As a trial between archrivals Move Inc. and Zillow approaches its June 6 start date, a Washington state judge has narrowed its scope, but a more than $1 billion damages claim against Zillow remains.

As a trial between archrivals Move Inc. and Zillow approaches its June 6 start date, a Washington state judge has narrowed its scope, but a more than $1 billion damages claim against Zillow remains.

The plaintiffs in the trade secrets case — News Corp. subsidiary and realtor.com operator Move and the National Association of Realtors — allege former Move employee Errol Samuelson, now Zillow’s chief industry development officer, tipped Zillow off to merger talks between Move and Trulia in early 2014, among other claims.

Errol Samuelson

Errol Samuelson

But in a May 27 order, Judge Sean O’Donnell of King County Superior Court said that Move and NAR failed to prove that Move and Trulia would mostly likely have merged absent Zillow’s intervention.

Therefore, O’Donnell granted a motion from Zillow, Samuelson, and fellow Zillow exec Curt Beardsley to dismiss Move and NAR’s $384 million claim for actual damages as a result of the alleged misappropriation of Trulia-related trade secrets.

The judge’s order allows the plaintiffs to continue to pursue their $803 million damages claim for “unjust enrichment” in relation to Trulia.

Litigation analyst Thomas Claps of Susquehanna Financial Group estimates that the judge’s order will trim Move’s damages claim against Zillow, Samuelson and Beardsley from around $2 billion to between $1.6 billion and $1.7 billion.

It is currently unclear whether the original damages claim was for $2 billion or $1.77 billion — legal filings in the case have listed both figures. If the $1.77 billion figure is the more accurate, the claim will have been reduced to around $1.4 billion.

“The Court’s reduction in total trial damages should give Zillow some modest relief, especially after the significant May 17 sanction issued against Zillow executive/defendant Curt Beardsley (VP of Industry Development),” Claps wrote in a research note.

As O’Donnell rules on outstanding pre-trial motions, it’s possible damages could get trimmed even further before the June 6 trial date, Claps added.

Evidence destruction and Trulia-related claims

After a lengthy evidence spoliation hearing in April, O’Donnell last month declined to impose sanctions on Zillow or Zillow executive Errol Samuelson, but ruled that Beardsley — one of the company’s top representatives to the real estate industry — destroyed evidence willfully and in bad faith in the case.

O’Donnell will allow Move and NAR to issue an instruction to the jury allowing the jury to infer the missing evidence would have benefited their case — or, alternatively, hurt Beardsley’s case.

In a filing yesterday, attorneys for Zillow said, “Despite the Court’s ruling that neither Zillow or Samuelson engaged in sanctionable conduct, the imposition of that severe sanction against Beardsley threatens to unfairly taint the proceedings against his co-defendants.”

Beardsley’s evidence destruction was a factor in the fate of two other Trulia-related claims against Beardsley he asked to be thrown out: misappropriation of trade secrets and breach of fiduciary duty.

O’Donnell said he had drawn “favorable inferences” on plaintiffs’ behalf because of Beardsley’s destruction and that had contributed to his decision to allow the claims to go forward. But that wasn’t the only reason.

Curt Beardsley

Curt Beardsley

He said plaintiffs’ had introduced sufficient evidence “to create a triable issue of fact” that Beardsley misappropriated Move trade secrets relating to the Move-Trulia merger and that a conspiracy between Beardsley and the other defendants exists.

“For example, Plaintiffs have introduced evidence that Samuelson and Beardsley began investigating how to kill ListHub in October 2013, and that by November 2013 they were plotting to join Move’s chief rival Zillow,” O’Donnell wrote.

“While Beardsley claims that he personally did not know information about the Move/Trulia merger, so he cannot be liable for its misappropriation, if the jury were to find the existence of a conspiracy, Beardsley will be liable for any act of trade secret misappropriation perpetrated by one of his co-conspirators, even if he did not commit the act himself.

“Accordingly, the Motion must be denied on this basis.”

