RegulationsTechnology

The $130M Zillow-Move legal bloodbath: A retrospective

Highlights, low points and a resolution

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

In the final hours of 2016, we reflect on a year of tech advancements, wild politics and one of the most captivating stories to unfold between two real estate behemoths at-odds: Zillow and realtor.com operator Move, Inc.

Like a high school literature class plot study, a lawsuit that combined all the makings of a page turner — archrivals, spilled secrets, digital indiscretions and billion-dollar claims — ended in a surprising twist when the parties settled out of court the day they were set to go to trial.

In April, publisher Brad Inman described the ongoing battle as more than “legal bloodsport,” with each thrown punch rattling industry nerves in a high-stakes boxing ring.

On the line: jaw-dropping damages, potentially stalled innovation and an executive shake-up for Zillow; mounting litigation costs for everyone.

In the end, money exchanged hands, but no one had to say mea culpa by expressing liability, removing a giant distraction from both giants’ technology rat race. Here’s how the rollercoaster ride rose, fell and stopped suddenly at a resolution.

Initial complaint

The timeline begins

Are you a rich broker, or a poor broker?
How to drive automation and profit from Robert Kiyosaki's 'Cashflow Quadrant‘ READ MORE

On March 5, 2014, Errol Samuelson, former Move Chief Strategy Officer and realtor.com president, unexpectedly jumps ship from News Corp.-owned Move and joins Zillow as the portal giant’s chief industry development officer.

Move’s blood pressure spikes, and, along with the National Association of Realtors (NAR), serves papers to the big Z and Samuelson 12 days later seeking damages and an injunction against trade secret disclosure.

The plot thickens

The same day the complaint was filed, Louise officially reunites with Thelma; Zillow announces that another prominent Move exec, Curt Beardsley, has also hopped aboard its mega portal train.

Move and NAR amend their complaint a year later to add Beardsley as a defendant.

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

Main beefs

Zillow snags Trulia for $2.5 billion in February 2015. An April 2015 court filing says that Trulia and Move were, in fact, considering merging and had taken steps to do so before Zillow beat Move to the punch and announced its own acquisition of Trulia.

An attorney for Move alleges in a legal filing that electronic messages between Samuelson and Beardsley indicate that the duo planned their departures from Move well in advance of March 2014 with the intent of delivering to Zillow information about Move and NAR’s confidential business strategies, proprietary databases, product information, and secrets regarding potential corporate transactions, including the intended merger.

Samuelson and Beardsley both face allegations that they “erased large swaths of electronic evidence across multiple Move devices.”

In September 2015, Zillow files a countersuit against Move, alleging Move’s disclosure of a “whistleblower” letter from a former Zillow employee has strained Zillow’s relations with real estate agents and hurt its ability to compete.

Read: Zillow execs evoked ‘Thelma and Louise’ after jumping ship from Move

2016 highlights and low points

‘Attack’ plan

The court releases versions of a memo written by Beardsley that the Move legal team says is a plan to attack ListHub. Move claims Beardsley drafted the plan months before leaving his then-employer to undermine Move’s widely used listing distribution platform and that Zillow, Samuelson and Beardsley thwarted Move’s plans for a “ListHub 2.0” strategy.

Beardsley’s attorney says, “There is no evidence that Beardsley shared this document with anyone or that he acted contrary to Move’s interests before his departure.”

The billion-dollar blow

In March 2016, Move and its co-plaintiff, NAR, claim that Zillow, Samuelson and Beardsley are liable for $1.77 billion in damages.

The damages claim is just over 40 percent of Zillow Group’s then market cap: $4.2 billion.

Read: Zillow could owe $2B in damages, Move and NAR allege

Evidence destruction ruling

May 18, 2016, trial is imminent: After a six-day blockbuster spoliation (evidence destruction) hearing, a judge rules that Beardsley destroyed evidence willfully and in bad faith, allowing plaintiffs to instruct the jury in the trial scheduled for June 6, 2016, to infer that missing evidence would have benefited their case.

Samuelson and Zillow walk away unscathed here, as the court finds neither “acted with the requisite willfulness or bad faith to destroy evidence to supporting spoliation sanctions.”

Litigation analyst Tom Claps of Susquehanna Financial Group calls the ruling “a significant, damaging setback for Zillow.”

Read: Judge punishes Zillow exec for evidence destruction

Animosity spills over into events

MLS CEO Cameron Paine stands up at NAR’s midyear conference in May and asks a question that, for a moment, stuns a room of hundreds into silence: Why is realtor.com operator Move Inc. — a third-party company owned by News Corp., not NAR — pitching its products to NAR members, while Zillow and homes.com are not?

“In light of the ongoing litigation, we elected not to permit Zillow to exhibit at or sponsor NAR’s meetings this year,” NAR spokeswoman Sara Wiskerchen tells Inman via email.

Read: NAR bans Zillow Group from 2016 events 

Zillow gains a little leverage

Five days before trial, a judge narrows the scope of Move/NAR’s suit, saying that the plaintiffs had failed to prove Move and Trulia would mostly likely have merged absent Zillow’s intervention, but a more than $1 billion damages claim against Zillow remains.

Read: Court order crops damages claim in Zillow-Move trial

Resolution

June 6, trial day, Zillow and realtor.com find common ground before dragging in the jury: a settlement for $130 million after more than two years of bitter legal combat.

The price they paid

In public filings, Zillow Group said it spent more than $27 million in 2015 on the litigation and another $15.7 million in the first three months of this year.

In February, the company projected it would spend an additional $36 million on the suit this year. That’s money the company said it could otherwise have used to support innovation and growth or to boost company profits.

What’s the total? Nearly $200 million, including the settlement, Claps estimated.

The suit also cost News Corp. millions, though perhaps less than Zillow Group. News Corp. spent a combined $11 million on the litigation in two of last year’s four quarters, according to earnings call transcripts.

Closing the book

In November, the expo hall of the National Association of Realtors’ annual conference was aglow with a surprising sponsor: Zillow Group.

A sign of thawed relations? Perhaps. On the potential for a fresh start in 2017 — time will tell.

In 2016’s second half, Zillow Group already appeared to channel more innovation energy with Facebook Ads for agents, new features for its Premier Agent app including support for non-Zillow leads, property video clips for rental listings and in the third quarter, a profit to show.

Meanwhile realtor.com overhauled its agent listing ad offering and received a $2.5 billion valuation from Morgan Stanley, according to News Corp. CEO Robert Thomson.

Could a referee declare either side a winner with an honorary hand raise? Maybe both, if you consider the settlement a swerve to miss mutual destruction.

Or neither, as some of our readers speculate, with the lawyers left laughing on their way to the bank.

Inman writer Andrea V. Brambila contributed reporting to this article. 

Email Caroline Feeney