Zillow execs to defend against claims of 'massive' evidence destruction

Errol Samuelson and Curt Beardsley — Zillow Group’s top representatives to the real estate industry — will be in the hot seat this week, facing allegations of “massive” evidence destruction in a Seattle courtroom as early as today.

Realtor.com operator Move Inc. and the National Association of Realtors have accused the execs of obliterating hundreds of gigabytes — equivalent to hundreds of thousands of pages — of evidence in a trade secrets lawsuit originally filed in March 2014

“This is a case where two sophisticated executives with technology backgrounds, who anticipated that they would be sued and that their communications would be subpoenaed, permanently erased data from multiple computers, smartphones, and mobile devices, deleted thousands of emails and an unknown number of text messages, used and even wrote special software programs to wipe even more data, and continued to destroy evidence even while the litigation was in progress and a subpoena was pending,” attorneys for the plaintiffs alleged in a legal filing before today’s evidentiary hearing.

“And instead of condemning their conduct, their employer and codefendant Zillow ratified and defended it.”

The defendants — Zillow, Samuelson and Beardsley — say the industry relations execs had no duty to preserve evidence before a lawsuit was filed against them and they did not intentionally destroy evidence in bad faith, but rather deleted data to protect their own personal information, including browser history revealing Beardsley’s visits to pornography sites.

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Zillow Group, speaking on its own behalf and for Samuelson and Beardsley, gave the following statement: “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.”

NAR declined to comment.

In an emailed statement, Move said: “The defendants used all manner of subterfuge to steal some of Move’s most valuable information and ideas, then destroyed evidence of their misdeeds and concocted shifting explanations for their behaviors.

“We are seeking justice for this misconduct and look forward to presenting our evidence in court.”

Two weeks ago, a legal filing revealed the size of Zillow’s potential bill in this case if Move and NAR get their way: $1.77 billion in damages — just over 40 percent of Zillow Group’s market cap.

In a separate filing, Zillow’s attorneys asserted that plaintiffs had failed to “show any nexus between allegedly lost evidence and specific claims in this case.”

“Plaintiffs attempt to sidestep the nexus requirement is a bid to unfairly obtain a windfall on the basis of a few missing documents (of unknown content) or bits of metadata. It should be rejected,” they added.

Fair trial no longer possible?

Move and NAR contend that the “decimation” of so much critical evidence means a fair trial of the case may no longer be possible.

Accordingly, they are asking the court for what they admit is a “drastic” ruling against the defendants: default. Also called a “terminating sanction,” this means the court would rule in favor of the plaintiffs without a trial.

“Terminating sanctions are warranted here given the scope of Defendants’ misconduct and the amount of evidence lost. If it were not for their own mistakes — accidentally producing a stolen database, failing to completely delete every incriminating email and text — they could have pulled off the ‘perfect crime,'” plaintiffs’ attorneys alleged.

“If Defendants are not sanctioned, they will exploit and benefit from their evidence destruction at trial, by spinning tales of innocence and arguing to the jury that they did not do anything wrong.”

Alternatively, if the case does proceed to trial, Move and NAR ask the court to instruct the jury “to presume that the evidence, if it had not been destroyed, would have shown that Samuelson and Beardsley stole Move’s information and either conveyed that information to Zillow or used it on Zillow’s behalf,” plaintiffs’ attorneys say in another filing.

Scope of alleged destruction

At least the following data and devices have been destroyed, according to Move and NAR’s attorneys:

• All of the data on Samuelson’s Move-issued iPhone.
• All of the data on Samuelson’s Move-issued iPad.
• All of the emails that were on Samuelson’s Move-issued MacBook.
• All of the other Outlook data (calendars, task lists, notes , etc.) that were on Samuelson’s Move-issued MacBook.
• Two USB drives Samuelson connected to his Move-issued MacBook in the weeks before he left Move for Zillow, then supposedly lost.
• An unknown number of text messages from Samuelson’s burner cell phone, which he used to communicate with Zillow CEO [Spencer] Rascoff and Beardsley between January and March 2014.
• The Western Digital hard drive that Beardsley connected to his Move-issued laptop the day before Samuelson left for Zillow, and then smashed after Plaintiffs subpoenaed it.
• Three USB drives that Beardsley connected to his Move-issued laptop in the weeks before he followed Samuelson to Zillow.
• The data from Beardsley’s 32 GB SanDisk Cruzer USB drive, which he erased before turning over to the neutral [forensic] expert.
• The files and data that were destroyed when Beardsley ran the Cipher deletion software on his Move-issued laptop.
• Thousands of emails that Beardsley deleted from his Move-issued laptop.
• The data that was destroyed when Beardsley ran deletion software on his home computer.
• The data that was destroyed when Beardsley ran deletion software on his Zillow laptop.
• An unknown number of emails Beardsley deleted from the personal email account that he used to communicate with Samuelson about their plans to defect to Zillow.
• An unknown number of text messages Beardsley deleted from cell phone, which we know included messages to and from Samuelson relating to their plans to defect to Zillow.

“The most important emails and text messages in the case are gone and cannot be recovered. This is an extreme case, and demands the harshest possible sanction,” plaintiffs’ attorneys said.

Zillow responds

Attorneys for Zillow maintain the vast majority of these deletions occurred before the defendants were sued, or in Beardsley’s case, before he was named a party to the lawsuit in March 2015, and that none of the defendants expected to be sued because they believed they had done nothing wrong.

“This is a case about two honorable and respected business executives who decided to leave their jobs at Move, Inc., to go to work for Zillow, Inc.,” Zillow’s attorneys wrote in legal filing opposing plaintiffs’ allegations.

“As a result of that decision — and the fiercely competitive business environment in which it occurred — they are now targets in an aggressive but unsubstantiated campaign of disparagement and alleged theft.

