Technology

Zillow to countersue Move over ‘whistleblower’ letter

Portal giant counterclaims against realtor.com operator include defamation, violation of trade secrets law

Learn the New Luxury Playbook at Luxury Connect | October 18-19 at the Beverly Hills Hotel

Portal giant Zillow has asked a Washington state court for permission to countersue Move Inc., accusing the realtor.com operator of defamation and violation of the state’s trade secrets act.

In an April 9 letter to Move’s attorneys, an anonymous whistleblower alleged that Zillow steals listing data from agent websites in order to compare it to data scraped from realtor.com and see where its own site is falling short, among other claims.

At the time, Zillow said the letter contained “a mix of mischaracterized facts and false information.” The letter writer, former Zillow Vice President of Strategic Partnerships Chris Crocker, has since come forward and stood by the letter.

In a King County Superior Court filing made public today (read it below), Zillow alleged that Move knew or should have known the letter came from a Zillow employee who had obligations to protect Zillow’s confidential and trade secret information, but Move nonetheless chose to file the letter in open court and provide it to media organizations for publication.

“As we have stated, Move’s litigation filing of a purported ‘anonymous letter,’ which was a mix of false, misleading information and confidential business information, was a clear attempt to discredit, disparage and damage Zillow publicly and competitively,” Zillow spokeswoman Katie Curnutte told Inman in an emailed statement.

Zillow has filed a motion to amend its previous (sealed) answer to a lawsuit filed by Move and the National Association of Realtors accusing Zillow of misappropriation of trade secrets and unjust enrichment, among other claims, after two Move executives, Errol Samuelson and Curt Beardsley, jumped ship to Zillow.

3 essential tools that will 10X your real estate marketing
Smart landing pages, a synchronized database and automation generate results READ MORE

The amendment would include six counterclaims against Move, including alleged defamation; abuse of process; aiding and abetting a breach of duty of confidentiality; intentional interference with a contractual relationship; breach of a protective order; and violation of the Washington Trade Secrets Act.

Zillow seeks monetary damages and dismissal of Move’s lawsuit in addition to other relief.

“Zillow is clearly hoping to create a sideshow of Zillow-suing-Move-for-suing-Zillow to distract plaintiffs from their claims, send the cost of this litigation through the roof, and make everyone forget the reason we are here to begin with: Zillow paid two former Move officers millions of dollars in compensation in exchange for breaching their fiduciary duties to Move and for revealing plaintiffs’ confidential and trade-secret information,” attorneys for Move said in a filing opposing Zillow’s motion to amend.

Move’s attorneys asserted most of Zillow’s proposed counterclaims were “futile” because they are based on events in this litigation — the filing of the Crocker letter or statements made to the court regarding the letter — and are therefore protected from liability. This is called “litigation privilege.”

They also claim that the Crocker letter does not contain Zillow’s trade secrets and that “illegal conduct never qualifies as a trade secret.”

In addition to claiming theft of agent and realtor.com listing data, the Crocker letter alleged that:

  • The Zillow sales team scrapes customer lists from realtor.com to target potential advertisers.
  • Zillow is running secret programs called “LSS” and “LSSv2″ around listing quality.
  • Samuelson was working while under a preliminary injunction, contrary to Zillow’s claims.
  • Beardsley stole multiple listing service contact, listing and other databases from Move (his former employer), keeps them in the cloud and uses them in his work at Zillow.

Samuelson and Beardsley have filed declarations denying allegations against them.

Attorneys for Zillow claimed Move’s actions in filing and distributing the letter were “willful and malicious” and that Zillow had suffered injury to its business and reputation as a result.

“Although the letter contains many inaccuracies and false and defamatory statements, it also discloses highly confidential and trade secret information about Zillow’s proprietary systems, programs, business practices and strategies,” they said.

“As found by the court, these trade secrets are set forth in two of the final three paragraphs of the Letter, which discuss internal programs, practices, and strategies Zillow uses to maintain its competitive positioning as a real estate portal, as well as a previously unannounced new product and strategy.”

Zillow declined to comment on that “unannounced new product.” It’s also important to note that these recent filings from Zillow and Move have been redacted due to trade secret concerns.

Attorneys for Zillow said the part of the Crocker letter that alleged that Zillow scrapes listing data from realtor.com and from agent websites through its Diverse Solutions subsidiary “caused Zillow harm by straining the relationships Zillow maintains with its key third-party partners, including agents, and by damaging Zillow’s reputation in the industry.”

They also noted that details revealed in that third to last paragraph of the letter “were not publicly known, and Zillow derived significant economic value from having this information remain confidential.”

In April, the court granted a motion filed by Zillow to seal part of the letter in the court record, although the letter is still available unredacted on the websites of some news organizations, including this one. Last week, Move filed a renewed motion to unseal the letter.

“Zillow is continuing its attempts to silence a whistleblower and victims of its unlawful business practices with frivolous litigation, this time a counterclaim against Move Inc. and National Association of Realtors,” Move spokeswoman Lexie Puckett told Inman in an emailed statement.

“Unfortunately, because Zillow was able to seal from public view a whistleblower’s allegations of Zillow’s wrongdoing and related court documents, we are unable to share a complete, uncensored explanation of why Zillow’s counterclaims are embarrassingly improper.”

In a May 26 filing, four press organizations — Allied Daily Newspapers of Washington, Washington State Association of Broadcasters, Reporters Committee for Freedom of the Press and the Washington Newspaper Publishers Association — asked to intervene in the case for the purpose of unsealing the letter.

“In Washington, public access to court records such as the Crocker Letter is a constitutional right,” attorneys for the trade groups said.

“The right of access ensures that the public will be informed about the operations of our courts, and protects the integrity of the judicial process,” they added.

Puckett said Move and NAR welcome the press organizations’ support.

“The whistleblower letter lays out a laundry list of Zillow’s unlawful conduct, including theft of trade secrets and the unauthorized access of realtor.com from offshore locations,” she said.

“We believe whistleblowers should be protected against retaliation, not silenced. We are also committed to free speech and a well-informed public.”

In a blow to Move last month, the court granted a motion filed by Zillow to disregard the Crocker letter from consideration in third-party discovery requests filed by Move seeking more information about the Zillow-Trulia merger.

In March, Move accused Samuelson of tipping Zillow off to a merger being considered between Trulia and Move. Move alleged that information allowed Zillow to acquire Trulia first and therefore obtain an unfair competitive advantage. Zillow CEO Spencer Rascoff denied that Samuelson tipped him off to any plans Move had with respect to Trulia.

Also last month, the court ruled that subpoenas issued to Trulia, JP Morgan Securities and Goldman Sachs regarding the Zillow-Trulia merger would be more limited in scope than Move desired.

Zillow countersuit against Move Inc.

Email Andrea V. Brambila.