Urban Compass Hit With IP Theft Suit After $360M Valuation

By Kaitlin Ugolik

Law360, New York (July 25, 2014, 4:10 PM ET) –– A man who claims to be the former business partner of apartment search website Urban Compass Inc. founder Robert Reffkin sued him and the company in New York state court Wednesday, accusing Reffkin of stealing proprietary information that helped Urban Compass reach a more than $360 million valuation last week.

Avi Dorfman sued Urban Compass and Reffkin, claiming the two men had agreed to create the company together but Reffkin ended up ditching Dorfman after gaining access to the information and software he used to build his own apartment search service, RentJolt Inc. Urban Compass contends, however, that the men never worked together at all.

“Despite [Urban Compass’] astronomical success, and Dorfman’s and RentJolt’s significant contributions conceptualizing, creating and launching the company, both were intentionally and wrongfully cut out by the defendants, without receiving either a single penny or any interest in Urban Compass as compensation, so that defendants could enrich themselves,” the complaint said.

Dorfman claims that after he created RentJolt, a website meant to help apartment seekers avoid the “broker-centered” process of finding a place to live in New York City, he met with Reffkin, who suggested they work together. Reffkin had allegedly sought to make a similar but “vague” idea work, and thought the two could have more success as partners.

The men signed a nondisclosure agreement, with Reffkin agreeing to conduct due diligence ahead of acquiring RentJolt and forming a new company, of which Dorfman would be a co-founder and co-owner, according to the complaint. Based on that NDA, Dorfman says, he gave Reffkin access to proprietary information and helped to create what is now known as Urban Compass.

But Dorfman alleges that Reffkin’s true goal was never to purchase RentJolt and run a new company in connection with Dorfman, but rather it was to gain access to Dorfman’s trade secrets and then “dispose” of Dorfman.

“Having extracted Dorfman’s and RentJolt’s knowledge and trade secrets, including RentJolt’s confidential, proprietary software and business process, and having had Dorfman work to assist in raising the initial seed round funds and key employees required to launch Urban Compass, Reffkin discarded Dorfman and cut him out of the company,” the complaint said.

Urban Compass went live in May 2013, and is now reportedly valued at more than $360 million, according to recent news reports. The company has been able to get to that point faster than its competitors thanks to its access to RentJolt and Dorfman’s proprietary information, the complaint says.

Dorfman’s attorneys told Law360 on Friday that they had reached out to Reffkin and Urban Compass in an effort to settle the issue, but the defendants had not responded.

 

“Mr. Dorfman has wanted to settle this amicably since he was removed from Urban Compass, and has tried to avoid litigation,” said Adam Ford of Harris O’Brien St. Laurent & Chaudhry LLP. “Unfortunately, Mr. Reffkin and Urban Compass have staked out a position that Mr. Dorfman is not entitled to a single penny for all the work he did in helping to create Urban Compass.”

Dorfman alleges fraud in the inducement, unjust enrichment, negligent misrepresentation and breach of implied contract and seeks to block Urban Compass from continuing to use his proprietary information or providing any services created with the use of his trade secrets. The suit also calls for the court to put all of Urban Compass’ gains from its allegedly illegal use of Dorfman’s information into a construct trust for Dorfman’s benefit.

“This lawsuit is totally without merit, and we look forward to the opportunity to substantiate that,” a spokesman for Urban Compass said in an emailed statement Friday.

Dorfman is represented by Jonathan Harris and Adam C. Ford of Harris O’Brien St. Laurent & Chaudhry LLP.

The case is Avi Dorfman and RentJolt Inc. v. Robert Reffkin and Urban Compass Inc., case number 652269/2014, in the Supreme Court of the State of New York, County of New York.

–Editing by Elizabeth Bowen.

Correction: An earlier headline