Testifying in court Wednesday afternoon, Zillow CEO Spencer Rascoff denied allegations that the company hired two executives from Realtor.com operator Move Inc. for the purpose of gaining access to the real estate rival’s trade secrets or other confidential information.
“Absolutely not,” replied Rascoff multiple times, when asked by a lawyer for Zillow whether the company wanted Move and Realtor.com’s trade secrets or hired the executives for that purpose.
If one of the executives had suggested as much during employment discussions, “I would have hung up the phone at that very moment,” Rascoff said.
Rascoff’s testimony turned contentious under questioning from a lawyer for Move, who cited emails in which the Zillow CEO criticized other industry executives. Rascoff also acknowledged under questioning by the Move lawyer that Zillow tried to buy Move in 2013. Move operates Realtor.com in partnership with the National Association of Realtors.
Move alleges in its lawsuit that two of its former execs, Errol Samuelson and Curt Beardsley, stole trade secrets and destroyed documents when they left Move for Seattle-based Zillow. Move has dubbed the actions of Zillow and the co-defendants “corporate espionage” and said that Zillow engaged in a “very regrettable act of executive poaching.”
The Santa Clara, Calif.-based company contends that destruction of evidence has damaged its case. As part of the hearing this week, Move is asking the judge to either issue a judgment against Zillow based on the executives’ actions, or to issue an instruction at trial requiring the jury to presume that the deleted evidence would have shown that the executives and Zillow used Move’s proprietary information improperly.
Move, part of Rupert Murdoch’s News Corp. and operator of Realtor.com, alleges damages totaling as much as $2 billion, which is more than half the market value of Zillow, the Seattle-based residential real estate media company.
On the stand, Rascoff described instances in which he stopped Samuelson during conversations to make sure they weren’t getting into areas that would be inappropriate based on his past employment as a Move executive.
Beardsley was suspended by Zillow for two weeks without pay in 2015 in part for retaining Move information on his computer after he joined the Seattle company. In other situations, Beardsley has also acknowledged destroying or reformatting external drives after being instructed to preserve documents related to the case.
“Curt made a number of decisions that exhibited bad judgment that I can only describe as knuckle-headed moves, which in the aggregate created the appearance of impropriety,” Rascoff said Wednesday. Rascoff said he learned of the situation from Beardsley’s deposition, noting that the executive was disciplined for “the totality of his actions.”
Rick Stone, a lawyer representing Move, challenged Rascoff with copies of emails related to the hiring of Beardsley and Samuelson, including one in which he wrote to an industry executive, “If you mess with the bull you get the horns. I don’t kid around.”
The lawyer for move also quoted from previously private emails in which Rascoff disparaged the appearance of former Move CEO Steve Berkowitz and Redfin CEO Glenn Kelman.
David Burman, a lawyer for Zillow, objected to the line of questioning, saying Stone was “playing to the press” in attendance at the hearing. Stone said the questions were relevant given Rascoff’s earlier citation of Zillow’s core values. The judge allowed the questions.
Rascoff said he regretted sending the messages. He said he believed the Move lawyer was simply trying to make him look bad, and taking the messages out of context. “I fire off emails sometimes, and I should be more careful, and I will be more careful. I should be more careful about my choice of words,” Rascoff said.
The testimony was part of an evidentiary hearing that started on Monday in King County Superior Court in Seattle, before Judge Sean P. O’Donnell. The testimony so far has been exploring, in great detail, the actions of the former Move executives before and after they accepted positions at Zillow.
“My intentions were to preserve my personal information and my privacy,” Samuelson said in court on Wednesday, explaining why he deleted data from devices that contained information related to Move. He said he also deleted some emails that might have caused hardship or embarrassment for his former Move co-workers, including details of personnel investigations at the company.
Under questioning from his lawyer, Samuelson said in court Wednesday that he didn’t believe he was doing anything improper when he deleted information.
Questions from Move’s lawyers also focused on a legal indemnification agreement extended to Samuelson by Zillow, which the executive had requested as part of his negotiation. Move alleges that Samuelson was anticipating a lawsuit. Zillow’s chief financial officer, Kathleen Philips, testified that the indemnification was a standard part of agreements with executives.
Move also alleges that Beardsley deleted emails, cleaned out his browser history, lost thumb drives and destroyed a hard drive upon his departure from Move. Beardsley’s attorney said the behavior exhibited by the real estate exec is commonplace when people leave a job, and nothing indicates some “sinister” plot to lose them on purpose.
Exhibits shown in court included a Google Doc file containing Beardsley’s notes on how Zillow could challenge Move. The notes, which date back to before Beardsley’s hiring by Zillow, include thoughts on how Zillow could “Undermine ListHub’s Reporting Revenue,” referring to one of Move’s businesses.
As part of their questioning, lawyers for Move are also trying to establish that Samuelson and Beardsley collaborated on their plans to leave Move to join Zillow, which they deny. At one point after Samuelson joined Zillow, Beardsley texted him, “Hey Louise, it’s Thelma. Hope you’re doing ok.” Beardsley says that was a reference to the difficult situation that Samuelson was in, and not any indication that they were in cahoots.
Beardsley acknowledged that he destroyed a Western Digital external drive that had been used to back up his computer, but he said he did so because he was frustrated that it was becoming faulty, not because of any legal implications.
In court this week, Beardsley said he wanted to make sure that his laptop was wiped clean due in part to the fact that he had visited porn sites and didn’t want others to find out. That aspect of the story was first reported this week by The New York Post, which like Move is owned by News Corp.
Zillow said in a statement this week, “This case is not about one salacious detail. 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 support Curt Beardsley and Errol Samuelson and will continue to vigorously defend them and Zillow against these claims.”
Thomas Claps, the litigation desk analyst at Susquehana Financial Group, noted in a report earlier this month that Move clearly has the “edge” in the case and the plaintiffs have “significant leverage” to ask for a large settlement.