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The legal battle pitting former Keller Williams CEO John Davis against Keller Williams and Gary Keller intensified this month after Davis expanded his list of defendants and upped the ante of his accusations against the brand’s co-founder.
Davis made his new accusations in an amended complaint filed on Nov. 20 — nearly three months after Davis initiated the lawsuit. Like the original complaint, the newly filed documents accuse Keller Williams of engaging in a “fraudulent, illegal business scheme.” The amended complaint also reiterates the original allegation that Keller Williams inflated key profitability metrics, such as company sales and profits, to convince individuals to purchase Keller Williams Regions and Market Centers.
However, the new complaint adds to the original filing, accusing Gary Keller of collecting fees from company franchisees and using those fees for himself, his son John Keller, and to create Keller Williams businesses, among other things.
“Gary Keller has misappropriated, diverted and embezzled the millions of dollars in fees collected from franchisees for purposes outside the scope of franchise agreements, and to fund his own personal ventures, through his new holding company, KWx,” the amended complaint argues.
News of the amended complaint was first reported by HousingWire.
Responding to the amended complaint, Keller Williams spokesperson Darryl Frost told Inman in an email that “once again, John Davis has filed baseless allegations against new parties to get more press coverage.”
Keller Williams has previously described the suit as an “attempt by John Davis to smear Keller Williams in the press under the guise of a lawsuit.”
“We will continue to follow the law and aggressively defend against his baseless claims,” Frost added.
Among other things, the amended complaint singles out 72Sold, which touts itself as a way for homeowners to sell their homes quickly and for high prices. The amended complaint states that 72Sold characterizes itself as a “leads and marketing platform” but that it actually conducts “misleading national advertising.” The complaint also states that Gary Keller owns 49 percent of the company and that he has pushed Keller Williams businesses to use 72Sold.
The complaint also disputes Keller Williams’ characterization of Livian, which started out as a team under agent Adam Hergenrother before rebranding following what, at the time, it described as a “strategic investment” from Keller Williams.
The complaint argues that in fact, Gary Keller purchased the team via KWx, and that he “has improperly allocated funds collected from franchisees to purchase and fund Livian, which operates in competition to KWRI Market Centers.”
The new complaint also expands the list of defendants. Originally, Davis sued Keller Williams, Gary Keller, Business MAPS Ltd. and Business MAPS Management LLC.
Now, however, the defendants also include John Keller, former Keller Williams President Josh Team, current President Marc King, Head of Industry and Learning Jason Abrams, President of KW Worldwide William Soteroff, regional directors Jonathan Dupree and Matt Green, Livian, 72Sold and the KW Southwest Region.
Davis’ original complaint ran 58 pages — the amended one clocks in at 71 — and among other things argued that the defendants financially abused franchisees by requiring them to adopt Keller Williams’ preset market cap, which refers to the fees that agents pay their market centers. It also accused Keller Williams of increasing technology fees and requiring franchisees to purchase “unneeded goods and services” from KWRI-owned and affiliated companies.
“If [Gary] Keller owns a company that sells produces or services, franchisees are not permitted in this instance to obtain similar products and services from independent third parties, even when the products and/or services of independent third parties are superior and/or less expensive,” the original complaint alleges.
Franchisees were also allegedly required to purchase Keller’s books, which the suit states was for “Keller’s own personal enrichment and self-serving needs.”
If franchisees attempt to step outside of the system, the suit claims KWRI and Keller ostracize them from the investor group — forcing them to sell their region or market center. However, the suit also claims Keller and KWRI interfere with any attempt to successfully sell the region or market center at market value to qualified individuals, once again forcing franchisees to sell their assets to Keller or favored KWRI members at “extremely depreciated prices.”
Originally, the suit made 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.
The amended complaint now makes one RICO claim, one Sherman Act restraint upon commerce claim, one embezzlement claim and one general partner liability claim.
Davis first filed the suit about three months after a judge ordered him to settle an earlier $300 million fraud claim against Keller Williams. That case began in 2022 and stemmed from what Davis said was an effort to restore his reputation after sexual misconduct allegations against him surfaced.
The amended complaint ultimately demands unspecified damages and a jury trial.
Read the amended complaint here:
