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Zillow executive Curt Beardsley testifies in King County Superior Court last month as Judge Sean P. O’Donnell looks on. (GeekWire File Photo)

A King County Superior Court Judge has denied Move Inc.’s motion for sanctions against its real estate rival Zillow after a lengthy hearing on allegations that two former Move executives hired by Zillow purposefully destroyed evidence in the case.

However, citing the actions of Zillow executive Curt Beardsley, Judge Sean P. O’Donnell granted Move a jury instruction that will allow the jury to infer that “the missing evidence would have benefitted plaintiffs’ case or alternatively hurt the defendant’s [case.]”

Still, that’s well short of the most severe ruling that Move had been seeking. The Santa Clara, Calif.-based company, which operates Realtor.com, had asked the judge to go as far as to issue a judgment against Zillow that would have ended the case, based on allegations of destroyed evidence presented in the court hearing.

Errol
Errol Samuelson in court

“In short, the evidence does not support a finding that Zillow acted willfully or in bad faith to withhold evidence from the plaintiffs,” the judge writes in his ruling. “It did not perform deletions; it did not hide or lose devices; and it notified its employees of their duty to preserve evidence through a litigation hold issued the same date Move filed its lawsuit.”

The court likewise found no cause to issue sanctions against Zillow executive Errol Samuelson, whose actions were also scrutinized during the court hearing. The judge has also sided with Zillow in a series of recent summary judgment rulings.

The financial stakes in the case are huge. Move contends that it has been damaged to the tune of $2 billion by the actions of Zillow, Beardsley and Samuelson, alleging that its two former execs stole trade secrets and destroyed documents when they left Move for Zillow.

Move sued Zillow and Errol Samuelson in March 2014, just 12 days after Samuelson joined Seattle-based Zillow. A King County Superior Court Judge later barred Samuelson from performing many of his key duties as Zillow’s Chief Industry Development Officer, sidelining the exec for a year.  Move later sued Curt Beardsley in December 2014, alleging that the former Move executive destroyed key documents on his way out the door to Zillow.

Beardsley testified that he wanted to make sure that his laptop computer was wiped clean due to the fact that he had visited porn sites and he didn’t want others to find out. But in his ruling, the judge cited evidence that Beardsley acted in bad faith in wiping and destroying devices and data related to the case.

“Mr. Beardsley’s hands are unclean when it comes to intentional destruction of certain evidence,” the judge wrote. “Plaintiffs have shown that Mr. Beardsley took deliberate steps to hide or destroy evidence after being on notice of his duty to preserve it. The loss of this evidence, specifically meta-data associated with a number of media storage devices, puts plaintiff at a disadvantage in presenting their case.”

Zillow issued this statement on the ruling.

We applaud the Court’s decision with respect to Zillow, which validates what we already knew:  that during the pre-trial hearing, News Corp. did not offer evidence that Zillow did anything wrong or that the company failed to live up to our obligations in this case. We look forward to vigorously defending against the claims in this litigation during the jury trial.

Zillow Group has and will continue to act with the utmost integrity in conducting our business. Ultimately this comes down to News Corp. trying to win in the courts, since they aren’t winning in the court of consumer opinion. We are fully focused on innovating and continuing to grow the most popular real estate network on mobile and Web.

Move issued this statement.

This important ruling validates our claim that one of Zillow’s top executives, Curt Beardsley, acted with “willfulness and bad faith” in destroying evidence, and his actions have “prejudiced plaintiffs’ ability to prosecute their case.”

We welcome the judge’s decision that there will be a jury instruction, which will allow the jury to “infer the missing evidence would have benefited plaintiff’s case or alternatively hurt the defendant’s.”

The judge also addressed Mr. Beardsley’s claim that his misconduct was motivated by his embarrassment about pornography use by noting that “the logical corollary to his decision to delete pornography is that he would be equally motivated to cover up his alleged perfidy in connection with misappropriated Move documents.” 

Today’s decision, when combined with the powerful evidence that has not been destroyed, will help us prove our case that our trade secrets were stolen and abused by the defendants to their advantage.

This case has cost Zillow – and their shareholders – more than $40 million so far, making the two poached executives among the most expensive in corporate history.  And one of those senior executives was found by this court to have engaged in “egregious” conduct that represents “an undermining” of the principles which make our system of justice work:  “honesty, fairness and compliance with the rule of law.”

That Zillow, which has known of such wrongful conduct for many months, has continued to employ someone like this as one of its chief ambassadors to the real estate industry raises serious questions.  

We look forward to presenting all these issues to the jury beginning on June 6.  We believe that this decision is an important first step toward holding the defendants accountable for their harmful and unlawful behavior. 

Here’s the full text of the judge’s ruling.

Move_Zillow_Ruling 5 16 (1) by Todd Bishop

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