Leading Edge Real Estate, a Boston-based indie and former franchisee of RE/MAX Intera, was awarded $22,500 in damages and attorneys’ fees last week in its year-long legal battle against its former franchisor.
In a 71-page decision, Massachusetts Superior Court Judge Christopher Barry-Smith ruled in favor of Leading Edge, which had accused RE/MAX Integra of breaching unexpired franchise agreements and engaging in predatory recruit practices.
“Victory is sweet,” Leading Edge CEO Linda O’Koniewski said in a statement. “We negotiated in good faith with RE/MAX for two years, seeking relief from what we view as one-sided franchise agreements.
“It is gratifying that the courts recognized that we were wronged and that our position had merit.”
In June 2018, after what Leading Edge co-owner Paul Mydelski previously called a “stalemate” in contract negotiations, Leading Edge announced its intention to no longer affiliate with the RE/MAX Integra brand after its franchise agreements expired.
Leading Edge had initially contract talks in 2016 with RE/MAX Integra to find what the former believed was more reasonable agreements, including having a single expiration date for the franchise agreements of all of Leading Edge’s offices.
“On one level the case was about predatory business practices that needed to be stopped,” Mydelski said. “For us, at the most basic level, it was about operating a business at the highest level with fair contracts.”
In the immediate wake of that decision, two offices with expired franchise agreements ended their affiliation, but four more had agreements until various dates in 2019, according to Leading Edge’s lawsuit. Mydelski first filed a preliminary injunction to keep the RE/MAX name until the agreements expired for all offices, but that injunction was not granted.
In the month following the decision, RE/MAX Integra engaged in what the original complaint called, “Project Aloha,” an effort to recruit Leading Edge agents to other RE/MAX brokerages in the area.
After that date, Leading Edge says it could not have been expected to continue operating as a RE/MAX franchise while its franchisor actively encouraged agents to leave the company. In total 29 agents left Leading Edge in the wake of the decision and subsequent recruiting campaign, according to the complaint. Leading Edge had around 180 agents before the split, according to previous Inman reporting.
“Leading Edge contends that RE/MAX breached the terms of the [franchise agreements] when it violated policy directive by recruiting Leading Edge sales agents — including agents who worked at a terminated location and those who worked at a location that remains under contract — to non-leading edge RE/MAX franchisees, encouraging those RE/MAX franchisees to do the same,” Barry-Smith wrote in his ruling. “RE/MAX contends that the policy directive does not apply to RE/MAX itself and that, in any event, it did not violate the policy directive because its conduct is permitted by the terms of the franchise agreements.”
“I agree with Leading Edge,” Barry-Smith continued. “RE/MAX’s conduct in June 2018 as some Leading Edge franchise locations expired and others remained operative breached the unexpired franchise agreements between RE/MAX and Leading Edge.”
In a statement, a spokesperson for RE/MAX Integra told Inman that the franchisor is disappointed by the outcome and carefully reviewing its next steps.
“The case was decided on narrow grounds as the court based its decision on two meetings RE/MAX Integra held for RE/MAX Leading Edge Agents to provide them with options to stay within the RE/MAX system,” the spokesperson said. “We are disappointed by the outcome of the trial and disagree with the court’s decision.”
