Keller Williams faces three lawsuits tied to its profit-sharing program 

Three agents formerly affiliated with Keller Williams Realty — Jerri L. Moulder, David L. Bueker and Robert E. Hill — have taken legal action against the real estate brokerage by filing three separate class-action lawsuits, Inman first reported on Tuesday. 

The lawsuits contest alterations made to Keller Williams’ profit-sharing program, with one of them seeking a court order to halt further payouts until the case concludes.

On March 22, Moulder, who worked with Keller Williams from 2002 to 2011, filed a complaint aiming for class-action status in the U.S. District Court for the Western District of Texas in  San Antonio. Allegations include breach of contract and unjust enrichment, with damages sought at $250 million. Moulder’s complaint challenges adjustments made to Keller Williams’ profit-sharing program and calls for a rollback of the new policy.

The following day, Bueker, a former KW agent from 2003 to 2011, filed a similar complaint in the U.S. District Court for the Eastern District of Missouri in St. Louis. Bueker’s filing echoes Moulder’s, but it also requests a preliminary injunction “specifically prohibiting the redistribution of disputed payments under the Profit Sharing Program.”

“To the extent that disputed Profit Sharing Program funds are distributed to other Profit Sharing Program participants during the pendency of this action, Plaintiff, Class Members and Sub-Class Members risk suffering irreparable harm absent an injunction because Profit Sharing Program funds will be distributed without any method or ability to recapture those funds from the recipients,” the Bueker complaint states. 

On March 25, Robert E. Hill, a former KW agent from 2002 to 2013, filed a similar complaint in the U.S. District Court of Kansas in Kansas City. Hill also demands a preliminary injunction to prohibit the redistribution of disputed payments.

In February 2020, KW introduced a more restrictive policy to its profit-sharing program. It stated that associates who joined the brokerage on or after April 1, 2020, and subsequently jumped to a competitor would lose their revenues from the company’s lifelong revenue program. But that policy did not impact agents who joined before April 1, 2020. 

The change introduced in 2020 also extended the wait period to become a vested member. But in August 2023, during KW’s Mega Agent Camp event in Austin, the company’s International Associate Leadership Council (IALC) voted to revise the profit-sharing distribution policy. Under the updated policy, vested agents who joined before April 1, 2020, and actively compete with KW brokerages would see their profit share reduced from 100% to 5%.

An incentive to go back to Keller Williams remained. Former agents who return to the company within six months of the effective reduction date will have their profit share restored to 100%, KW President Marc King wrote in an email in August 2023. Also, former KW agents who have retired or left the industry altogether will retain their full profit-share distribution. The new policy is supposed to be implemented on or before July 1, 2024.

“On August 16, 2023, the IALC — the voice of Keller Williams Realty, Inc.’s franchisees and agents — voted to update their profit share distribution policy, set to go into effect July 1, 2024,” KW spokesperson Darryl Frost told Inman in a statement Monday.

“Under the revised policy, former KW agents who actively compete against our brokerages will receive less profit share, with more redistributed to the agents who continue to partner in our growth. This change will not affect agents that retire or leave the real estate brokerage business. Importantly, this change does not enrich Keller Williams Realty, Inc. — these funds continue to enrich only affiliated real estate agents, investors, brokers, and staff.”

Both the Moulder and Bueker lawsuits — filed by the firm of Humphrey, Farrington & McClain, based in Independence, Missouri — focus on the contention that Keller Williams breached its contract with agents by retroactively altering the profit-share program. They also highlight a provision added by the IALC in August, allowing KW to utilize profit-share program funds for legal defense against disputes.

According to the complaints, a report presented to the IALC in August 2019 revealed that approximately $25 million to $40 million had been paid in profit-sharing distributions to non-Keller Williams participants who were directly competing with the company.

Gary Keller, co-founder of Keller Williams, introduced the concept of profit sharing for agents in 1986. Keller and the company’s first Associate Leadership Council created the profit-share system, and an early version of the program was officially launched in 1987.

The tenets of the program are simple: Owners of individual Keller Williams market centers allocate roughly 50% of their monthly office profits to associates who play an instrumental role in attracting new talents to the company’s fold. When an associate agent joins any KW market center, they have to name their sponsor. 

On the 21st of the following month, a portion of the market center’s profit is automatically deposited to the sponsor’s account. The sponsor does not receive a portion of the associate’s commission but is sharing in the owner’s profits, although a market center must be profitable for a share to be paid.