A lawsuit filed by former Keller Williams CEO John Davis against the company appears to be escalating, as Davis last week added new accusations and named more names as he claims Co-Founder Gary Keller used franchise fees and self-dealing to fraudulently enrich himself at the expense of agents and franchise owners.
The updated complaint, filed in federal District Court in Texas, adds several more Keller Williams employees to the list of defendants, including Keller’s son, John Keller, who currently serves as vice chairman of the company, and claims the defendants engaged in illegal federal racketeering.
Davis also detailed what he calls an “illegal and criminal-minded scheme,” where Gary Keller and the other defendants allegedly misrepresent franchise agreements, force franchises to pay for services through companies that Keller owns or invests in, and retaliate against anyone who doesn’t play along.
“Gary Keller and KWRI consistently engage in conduct where they seek to target, punish and destroy those that attempt to go against Gary Keller,” the filing reads. “Defendants’ pyramid scheme-type playbook pits franchisees against each other in a divide and conquer manner, where only Gary Keller comes out on top or wins.”
In a statement, Keller Williams spokesperson Darryl Frost broadly denied these allegations.
“Once again, John Davis has filed more baseless allegations against new parties to get more press coverage. We will continue to follow the law and aggressively defend against his baseless claims,” Frost told RISMedia via email.
The acrimony between Davis and his former company goes back to at least 2019, when Davis resigned from the company allegedly due to disagreements over business strategy. In 2022, a former Keller Williams franchise owner sued Davis and several other company executives, alleging that Davis sexually harassed her for years and oversaw an unsafe work environment.
Davis denied those allegations, but filed another lawsuit himself against the company, claiming that Gary Keller and other executives used the sexual harassment allegations to smear him and hamper the sale of his company market centers. That lawsuit was later dismissed.
This lawsuit was initially filed back in August of this year. But this latest filing goes much deeper into the allegations, calling into question the entire structure of the company he used to lead, and saying the alleged scheme “runs afoul of franchise ethics.” He also claims that John Keller was very recently appointed CEO to shield his father from accountability from the lawsuit, even as the elder Keller continues to run the company.
Also notable in this new filing, Davis claims a recent increase in agent technology fees—which he said will reach $150 per month by 2025—is designed purely to enrich Gary Keller, and does not reflect any increase in tech availability or quality. This was partly due to Keller being “not particularly astute to technology,” and reckless spending by another named defendant, former Keller Williams President Josh Team.
The increased revenue for Keller Williams amounts to over $80 million so far, which Davis claims Keller is keeping for himself.
Two companies, 72Sold and Livian, are also singled out as being owned or controlled by Gary Keller, who then pushed them on Keller Williams agents and franchises for his own profit.
Davis attributes many of the decisions and allegedly fraudulent behavior to Keller’s fear of rival brokerage eXp, which had lower caps and was ascendant at the time that Davis claims Keller Williams began engaging in the alleged scheme.
“(Gary) Keller was fixated on eXp and could not stop talking about it,” the filing reads.
Keller, according to Davis, was also enraged and paranoid because eXp was attracting at least some Keller Williams defectors, and was founded by a former top Keller Williams agent.
“When (Gary) Keller feels that he has been slighted in any magnitude…he seeks to target and destroy that person at all costs, even if it would hurt his own people,” Davis claimed.
Keller demanded franchises lower their caps, which Davis claims violated independent franchise agreements and was a “lose-lose-win,” where agents and owners saw profits decline as Keller continued to collect the same royalty.
Owners that resisted were threatened with losing their licensing, or even having top agents moved to complying franchises, according to Davis.
Claiming he resisted the push for “universal” caps for years, Davis said he eventually resigned from the company.
At press time, defendants had not responded to the filing in court.
After being with KW for years, and hearing caps were to be lowered and my office never lowered them., outrageous splits as well as technology being shotty, I had to go elsewhere…. Never looked back
In our market center, everything is wide open for everyone to look at the financial and dig themselves to see how our offices are operating. Gary Keller is the only franchisee who is standing against the lawsuit to get rid of the buyer agent position. His MREA book is the only manual to become a millionaire in real estate. He constantly fights and works for the benefit of the agents. We need a person like him in our broken industry where everyone wants a piece of our commissions. It’s amazing to see capitalism is good everywhere else except for the real estate agents! Those companies with a lower cap, provides much less to the agents as far as education and agent support. Look at how exp is running their business. Most of their top agents are losing their production because they are focused on recruiting other agents vs. focusing on their own productions.
I feel over the years kw and Gary Keller have done a great job with their model . However the industry as a whole is changing and evolving. I was a market center op and even though I enjoyed my time at KW it didn’t end up being completely what they say it will be. Our market center lost a ton of capital and was constantly in recruiting mode just to make ends meet. At the end of the day the profit share is not that profitable especially compared to the revenue share structure I have experienced at exp. Also I would ask how much of KW do you own and I mean really own with stock and equity ownership in the company? True ownership changes lives and how people approach and care for that business. There has never been ownership offered to all the agents that are part of kw or most other brokerages. And this never truly offers the opportunity to change their lives when it comes to retirement or a legacy that they leave to their family.
After nearly a decade with Keller Williams as a top producing agent, I was tired of paying the incredibly high fees and watching my hard earned money fill their pockets. I am surprised there isn’t a lawsuit regarding Broker/Agent splits, fees, and a few very grey areas where Brokers keep commissions when they shouldn’t have. Word of advice read the fine print on your commission agreement…