Elegran CEO Michael Rossi, former Elegran and current Compass agent Zino Angelides, and Compass CEO Robert Reffkin (Credit: Michael Toolan, iStock)
UPDATED, Thursday, August 1, 5:39 p.m.: The long list of lawsuits against SoftBank-backed residential brokerage Compass now has one more entry. The latest legal challenge comes from a fellow “tech-centric” brokerage, New York-based Elegran Real Estate, whose executives were found this week to be behind a massive network of knockoff building websites.
The lawsuit, which Elegran filed on Wednesday against Compass and one of its agents, Zino Angelides, comes with a laundry list of allegations surrounding the circumstances of Angelides’ abrupt departure from Elegran in late June. Elegran claims that Angelides and three other Elegran agents took over $2 million worth of data on over 6,300 prospective clients on their way out the door.
Elegran CEO Michael Rossi stated in an affidavit that the lawsuit is necessary to protect the company from “ongoing efforts to steal Elegran’s business, licensed real estate salespersons, clients and prospective clients through wrongful means.”
According to the lawsuit, Angelides began recruiting other colleagues to Compass while he was still at Elegran. He and three other brokers “held meetings during May and June to discuss their move to Compass, several of which were held in Elegran’s offices, using Elegran’s resources, at times when these brokers were expected to be working on Elegran’s business,” Rossi says in his affidavit. The four brokers allegedly left the firm together on June 24 with no prior notice, and began working at Compass on the same day.
Compass shot back, accusing Elegran of turning to the courts because it can’t compete.
“Instead of building a better future for the real estate industry, our competitors are using the court system to stifle competition, but these efforts have been unsuccessful,” a company spokesperson told The Real Deal. “Compass will continue on its mission to meaningfully improve the real estate industry and help everyone find their place in the world.” The brokerage closed on a $370 million round of Series G funding earlier this week, valuing it at $6.4 billion.
A “substantial portion” of the stolen lead data was purchased from Zillow and could have produced more than $10 million in business for the firm, Elegran alleges. As TRD recently reported, Elegran’s sprawling lead-generation pipeline also includes a network of more than 270 knockoff building websites, which the firm’s own executives first set up in 2012.
Elegran was also recently censured by the Real Estate Board of New York in connection to lead-generation sites that displayed another firm’s exclusive listings.
For roughly the past three years, Compass has required new hires to sign Silicon Valley-style contracts prohibiting the “taking, storing or use of any information from [the agent’s] previous firm.”
The lawsuit also accuses Compass of trying to divert $63,800 in commissions owed to Elegran, and of continuing to target other Elegran agents for solicitation using “trade secrets,” such as sales performance data, that Angelides had access to.
Finally, the suit accuses Angelides of disparaging Elegran and its business by “making false claims that Elegran is nearing insolvency and that agents should disassociate from Elegran because it may be unable to pay commissions due to them.”
“Elegran takes matters of poaching and theft of proprietary information very seriously and would not enter into litigation lightly,” a spokesperson for the firm said. “We look forward to a swift resolution and hope for a fair and satisfactory outcome.”
The action against Compass comes on the heels of an explosive suit brought by brokerage conglomerate Realogy last month, which also included allegations of improper agent poaching, data theft and disparagement.
Legal experts have pointed out that poaching-related allegations against Compass may turn out to be seriously misguided in an industry that runs on independent contractors — because “no poaching is illegal.”
This article was updated to include a statement from Elegran Real Estate.