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