An 8-year-old lawsuit claiming Century 21 Real Estate Corp. and its parent company misused franchisee proceeds after Century 21 was sold in 1995 has new legs, after a judge granted the case class-action status this week.
Attorneys who filed the lawsuit say the class certified by New Jersey Superior Court Judge Robert J. Brennan on Tuesday includes at least 1,000 current and former Century 21 franchisees, and possibly 4,000 or more.
In a press release, attorneys for the plaintiffs said they estimate damages suffered "may total in the hundreds of millions of dollars."
The lawsuit charges that Century 21 and its parent company failed to provide the required level of services, and misappropriated fees paid by franchisees into a national advertising fund.
In a statement, Century 21 parent company Realogy Corp. said the claims in the 2002 lawsuit "were without merit, and they remain so today."
"We have capably managed the Century 21 brand since its acquisition in 1995 and have continuously enhanced the brand through many market cycles, including the worst downturn in housing in the history of our country," Realogy said.
The lawsuit "does not properly reflect the strong relationships we have with our current franchisees," Realogy said, promising to "aggressively defend" against its claims.
The 2002 lawsuit was filed on behalf of five Century 21 brokerages located in Florida, Michigan, Arizona and New Jersey, and sought class-action certification to expand its reach to other brokers.
With class certification, any Century 21 franchisee active from August 1995 to April 2002 and whose franchise agreement contains a clause stipulating that legal disputes be resolved in New Jersey is a potential class member.
The lawsuit names as a defendant Realogy’s predecessor company Cendant Corp., which was known as Hospitality Franchise Systems Inc. at the time of the Century 21 acquisition.
After acquiring Century 21 from Metropolitan Life Insurance Co., Cendant also began buying all of the previously independent regional Century franchisors, and took charge of a $40 million-a-year national advertising fund, the lawsuit alleged.
Franchisees paid 2 percent of their gross revenue into the fund, on top of a 6 percent franchise service fee, the complaint said.
The lawsuit alleges that revenue from the fund was diverted for uses that did not benefit Century 21 franchisees, such as the promotion of Cendant-owned competitors Coldwell Banker and ERA.