Moreover, although Beardsley said there was no evidence that he knew about the Move-Trulia merger talks, O’Donnell said plaintiffs had put forth evidence that he did.

“[A]nd Beardsley owed Move a fiduciary duty. Accordingly, dismissal of the breach of fiduciary duty claim is also denied on the issue of disclosure of Trulia information,” O’Donnell wrote.

Orders on trade secrets, fiduciary duty, loyalty

In addition to the orders on Trulia claims, O’Donnell ruled on eight other summary judgment motions submitted by Zillow, Samuelson and/or Beardsley. “Dismissed with prejudice” means that the court’s judgment is final — Move cannot refile those claims in another lawsuit.

  • O’Donnell declined to dismiss two alleged trade secret claims having to do with Move’s platform strategy, so those claims will go to trial.
  • O’Donnell dismissed with prejudice all of plaintiffs’ allegations in regards to Move’s “AppHub” real estate platform initiative.
  • O’Donnell dismissed with prejudice trade secret and breach of contract claims against Samuelson based on Samuelson’s copying certain of his Outlook contacts prior to his joining Zillow.
  • O’Donnell dismissed with prejudice trade secret and breach of contract claims against Beardsley based on the copying or possession of certain contact information.
  • O’Donnell dismissed with prejudice plaintiffs’ allegations of misappropriation of trade secrets related to Retsly. But the judge allowed breach of fiduciary duty claims to stand in relation to Move’s allegation that Samuelson wrongfully withheld from Move the opportunity to acquire Retsly in order to allow Zillow to do so.
  • O’Donnell denied Samuelson’s motion to dismiss breach of fiduciary duty and contract claims against him, though these claims cannot be based on AppHub as a trade secret, Retsly as a trade secret, Outlook contacts as a trade secret, or breach of Move’s confidentiality agreement. The withholding of Retsly as a “corporate opportunity” and the non-disclosure agreement governing the Move-Trulia merger talks are still fair game.
  • O’Donnell allowed plaintiffs’ trade secret disclosures to stand, despite defendants’ assertions of “deficiencies.” “The court will address alleged deficiencies in plaintiffs’ trade secret disclosures on a case-by-case basis,” he wrote.
  • O’Donnell allowed plaintiffs’ duty of loyalty claims against Beardsley to go forward, though these claims cannot be based on AppHub as a trade secret, Retsly as a trade secret, Outlook contacts as a trade secret, breach of Move’s confidentiality agreement, or sale of Move stock prior to quitting Move.

Zillow responds

In an emailed statement, Zillow Group spokeswoman Amanda Woolley said, “We are pleased the judge dismissed many of News Corp’s claims, especially around trade secrets, before we head to trial.

“We have consistently said News Corp’s allegations were baseless, and today’s rulings give us further confidence as we head to trial. We think a jury will see this case for what it’s really about: News Corp’s attempt to win in the courts a battle it is losing in the field of competition.

“We look forward to the judge’s additional rulings on summary judgements, and to addressing the remaining allegations head-on in the trial.”

Move and NAR respond

In an emailed statement, Move spokeswoman Christie Farrell said,”Seeking to have the claims of Move and the National Association of Realtors dismissed before trial, Zillow desperately filed an unprecedented number of motions for summary judgment — more than 20 motions totaling more than 10,000 pages of argument and evidence.

“The massive effort must have cost Zillow millions. It has failed. With most of Zillow’s motions having been ruled on, NAR and Move are very pleased that the core of our claims remain intact, and that the mountain of evidence supporting allegations of trade secret misappropriation, fiduciary breaches, lying, and broad evidence destruction are moving forward.

“NAR and Move look forward to the jury trial, beginning June 6, with an adverse jury instruction as the Court in Seattle has already found to be appropriate because of evidence destruction in the case, and to the head-on impact this case will have on Zillow.”

NAR declined to comment other than to refer Inman to Move’s statement.

Email Andrea V. Brambila.

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