The pile of lawsuits facing Gary Keller and the real estate firm he co-founded, Keller Williams, just got larger. Former KW CEO John Davis filed his second lawsuit against the firm on Wednesday in the Western District of Texas.
In the filings, which name Keller Williams, Keller, former KW president Josh Team, Business MAPS Ltd. and Business MAPS Management LLC as defendants, Davis alleges that the defendants inflated key profitability metrics including company sales and profits to convince individuals to purchase Keller Williams Regions and Market Centers.
According to the filing, after the franchisees signed a contract, the defendants then required franchisees to adopt KWRI’s present market cap, which is the fee agents pay their market centers. Davis alleges that these fees went to increasing technology fees and the purchase of “unneeded goods and services” from KWRI-owned and affiliated companies, such as MAPS training and coaching.
“Nothing in the individual franchise agreements gave Keller or KWRI the power to set market caps themselves for independently owned and operated Market Centers,” the complaint states. “Indeed, in recommending specific and universal Market Center cap amounts, Keller was overstepping the franchisee’s role in leading an independently owned and operated Market Center.”
In addition, Davis claims that franchisees were required to purchase Keller’s books.
After signing the franchise agreement, if a franchisee attempted to move away from the KW system, the lawsuit alleges that they were forced to sell their Region or Market Center, and that Keller and KWRI interfered with any attempt to sell the franchise for market value, forcing the Region or Market Center owners to sell their franchises to Keller or other KWRI members at “extremely depreciated prices.”
In total, the lawsuit makes two civil Racketeer Influenced and Corrupt Organizations (RICO) claims, one Sherman Act restraint upon commerce claim, one intentional fraud in the inducement claim and one breach of contract claim against the defendants.
“Through this scheme, KWRI itself and the other Defendants suffer no loss, and only gains, from the harm caused to the individual owners,” the filing states. “In total, Defendants’ scheme has caused franchisees to lose hundreds of millions of dollars in total. Unless stopped, Defendants will continue to subject franchisees to the same scheme for the purposes of substantial interest and profit.”
Davis is seeking a jury trial and damages worth millions of dollars.
This latest lawsuit comes just three months after a judge in Texas granted Keller’s motion to dismiss Davis’ appeal, ordering Davis to settle his $300 million fraud claim against KW, Keller and Team through arbitration.
Originally filed in the fall of 2022, Davis’ initial lawsuit was prompted by Davis’ desire to “restore his reputation and clear his good name” after sexual misconduct allegations against him surfaced in the spring of 2022.
According to the initial complaint, Davis resigned from his position at Keller Williams in January 2019 due to a disagreement with Keller over a business strategy that he felt would hurt the income generated by Keller Williams offices.
In response to his resignation, Davis alleged that Keller and Team smeared him and withheld Inga Dow’s accusations of sexual misconduct from him as he was negotiating the sale of his KW market center regions following his resignation. This resulted in tens of millions in financial losses, according to Davis.
“This is yet another attempt by John Davis to smear Keller Williams in the press under the guise of a lawsuit. Two federal courts previously directed him to bring his claims [to] arbitration,” Darryl Frost, a Keller Williams spokesperson, wrote in an email discussing Davis’ August 2023 lawsuit. “Mr. Davis has ignored those courts. We will continue to act professionally, follow the law, and aggressively defend these baseless claims.”
In March, Colleen and Bart Basinski, former Keller Williams Market Center owners in Illinois and Indiana, and partial owners of a third Market Center in Southern California, filed their own lawsuit against KW, Keller and other top brokerage executives, alleging that they faced constant pressure from Keller, Marc King, and co-defendants Dan Holt, who is the regional director of Keller William’s Mid America Region, and Colette Ching, the regional director of Southern California, to alter their business operations, despite parameters set up in their franchise agreement, and adhere to Keller’s plans to lower Market Center caps in 2020.
The Basinskis’ case is still open.
