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Century 21 broker Gwen Johnson in Miami knows she’s up against a Goliath in her lawsuit against New York-based Cendant Corp., owner of the Century 21, ERA and Coldwell Banker brands. Johnson figures her case is a bellwether for small operators trying to compete against much larger companies, whether they are franchisers like Cendant or not. But there’s a twist in her story: Johnson believes the parent company’s marketing strategies are hurting her and other Century 21 franchisees. “We look weak and we are weak,” she said. Johnson, who owns Century 21 Frank K. Cooper, sued Cendant almost two weeks ago in New Jersey Superior Court in Morris County, where the parent company is incorporated. The suit, which seeks class action status, alleges that Cendant “schemed” to use Century 21 franchise fees to build up Coldwell Banker offices and PHH, a separate relocation company owned by Cendant. According to the suit, Cendant used $40 million from Century 21′s advertising trust fund to help Coldwell Banker take over Century 21′s nationwide No. 1 ranking based on average sales price and total dollar volume. In the process, Century 21 fell to about sixth place. The suit claims that the movement of the money, of which Century 21 was the trustee, breaches Cendant’s contract with Century 21 franchisees. The plaintiffs are also accusing Cendant of not dealing fairly with Century 21. The suit says the movement of the money would favor Coldwell Banker but gives no reasons why. According to the suit, Cendant’s actions were “not the result of competitive growth and development practices by Cendant, but rather the anti-competitive, willful and intentional conduct … in misappropriating and diverting money and resources derived from Century 21 franchisees, including [trust] funds, and allotting them to other Cendant-owned companies, including Coldwell Banker.” Kevin Meyer, a spokesman for Cendant’s real estate division, said Tuesday that Cendant would “vigorously and aggressively” defend itself against the allegations. The suit, Meyer added, is inaccurate and without merit. He also noted that Johnson renewed her franchise in 1998 with no mention of franchise issues. “After preliminary review of our files, we haven’t been able to obtain a single written notice that any of these issues had reached the point of this concern by the brokerage,” Meyer said. The advertising fund, he noted, is audited annually and is open to inspection by franchisees. Cendant hasn’t yet filed an answer to the lawsuit, said Samantha Tesser, an associate at Atlas Pearlman in Fort Lauderdale. Tesser and Robin Campbell, a partner in the firm, are Johnson’s local attorneys. Johnson is also represented by McElroy Deutsch & Mulvaney in Morristown, N.J., and Zwerling Schachter & Zwerling in New York and Seattle. While Johnson is the only plaintiff so far, Tesser said she expects three New Jersey brokers to join in the near future and she added that once the class is certified hundreds more will be identified nationwide. Johnson bought her brokerage about a year before Cendant’s predecessor acquired Century 21 in 1995. In 1996, Cendant bought Coldwell Banker in a deal that included about 370 offices directly owned by corporate Coldwell Banker. In 1997, Cendant and Apollo Management LP created NRT Inc., a New Jersey-based joint venture that assumed control of the real estate brands. Most of the offices, and those acquired since, operate as Coldwell Banker, the suit states. When she bought her franchise, for example, Johnson said she banked heavily on Century 21′s advertising and company school to recruit salespeople. But Century 21 closed the school, no longer spends money on local advertising and brokers must handle much of the administrative duties once handled by a South Florida regional office of at least 50 people in pre-Cendant days, she said. But not all brokers agree with Johnson’s allegations. “I’ve been with the Century 21 system for 20 years, and I don’t see any unfair competition” with either other brands or other Century 21 offices, said broker Charles Bonfiglio, who owns four offices in Broward County. Does Cendant favor larger Century 21 operations like his over small ones like Johnson’s? “Probably, but I don’t see that as unfair any more than a broker favoring a [top salesperson] over a nonproducer in the same office,” he said. While Bonfiglio wouldn’t discuss franchise fees, he said they’re worth it. “I’ve seen large brokers say they pay too much money and can save money [by dropping a franchise], and those guys aren’t around anymore,” he said. At ERA Sales Alvin in north Miami-Dade County and Pembroke Pines, broker Alvin Waltzer said he sees the competitive problem — and chooses to ignore it. The former ERA Lethbridge in Plantation, he noted, was once considered the largest ERA franchise in South Florida. It has been switched to the Coldwell Banker brand. “That’s a perfect example of what’s been happening,” Waltzer said. When Waltzer complained to Cendant, he said that the company acknowledged that new acquisitions in South Florida were converted to Coldwell Banker offices. Then again, he added, the company also said acquisitions in the Northeast became ERAs. “What difference does it make to me if it becomes a Coldwell Banker or a mom-and-pop outfit?” said Waltzer, who renewed his ERA franchise last year. “It’s still a competitor. At least I know it’s a reputable operation that is a straight-forward company.” Not so, said Pat Killen. A Century 21 broker for 20 years, Killen dropped the franchise in 2000 and then declared bankruptcy last year. He’s now a broker with a large regional independent brokerage he declined to identify. “If Century 21 is the largest in the U.S. and then, three years later, it’s No. 6 and [Coldwell Banker] is No. 1, what’s wrong with this picture?” said Killen, who paid about $80,000 in annual franchise fees as Century 21 Allstate. Killen, who expects to become a plaintiff in the suit, said Cendant executives “promised us they’d wake the sleeping giant” when Century 21 was purchased. “But all they did,” he added, ” was bring in a Trojan horse and cut the giant’s legs off.”

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