Compass is going to trial in Avi Dorfman case

Entrepreneur seeks $200M+ stake as brokerage co-founder

Feb.February 20, 2020 01:00 PM
Compass CEO Robert Reffkin and Avi Dorfman (Illustration by The Real Deal)
Compass CEO Robert Reffkin and Avi Dorfman (Illustration by The Real Deal)

It looks like Avi Dorfman, who is suing Compass to be recognized as a co-founder, will get his trial after all.

In an attempt to avoid a courtroom faceoff, the SoftBank-backed firm had appealed an October ruling by a New York judge, who granted Dorfman a trial. But an appellate court judge has just denied the appeal.

“The documentary evidence in the record shows that Dorfman actually performed at least some of the alleged actions which this Court exempted from the statute of frauds,” read the Feb. 20 decision. “Specifically, he developed materials to secure financial backing from investors — including Goldman Sachs — and the deposition testimony and email evidence showed that Dorfman introduced and recruited Paul Goudas to Urban Compass.”

In its motion for summary judgement, Compass claimed that Dorfman worked with CEO Robert Reffkin and Chairman Ori Allon prior to October 2012, when the company wasn’t yet incorporated. In denying the motion, the court ruled that by that time, Reffkin had signed nondisclosure agreements on behalf of Compass, and he and Allon were “actively engaging potential investors.”

Representatives for Compass and Dorfman didn’t immediately comment on the decision.

Dorfman sued Compass in 2014, alleging he helped CEO Robert Reffkin work out the concept for Compass but was later cut out. He is seeking an estimated $200 million-plus stake in Compass, which is valued at $6.4 billion after raising $1.5 billion from investors, including SoftBank.

In October, Judge Andrea Masley granted him a trial. “The record is clear that they exchanged, among other things, emails that set forth offers and counteroffers as to how Dorfman would be compensated as a ‘founding team member,’” she wrote at the time.

But Compass has characterized the suit as opportunistic. In a motion for summary judgement, it said that Dorfman “spurned multiple offers” to work for Compass and “now seeks a do-over of that decision, claiming he should be awarded tens of millions of dollars in equity in Compass far in excess of what he could have earned if he had actually chosen to join that venture.”

Although the original suit did not specify damages, it could be up to $200 million or more based on various estimates.

A 2017 report by one of Dorfman’s experts found he is entitled to 5.96 percent to 6.91 percent of Compass equity. The conclusion was based on a capitalization table provided by Compass during discovery, in addition to Reffkin and Allon’s stock agreements. According to the cap table, Reffkin and Allon each got just over 3 million shares, or 25.3 percent, of Compass equity in 2012.

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