The Real Deal New York

And the beat goes on for broker poaching

Why Douglas Elliman’s win in a lawsuit against William Raveis does nothing to discourage brokerages from luring talent away from other firms
By Miriam Hall and E.B. Solomont | August 02, 2017 11:00AM

(Illustration by Nate Kitch)

Douglas Elliman won a $5 million battle against rival William Raveis Real Estate in June, but it’s unlikely that this court victory will end the long-running war between the two firms — or the skirmishes over agent-poaching that continue to erupt throughout the industry, experts told The Real Deal.

On June 20, a jury upheld Elliman’s claim that Raveis and a former Elliman manager conspired to poach top agents from its office in Armonk. The jury awarded Elliman $5 million in damages.

Elliman had sued Raveis and former manager Lisa Theiss in 2015 for allegedly conspiring to “decimate” its branch by secretly recruiting the firm’s top agents, according to court papers. The suit alleged that Theiss poached 10 agents, including four “top producers,” from her former firm and lured them to Raveis’ newly opened office across the street.

Elliman was quick to mark its victory in the case. “I am extremely pleased that the jury saw fit to rectify the egregious and outrageous actions of William Raveis Real Estate,” Chairman Howard Lorber said in a statement.

“This verdict confirms what Elliman had claimed from the outset, that Raveis and Theiss had unlawfully schemed together in an attempt to harm Elliman in Westchester,” said the lawyer who won the case, Mark Lerner of Kasowitz Benson Torres.

But Raveis isn’t backing down. In an email to TRD, Bill Raveis, the chairman and CEO of the family-owned firm said “We disagree with all aspects of the jury verdict and will vigorously appeal the decision.”

Bitter rivals

The competition between the two firms has always been apparent. In a quote that Elliman used against him in the filing for the Armonk case, Raveis sarcastically told a reporter from TRD, “I have great admiration for everyone at Douglas Elliman. They’ll eventually be out of Westchester County.”

The adversaries have sparred since 2014, when Elliman opened an office in Greenwich — right in the heart of Raveis country.

That year, Raveis, a suburban powerhouse that was founded in Fairfield, broke into the Manhattan market by opening an office headed by Paul Purcell, a former Elliman president, and Kathy Braddock.

The firms’ battle came to a head in mid-2015 when 14 Elliman agents in Westchester defected to Raveis. Purcell said at the time that the Elliman agents in the suburbs were unhappy and were treated like “the redheaded bastard stepchildren” of the company.

In return, Douglas Elliman President and CEO Dottie Herman issued a statement saying that the firm was “100% committed to our agents and customers in Westchester and Greenwich, as we are in all of our regions.”

Bill Raveis then accused Elliman of retaliating by blocking all emails that came from his firm — a move he likened to a “baby tantrum.”

Elliman, meanwhile, said Raveis was sending mass emails to brokers in the city in an attempt to lure them into joining the then-new New York office.

Both firms are power players in Westchester. Raveis logged $439 million in Westchester sales in 2016 while Elliman followed with $378 million, according to an analysis by TRD. Both, however, trail Houlihan Lawrence and Julia B. Fee Sotheby’s International Realty, which dominate the area. This issue’s ranking of top 10 brokerages in Fairfield County shows William Raveis in the fifth spot, with Douglas Elliman coming in eighth.

Poaching precedent

But there’s another, larger war being fought across the industry. And the Armonk case won’t end that one, either. 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.”

That’s a sentiment echoed by Elliman’s Lorber. “Such deception does not serve our industry, and it is my hope that today’s verdict will help deter others from similar practices,” he said in his victory statement.

But lawyers told TRD that any firm hoping the ruling against Raveis 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 a bellwether case,” said Terrence Oved, an attorney with Oved & Oved. “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.

Though far from being the only target, Compass often finds itself in the firing line for poaching litigation. In October, Elliman sued Compass and its president, Leonard Steinberg, alleging they plotted to steal agents and contracts. In 2015, Brown Harris Stevens sued broker Ed Reale, saying he breached a noncompete contract when he headed to Compass.

Many cases — such as the Citi Habitats’ 2014 suit against Compass for allegedly stealing trade secrets and the Corcoran Group’s accusation 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.

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, rules and regulations should be followed.

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 Theiss held “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 Raveis case had a specific set of facts, according to Noonan, the ruling does highlight that, even though companies can poach, there are still legal guidelines. “They crossed lines,” he said.

“The facts are so outrageous … even for the cutthroat brokerage business for New York City,” said Oved. “[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, nonsolicitation and nondisparagement 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.”