ActiveRain, an online real estate blogging community and social network with about 47,000 members, has filed a lawsuit against property-search giant Move Inc. that seeks millions in damages and alleges that Move broke the law when it backed out of an acquisition plan and launched its own blogging platform.
In an 18-page response to the lawsuit, filed this month, Move opposes the allegations and seeks a jury trial. Julie Reynolds, a Move spokeswoman, said the company cannot comment about active litigation.
The lawsuit, filed Aug. 2 in U.S. District Court for the Central District of California, alleges that Move approached ActiveRain in November 2006 “about a potential financing or purchase of ActiveRain by Move,” and also alleges that the company “assured ActiveRain that it wanted to acquire ActiveRain, and gave assurances in this regard in order to convince ActiveRain to disclose its confidential information to Move.”
ActiveRain seeks $33 million in damages, and alleges Move violated the California Trade Secrets Act, among other allegations, including breach of contract, unjust enrichment, promissory-equitable estoppel, unfair competition, violation of the Washington Unfair Business Practices Act, and fraud-deceit.
The ActiveRain Real Estate Network launched in June 2006 as a free networking resource for the real estate industry. Move Inc. operates Realtor.com, the leading real estate search site in unique visitors, and also operates the Move.com search site. Move is publicly traded and was formerly known as Homestore before rebranding last year.
Move has rolled out a series of new features over the past year, including new mapping capabilities, community information and enhanced multimedia capabilities for property information, and the company had promoted the pending release of new user-generated content and tools during earnings announcements dating back to mid-2006.
In May 2006, Move CEO Mike Long said during an earnings announcement that Move was planning to add “user-generated content supplied by local Realtors and members of the community.”
The lawsuit alleges that ActiveRain officials were led to believe in March 2007 that “Move’s Board of Directors had unanimously approved the acquisition of ActiveRain … (and) further assured ActiveRain that final closing of the deal was contingent upon the tweaking of some minor details,” including the sharing of additional confidential information.
According to ActiveRain’s complaint, “Move acknowledged that ActiveRain had the ‘secret sauce,’ and had captured ‘lightning in a bottle,’ with respect to its social networking and blogging community services for real estate professionals.”
Move, in its response to the lawsuit, denied allegations that it “had not been able to successfully develop, launch or market a social network and blogging community or platform … equivalent to that provided by the ActiveRain real estate network.”
Move representatives informed ActiveRain managers that Move planned to announce the purchase of ActiveRain during an annual National Association of Realtors meeting in Washington, D.C., in May of this year, the lawsuit alleges. Move operates Realtor.com through a contract with the National Association of Realtors trade group.
ActiveRain provided “highly sensitive material about its members and its network or platform in electronic format, in anticipation of the supposed impending closing” on May 3, the lawsuit alleges, and “within hours of its receipt of this especially sensitive information in unrestricted digital electronic format, Move told ActiveRain that it had ‘cancelled’ the deal.”
Later that month, Realtor.com President Errol Samuelson announced that the company would be offering free blog sites for all Realtors and said that a group of about 1,000 agents had been testing the blogging platform for four to five months. In July, Move officials discussed other social networking initiatives for Move’s family of Web sites during Investor Day presentations.
The lawsuit alleges that Move is apparently using ActiveRain’s confidential information “in order to create and maintain this ‘redesigned’ and ‘retooled’ Realtor.com Web site network, providing free blogs for real estate professionals.”
Meanwhile, in its response to the lawsuit, Move denied “that ActiveRain’s ‘confidential information’ has value,” denied that this “‘confidential information’ is not generally known to the public” and also denied that the information requested from ActiveRain and provided by ActiveRain is actually “confidential information.”
Also, Move states in its response that “all of (the company’s) actions with regard to (ActiveRain) were conducted in good faith and without fraud, oppression or malice toward (ActiveRain) or its legal rights.”
ActiveRain charges that it entered into a “no shop” agreement during acquisition talks with Move, and that it cancelled “key contracts,” ceased strategic partnerships with Move’s competitors, and cancelled its bank line of credit. “ActiveRain did so, to its competitive detriment, and to Move’s unfair competitive advantage,” the company alleges.
In its response, Move “denies that (ActiveRain) is entitled to recover punitive damages in this action.”