Court declines REBNY move to dismiss Compass antitrust lawsuit

Judge Alison Nathan dismissed tortious interference claim

Compass CEO Robert Reffkin and REBNY president James Whelan (Getty, Illustration by Kevin Rebong for The Real Deal)
Compass CEO Robert Reffkin and REBNY president James Whelan (Getty, Illustration by Kevin Rebong for The Real Deal)

UPDATED, April 7, 2022, 9:45 a.m.: A federal judge denied the Real Estate Board of New York’s request to dismiss an antitrust lawsuit filed by Compass.

The ruling preserves Compass’ suit centered on agents carrying clients when they switch brokerages.

The brokerage sued REBNY in March 2021, alleging the group conspired with Douglas Elliman and the Corcoran Group to collectively modify and enforce the trade group’s rules in a way that would “smother” Compass. Elliman and Corcoran are not defendants in the case, but are cited throughout.

“Instead of adapting and evolving to meet the competitive challenge, REBNY and its co-conspirators sought to smother [Compass], repeatedly acting to preserve the market’s status quo, their business models, and their dominance of New York City residential real estate sales,” the complaint said.

In a March 31 ruling, Southern District Judge Alison Nathan denied REBNY’s motion to dismiss it.

A spokesperson for Compass said the brokerage was “pleased” with the rejection, but remains “prepared to continue demonstrating that REBNY’s anti-competitive behavior negatively impacts buyers and sellers of New York City real estate.”

Central to the long-simmering tension is the universal co-brokerage agreement, a REBNY rule that bars agents from further communications with their clients if they leave the firm where the exclusive listing agreement was signed.

Under the rule, if an agent switches brokerages, the agent cannot contact previous clients without the former brokerage’s consent or a signed statement ensuring the client wants to keep working with the agent. REBNY eventually eliminated the option of having the client sign a statement, allegedly under the pressure of Elliman and Corcoran.

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REBNY fined the brokerage $250,000 in January 2021, citing “repeated violations” to the agreement.

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The group also filed a motion last May to dismiss the anti-trust suit, claiming the brokerage’s allegations lack credibility.

Compass claims REBNY violated the Donnelly Act, the federal Sherman Antitrust Act and a claim for tortious interference with prospective economic advantage, meaning a third party unlawfully interfered with a business relationship.

Nathan, however, did dismiss the interference claim, saying “Compass’ allegations are too vague to meet the specificity requirement.”

“We appreciate the Court’s dismissal of the case regarding claims of tortious interference and remain confident in the merits of our defense,” REBNY President James Whelan said in a statement. “REBNY’s co-brokering rules, which Compass has helped to shape and enforce as a REBNY member, are based upon state law and legal precedent.”

An earlier version of this article incorrectly stated REBNY suspended Compass from its syndicated listing feed for 10 days in 2020. The suspension was never implemented and the brokerage was fined as an alternative penalty.