Brokerage Sues Former Employees for $5 Million : Real estate: Palo Alto-based Marcus & Millichap alleges that the founders of Newport Beach’s Sperry Van Ness pirated away other workers and misappropriated confidential information.

A large Palo Alto-based real estate brokerage with offices in Southern California has sued two former employees for $5 million, alleging that they “boldly and recklessly” pirated away its other employees after they started their own company three years ago.

Marcus & Millichap Real Estate Investment Brokerage Co. also accused Mark Van Ness and Rand Sperry of spiriting away clients and said they misappropriated confidential information when they started Newport Beach’s Sperry Van Ness Investment Real Estate brokerage.

Both firms compete in a specialized niche of the brokerage market: representing buyers and sellers of properties. At many firms the brokers also represent landlords, tenants or both in lease deals.

Sperry Van Ness said in a statement Tuesday that the charges are unfounded and that Marcus & Millichap “has a turnover problem and they are trying to point a finger at Sperry Van Ness.”

“I think that they are attempting to slow us down with legal maneuvers,” Van Ness said.

Van Ness worked at Marcus & Millichap for five years. He was regional manager of the Newport Beach office when he left in August, 1987.

Rand Sperry was a senior broker who worked at Marcus & Millichap less than a year.

As the real estate market has slowed, competition has intensified among local commercial brokerages and sometimes has spilled into court.

Los Angeles’ Daum Commercial Industrial Real Estate, for instance--one of Southern California’s oldest brokerages--sued Irvine-based upstart Scher-Voit Commercial Brokerage Co. two years ago for allegedly pirating brokers and real estate listings.

The two companies eventually settled out of court.

The investment market--in which both Sperry Van Ness and Marcus & Millichap specialize--is especially weak these days, say some brokers, as Japanese buyers in particular have taken a lower profile. Economic conditions in Japan are weaker and the Japanese also fear stirring a backlash in the United States.

The Marcus & Millichap suit, filed Monday in San Diego County Superior Court, alleges that Van Ness violated a signed agreement saying he wouldn’t solicit employees or clients from the company for two years after leaving.

Instead, the suit alleges, Van Ness and others conspired in a “far-reaching scheme of insider raiding.”

According to the firm’s legal complaint, Sperry and Van Ness plundered “literally thousands” of Marcus & Millichap documents, including “what amounted to client lists and client profile data”; disrupted and hurt “the morale and effectiveness of (the firm’s) work force”; and stole clients by falsely telling them Sperry Van Ness was “more knowledgeable and better-skilled” than Marcus & Millichap.

The Marcus & Millichap office in San Diego was especially hard hit by the alleged raids, a Marcus & Millichap spokesman said, and that’s why the suit was filed there. The two companies compete directly in that city, where Sperry Van Ness opened an office in March, and in Orange, Riverside and San Bernardino counties.

The suit asks for an injunction to bar Sperry Van Ness from the alleged raiding, which the suit says will cause “irreparable harm” to the “financial success, morale and economic viability” of its Southern California operations if not stopped; at least $5 million in compensation for revenue Marcus & Millichap allegedly lost to its rival, and an unspecified amount in punitive damages for the courts to determine.

This is not the first time Marcus & Millichap has sued former employees who it alleged had pirated away clients and brokers. The firm said it recently settled a similar suit against two former employees in its San Francisco office.

Although the terms of that settlement are confidential, the firm said the two brokers had agreed to pay it an unspecified sum and admitted mistakes.

But Sperry Van Ness said the charges against it are “frivolous.”

The firm has attracted brokers from other companies because, unlike Marcus & Millichap, it is set up to share profits with its brokers through partnerships, Sperry said in the statement issued Tuesday.

And, Van Ness said, Marcus & Millichap is trying to blame its own problems on his firm. When Van Ness left the brokerage’s Newport Beach office, he said in the statement, it had 12 senior brokers. There is only one left, he said.

“They would have you think that we stole the other 11, when in fact only one senior broker joined us,” Van Ness said. “And he solicited us.”

Altogether, nine brokers have defected from Marcus & Millichap to Sperry Van Ness, said Sperry, who contended that all of them were “disgruntled” with his competitor’s more regimented corporate style. The nine brokers included five in San Diego, three in Newport Beach and one in Ontario.

Sperry and Van Ness said their company has grown rapidly to become a medium-sized broker in Southern California by sharing profits and by exploiting the investment niche in the market while shunning the transition to a full-service brokerage.

Sperry Van Ness says it has 25 brokers each in its Newport Beach and Ontario offices and 18 in its newer San Diego office.

It specializes in sales of shopping centers, apartment complexes, office buildings, industrial parks and land.

Much-larger Marcus & Millichap has 15 offices in the West and Southwest with 1989 sales of $1.35 billion.