What Robert Reffkin, Compass says, deserves Avi Dorfman if he wins the suit


Robert Reffkin and Ori Allon (Getty; iStock) Avi Dorfman and Compass

Robert Reffkin and Ori Allon (Getty; iStock) Avi Dorfman and Compass

WITH the jury is looming, Compass is trying to alleviate the unexpected cases that Avi Dorfman could reap if he proves that he founded the company.

The brokerage firm asked the court to limit Dorfman’s damages to cash instead of shares. He further urged the court to base Dorfman’s damages on Compass’s value in 2012, claiming that he had worked with CEO Robert Reffkin.

“Dorfman’s recovery should not differ based on fluctuations in the value of Compass shares during the nearly eight years since his claim arose,” the company, whose recent value was $ 6.4 billion, argued in a August 31 proposal.

Dorfman sued Compass in 2014, claiming that Reffkin had used the concept they had worked on together in 2012 as a basis for mediation. Dorfman said Reffkin gave up a timely job offer and a 2.5 percent stake in the company; Compass claims that Dorfman rejected the offer only to strive for a “do-over”.

The case changed this summer when Judge Andrea Masley said valuation issues would not be part of the trial. Rather, the jury will decide whether Dorfman is entitled to a “presence” of Compass shares.

The brokerage company has grown more than $ 1.5 billion from investors, including SoftBank. The New York company has more than 15,000 agents nationwide and claimed to have sold $ 88 billion worth of properties last year.

As for Dorfman, the brokerage firm says capital should be off the table. “He was consistently looking for damages – and in this case only damages,” said her August 31 proposal.

However, Dorfman’s legal team claims that this is simply not true. “We believe the jury will find that Avi Dorfman was the founder of Compass and, as the founder, is entitled to the company’s equity,” said Jonathan Harris.

A Compass spokesman said the company was looking forward to its chance to “refute Mr Dorfman’s false claims that he should receive any compensation for the limited working hours he allegedly paid in 2012.”

In the world of technology, the disputes of the founders are nothing new.

Facebook’s Mark Zuckerberg fought several, including one from Eduard Saverin and the other from the Cameron and Tyler Winkelvoss brothers, who settled only $ 65 million. Martin Eberhard, former CEO of Tesla, threatened defamation over the title of founder CEO Elon Musk.

In general, such actions allege a breach of contract and, if the plaintiff is successful, he is compensated by monetary damages.

But in situations where cash is considered insufficient, the court may award other forms of damages, said Jonathan Gworek, a junior attorney at Morse, Barnes-Brown & Pendleton in Waltham, Massachusetts.
The forthcoming IPO may be one of the reasons why the monetary reward is considered insufficient, said Gworek.

“I see the plaintiff saying, ‘If you give me cash, I won’t be able to turn around and buy shares. “So I will not benefit from the increase in value when it is published,” he said.

For Compass, financial stakes are high in both directions. Randall Baron, a partner at Robbins Geller Rudman & Down, believed the company was likely “trying to deny the valuation of its shares” over the past few years. Sources said the company could bet that the jury would have a harder time awarding a staggering amount than just the shares, even if they were just as valuable.

However, the granting of new shares to Compass has other disadvantages.

After six years of litigation, the brokerage company probably wants to avoid a fiduciary relationship with Dorman. Thanks to the shares, Dorfman would be entitled to request financial information and it is possible that his vote would be needed to approve the sale of the company. “If the court grants him cash, their relationship is contractual and short-lived.” They will tear down Band-Aid, “said Ed Zimmerman, chairman of the Lowenstein Sandler technology group.

In addition, the release of new equity could have a “cascading effect” by weakening the ownership of other shareholders, Gworek noted. The company would most likely have to issue additional shares to investors in order to maintain its position. “This could cause confusion on the company’s capitalization table,” he said.

Compass lawyers said this in a letter to the judge on August 24. “While the defendants do not agree that Dorfman may recover the ‘current valuation’ of Compass shares, as opposed to their 2012 value, it remains the case that Dorfman was clearly seeking the value of the shares as compensation, not the shares themselves,” they wrote.

However, the original complaint alleges that Dorfman was denied part of the company and claims damages.

In the original lawsuit, Dorfman did not specify the value of his damages, only initially believing that he owed him 5 to 10 percent of the founder’s share. Compass offered 2.5 percent, then 1.8 percent, which Dorfman refused because they were offensive. Experts hired by Dorfman in 2019 said he could be entitled to 2.5 million shares.

According to court documents Reffkin only paid $ 335.50 for 3.355 million shares in 2012. The value of his shares is unclear today, as they have probably been diluted over time. G Series, Compass, $ 370 million shares at a price of 154.27 USD per piece, according to Pitchbook.

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