Leading Edge Real Estate, a Boston-headquartered indie brokerage that split from parent brokerage RE/MAX Integra last year, is suing its former franchisor for what it’s calling a “predatory” recruiting campaign in violation of franchise agreements.
In June 2018, after what Leading Edge co-owner Paul Mydelski called a “stalemate” in contract negotiations, Leading Edge announced its intention to no-longer affiliate with the RE/MAX Integra brand after its franchise agreements expired.
In the immediate wake of that decision, two offices with expired franchise agreements ended their affiliation, but four more had agreements until various dates in 2019, according to Leading Edge’s lawsuit. Mydelski first filed a preliminary injunction to keep the RE/MAX name until the agreements expired for all offices, but that injunction was not granted.
In the month following the decision, RE/MAX Integra engaged in what the complaint called, “Project Aloha,” an effort to recruit Leading Edge agents to other RE/MAX brokerages in the area.
“RE/MAX materially breached the unexpired franchise agreements by its conduct during the week of June 25, 2018 in executing its long-planned ‘Project Aloha,’ which included encouraging and coordinating the efforts of competing RE/MAX franchisees to engage in ‘predatory recruiting’ of Leading Edge sales agents,” the complaint reads.
“RE/MAX contacted Leading Edge agents on June 26, 2018, to tell them that the owners of Leading Edge intended to ‘sell their business’ and to invite them to a recruiting event the following day; organized a dinner with competing RE/MAX franchisees that evening,” the complaint continues.
After that date, Leading Edge says it could not have been expected to continue operating as a RE/MAX franchise while its franchisor actively encouraged agents to leave the company.
In total 29 agents left Leading Edge in the wake of the decision and subsequent recruiting campaign, according to the complaint. Leading Edge had around 180 agents before the split, according to previous Inman reporting.
In an interview with Inman after Leading Edge’s initial announcement in June 2018, RE/MAX Integra CEO Pamela Alexander told Inman the company planned to open RE/MAX franchises in the specific areas in which Leading Edge was operating.
“We’ll definitely put RE/MAX franchises in those specific areas with the right candidates,” Alexander said, at the time. “We’re in discussion already with a number of prospects.”
On July 3, 2018, Leading Edge delivered a letter to RE/MAX saying it breached and terminated the remaining franchise contracts due to its conduct, according to the complaint.
Leading Edge is seeking damages in costs it expended to rebrand as a result of RE/MAX’s early termination of the unexpired franchise agreements, plus the losses associated with the departure of 29 agents. Leading Edge is also seeking payback of franchise fees dating back to June 2014.
RE/MAX Integra is countersuing Leading Edge for violating its franchise agreements.
A spokesperson for Leading Edge told Inman, “We are looking forward to our day in court.”
A spokesperson for RE/MAX Integra told Inman they will not comment on pending legislation at this time, given that the trial is set to begin within a week. The spokesperson did say RE/MAX Integra is confident in its position and expects to prevail in its countersuit.
Leading Edge Real Estate, formerly RE/MAX Leading Edge, is a Boston-based indie with around 180 agents and offices across the greater Boston area. RE/MAX Integra is an independently-owned subfranchisor of RE/MAX.
UPDATE: Updated with additional comment from RE/MAX Integra.