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A long-running legal battle between Keller Williams and a former CEO of the company, John Davis, has inched closer to a conclusion after a judge this month sent the case to arbitration.
John Davis
The move is a response to a request from Keller Williams and other defendants to either dismiss the case, or compel arbitration. The judge refused to dismiss, but granted the latter request in an Aug. 12 order. The plaintiffs in the case, including Davis, also consented to arbitration, the order reveals.
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News of the order was first reported by RISMedia. The case is being adjudicated in U.S. District Court for the Northern District of Texas, Fort Worth Division.
In a statement to Inman, Keller Williams spokesperson Darryl Frost said the company “is pleased with the court’s decision to compel arbitration in this matter, which is precisely the outcome we sought and expected.”
“While our motion to dismiss was a procedural alternative, the court’s decision to, yet again, enforce a binding arbitration provision is supported by the law and reflects the strength of our position,” Frost continued. “It is unfortunate that judicial resources, as well as our own time and resources, were wasted to enforce what should have been a straightforward legal process. We are fully prepared to defend these baseless claims in arbitration.”
Meanwhile, Davis’ attorneys Andrew Miltenberg and Kristen Mohr said in a statement to Inman that “we are pleased that the court agreed with us that these claims should move forward in a forum where Keller Williams, Gary Keller, John Keller, Marc King, Josh Team, and their various entities have to answer for their wrongdoing, which has harmed many business owners within the Keller Williams ecosystem.”
The case is the second of two lawsuits Davis has filed against his former employer. The first began in 2022 in what Davis characterized as an effort to restore his reputation after sexual misconduct allegations against him surfaced earlier that year. In addition to Keller Williams, Davis named as defendants Gary Keller, former KW President Josh Team, and Inga Dow — the CEO of various KW offices and the person who made the misconduct allegations.
Dow eventually dismissed her claims against Davis.
A judge sent Davis’ initial lawsuit to arbitration in March 2023.
However, in November of last year he filed a second suit. The second lawsuit reiterated some of the same claims, including that Keller Williams engaged in a “fraudulent, illegal business scheme” and that it inflated key profitability metrics. But it also made additional allegations, including accusing Gary Keller of collecting fees from company franchisees and using those fees for himself, among other things.
For its part, Keller Williams told Inman at the time the second suit was filed that the claims were “baseless” and an attempt to “smear Keller Williams in the press under the guise of a lawsuit.” Keller Williams and other defendants also asked the court to hold Davis in contempt for avoiding arbitration, and claimed the second suit was merely a repackaged version of the first suit.
This month’s new order, however, states that “Davis responded that the different mix of parties and claims in the second lawsuit did not violate the arbitration order.”
‘The second lawsuit includes a new plaintiff, Jesse Herfel (“Herfel”), and various new defendants,” the order states. “It also involves new theories of liability based on civil RICO, Sherman Act violations, embezzlement, and general partner liability.”
Keller Williams and the other defendants asked that the case either be dismissed or forced into arbitration in April. After a series of subsequent requests and legal filings, the judge ultimately granted the arbitration request this month.
In addition to sending the case to arbitration, the judge denied the defendants’ request to recoup some attorney’s fees. However, the judge also warned the plaintiffs that they could ultimately end up on the hook for their opponents’ legal bills.
“To be sure, the court is acutely aware of what seem to be delay tactics and a waste of resources in two separate matters,” the judge wrote in the order. “The most recent effort appears to be plaintiffs’ request for an extension of time to amend pleadings and add parties after consenting to arbitrate all claims. Should plaintiffs continue to act in such a manner, defendants may reassert their request for attorneys’ fees in connection with the first lawsuit and/or the second lawsuits.”
Read the judge’s Aug. 12 order here (if the document does not appear, try refreshing the page):
Update: This post was updated after publication with additional details from the lawsuit, and with commentary from the various parties involved in the case.
