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Keller Williams co-founder Gary Keller is getting his wish: claims against him and the company brought by former KW CEO John Davis will be handled through arbitration rather than through a public trial.
After a hearing Monday, Judge Reed O’Connor of a federal district court in Fort Worth, Texas, granted a motion to compel arbitration in Davis’s case filed by Keller Williams, Keller, and former KW President Josh Team last month. Arbitration is a private process in which the parties agree that a neutral third party can make a binding decision about a dispute after considering evidence and hearing arguments.
The ruling suspends the case pending the results of arbitration. How long the process will last is an open question. O’Connor ordered the parties to file a joint status report and either a motion to reopen the case or a motion to dismiss the case two weeks after arbitration concludes.
In the fall, Davis filed a fraud lawsuit in what Davis said is an effort to restore his reputation after sexual misconduct allegations against him surfaced earlier in 2022 and to recover $300 million in damages. The Oct. 27 complaint also names Inga Dow, the CEO of multiple Keller Williams offices who lodged the allegations against Davis, as a defendant. At the end of January, the court refused Keller’s request to merge the suits filed by Davis and Dow, ruling that they will continue as two separate cases.
In his suit, Davis alleges he resigned from KW because of a disagreement with Keller over a business strategy that he believed would bring in less income to Keller Williams offices, and that Keller and Team responded by smearing him and withholding Dow’s accusations from him when he was negotiating the sale of his KW market center regions after his resignation, resulting in tens of millions in financial losses.
In a phone interview, John Davis spokesperson Paul Omodt told Inman that whether the case is heard through arbitration or a public trial, the truth will eventually come out.
“Keller Williams can’t hide from the truth,” Omodt said. “The truth will still come out.”
He added that other Keller Williams market center owners were making similar allegations against Keller and Keller Williams, including in a lawsuit filed last week.
“It’s not only John’s truth, but also other people,” Omodt said. “It just shows how it’s not the right way to do business.”
The court’s order did not elaborate on O’Connor’s reasons for granting the motion to compel arbitration.
“We are very pleased with today’s court ruling that enforced the parties’ agreement to arbitrate, and we look forward to an arbitrator dismissing this meritless dispute,” KW spokesperson Darryl Frost told Inman in an emailed statement, speaking on behalf of KW, Keller, and Team.
Keller, Keller Williams, and Team filed their motion to compel arbitration in Davis’s case on Feb. 8, arguing that Davis signed “numerous agreements” with the defendants that include arbitration clauses. On Feb. 13, Dow told the court she agreed with Keller Williams that Davis’s claims — including those against her — should be resolved under arbitration.
But on Feb. 16, Davis told the court that an agreement he signed with Keller Williams on Nov. 4, 2020 “expressly cancels all previous contracts and agreements.”
Moreover, Davis’s attorneys argued that the arbitration agreement the defendants seek to enforce is “unconscionable” because it is designed to prevent franchise owners from suing and therefore keeping Keller Williams’ alleged wrongdoings from coming to light. The filing alleged that Keller runs Keller Williams “similar to a criminal enterprise, whereby investments and interests are taken or devalued through unlawful tactics, whether through improper reduction of market caps or other means, because of Gary Keller’s greed.”
In a Feb. 20 reply to Davis’s filing, attorneys for Keller, Keller Williams and Team did not address Davis’s allegations regarding the operation of Keller Williams. Rather, they argued that Davis’s position that the subject arbitration agreement is unconscionable is “unsupported.”
“[T]here is nothing in the Agreement’s arbitration provisions that is ‘sufficiently shocking or gross to compel the court to intercede,’ which is the standard for substantive unconscionability,” the filing reads.
“Finally, arbitration is not against public policy,” the filing continued. “It is well established that arbitration of disputes between parties is strongly favored under federal and state law.”