The Move-Zillow lawsuit has become legal blood sport — imagine a face-off between boxer Floyd Mayweather and kickboxer Ronda Rousey.
But we should not let the punching match distract us from bigger issues that are at stake. This week’s court battle was merely a proxy for a meatier war still brewing.
For Move, the lawsuit has become a platform for shedding light on the integrity of the Trulia acquisition, which portends severe legal damages for Zillow Group if nefarious actions are proven to be true. That is why erased computer files, graphic porn, dubious emails and obscure indemnification clauses are spicy little details that could add up to an expensive migraine for Zillow.
But the mighty Seattle portal may have figured out a way to use this legal brouhaha to its advantage.
Again, the stakes are much higher than Errol Samuelson and Curt Beardsley being thrown under the bus — or Samuelson shoving Marty Frame onto the subway tracks or Spencer Rascoff’s email graffiti about who in the industry is ugly, stupid or not cool.
Here is Zillow’s hook: I hear on the chatty realty grapevine that industry leaders who are being deposed by the Zillow legal team are being asked lots of questions about Upstream, the National Association of Realtors’ big-broker initiative to create a single-sign-on MLS system.
What does Upstream have to do with this nasty court case over Zillow poaching two Move executives?
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The deeper consequences
I suspect that Zillow would love to use this case to hand over evidence to the Department of Justice about whether Upstream is an industry cabal that could result in constraint of trade and other unfair business practices. The DOJ has a watchful eye, since it acted ten years ago to stop industry shenanigans to manipulate home listing data.
Critics like to characterize Upstream as an insider backroom ploy to circumvent the flow of listing data, even though supporters insist its agenda is innocent. Its stated goal is to create a better process for agents and brokers to upload listings to multiple sites, including the portals like Zillow. The differing accounts — friends versus foes — of what Upstream is up to don’t match up — like someone suggesting that Bernie Sanders is a secret capitalist.
Upstream insiders admit that the intentions of the interests supporting the project may be somewhat varied, but they insist it is not a conspiracy and they have no interest in stimulating the wrath of the DOJ. Lots of smart, capable and well-intended people are behind this deal.
Zillow distrusts Upstream. And while the DOJ may not even consider snooping around the broker-NAR project, if pushed, the Feds might distract the organizing team and impede their progress.
That might give Zillow valuable time in its scramble to build its own solution that fortifies the company against ListHub and Upstream. Or, Zillow might try to use this ploy as leverage to get NAR to back off or settle the lawsuit — but figuring out that far flung scenario is above my pay grade.
Robert Frost said, “a successful lawsuit is the one worn by a policeman.”
How can success be measured in this portal skirmish?
The big prize for each side
The big prize would be if Move and NAR could win eye-popping damages in the case, poking a cataclysmic financial hole in the Zillow machinery. Those prospects are highly uncertain for now, and even if Move/NAR won a judgement, the process will take a very long time after appeals and delays.
Nevertheless, the legal costs are mounting, so the financial consequences are no longer trivial.
The lawsuit could create too much noise around how Zillow is being managed, which could lead to an executive shake-up.
One real estate observer who has no skin in the game — but no supporting facts, either — insists that the smoking gun is Rascoff’s future. Plausible but unlikely. In the end, it depends on how much goop he gets on him before the case is over. I doubt if his emails making fun of folks like Redfin CEO Glenn Kelman will get him fired.
For Zillow, victory would be using the process to trip up Upstream. The prospect of Zillow working collaboratively with Upstream has apparently gone nowhere. The word is that its relationship with NAR has deteriorated beyond recovery, with the trade group purportedly prohibiting Zillow from sponsoring some of its group meetings — like the gathering of NAR’s association executives
The personal damage to the mid-level executives in this legal cesspool is sad — folks like Samuelson, Beardsley and former Zillow employee Chris Crocker who was not accused of any wrong doing whatsoever.
All three have obviously made some mistakes, but for years they made valuable contributions to the industry.
They are pawns in a much bigger game. This is chess, not checkers.
Like the subprime mess, the guys at the top went on their merry way, while junior people, who played a part, received an unfair load for the injustices.
Onward!
