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Keller Williams co-founder Gary Keller has notched another win in litigation filed against him and the company by former KW CEO John Davis: Davis’s appeal to overturn a lower court ruling sending the case to arbitration has been denied.
On Wednesday, a three-judge panel of the U.S. Court of Appeals for the Fifth Circuit granted a motion to dismiss Davis’s appeal filed by Keller, Keller Williams and former KW President Josh Team earlier this month. The judges agreed with the KW defendants that the appeals court lacked the authority to grant the appeal because the lower court’s March ruling sending the case into arbitration was not final.
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.
“Here, in addition to compelling arbitration, the district court stayed the rest of the case and ordered it administratively closed,” the appeals court judges wrote in their May 24 order.
“It expressly stated that the parties file a joint status report at the close of arbitration and file a motion to reopen or dismiss the case as appropriate. By entering a stay and allowing for reactivation of the case, the district court demonstrated that it was postponing, not terminating, the proceedings. Thus, the order compelling arbitration is not a final appealable order over which this court has jurisdiction.”
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 a phone interview, John Davis spokesperson Paul Omodt told Inman he saw the appeals court order as a timing issue.
“What it says is the right time to appeal is after arbitration,” Omodt said.
“The truth will still come out.”
Omodt said arbitration had not yet begun and he did not know how long it would take.
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 March, two Keller Williams market center owners, Colleen and Bart Basinski, sued Keller Williams, Gary Keller, KW President Marc King and regional leaders Dan Holt and Colette Ching, alleging that they experienced retaliation for their association with Davis and for also refusing to follow the same business strategy that Davis objected to. The Basinskis alleged the defendants “maliciously interfered” with multiple business contracts that allegedly caused the couple to lose approximately $10 million in investments, disbursements, profits and income from their roles as market center owners, KWRI coaches and team leaders.
Omodt told Inman that the longer the Davis case drags on, the worse it will be for the Keller Williams defendants because more KW franchise owners will come forward with similar claims against the franchisor and its leaders.
“They’ll have to face the music at some point,” Omodt said.
In an emailed statement, Keller Williams spokesperson Darryl Frost told Inman the appeals court ruling was the right one.
“We’re pleased the court upheld the ruling requiring Mr. Davis to honor his agreements,” Frost said.
“Unlike Mr. Davis, we are not interested in litigating our disputes in the press nor are we interested in wasting judicial resources on a dispute that is rightly required to be arbitrated. We intend to continue to conduct our business in a professional and lawful manner and look forward to the arbitration.”
Editor’s note: This story has been updated with a comment from Keller Williams.