Century 21 Franchisees Win Class Certification

Century 21 franchisees involved in an 8-year-old lawsuit against the company have finally been granted class action status this week. The 2002 class action lawsuit accused Century 21 of misusing franchisee proceeds after the company was acquired by Cendant in 1995. The lawsuit claims Cendant misused the money, which directly contributed to the demise of Century 21 in the real estate market.

The lawsuit was filed on behalf of five Century 21 brokerages located in Arizona, Florida, Michigan and New Jersey, and sought class action certification to cover other brokers. The lawsuit alleged Century 21 and Cendant failed to provide the required level of services, and misused fees paid by franchisees by placing them into a national advertising fund that was supposed to benefit Century 21 franchisees, but was ultimately used for other purposes.

The class action lawsuit claims franchisees paid 8 percent of their gross revenue income into the advertising fund for a collective sum of $40 million each year. The fund was supposed to be used to advertise and build the Century 21 brand, but Cendant used the money to grow its company-owned Coldwell Banker broker franchises, in which Cendant had a more “beneficial financial interest.”

Before Cendant acquired Century 21, Century 21 was the largest volume brokerage firm in the country, and was rated the number-one real estate company nationally. After the acquisition, however, Century 21’s ratings in the real estate market dropped from first to approximately sixth as a “direct result of Cendant’s acquisitions and mergers,” the lawsuit says. The lawsuit claims this was in large part due to Cendant utilizing the market power and resources of Century 21 franchisees to promote Coldwell Banker franchisees and other Cendant companies to push Century 21 franchisees out of their number-one position in the real estate market. The fall of Century 21, the lawsuit claims, was not the result of competitive growth and development by Cendant, but rather “the anti-competitive, willful and intentional conduct of Cendant in misappropriating and diverting money and resources from Century 21 franchisees and allotting them, instead, to other Cendant owned companies.”

The newly certified class action lawsuit includes at least 1,000 current and former Century 21 franchisees (and possibly 4,000 or more) that had active franchises from August 1995 to April 2002. Attorneys for the franchisees estimate the class action lawsuit settlement could total hundreds of millions of dollars. You can read the lawsuit documents here.