A Pennsylvania-based Better Homes and Gardens Real Estate affiliate has filed a lawsuit against Compass for helping a former agent breach several covenants, including non-disclosure, non-competition and non-solicitation.
Pennsylvania-based Better Homes and Gardens Real Estate affiliate Valley Partners Real Estate (VPRE) has added Compass as a defendant in its April 1 civil suit against former VPRE shareholder, managing partner and commercial division head Carl Billera for violating non-disclosure, non-competition, and non-solicitation covenants.
In March 2019, Billera relinquished his rights as a shareholder and received an initial $100,000 stock redemption payout in accordance with his shareholder’s agreement. Billera stayed with VPRE as an agent and commercial division leader and agreed to follow the covenants until a second and final $35,000 payout scheduled for March 6, 2021.
However, VPRE said Billera broke non-disclosure, non-competition, and non-solicitation covenants starting in April 2019 when he began fielding partnerships with competitors Main Street Commercial Realty and Compass Real Estate. MSCR declined Billera’s proposal, but Compass agreed to establish a Lehigh Valley-based team with Billera, despite allegedly knowing about the restrictive covenant.
From September to November 2020, VPRE said Billera had several email exchanges with Compass Senior Strategic Growth Manager Margaux Viola about establishing the brokerage’s presence in the Greater Lehigh Valley market; however, the contract was signed before Billera’s restrictive covenant agreement was set to expire on March 6, 2021.
“On October 28, 2020, Margaux sent an email to Brian with an attached independent contractor agreement. This email states: ‘This will be sent via Docusign for your signature next week after Carl is officially out of his non-solicit,’” the complaint read. “The ‘next week’ referenced in this email is well before Defendant Billera’s non solicit agreement actually expired.”
Throughout the process of finalizing details of his team with Compass, VPRE said Billera attempted to be freed of the restrictive covenants before the two-year deadline. During this attempted renegotiation, VPRE said, is when they discovered Billera’s deal with Compass and the involvement of former VPRE transaction manager and agent Lynn Zegalia in recruiting VPRE agents to join the new team.
Billera and Zegalia were terminated immediately. VPRE claimed Compass was aware of the restrictive covenants, Billera and Zegalia’s attempt to work around the covenants by temporarily working at a far-flung office of another local competitor, and accepted confidential information about VPRE in the process.
“Defendant Compass actively assisted Defendant Billera with soliciting employees/agents from VPRE [and] it is believed and therefore averred that Defendant Compass requested and accepted Confidential Information from Defendant Billera belonging to VPRE,” the complaint read. “It is believed and therefore averred that Defendant Compass agreed to allow Defendant Billera to work at Iron Valley until the expiration of the Restrictive Covenants.”
“It is believed and therefore that Defendant Compass communicated to Defendant Billera that it would hire him after the expiration of the Restrictive Covenants,” it added. “Defendant Billera’s purposeful solicitation of agents and/or employees of VPRE and his [engagement] with a competitor have undermined VPRE’s business operations.”
Billera, Zegalia nor Compass has yet to file a response to the seven counts levied against them, including three counts for breaching non-competition and non-solicitation covenants and fiduciary duties, two counts of tortious interference, one count of civil conspiracy and one declaratory judgment.
Compass declined Inman’s request for comment.
This isn’t the first time Compass has been lambasted for its recruiting tactics. In fact, it’s the crux of Better Homes and Gardens Real Estate parent company Realogy’s two-year legal battle with Compass for “unfair business practices and illegal schemes to gain market share at all costs.”
“Compass then uses that illicitly obtained confidential information to recruit Realogy-affiliated agents,” Realogy’s 2019 complaint read. “Compass instructs and encourages its recruits to interfere directly with Plaintiffs’ existing contracts and with other business relationships by inducing Plaintiffs’ employees to breach their non-solicitation and non-compete agreements while promising to indemnify employees if and when they are sued.”
Since then, other competitors, most recently New York-based Howard Hanna, have accused Compass of the same thing. Multiple former agents have made other claims about deceptive contracts, with two class-action suits making their way through California Superior Courts.
Read the full complaint below:
Email Marian McPherson