Coldwell Banker is suing a former employee for allegedly stealing the company’s trade secrets.
The residential real estate brokerage company is going after John Nisbet, who left Coldwell Banker’s Santa Barbara office to work for the rapidly expanding residential real estate firm Compass.
Coldwell Banker is accusing Nisbet of stealing confidential data, including market data, revenue reports, commission splits and compensation agreements of Coldwell sales associates, giving its new competitor an unfair advantage. The data contains proprietary “internal ranking metrics” that allows Compass to cherry-pick its top agents, Coldwell Banker claims.
“Based upon publicly available information and the facts of this case, this appears to be the next step in Compass’s overall corporate strategy to ‘take down’ its competitors by misappropriation,” the lawsuit filed in Santa Barbara Superior Court on Jan. 11 reads.
Compass responded to the lawsuit by saying that it never used the documents Nisbet sent to Compass. Even if it did, Compass argues, the information is widely available via the Major Listing Service and other means and does not constitute a “trade secret.” Nisbet claims he sent along the data only to prove his merit.
Coldwell Banker is resorting to legal action to “stop its losses in the real estate markets in Santa Barbra and Montecito,” Compass claims in a motion filing.
“(Coldwell Banker) is unable to win in the market so (Coldwell Banker) has taken its fight to the courtroom by bringing a ‘specious action as a preemptive strike for anticompetitive purposes,’” a motion filing reads.
Forensic evidence revealed the emails under question were not forwarded, the filing states. But Coldwell Banker contends that Nisbet sent texts to Compass CEO Robert Reffkin with a photo of Coldwell Banker agents and their contact information along with the text: “This list is the top tier of agents we want,” according to a motion filing.
“Their spinning of facts notwithstanding, Defendants are in the wrong and they know it,” Coldwell Banker said in the filing. “In ordinary course of business, executives don’t take photos of screens and text them. The only reason to do that is to conceal.”
For now, it seems Santa Barbara County Superior Court Judge Thomas Anderle has sided with Compass. Anderle presided at a hearing on Feb. 2 over a preliminary injunction that would prohibit Compass from hiring other Coldwell Banker employees and force it to return the documents.
The information that Coldwell Banker classifies as a trade secret is readily ascertainable, Anderle said. California also has strong statutory laws supporting employee mobility.
“Based on the facts and the law presented at this juncture in this case, to maintain the (temporary restraining order) in place would be draconian,” Anderle said at the hearing. “The court would be doing indirectly exactly what the law forbids it to do directly.”
New York-based Compass uses in-house software that aims to cut down on brokers’ administrative work and streamline listing updates. Compass, which was co-founded in 2013 by Ori Allon, the former engineering director of Twitter’s New York office, has raised $125 million in investor capital. It doubled its number of agents over the past year and has more than $1.4 billion in luxury real estate listings.
Since launching in Manhattan, Compass has opened offices in Brooklyn, Washington, D.C., Boston, Miami, the Hamptons, the Los Angeles area and Santa Barbara.
To fuel its frenetic expansion, Compass has lured top brokers and managers to the chagrin of its rivals. It recently selected Nisbet, who was a manager at Coldwell Banker and has more than 30 years of experience, to head a 4,400 square-foot office at 1283 Coast Village Circle in Montecito that will eventually house a staff of 50 to 100 people.
Compass provides a technology-driven platform and a culture that fosters entrepreneurship, he said.
“Compass puts all that data at the agent’s fingertips in one place, allowing them to be more efficient and effective,” Nisbet told the Business Times in January. “It’s really a revolutionary platform. That’s why it’s growing so fast.”
That technology has been disruptive. In 2014, two New York-based brokerages sued Compass, accusing them of accessing its propriety listing system and alleging former employees violated non-compete contract clauses. Both were settled and resulted in Compass returning data.
A third case filed by Hampton-based brokerage Saunders & Associates has led to a restraining order. Compass was ordered to return 11,600 listings and other confidential data allegedly obtained by fraudulent login credentials.
“Compass seemingly has determined that it is cheaper and faster to build its business by unlawfully poaching managers and independent sales associates from other brokers than to engage in lawful competition,” Coldwell Banker said in the lawsuit.
Anderle denied a preliminary injunction, dissolved a temporary restraining order issued on Jan. 14 and dismissed the Order to Show Cause.
“Coldwell Banker’s attempt to stifle competition by blocking its agents from leaving to join Compass was soundly rejected by the Court,” Compass said in a statement.
Coldwell Banker is seeking compensatory damages, punitive damages and payment for legal services.
“The case is far from over,” Coldwell Banker said in a statement. “The Court recognized our right to seek restitution and compensatory damages for the conduct alleged in the complaint and we will continue to pursue these legal remedies vigorously.”
The court will reconvene on April 29 over the lawsuit.
• Contact Alex Kacik at [email protected]