Compass, Inc. v. Real Estate Board of New York, Inc.

Background

On March 31, 2022, Judge Alison J. Nathan granted in part and denied in part the defendants’ motion to dismiss. That ruling dismissed Compass’s claim for tortious interference with prospective economic advantage but found that the complaint sufficiently alleged antitrust violations under the Sherman Act and the Donnelly Act. The case was later reassigned to Judge Lorna G. Schofield.

The defendants then moved for reconsideration of the decision allowing the antitrust claims to proceed. Reconsideration is an extraordinary remedy generally limited to an intervening change in controlling law, newly available evidence, or a need to correct clear error or prevent serious injustice. The court also noted that reconsideration is not a way to repeat arguments already made or obtain a second hearing on the same issues, particularly before a newly assigned judge.

Arguments and Analysis

The defendants argued that Compass had failed to plead a relevant product market. They maintained that the complaint alleged only anticompetitive effects in a market for brokerages seeking agents and that Compass’s preference for hiring “top agents” could not define a legally recognized market. They also repeated their argument that Compass had not alleged a legally cognizable antitrust injury.

Judge Schofield held that the defendants identified no change in controlling law and no controlling precedent that the earlier ruling had overlooked. She therefore denied the motion as a rehash of the original motion to dismiss.

The court also explained that the defendants’ arguments failed on their substance. The complaint sufficiently alleged harm in the market for “New York Residential Brokerage Services,” involving companies such as Compass, Corcoran, and Douglas Elliman. According to the complaint, these companies compete both to recruit licensed real estate agents and to attract customers who want to buy or sell real property. The court found that the alleged market was adequately pleaded and was not improperly defined by Compass’s preferences for particular agents.

The court further found that Compass adequately alleged antitrust injury. The complaint alleged that the defendants, which Compass said had market power, coordinated the adoption, revision, and selective enforcement of Article II, Section 7. The alleged effects included limiting competition among brokerages for agents, denying brokerages an important business input, hindering entry into the market, and reducing consumer choice. The court said the alleged injury matched the alleged anticompetitive effect because the challenged conduct allegedly restricted Compass’s ability to recruit agents.

The court rejected the defendants’ argument that exclusive-distribution principles made the challenged arrangement presumptively lawful. It explained that the alleged arrangement was not an exclusive distributorship contract and that the earlier ruling had identified at least four alleged anticompetitive features beyond exclusivity. The court also rejected the argument that lost revenue could not qualify as antitrust injury, finding that the complaint sufficiently alleged that Compass’s lost revenue flowed from the alleged anticompetitive conduct and its resulting inability to recruit agents.

Ruling

Judge Lorna G. Schofield ordered that the defendants’ motion for reconsideration was DENIED. The court directed the Clerk of Court to close the motion at Docket No. 36. The opinion did not alter the earlier ruling that Compass’s antitrust claims were sufficiently pleaded and could proceed.