“The stridency of Plaintiffs’ rhetoric is directly proportional to their dismay at losing these two industry leaders, and inversely proportional to actual evidence of wrongdoing in this case, which is nil.”

Zillow’s attorneys contend that many of the deletions were — ironically —  good-faith efforts by Samuelson and Beardsley to ensure that they did not retain Move documents when they left the company.

“Plaintiffs hope to create and exploit a Catch-22: if Samuelson and Beardsley deleted files, they are guilty of evidence destruction; but if they did not delete them (as in a few instances where, among multiple devices and accounts, a small number of Move documents were overlooked), then they are guilty of intentional theft of vitally important trade secrets,” they wrote.

Samuelson and Beardsley spent many years at Move and much of their time traveling, and therefore “the loss of certain thumb drives is not at all suspicious, and does not prove intentional destruction of evidence,” they said.

Their schedules also meant they had a lot of “sensitive” personal data mixed with business data on their Move devices, Zillow’s attorneys said.

“Neither believed that their efforts to remove that personal data from Move devices was inappropriate, nor that it would in any way deny Move any information in which it had a legitimate interest,” they said.

All three defendants argue that the neutral forensic expert appointed to examine their electronic devices should be allowed to finish his work before any sanctions are imposed. The alternative would risk “a serious miscarriage of justice,” Zillow’s attorneys said.

“Plaintiffs hope to win by cries of ‘spoliation’ what they cannot win on the merits: either a judgment against Defendants for trade secret misappropriation, or a deeply prejudicial jury instruction that will brand Defendants as dishonest or effectively end the case by directing findings of fact,” they added.

Beardsley’s browser history

In a legal filing, Beardsley admitted that he ran deletion programs on his Move, Zillow, and home office computers.

“To be sure Mr. Beardsley regrets running the ‘cleanup’ programs, which we recognize could raise concerns,” his attorneys said.

“Plaintiffs nonetheless must sustain their burden and establish that Beardsley acted with bad faith in so doing, and also that important evidence was lost as a result of those programs. They have failed to do so.”

Beardsley ran the programs in order to hide his “regular visits to hardcore pornography websites,” not in order to destroy anything relevant to the case, his attorneys said.

“He feared that if his frequent viewing of pornography was revealed to his employer, colleagues in the industry, family and friends or the public, it would not only be extremely embarrassing but perhaps very damaging to his career reputation, and relationships,” they said.

“Beardsley is deeply religious, and often stands in to preach at his local church. He was profoundly ashamed of what he viewed as a serious moral failing.

“He struggled with his pornography usage, and did not want his new Zillow colleagues, family, or those in the industry in which he worked to know about it.

“He feared what exposure of his pornography use would do to him personally and professionally, that it would be the first thing everyone thought about when they met or saw him.”

A sample of Beardsley’s browser activity from plaintiffs’ forensic expert, which includes entries for searches about deleting data in addition to pornography websites:

Move and NAR allege this is a cover story.

“Although Beardsley claims he did this to hide the fact that he visited pornographic websites, he actually deleted all internet browsing history, including visits to DropBox or cloud services where Beardsley could have been storing stolen Move documents,” their attorneys said.

For their part, Zillow’s attorneys said they “promptly implemented a litigation hold” when the lawsuit was filed and the company should not be held liable for Beardsley’s actions.

Move and NAR disagreed.

“Most of Beardsley’s evidence destruction occurred while he was employed by Zillow, yet Zillow apparently did nothing to prevent him from destroying it and did not even discipline him for wiping a Zillow computer while under a subpoena,” their attorneys said.

“To the contrary, Zillow has repeatedly vouched for Beardsley’s honesty and denied that any evidence destruction occurred.”

‘Absence of a smoking gun’

In a legal filing, Samuelson admitted that when he resigned from Move, he restored his Move-issued iPad and iPhone to factory settings before returning them and tried to remove his personal files and information from his Move-issued laptop.

“Samuelson did this because it was not uncommon for Move to provide ex-employee’s devices to other employees,” he said.

“As a departing executive, Samuelson did not want other employees at Move having access to sensitive personal information that may have remained on those devices.”

But, “Samuelson deleted nothing after Plaintiffs filed this lawsuit,” his attorneys said in a separate filing.

“Plaintiffs now ask the Court to sanction Samuelson for spoliating evidence because they haven’t found a smoking gun,” they added.

“But the absence of a smoking gun isn’t because the evidence was destroyed; it’s because there never was one.”

Moreover, Samuelson’s attorneys maintain that Plaintiffs have recovered much of the data that was deleted and therefore it isn’t truly missing.

To that plaintiffs say the defendants’ actions have gotten rid of critical evidence: the metadata associated with the specific electronic files defendants copied.

“[N]ot just what files were deleted, but also data showing which files were in Defendants ‘ possession when they changed jobs; which files were copied and by whom; when the files were accessed and by whom; and what other computers or devices they were transferred to,” Move and NAR’s attorneys said.

“When Defendants wiped their computers and devices, trashed the hard drives and flash drives they used to copy files, and ran deletion software, they destroyed this critical evidence.”

“The only way to verify Defendants’ claim that they destroyed only irrelevant, personal material would be to review the data and devices that Defendants destroyed — which cannot be done because Defendants destroyed them,” they added.

An evidentiary hearing in the case starts today in Washington’s King County Superior Court and will run for at least two days. The trial date is June 6.

Read day 1 of our live blog coverage of the evidentiary hearing.

Read day 2 of our live blog coverage of the evidentiary hearing.

Read day 3 of our live blog coverage of the evidentiary hearing.

Read day 4 of our live blog coverage of the evidentiary hearing.

Email Andrea V. Brambila.

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Editor’s note: A statement from Zillow has been added to this story.