After filing a suit in August that alleged a real estate broker had violated RE/MAX’s predatory recruiting policy in its franchise agreement, the broker filed a countersuit in federal court on Friday claiming, among other things, that RE/MAX has violated the same policy.
In the original complaint, RE/MAX sued broker Jimmy Dulin and his Carmel, Indiana-based company, The Hamilton Group, of RE/MAX Ability Plus (REAB), for allegedly violating the terms of four franchise agreements for RE/MAX offices in Indiana by recruiting 41 agents to eXp Realty while still under contract with RE/MAX. According to the complaint, Dulin and seven members of the REAB management team held their annual company retreat in Arizona in April 2021. While in Arizona, RE/MAX alleges that Dulin and his team met with eXp agents Chuck and Angel Fazio. During the meeting RE/MAX alleges that Dulin asked his team to commit to joining eXp.
According to the complaint, if Dulin moved to eXp and named one of the Fazios as his eXp sponsor and then one of Dulin’s associates joined and named Dulin as their sponsor, then both the Fazios and Dulin would be compensated under eXp’s revenue share plan.
However, citing the sworn testimony of eXp’s head of U.S. growth, Dave Conord, the complaint claimed that Dulin told eXp that he was interested in joining eXp with his team, but eXp told Dulin that he could not because he remained under contract with RE/MAX.
Inman News first reported on the countersuit.
According to the countersuit, RE/MAX requires its franchisees to enter into separate franchise agreements for each office they open, even if the brokerage functions as a single business. This means that each office location has a different franchise termination date. Attorneys for Dulin stated in the filing that a Massachusetts court found that this policy exists in Leading Edge vs. RE/MAX.
“RE/MAX has an undisclosed policy of refusing to allow owners of multiple locations with Franchise Agreements on staggered terms like REAB to have a coterminous expiration date for all locations because those owners might choose to leave the RE/MAX network upon the expiration of their Franchise Agreements,” Dulin’s attorneys wrote in the filing.
According to the countersuit, this, plus the noncompete provision in RE/MAX’s franchise agreement prohibiting brokers or their immediate family members from competing with RE/MAX by opening a non-RE/MAX brokerage during the term of any franchise agreement, turns the agreements into “perpetual agreements” instead of the five-year terms they supposedly are.
The countersuit goes on to claim that RE/MAX uses this to “dictate increasingly onerous and anticompetitive terms on multi-point franchises like REAB,” and that Dulin and REAB “are left to choose between systematically closing their offices one-by-one and destroying the value of 30 years of hard work or acquiescing to the increasingly unreasonable terms dictated by RE/MAX.”
As an example of this practice, the countersuit alleges that Dulin and RE/MAX mutually agreed to close REAB’s office in Lebanon, Indiana, without extending the term of any other franchise location, but RE/MAX has since claimed that Dulin and REAB can only close that office if they agree to extend the term of REAB’s office in Carmel, Indiana.
By closing the Lebanon office and not extending the term of the Carmel office, RE/MAX claims that Dulin breached his contract.
In the countersuit, Dulin asks the court to declare that the Lebanon agreement has been terminated and that the Carmel office’s term was not extended. The filing also asks that the court declare RE/MAX’s noncompete clauses invalid and unenforceable, and to find the staggered terms of the franchise agreements represents a restraint of trade and unfair practices.
“RE/MAX makes it nearly impossible for its franchisees to compete against RE/MAX in the future, whether as an independent business or with a different franchise,” the countersuit said. “The non-compete provisions, in combination with the staggered terms required by RE/MAX, are unreasonable restraints on trade. The only basis for a non-compete is to protect confidential information, but … RE/MAX never disclosed confidential information to the Counterclaim Plaintiffs during their long relationship, and therefore RE/MAX cannot enforce any non-compete provision.”
In addition, the countersuit alleges that RE/MAX breached its own contract and engaged in tortious (wrongful) interference with a contract by taking part in and encouraging “the predatory recruiting and poaching of REAB’s sales agents,” in violation of its own predatory recruiting policy and interfering with Dulin’s contracts with the agents in questions, which Dulin’s attorneys name in the filing.
Due to this, the filing alleges that Dulin and REAB “lost valuable business relationship and they expect to suffer lost income and profits as a result of those lost relationships.”
The countersuit’s final claim is that RE/MAX improperly mixes funds from a monthly “Promotion Fee” and a monthly “Hot Air Balloon Fund Fee,” which RE/MAX’s franchise agreements say are accounted for separately from the franchisor’s other funds for advertising to benefit all of RE/MAX offices in the region.
