NAR and realtor.com operator Move Inc. file suit against Zillow, Errol Samuelson

Suit alleges breach of contract, breach of fiduciary duty and misappropriation of trade secrets

Move Inc. and the National Association of Realtors have filed a lawsuit against Zillow and former Move Chief Strategy Officer and realtor.com President Errol Samuelson for alleged breach of contract, breach of fiduciary duty and misappropriation of trade secrets.

Samuelson unexpectedly resigned from Move and joined Zillow as the portal giant’s chief industry development officer on March 5.

Gavel image via Shutterstock.
Gavel image via Shutterstock.

The complaint, filed today, comes as Zillow announced it had hired another prominent Move exec, Curt Beardsley, as its new vice president of industry development. Beardsley assumed Samuelson’s industry relations role at Move after Samuelson’s departure. Beardsley is not mentioned in the complaint.

NAR subsidiary Realtors Information Network (RIN) and Move subsidiaries RealSelect Inc. and Top Producer Systems Co. are also plaintiffs in the suit. In addition to Zillow and Samuelson, the complaint names “Does 1-20″ as defendants.

“At Move, we take our trade secrets and intellectual property extremely seriously as a valuable asset in our competitive position in the marketplace,” said Steve Berkowitz, CEO of Move, in a statement.

“We take action in cases in which we believe our trade secrets have been compromised. We have raised this matter for the courts and believe that the matter will be resolved judiciously.”

Move declined to comment further. Zillow declined to comment on pending litigation.

“One of realtor.com’s greatest assets is its strong ties to Realtors and the real estate industry, and its competitors know that,” said NAR CEO Dale Stinton in an emailed statement.

“Move and realtor.com respect Realtors for their industry commitment, knowledge and insights. NAR’s relationship with Move is based on that foundation, and we will represent them against others who don’t show them that same respect.”

The complaint seeks an award for damages and preliminary and permanent injunctive relief “to protect plaintiffs’ trade secrets and to prevent further actual, threatened and inevitable trade secret misappropriation, breaches of fiduciary duty and breaches of contract, and to eliminate the commercial advantage that Mr. Samuelson and Zillow would otherwise derive from the trade secret misappropriation.”

Read the complaint.

The complaint spelled out the many instrumental roles Samuelson has played at Move since joining the company in 2001. Samuelson, who was named president of realtor.com in 2007, became Move’s chief revenue officer in 2009 and spearheaded Move’s acquisition of ListHub in September 2010. He also led negotiations for Move in the purchase of lead generation company TigerLead in 2012.

Last year, Samuelson became Move’s chief strategy officer, “directing strategy for all of Move’s business lines” and directing a team responsible for identifying potential merger and acquisition targets, the complaint said.

Samuelson’s former roles at Move “gave him access to and knowledge of essentially all of Move’s trade secrets across all of its business lines, whether those secrets dealt with finance, technology, data content, strategy, marketing, or some other aspect of the business,” attorneys for Move said.

The complaint noted that as Move’s employee, Samuelson “spent substantial time traveling in the United States,” including King County, Wash. — where Zillow is headquartered.

Attorneys for Move also cited a 1996 operating agreement between NAR, Move and subsidiaries of both organizations governing the operation of realtor.com. The “strategic partnership” between NAR and Move “involves and requires the sharing of confidential information” between NAR and Move “for the purposes of developing synergistic strategies.”

Nondisclosure agreements forbid the sharing of confidential information outside of the partnership, according to the complaint. This includes attachments to the realtor.com operating agreement that have not been made public and were put in place in mid-2013 as part of “historic” changes to the agreement. Samuelson was the chief negotiator of the update, and that, as well as his role in the daily operations of realtor.com and joint meetings with RIN and NAR, has made him privy to the trade secrets of both, the complaint alleged.

According to the complaint, Samuelson has divulged and will continue to divulge trade secrets from all plaintiffs in the case to Zillow in order to do his job at the company.

If Samuelson “undertakes the tasks for which he was hired by Zillow, the unauthorized disclosure or use of plaintiffs’ trade secrets … is inevitable,” the lawsuit alleged.

Attorneys for Move noted that beginning in August 2013, Samuelson was involved in Move’s discussions of its budget, strategic planning and technology development plan for 2014 — a process that was not complete until a week before he resigned.

Furthermore, the complaint alleged Samuelson “arranged to defect to Zillow, destroyed evidence, and then resigned from Move without notice,” an act “timed to damage Move and inhibit Move’s response.”

Among other allegations, the complaint charges that, the day before his resignation, Samuelson erased all memory from the laptop, iPhone and iPad that Move had issued to him for business use, despite warnings that the data contained in them belonged to Move and specific instructions not to discard certain litigation-related documents.

The complaint also faulted the timing of Samuelson’s departure. On the morning of March 5, the complaint said, Samuelson first informed Move’s head of human resources, not CEO Steve Berkowitz, of his immediate resignation, just hours before a Zillow release announcing Samuelson’s hiring.

Berkowitz later received a voice mail from Samuelson informing him of the resignation and the upcoming Zillow release. At the time, Berkowitz was at an investor conference, and the complaint alleges both Samuelson and Zillow knew Berkowitz would be spending the day with significant investors and therefore “would be unable to devote himself to responding to the news of Mr. Samuelson’s departure.” Moreover, both Zillow and Samuelson knew that the news would go public in the middle of Move’s investor meetings, the complaint said.

Attorneys for Move alleged Samuelson had been planning his defection to Zillow for several weeks before his departure from Move, creating a conflict of interest, and that during that time, the plaintiffs were not informed and therefore continued to supply him with trade secrets.

From 2009 through 2013, the complaint said, Samuelson was Move’s second-highest-compensated employee, and the only one “to receive perquisites,” or “perks.”

According to an April 25, 2013, proxy statement, Samuelson was set to earn $1.87 million in total compensation in 2012, including $343,716 in base salary, a $295,000 bonus, $936,000 in stock awards, and $289,400 in option awards. His compensation also included perks like fitness club dues, and $5,958 in travel expenses for his wife.

That total overstates Samuelson’s actual compensation, because it includes 80,000 shares that Move said were granted to him “in connection with an anticipated reduction to his annual cash incentive bonus opportunity.”

After a compensation committee “determined that such reduction to Mr. Samuelson’s incentive bonus opportunity was not in the best interests of the company,” he forfeited those shares, which would have been worth $989,600 at today’s closing price of $12.37.

Under Move’s 2013 bonus plan, he was eligible to earn an incentive bonus of up to $700,000.

According to the proxy statement, Samuelson owned 537,517 shares of Move common stock as of April 1, 2013, which would be worth about $6.65 million today, presuming that he still owns them.

Move CEO Steve Berkowitz, by comparison, pulled down $2.75 million in 2012, including $547,459 in base salary, a $513,384 bonus, $648,000 in stock awards, and $1.04 million in stock options.

Berkowitz owned 1.311 million shares of Move common stock as of April 1, 2013, which would be worth $16.2 million today.

Editor’s note: This story has been updated.


Comments