Compass follows through on vow to sue CRMLS
The brokerage giant sent the MLS a letter last month demanding rule changes and told Real Estate News last week that it would follow the letter with a lawsuit.
Key points:
- Two weeks after CRMLS sued Compass, the brokerage has clapped back at the MLS with a lawsuit of its own.
- Compass alleges that CRMLS controls "a home listing database that real estate agents in much of California cannot work without" and enforces "competition-blocking" rules.
- CRMLS contends that its rules "support fair competition, preserve seller choice, and ensure that no brokerage gains an unfair advantage."
Compass made good on its threats to sue California Regional Multiple Listing Service (CRMLS) on Friday, filing a complaint against one of the largest MLSs in the nation in the U.S. District Court for the Central District of California. Inman was first to report the news.
The Oct. 16 filing comes less than two weeks after the MLS initiated its own lawsuit against the brokerage giant in New York, and several weeks after CRMLS said it received a demand letter from Compass warning that the MLS would face litigation if it did not change its rules.
"Every single member of CRMLS's Board of Directors is a direct competitor of Compass, and they are dictating how Compass and our agents can and cannot compete, how our agents can and cannot serve their clients, and how homeowners can and cannot publicly market their own homes," Compass International Holdings Chairman and CEO Robert Reffkin wrote in a post on LinkedIn.
"Only the law and the homeowner should tell agents how to publicly market a home, and CRMLS is neither the law nor the homeowner," Reffkin argued, adding that his company is "proud to stand by our California real estate professionals and their clients."
What Compass alleges
Compass is taking issue with CRMLS's rules on the public marketing of homes that do not appear on the MLS. CRMLS issues fines, and sometimes suspensions or expulsions, against real estate professionals who violate its rules, even when those agents are following "their client's lawful instructions to publicly market their property outside of CRMLS," Compass said in a news release.
In the filing, Compass said its new See It First phased marketing strategy gives homeowners a choice on how to publicly market their property and that, "under California law," these clients "are entitled to decide how to market their own properties."
Compass is accusing CRMLS of antitrust violations, alleging in the filing that the MLS is "using control of a home listing database that real estate agents in much of California cannot work without" and, with its "co-conspirators," is blocking Compass' marketing strategy "to protect Compass' competitors from having to compete with Compass on the merits for clients and agents."
Damages, changes sought
These alleged actions have cost Compass and its agents "hundreds of millions of dollars in harm," the filing alleged. The brokerage is seeking "treble damages, to the full extent allowed by the law, for every dollar of harm CRMLS and its co-conspirators caused Compass."
Compass has requested a court order to put an end to the MLS's "competition-blocking" rules. The brokerage said in its news release that it will also "pay all CRMLS fines" incurred by agents affiliated with Compass International Holdings-owned brokerages as a consequence of "publicly marketing homes outside of CRMLS at the lawful written direction of their clients."
CRMLS: Our rules support 'fair competition'
"Compass's decision to pursue litigation does not change our commitment to protecting a fair, transparent, and competitive real estate marketplace," CRMLS CEO Art Carter said in a statement to Real Estate News.
"CRMLS stands firmly behind the principles of cooperation that have served brokers, agents, buyers, and sellers for decades. Our rules are designed to support fair competition, preserve seller choice, and ensure that no brokerage gains an unfair advantage by benefiting from the cooperative while withholding its own publicly marketed listings," the statement added.
"We believe cooperation is fundamental to a healthy real estate marketplace, and we will vigorously defend our rules and the interests of the real estate professionals and consumers who depend on them. While we would have preferred to resolve these differences without litigation, CRMLS remains steadfast in its commitment to protecting the integrity of the cooperative marketplace."
How we got here
CRMLS previously said it received a Sept. 8 letter from Compass calling on the MLS to stop issuing fines and handing down other punishments for subscribers who publicly market office exclusives. If CRMLS did not abide by these requests, the letter added, the MLS may be "named as a defendant in a federal antitrust lawsuit." Other MLSs have also said they received a copy of the demand letter, which listed Oct. 6 as Compass' deadline to comply.
In a written response to the mega brokerage's outside counsel, CRMLS VP and General Counsel Ed Zorn said the MLS would not be giving into Compass' demands, suggesting that doing so would push buyers to use Compass agents and create new rules that would "assist Compass in committing fraud," among other potential consequences.
The day before Compass' deadline, CRMLS filed a lawsuit of its own against the brokerage in the U.S. District Court for the Southern District of New York. The lawsuit requested that the court decide on the legality of CRMLS's rules under federal and state law. The suit also sought an injunction barring Compass from suing CRMLS over claims that its rules were illegal.
Compass confirmed on Oct. 7 that it planned to sue CRMLS in the coming weeks. At the time, the brokerage giant said it also intended to sue Unlock MLS after the Central Texas organization took its own stand against Compass' legal threats.