Daum-Johnstown Sues Rival, 50 Workers for $1 Million Over Alleged Broker ‘Raid’

Daum-Johnstown American sued a rival real estate brokerage and 50 of its former employees this week for more than $1 million, saying many of the employees breached their contracts earlier this month when they jumped overnight from Daum-Johnstown to its rival.

Filed in Orange County Superior Court, the suit accuses Scher-Voit Commercial Brokerage Co. in Irvine of trying to “destroy” Daum-Johnstown by “raiding” its work force and improperly taking real estate listings belonging to Daum.

Scher-Voit President Lawrence M. Scher in a statement called the allegations “totally unfounded.”

Daum-Johnstown said earlier that the decimation of its Anaheim office killed a deal in which employees would buy the Los Angeles brokerage from its parent, Johnstown American, itself a subsidiary of Dallas’ Southmark Corp.

Daum-Johnstown executives did not want to talk about the suit.

Scher started his new brokerage last year, but he once employed many of the Daum-Johnstown brokers in Anaheim in another brokerage that he sold to Daum-Johnstown in 1984.

Scher said earlier that the Daum-Johnstown brokers came to him after getting worried that yet another change of ownership at Daum might hurt the brokerage and their commissions.

Daum, an 80-year-old Los Angeles brokerage, had already been bought by Johnstown American in 1984.

The mass defections this month at Daum-Johnstown’s Anaheim office, Scher said earlier, came as “a surprise” and was “unsolicited.” Since then other employees have left the brokerage’s Orange County offices to join him, often at higher commissions than Daum paid.

It is considered bad etiquette in the industry to aggressively recruit other firms’ brokers, although brokers say it is sometimes done.

But Daum-Johnstown alleges in its suit that Scher went much further by forming a “conspiracy” with his former employees to empty Daum’s Anaheim office the night of Oct. 4 in a “systematic, wide-ranging, overnight raid.” In that raid, Daum alleges, two dozen top-producing employees emptied their desks and appeared for work the next day in Scher-Voit’s new Anaheim office.

With the brokers, Daum alleges, went confidential information and valuable listings of commercial property that Scher-Voit was “so blatant” as to try to sell or lease on its own.

In addition, Daum alleges Scher broke his own contract with Daum after Daum paid him $4.4 million for his old brokerage.

Daum said its purchase agreement prohibited Scher from competing with the brokerage until December, 1987. Scher founded Scher-Voit in July of that year.

Daum asked the court for an unspecified amount of damages in excess of $1 million.