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Two former Keller Williams agents have filed separate class-action lawsuits against the franchisor over changes to its profit share program — with one suit calling on the court to block the brokerage from paying out additional funds until the case is resolved.
Former Keller Williams agent Jerri L. Moulder, who served with the brokerage from 2002 to 2011, filed a complaint March 22 seeking class-action status in the U.S. District Court for the Western District of Texas at San Antonio against Keller Williams Realty. The complaint, which seeks $250 million in damages, alleges breach of contract and unjust enrichment and seeks an order from the court rolling back changes announced last summer to its profit share program.
A day later, on March 23, David L. Bueker, who was a KW agent from 2003 to 2011, filed a nearly-identical complaint — without the damages figure — in the U.S. District Court Eastern District of Missouri at St. Louis against KW with similar allegations, but also requesting a preliminary injunction “specifically prohibiting the redistribution of disputed payments under the Profit Sharing Program.”
“To the extent that disputed Profit Sharing Program funds are distributed to other Profit Sharing Program participants during the pendency of this action, Plaintiff, Class Members and Sub-Class Members risk suffering irreparable harm absent an injunction because Profit Sharing Program funds will be distributed without any method or ability to recapture those funds from the recipients,” the Bueker complaint says.
In February 2020, KW announced that associates who joined the real estate franchisor on or after April 1, 2020 and subsequently jumped ship to a competitor would no longer be able to receive profit shares from the company’s lifelong revenue program. That policy was not retroactive and so did not apply to agents who joined before that date.
That changed in August. At KW’s Mega Agent Camp event in Austin, Texas, the company’s International Associate Leadership Council (IALC) voted to change its profit share distribution policy so that vested agents who joined KW before April 1, 2020 and who “actively compete” with KW brokerages have their profit share amount cut from 100 percent to 5 percent.
The company noted at the time that it would send a letter to vested agents — or those who remain at KW for seven consecutive years — affected by the policy, giving them six months to return and not have their profit share cut. Those letters started going out in December.
“On August 16, 2023, the IALC — the voice of Keller Williams Realty, Inc.’s franchisees and agents — voted to update their profit share distribution policy, set to go into effect July 1, 2024,” KW spokesperson Darryl Frost told Inman in a statement Monday.
“Under the revised policy, former KW agents who actively compete against our brokerages will receive less profit share, with more redistributed to the agents who continue to partner in our growth. This change will not affect agents that retire or leave the real estate brokerage business.
“Importantly, this change does not enrich Keller Williams Realty, Inc. — these funds continue to enrich only affiliated real estate agents, investors, brokers, and staff.”
Both suits were filed by the law firm Humphrey, Farrington & McClain, based in Independence, Missouri, whose home page says “We Specialize In Big Cases Other Firms Won’t Touch.” Inman has reached out for comment and will update this story if and when a response is received.
The complaints allege Keller Williams anticipated that the changes in its profit share program were a breach of contract and so when the IALC changed the program in August, the council also added a provision to the terms of the program that would ensure the program’s funds could be used to defend the change in court.
That provision reads: “Administration and Defense of the Profit Sharing Program. Any and all funds in the Profit Share program may be utilized by KWRI for administration or defense of the Profit Share program, including to cover all costs, attorneys’ fees, expenses, sums of money, debts, interest, losses, damages, settlements, fines, penalties, assessment, and judgments incurred, levied or resulting from any claims or disputes relating to the Profit Share program.”
According to the complaints, a report presented to the IALC in August 2019 told the the council that “in the last year, approximately $25 million to $40 million was paid in profit sharing distributions to non-Keller Williams participants who are directly competing with Keller Williams.”
The complaints maintain that under KW’s Policies & Guidelines Manual, any termination or change to the profit share program would be “prospective only” — meaning it would only apply to future recruits. They allege the August change “is retrospective in affect and violates the terms of the contractual agreement between Plaintiffs, Class Members, and Sub-Class Members and defendant Keller Williams.”
The suits were filed on behalf of those “with a Keller Williams Anniversary Date before April 1, 2020, and are or will be designated by Keller Williams as being a Vested Competing Associate and have, or will have, payments under the Profit Sharing Program reduced from 100% to 5%” both in Missouri and nationwide. The suits did not say how large they believe the nationwide class is, just that it would include more than 100 people.
“The benefit received and accepted by defendant Keller Williams was at the expense of Plaintiffs and Class Members or Sub-Class Members in that they expended time, energy and effort to recruit top sales associates to join Keller Williams,” the complaints say.
“To allow defendant Keller Williams to retain the benefit of the profits generated by sales associates recruited by Plaintiffs and Class Members or Sub-Class Members would be unjust when Keller Williams encouraged and enticed Plaintiffs and Class Members or Sub-Class Members to put forth such efforts.”
Moulder is currently a broker associate with Platinum Realty in Kansas City, Missouri and Bueker is an agent with Red Key Realty Leaders in Chesterfield, Missouri.