Sanctions for Zillow in Move Lawsuit?

A Seattle judge is weighing whether Zillow should be held liable for the actions of two executives accused of destroying evidence in an alleged plot to steal trade secrets from Move, Inc.

After six days of testimony from key witnesses during a pre-trial hearing in the Move v. Zillow case, Judge Sean O’Donnell is expected to decide in the coming weeks whether Errol Samuelson and Curt Beardsley knowingly destroyed or withheld evidence. Move and the National Association of REALTORS® are suing Samuelson and Beardsley, former Move employees who jumped to Zillow in March 2014, claiming they stole confidential Move documents when they resigned. Zillow, which Move and NAR say benefitted from Samuelson and Beardsley’s actions, is also named as a defendant in the suit.

Previous Move v. Zillow Coverage

Expert: Too Much Evidence Missing in Zillow Case

Samuelson: I Didn’t Want Move to Know My Business

What Did Samuelson Tell Zillow?

Was Beardsley Eyeing a Coup Against Move?

But during the hearing, which wrapped up Monday in Seattle’s King County Superior Court after a weeklong postponement, Samuelson and Beardsley testified that they weren’t after Move’s trade secrets. They admitted to copying thousands of documents and deleting scores of text messages and emails from their Move-issued computers and mobile devices when they resigned, but the reason, they said, was to remove personal files accumulated over many years before returning the devices to Move. Samuelson testified that the deleted files contained private information about his health, family, and finances, which he didn’t want to be available to Move after his departure.

 Samuelson and Beardsley also acknowledged copying Move documents onto USB drives and external hard drives that they took with them to Zillow. Since Move and NAR’s lawsuit was filed in March 2014, Samuelson and Beardsley say they’ve lost, accidentally damaged, or reformatted many of those drives, making their original content undecipherable.

Move and NAR say Samuelson and Beardsley disposed of the drives so they couldn’t be used against them in court. That coupled with their actions to copy and delete data on Move devices show their intent to steal Move documents for Zillow’s gain and then cover it up, Move and NAR say.

Move and NAR are asking O’Donnell to issue a default judgment against Zillow or instruct the jury to infer that the evidence that was destroyed was incriminating. Zillow says the charges are unfounded and should be dismissed.

On Monday, the final day of the hearing, Move and Zillow traded barbs over whose story was more credible. Here are some of the major positions they summarized in closing arguments.

Evidence preservation: While Move’s Human Resources department instructed Samuelson and Beardsley not to delete to any material from their Move computers at the time of their resignation, the fact that they did so shows their intent to steal documents, said plaintiffs’ lawyer David Singer. However, Zillow attorney Joe McMillan, contended, that the HR department gave Samuelson permission to remove personal files.

Missing documents: Many USB drives are missing in the case. Others were turned over to the court, and they were found to contain Move documents. “Our point is not that the Move documents that have been recovered are the holy grail of Move documents,” Singer said. “But it’s proof they had our stuff on a hard drive.” So what else might be on all the other drives that weren’t turned over to the court? Even so, McMillan argued, the plaintiffs have also not been able to show that the missing drives contain any incriminating evidence, and the burden of proof should be on Move.

Recovered evidence: Many texts and e-mails deleted by Beardsley and Samuelson were backed up to Move servers or other Mac systems, so they were able to be recovered. According to Michael Fandel, Samuelson’s lawyer, none of those files appeared to show that Move trade secrets were compromised, which means “Move didn’t investigate their claims adequately before making them.” But there are still some texts and e-mails that weren’t recoverable, and the fact that Samuelson and Beardsley deleted the data in the first place shows they intended to hide something, Singer said. “They tried to delete stuff, found out it was backed up, then called it ‘preserved evidence,’” he said. “That’s misleading.”

Samuelson’s “burner” phone: Samuelson used a secondary phone solely to communicate with Zillow while he was still employed with Move. He called it a burner phone—a term often used to describe a device that’s used to conduct wrongful activity and then discarded. Samuelson later said he used the term as a funny joke, despite the fact that he wiped it clean of data once he was done using it. “It wouldn’t be such a funny joke if he wasn’t deleting data off of it,” Singer said. Fandel said Samuelson was using the phone because he thought it would be disrespectful and improper to use Move property to discuss employment with a competitor. Plus, the majority of texts from the burner phone have been recovered, he added.

Zillow’s behavior: When Zillow officials learned that Beardsley had transferred Move documents to his Zillow laptop—unwittingly, according to him—they told him to permanently delete them despite the fact that the lawsuit had commenced and despite a court order to preserve evidence. Zillow then disciplined Beardsley with two weeks’ unpaid leave. But later, Zillow increased his salary and gave him his full bonus, Singer said. “At every step, Zillow has not been part of the solution—they’ve been part of the problem,” Singer added. McMillan said Zillow has a strict policy that all incoming employees get rid of any documents from past employers to ensure that they are not in possession of confidential documents.

—By Graham Wood, REALTOR® Magazine