The Real Deal National

The juiciest claims in the Realogy v Compass lawsuit

Among the claims in the suit, Compass told one recruit to open a gmail account, restrict communication to the phone to avoid trace
By E.B. Solomont | July 11, 2019 07:00AM

Compass CEO Robert Reffkin (Credit: iStock)

Compass CEO Robert Reffkin (Credit: iStock)

The incendiary lawsuit Realogy filed Wednesday accuses Compass of “illicit” business practices, “predatory” poaching and attempts at price-fixing.

The 68-page suit, filed in New York State Supreme Court, provides a raft of detailed examples for how the $4.4 billion Softbank-backed firm allegedly operates — from making “inflated” job offers to flouting co-brokerage rules. In a statement, a Compass spokesperson said its competitors are “using the court system to stifle competition” and noted that past attempts to do so have failed.

We read through every page of Realogy’s suit so you don’t have to. Here are some of the juiciest tidbits.

1. To circumvent non-compete clauses, Compass offered new hires fake titles, the suit alleges. For example, an Atlanta office manager was hired as a “director of learning and development.” A Chicago manager was hired as a “national coach.” A Brooklyn manager was hired as “director of communications.” And a Houston sales director was hired as a “culture czar.”

2. In New York, Compass went after listings so aggressively that it encouraged recruits to alter Corcoran’s listing system, according to the suit. In one case, a former Corcoran agent was marketing a 500-square-foot studio in East New York. Just before leaving Corcoran, the agent changed the status of the listing to “sold.” When the agent joined Compass, she manually marked it as “active” on Compass’ site.

3. In California, a 2017 attempt to poach a manager involved wining and dining and dirty tricks, the suit alleges. First, the manager was taken to lunch by Compass’ senior vice president Gene Martinez — himself the subject of a now-settled suit filed by Corcoran in 2015. According to the suit, the manager was offered twice his salary, a large bonus and the opportunity to purchase $600,000 to $1 million worth of stock options. Compass CEO Robert Reffkin later urged the manager to “get a gmail account” and to restrict conversations with Reffkin to the phone to avoid traceable communications. Reffkin’s plan to get around the manager’s non-solicitation agreement was to recruit agents via a designated recruiter, the suit contends. To help that person be effective, Reffkin instructed the manager to bring his “A list” agents to Compass, and asked him to identify information that would help Compass make compelling offers to those agents.

4. The complaint accuses Compass of questionable SEO practices to generate leads. This spring, after purchasing the operations of a Maryland-based franchise — Better Homes and Gardens Real Estate The J. Melvin Group — Compass left references to Better Homes within the source code for the franchisee’s website. That’s ensured that anyone who Googles Better Homes is redirected to Compass’ website.

5. Compass got a bit creative with job locales to avoid non-competes, the suit says. In 2018, Corcoran’s former Brooklyn Heights office manager, Joe Fuer, joined Compass as “director of communications.” By 2018, Fuer’s LinkedIn profile said he was working in Atlanta as an expansion sales manager. And as of April, Fuer’s LinkedIn profile said he was working as a regional sales manager in the Hamptons. In a separate example, longtime Realogy finance executive Urvin Pandya — whose non-compete prohibited him from working for a competitor within 50 miles for six months — was hired and told to work out of Philadelphia, the suit alleges. But, it added, he still reported to Compass’ CFO in Manhattan.

6. Compass has accessed a proprietary database known as the Listing Exchange Apartment Rentals system (LEAR), according to the suit. Based on an analysis of log-in attempts, Realogy said it determined the “unauthorized incursions” were made from a computer with an internet protocol linked to Compass.

7. Recruiters use scripts that include rumors that Realogy is bankrupt or going out of business. In May 2019, one recruiter told a Coldwell Banker agent that Realogy planned to close their office, a claim that was “completely fabricated.” According to the suit: “This statement also raises questions about how Compass could have come by that confidential information, had it been true.”

8. Compass commissioned a study by Blueshift, which claims former Sotheby’s International Agents who joined Compass saw their business grow 20 percent to 40 percent within a year. Realogy said the study only included seven agents. Realogy’s own analysis found that agents who left the conglomerate in 2017 and early 2018 saw their business drop 9 percent to 20 percent.

9. Just before the lawsuit was filed, Reffkin solicited Realogy to enter a “price-fixing agreement where the two companies would agree to limit agent compensation and ‘compete on brand,’ but not on price, the suit claims. Realogy declined.