A real estate broker has filed a countersuit against real estate franchisor RE/MAX, alleging RE/MAX allowed other RE/MAX franchises to recruit away his agents.
The countersuit also alleged a noncompete clause in RE/MAX’s franchise agreements effectively locks brokers with multiple RE/MAX offices into the franchise perpetually.
In August, RE/MAX sued James E. Dulin II and his Carmel, Indiana-based company, The Hamilton Group, 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.
On Friday, Dulin filed an answer in federal court denying the allegations against him and lodging counterclaims against RE/MAX.
According to the 10-count countersuit, RE/MAX requires its franchisees to enter into separate franchise agreements for each office they open, even though Dulin’s brokerage, RE/MAX Ability Plus (REAB), functions as a single business. That means that each of Dulin’s four office locations has a different franchise termination date.
“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.
The countersuit alleges that a Massachusetts court had found in a past, separate case — Leading Edge vs. RE/MAX — that this policy exists.
That, added to a noncompete provision in RE/MAX’s franchise agreements that prohibits 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, “effectively turns the Franchise Agreements into perpetual agreements with no expiration dates, rather than the agreements with [a] five-year term, ” Dulin’s attorneys wrote.
RE/MAX uses this leverage to improperly “dictate increasingly onerous and anticompetitive terms on multi-point franchises like REAB,” according to the countersuit.
“The Counterclaim Plaintiffs 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,” the filing said.
For instance, 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 that RE/MAX is now in breach of contract by claiming that Dulin’s company can only close that office if it agrees to extend the term of REAB’s office in Carmel.
The countersuit asks the court to declare that the Lebanon agreement has been terminated and that the Carmel office’s term was not extended.
“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.
In an emailed statement, a RE/MAX spokesperson told Inman, “Broker/Owner Jimmy Dulin remains in breach of his contractual obligations with RE/MAX and is actively working to harm the brand and its business. Mr. Dulin’s counterclaims have no basis in fact and lack merit. RE/MAX, LLC will vigorously defend against them.”
The countersuit asks the court to declare that RE/MAX’s noncompete clauses are invalid and unenforceable and to find that the staggered terms of the franchise agreements constitute restraint of trade and unfair practices.
“The non-compete provisions, in combination with the staggered terms required by RE/MAX, are unreasonable restraints on trade,” the filing said.
“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.”
The countersuit also alleged breach of contract and tortious (wrongful) interference with a contract or business relationship, alleging that “RE/MAX took part in and encouraged the predatory recruiting and poaching of REAB’s sales agents,” violating its own Predatory Recruiting Policy in the franchise agreements and interfering with Dulin’s contracts with those agents.
Dulin’s attorneys name specific agents that were recruited away to other neighboring RE/MAX franchises or encouraged to set up their own RE/MAX brokerages nearby.
The attorneys alleged that Dulin and his company had “lost valuable business relationships” as a result, “and they expect to suffer lost income and profits as a result of those lost relationships.”
Lastly, the countersuit alleges that RE/MAX improperly commingles 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 for the benefit of RE/MAX offices in the region.
“RE/MAX has and is improperly commingling these funds and not using the fund as required under the Franchise Agreements,” Dulin’s attorneys wrote.
The countersuit seeks the recovery of actual, compensatory and consequential damages; disgorgement of profits gained as a result of violations; the above-mentioned declaratory relief; attorneys’ fees and costs; and reimbursement of the fees paid to RE/MAX “which were impermissibly used, to which Plaintiffs may show they are justly entitled.”
According to the original RE/MAX complaint against Dulin, the broker and seven members of the management team at RE/MAX Ability Plus held their annual company retreat in Arizona in April 2021. There, Dulin and his team allegedly attended a meeting at the home of eXp agents Chuck and Angela Fazio and Dulin allegedly asked his team to commit to joining eXp.
If Dulin named one of the Fazios as his eXp sponsor and Dulin’s sales associates then joined and named Dulin as their sponsor, then both the Fazios and Dulin would be compensated under eXp’s revenue share plan, according to the complaint.
Citing the sworn testimony of Dave Conord, eXp’s head of U.S. growth, the complaint alleged 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.
Dulin declined to comment for this story.