The Real Estate Board of New York represents the interests of the city’s many residential brokerages. Compass says it’s not one of them.
The brokerage alleges in a new lawsuit that REBNY has conspired with Douglas Elliman and the Corcoran Group to “thwart” its business in New York City. The complaint was filed in federal court for the Southern District of New York Friday afternoon. (Elliman and Corcoran are not defendants in the case, but are cited throughout.)
Compass said it was bringing the suit to “halt REBNY and its co-conspirators’ anticompetitive scheme, release from their market dominance, and reinvigorate the competitive process.”
At the core of the tension is the universal co-brokerage agreement (UCBA), which dictates how agents share listings. Compass alleges the UCBA and the REBNY committees tasked with enforcing it are being weaponized by Corcoran and Elliman to stymie Compass’ growth in a bid to keep the legacy brokerages and the trade organization on top.
Meanwhile, REBNY — and Compass’ competitors — have claimed that the firm has repeatedly violated the agreement. In January, REBNY fined Compass $250,000, citing “repeated violations” of the agreement for improperly pursuing competitors’ exclusives. Compass managers were also required to undergo further training to learn about the agreement and REBNY’s code of ethics.
The complaint focuses on part of the agreement that governs communications between agents and their sellers if they move to a new firm. Specifically, agents are barred from further contact with their clients if they leave the firm where the exclusive listing agreement was signed.
Compass claims this provision is enforced in a “discriminatory manner” against it, and claims this “directly limits” its recruitment efforts and ability to grow its market share in New York City.
The firm singled out Howard Lorber, Elliman’s executive chairman, as being particularly “instrumental” in getting the provision adopted.
While Compass has been in legal spats with competitors on and off since launching in 2013, its suit against REBNY is a direct rebuke of the industry’s main trade group at a particularly sensitive time for the IPO-bound brokerage.
“Compass’ lawsuit is surprising, disappointing and misplaced,” REBNY president James Whelan said in a statement. “Compass’ point of contention is with New York State law. Instead, Compass takes issue with REBNY co-brokering rules which are based on current State law and which Compass has helped shape and enforce.”
REBNY hasn’t been sued by a member since 2004.
Compass agents and executives sit on several of REBNY’s residential committees, which oversee policies including the universal co-brokerage agreement. REBNY’s residential members must follow the agreement to access its syndicated listing feed, the Residential Listing Service.
Three Compass employees are part of the REBNY committee dedicated to the regulating and enforcing the agreement: Valentina Shenderovich, Compass’ associate general counsel; Emily Whitney, senior legal counsel for the firm; and Rory Golod, Compass’ regional president of the Tri-State area, who has been on the committee for at least two years, according to a source familiar with the matter.
In its complaint, Compass argues that Elliman and Corcoran have “disproportionate” representation on REBNY boards that allows them to “control any policy or rule changes.”
Representatives for Compass and Elliman declined to comment. A spokesperson for Corcoran called Compass’ claims “fiction,” and pointed to Compass’ continued efforts to force its parent company’s lawsuit against it into arbitration at REBNY. “Yet, Compass now claims Corcoran is supposedly conspiring with REBNY,” the representative said.
(Corcoran’s parent, Realogy, sued Compass in July 2019, alleging that Compass engaged in “illicit” business practices and “predatory” poaching. Compass filed a countersuit this January, accusing the company and its subsidiaries of unfair competition and defamation.)
Tensions over listings between the firms, and REBNY’s involvement, are longstanding. It was previously reported that REBNY fined Compass $1,000 in 2018, but the complaint disclosed the total fines REBNY levied against the firm for UCBA violations that year was $34,000. Beyond the charges, competing firms have been urging the trade organization to take further action against Compass for years.
In a heated 2018 meeting, REBNY president John Banks and brokerage heads discussed Compass’ alleged practice of giving its new recruits a form to share with clients to urge them to transfer the listing to their new firm. (In New York, when a client decides to sell their home, they sign an exclusive listing agreement with the brokerage, not the agent. When an agent switches firms, bringing their exclusive listings with them often becomes a point of negotiation.)
The meeting, which was attended by Douglas Elliman’s Howard Lorber and Halstead’s Diane Ramirez among others, was the second meeting among REBNY leadership and brokerage heads regarding the issue in a matter of months.
At the time, Ramirez said REBNY’s residential brokerage board of directors was taking action by introducing changes to the UCBA to include more specific rules and penalties in order to ensure greater compliance.
In the complaint, Compass says it was barred from participating in the process: Golod was allegedly turned away from a 2019 meeting in which revisions to the UCBA were to be discussed. (Golod was trying to attend in the place of Compass’ designated representative, who was unable to attend due to personal reasons, according to the complaint.)
The new measures, which penalize inaccurate data and bad business behavior, were adopted in early 2019. In the complaint, Compass argued the revisions were made to prevent property owners from choosing to continue working with their agent at their new firm, and in doing so hamper Compass recruitment efforts and stifle competition.
Compass also alleged that Corcoran and Elliman frustrated its attempts to recruit specific agents by refusing to release former agents’ listings even when Compass offered to pay “exceptionally generous offers,” but would “routinely” release listings when agents moved to a firm other than Compass.
Compass is seeking damages for lost business, defined in terms of recruitment and sales. The brokerage disclosed $270 million in losses last year and a 56 increase in revenue in its IPO prospectus.