As HousingWire (and others) reported earlier Wednesday, a Washington state judge handed down a ruling in the pre-trial proceedings of the legal battle between Move and Zillow over the alleged theft of trade secrets.
Both sides claimed that they’re happy with the judge’s ruling. But why?
So, here’s a quick summary of the lawsuit that’s cost two of the largest players in online real estate tens of millions of dollars already, with the prospect of far more significant financial consequences looming.
Move, which operates Realtor.com for the National Association of Realtors and is now owned by News Corp, claims that Zillow owes the company $2 billion in damages over allegations of trade secret theft involving Errol Samuelson, who was once Move's chief strategy officer.
Move sued Zillow after Samuelson resigned from Move on March 5, 2014, and joined Zillow as the company's second-highest paid executive on the same day.
Move filed suit against Zillow after Samuelson left, alleging that Samuelson, and by extension Zillow, stole trade secrets and proprietary information. Further, Move alleges efforts to cover up the claimed theft.
The original lawsuit alleged breach of contract, breach of fiduciary duty and misappropriation of trade secrets and accused Samuelson of misappropriating trade secret information by acquiring it using improper means, and by copying it without authorization.
The lawsuit was eventually expanded to include Curt Beardsley is a former Move employee. He is now vice president of industry development at Zillow.
The ruling, handed down by Judge Sean O’Donnell earlier this week, dealt with a “spoliation” hearing that took place last month.
At issue in that six-day hearing that included testimony from Zillow Group CEO Spencer Rascoff, Samuelson, Beardsley and more, was whether Zillow, Samuelson and/or Beardsley destroyed evidence related to the lawsuit that would have negatively impacted Move’s ability to receive what it felt would be a fair trial.
Specifically, Move claimed that Zillow, Samuelson and Beardsley destroyed evidence stored on various devices (hard drives, other portable storage devices, computers) after the initial lawsuit was filed, in clear violation of the court’s instruction to the contrary.
So after a six-day hearing that included accusations being thrown in any and all directions, O’Donnell handed down his ruling, and both sides are happy about it.
Why? Well, both sides won, and lost.
O’Donnell ruled that Zillow did not act “willfully or in bad faith with respect to any evidence allegedly lost to due to spoliation.”
O’Donnell went on to say that there was no evidence presented during the hearing that proved that Zillow was in possession of any of the “so-called missing storage devices” that belonged to Beardsley or Samuelson, nor did Zillow have any knowledge of Beardsley or Samuelson allegedly deleting, reformatting or copying any of the files in question.
O’Donnell said that Zillow took “early and appropriate” steps to notify its employees, including Samuelson and Beardsley, of their obligations to preserve evidence after the lawsuit’s filing.
“In short, the evidence does not support a finding that Zillow acted willfully or in bad faith to withhold evidence from the plaintiffs,” O’Donnell wrote. “It did not perform deletions; its did not hide or lose devices; and it notified its employees of their duty to preserve evidence through a litigation hold issued the same date Move filed its lawsuit.”
As for Samuelson, the judge found that the evidence presented “does not support” a finding that Samuelson was “under a duty” to preserve evidence prior to the filing of the lawsuit.
As O’Donnell writes, Samuelson held a series of conversations with Zillow and its executives prior to his departure from Move. Part of those conversations included an indemnification agreement that was to be included in Samuelson’s contract with Zillow.
O’Donnell writes that neither Samuelson’s negotiations with Zillow nor his indemnification agreement show that he had notice or expectation that a lawsuit was going to be filed, therefore he was under no obligation to preserve the alleged evidence.
According to the ruling, Samuelson did “attempt” to copy the contents of his Move-issued computer to a USB memory device and then made attempts to delete the contents of his Move-issued Apple devices, including his computer.
O’Donnell wrote that Samuelson’s efforts to delete the contents of his Move devices were not conducted in “bad faith or with a willful intent” to prevent Move from obtaining evidence of the alleged trade secrets theft.
“(Samuelson’s) explanations regarding why he took steps to delete information are not, as plaintiffs suggest, incredible,” O’Donnell wrote. “It was uncontested that he had personal information on his Move devices, including personal tax information, family photographs, family medical history and the like. His explanation that he did not want to his soon-to-be former employer retaining this information was reasonable.”
So Zillow’s and Samuelson’s hands appear clean, at least in regards to the alleged destruction of evidence. And Zillow is pleased about that.
Beardsley, on the other hand, didn’t fare quite so well in O’Donnell’s eyes, and Move is pleased about that.
Click "page 2" or "next" at the bottom to read all about what the judge ruled that Beardsley did and what Move and Zillow think about the ruling.