Colorado-based RE/MAX sued eXp Realty last week, claiming the virtual brokerage improperly tried to recruit RE/MAX agents and that it “unfairly and deceptively attacked” RE/MAX in ads.
RE/MAX filed the suit in state court in Denver Thursday. It explains that RE/MAX “has binding franchise agreements with franchisees,” and that these agreements have specific beginning and ending dates. In other words, RE/MAX is saying that its franchisees can’t simply abandon the company and immediately join a rival firm.
However, RE/MAX goes on to claim in the suit that eXp has repeatedly enticed RE/MAX agents to do just that. The suit says the virtual brokerage “targets franchise owners to abandon their franchises” and join eXp, then goes on to point to numerous specific instances of alleged improper recruitment. For example, RE/MAX claims that eXp tried to recruit franchisees in Texas, Missouri and Nevada in 2019. And in 2020, the suit also claims, eXp improperly tried to solicit RE/MAX franchisees in Michigan, California, Pennsylvania and South Carolina.
In addition to complaints about recruitment, RE/MAX also takes issue in the suit with eXp’s advertising. It specifically claims that eXp has “published false and misleading information” about RE/MAX commission splits and caps. The misleading information was used to recruit other agents, the suit states, and ultimately all of these actions are “irreparably harming” RE/MAX. The suit also claims eXp’s actions amount to a “repeated, malicious, and intentional pattern of interference.”
The suit ultimately asks a judge to bar eXp and its agents from contacting “any franchisee” of RE/MAX in an effort to recruit them before their term with the company expires. The suit also asks for unspecified damages.
A RE/MAX spokesperson said Friday that the company could not comment on pending litigation. However, RE/MAX CEO Adam Contos sent a letter to RE/MAX associates last week explaining the suit, and saying that “we welcome fair competition within the industry, but this type of behavior is not that.”
“Misleading agents and encouraging franchisees to default on their contracts are unlawful business practices,” Contos said. “We will not stand idly by as they attempt to tarnish our brand. Today, we fight back — on behalf of our affiliates as well as our company.”
For its part, eXp also said it couldn’t comment on pending litigation. However, in an emailed statement company CEO Jason Gesing said “We are confident in our business model and continue to gain global market share.”
“We appreciate competition and are focused on continuous innovation of our agent-centric value proposition,” Gesing said, adding that “organically, agents are attracted to the eXp model and with our significant growth, allegations of this type can occur and are without merit.”
The growth that Gesing references has been significant. Last month, real estate analyst and consultant Mike DelPrete described eXp as one of the “largest, fastest-growing brokerages” in the U.S. Recent months have also seen a wave of high-profile teams from numerous brands, including RE/MAX, defecting to eXp.
This also isn’t the first time recruitment battles have erupted into legal battles. Most famously, Realogy sued Compass in 2019 claiming the firm “tortiously interferes with, and disparages its competitors” — essentially the same thing RE/MAX is now accusing eXp of doing. Compass eventually countersued and the case is still working its way through the courts, but in the mean time The Agency, Howard Hanna and a Better Homes and Gardens affiliate have also sued Compass.
It’s significant that along with eXp, Compass was another company that DelPrete highlighted in his recent analysis of fastest-growing brokerages. In other words, both companies have expanded aggressively and quickly, and both are also now targets of lawsuits over those expansion tactics.
Read RE/MAX’s complaint here: