FILED 15 APR 16 AM 11:56

Transcription

1 FILED APR AM : HONORABLE JOHN CHUN Noted for Hearing: KING April COUNTY 0, 0 SUPERIOR COURT CLERK E-FILED CASE NUMBER: SEA IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON FOR THE COUNTY OF KING 0 0 MOVE, INC., a Delaware corporation, REALSELECT, INC., a Delaware corporation, TOP PRODUCER SYSTEMS COMPANY, a British Columbia unlimited liability company, NATIONAL ASSOCIATION OF REALTORS, an Illinois non-profit corporation, and REALTORS INFORMATION NETWORK, INC., an Illinois corporation, vs. Plaintiffs, ZILLOW, INC., a Washington corporation, ERROL SAMUELSON, an individual, and CURTIS BEARDSLEY, an individual, and DOES -0, Defendants. Case No SEA PLAINTIFFS OPPOSITION TO ZILLOW S MOTION TO STRIKE PLAINTIFFS NOTICE OF SUPPLEMENTAL SUPPORT AND DECLARATION PLAINTIFFS OPPOSITION TO ZILLOW S MOTION TO STRIKE

2 0 0 Zillow s Motion to Strike is noting more than a misguided attempt to prevent the Court s consideration of damning admissions from a whistleblower who Zillow claims is very likely one of its executives its Vice President of Strategic Partnerships. Zillow inappropriately positions its motion as if the parties are in the middle of trial and the Court must decide whether the whistleblower letter should go to the jury relying authentication, hearsay, and admissibility objections. This is a discovery motion, and the strict rules of admissibility simply do not apply. No matter, Zillow s admissibility complaints are largely belied by its own admissions regarding the contents of the whistleblower letter and the identity of the author, who Zillow states sent the letter while still a Zillow employee. Thus, the whistleblower letter has been authenticated by Zillow, and is not hearsay. Zillow fails to cite even one reasonably applicable authority that a whistleblower letter from one of its own employees should be excluded during a discovery motion. Instead, it relies on cases regarding a home foreclosure, a horse breeding contest, a driver s license revocation appeal, and a criminal molestation appeal none related to discovery issues. Each case concerns an appeal or final determination of a matter, not what is the proper use of a whistleblower letter to warrant discovery. Those cases reveal the proverbial bottom of the barrel to which Zillow attempts to reach to distract attention from evidence catching it in acts of severe wrongdoing and hiding evidence from plaintiffs. Zillow also trumpets the supposed inaccuracy of the whistleblower letter five times in its motion to strike, six times in a one-page declaration to support the motion to strike, and eight times in its submission to the Special Master this week calling the letter false, inaccurate, misleading, unfounded, or any number adjectives to tarnish the letter. Yet Zillow has not, and will not, say what specifically is incorrect. In fact, it is quite ironic that Zillow claims the letter is so inaccurate to not be trusted, but then alleges it contains important Zillow trade secrets, which by definition must be true. Zillow s motion to strike, the submission to the special master, and Zillow s motion to seal portions of the letter and its corresponding reply brief, are all silent about what is inaccurate. According to Zillow, the whistleblower letter is from a knowledgeable PLAINTIFFS OPPOSITION TO ZILLOW S MOTION TO STRIKE -

3 0 0 source (a Zillow Vice President), and its authenticity or the knowledge of the author cannot be challenged and does not warrant striking the letter in this discovery context. Of course, Zillow s claim that the whistleblower letter contains trade secrets is wrong as a matter of law because a defendant s methods for stealing the plaintiffs trade secrets cannot themselves be protectable trade secrets. The issue of whether Zillow can use the judicial process to immunize and seal from public view Zillow s unlawful conduct will be addressed in a separate motion to this Court. But, for purposes of Zillow s motion to strike, it makes no difference whether or not the whistleblower letter contains any supposed trade secrets of either party (and Zillow does not even make this argument). Lastly, the letter is relevant to this discovery dispute. Defendants have destroyed evidence, failed to produce a substantial amount of documents, which has resulted in numerous motions to compel that defendants fight tooth and nail with emphatic declarations of innocence and alleged compliance with their discovery obligations. The whistleblower letter shines a bright light on what plaintiffs have suspected all along; defendants have been withholding large categories of documents and simply cannot be trusted to produce relevant documents, which is why the third party subpoenas are critical for plaintiffs case. I. STATEMENT OF FACTS A. Defendants Have Been Caught Destroying Evidence Before. Plaintiffs National Association of Realtors and Move, Inc. operate the realtor.com real estate website. Plaintiffs are suing their biggest competitor, Zillow, Inc. and two former Move executives that Zillow poached from Move in 0 for misappropriation of trade secrets, tortious interference, and breaches of fiduciary duty. On June 0, 0, the Court issued a preliminary injunction against defendants finding, among other things, that defendant Errol Samuelson misappropriated plaintiffs trade secrets. The Court also drew negative inferences against defendants because Samuelson took steps to destroy evidence from his computers. On February PLAINTIFFS OPPOSITION TO ZILLOW S MOTION TO STRIKE -

4 0 0, 0, this Court issued an Order To Show Cause Re Contempt For Defendants Violation of The Preliminary Injunction, which was subsequently settled out of court. In short, this is not an ordinary case with ordinary defendants. The Court has already concluded they destroyed evidence. Experts have confirmed they destroyed evidence. And plaintiffs have complained for months that defendants are systematically hiding evidence in secret non-zillow accounts and file-sharing services. Defendants have denied the claims, deriding them as silly conspiracy theories and claimed they have produced their documents, supposedly even from non-zillow s and file sharing services. B. A Whistleblower Has Revealed that Defendants Continue to Hide Evidence and Misappropriate Trade Secrets. Last Thursday, April, the plaintiffs received an anonymous whistleblower letter. Zillow now confirms the whistleblower letter is authentic when it describes that it was written by a Zillow employee. The two-page whistleblower letter corroborates plaintiffs allegations in this case and provides more details about defendants misappropriation and other unlawful conduct. Regarding Mr. Samuelson and his conduct while enjoined by this Court, the whistleblower letter states: Was he working while on injunction? yes, absolutely. Was he careful so you couldn t catch him, yes, absolutely. April 0, 0, Singer Dec., Sub., Ex. A. The letter also confirms that defendants have stolen multiple documents and entire databases, are using the stolen information, and are hiding evidence on non-zillow electronic services. The whistleblower letter discloses that Mr. Beardsley has stolen copies of Move s private MLS contact database, listing count database and other databases, and that Mr. Beardsley uses these stolen databases through a non-zillow Google Docs account to attempt to shield them from discovery. Id. Mr. Beardsley s use of the stolen Move databases was not hidden, but many other employees have witnessed him using this database to benefit Zillow s efforts. Id. Google Docs is a web-based application where documents can be created, edited and stored online, and then accessed from any computer with an Internet connection and web browser. PLAINTIFFS OPPOSITION TO ZILLOW S MOTION TO STRIKE -

5 0 0 The whistleblower identifies specific individuals, specific documents, and specific locations to search for evidence of defendants unlawful conduct. For instance, it lists Mr. Samuelson s last two assistants by name, identifies the Concur system Zillow uses for expenses, identifies names of more than a dozen Zillow employees and specifies the information each person knows. Id. The whistleblower also exposes Samuelson s failure to comply with the Court s preliminary injunction by disclosing his meetings in private meeting rooms at a hotel near the Inman Technology Conference, and that Beardsley booked those rooms. The whistleblower also reveals that Zillow CEO Rascoff would have known that Samuelson was violating the injunction by actively working on matters prohibited under the injunction because he has to personally approve large amounts in the expense reports. Id. The extensive detail in the whistleblower letter, with employee names, details of the misdeeds, identification of the stolen databases, dates of particular events, and the recitation of facts only an employee would know, are more than sufficient detail to give the letter credibility certainly enough to reject Zillow s arguments otherwise. C. Because the Whistleblower Letter is Relevant to the Pending Motions, Plaintiffs Promptly Shared it With the Court and Opposing Counsel. On Friday, April 0, at 0:00 a.m., plaintiffs submitted the whistleblower letter to this Court as further evidence of defendants ongoing misappropriation and related cover-up. This new evidence is relevant to the two pending motions regarding the scope of third-party document subpoenas to Trulia and the Goldman Sachs and J.P. Morgan investment banks involved in Zillow s acquisition of Trulia, which plaintiffs contend was instigated by a tip from Samuelson (while a Move executive) to Zillow s CEO that a Move/Trulia merger was forthcoming. The whistleblower letter discredits Zillow and Samuelson s blanket denials of responsibility regarding Samuelson s tip to Zillow, and Zillow s subsequent Trulia acquisition. Those same declarants (Rascoff and Samuelson) have also declared in filings to this Court that Samuelson was not working during the injunction. The letter specifically refutes those PLAINTIFFS OPPOSITION TO ZILLOW S MOTION TO STRIKE -

6 0 declarations and alleges that Samuelson was absolutely working during the injunction, absolutely being careful to hide his conduct, and that his conduct was known to Rascoff. Thus, the letter raises serious doubts about all of Rascoff s and Samuelson s declarations, including the outright denials provided to the Special Master that led to the Special Master s slashing of the scope of the subpoenas to Trulia and the investment banks. In addition, plaintiffs have received no documents from Zillow regarding the illegal conduct disclosed in the whistleblower letter, such as the stolen Move databases and information stored on non-zillow Google Docs cloud storage even though plaintiffs moved to compel production of information stored on gmail and non-zillow cloud storage locations, which was met with defiant denials that any documents were being withheld. Plaintiffs have received no documents regarding Samuelson meeting with MLSs in private hotel rooms in violation of the injunction, which is described in detail in the whistleblower letter. The end result is that plaintiffs cannot rely on defendants to satisfy their obligations to produce the necessary and required discovery, which is why the third party discovery that is the subject of these Motions is so critical they may be the only reliable source of documents. Because the whistleblower letter calls into serious question defendants denials and their ability to provide fulsome discovery, it is appropriate evidence for this Court to consider when deciding whether the Special Master orders should be revised. II. ARGUMENT 0 A. Zillow s Complaints Regarding the Whistleblower Letter s Admissibility are Both Irrelevant and Incorrect. Zillow s arguments that the whistleblower letter is inadmissible, not authentic, and hearsay are not valid bases to strike the document, and are not even true. The proper standard for this discovery motion is not admissibility. Indeed, CR (b)() explicitly states: It is not grounds for objection that the information sought will be inadmissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence. CR (b)(). The rule equally applies to this situation where the allegedly PLAINTIFFS OPPOSITION TO ZILLOW S MOTION TO STRIKE -

7 0 0 inadmissible documents is only being used in the discovery context. Fleming v. Parnell, 0 WL, at * (W.D. Wash. Jan., 0) (allowing discovery based on affidavit over hearsay objection because the party did not submit the affidavit at trial to prove the truth of the matter asserted, but instead to support a motion to compel discovery of relevant documents.) The same is true here. Zillow argues that the letter is unsigned and therefore inadmissible to support its effort to strike the letter from the record. It misleadingly quotes only select portions of Wilkerson v. Wegner to further its argument leaving out a key differentiating segment: The certifications considered by the trial court were not signed under penalty of perjury nor were they sworn statements. [W]e do not consider such certifications to be competent proof. (Br. at ), but Zillow withholds the key finish to the quote not competent proof in a summary judgment proceeding. Wash. App. 0, 0 fn.. This is not a summary judgment proceeding, or a trial. It is discovery. The standards are different, and Zillow surely understands the distinction. Zillow s intentionally misleading recitation of an already strained case highlights the lengths it will go to eliminate this damaging document from the record. Zillow s hearsay arguments are equally inapplicable and unconvincing. In fact, for discovery purposes, even an anonymous letter can be persuasive evidence to allow further discovery. Wright v. Watkins & Shepard Trucking, Inc. F. Supp.d 0, 0 (D. Nev. 0) (re-opening discovery based on anonymous letter supporting plaintiff s claims); Plunk v. Vill. Of Elwood, 00 WL, at * (N.D. Ill. May 0, 00) (allowing further discovery based on receipt of anonymous letter). Zillow now claims it knows the identity of the whistleblower. Thus, the plaintiffs use of the letter here is even more reliable than in cases where Courts have relied on anonymous letters to warrant further discovery. In any event, Zillow claims the letter was authored by Zillow employee Chris Crocker, and received by plaintiffs two business days before Mr. Crocker s last day at Zillow. Declaration of Jack M. Lovejoy, Ex. (Zillow Emergency Application for a Preservation Order (submitted to Special Master Hilyer) at. Thus, Mr. Crocker Zillow s Vice President PLAINTIFFS OPPOSITION TO ZILLOW S MOTION TO STRIKE -

8 0 0 responsible for strategic partnerships, product development, and representing Zillow at industry events was a Zillow employee at the time he drafted the letter. Lovejoy Dec., Ex., (Crocker LinkedIn page). His statements, made with an executive s knowledge, are Zillow admissions, not hearsay. See Sea-Land Serv. Inc. v. Lozen Int l, LLC, F.d 0, (th Cir. 00) (a statement made by a party employee concerning a matter within the scope of the agency or employment is a party admission and not hearsay). While Zillow blasts the letter as unfounded and challenges its authenticity, it at the same time asserts that Mr. Crocker was one of few individuals with knowledge of some of the information in the letter, and that it supposedly contained his trademark sign off: Good hunting. Lovejoy Dec. Ex. at -. Even if authentication were an issue in this discovery motion, which it is not, Zillow s admissions have sufficiently deemed the letter (from a disgruntled former employee ) to be authentic. Wash. ER 0(a) (the authentication requirement is satisfied by evidence sufficient to support a finding that the matter in question is what its proponent claims. ) B. Plaintiffs Supplemental Filing is Procedurally Proper and Should Not Be Stricken. Plaintiffs filed the instant motion on April. Plaintiffs received the whistleblower letter on Thursday afternoon, April, and submitted it to the Court on the morning of April 0. Despite that record, Zillow argues that the supplemental submission is untimely filed (Br. at ), which makes no sense. Plaintiffs submitted the letter as soon as they could have. Similarly, Zillow complains that the whistleblower letter was not before the Special Master and therefore should not be considered. Again, the whistleblower sent the letter after the Special Master delivered his relevant orders. The letter could not have been submitted any sooner because it did not exist yet. Zillow also challenges the submission of any supplemental materials based on the Order appointing the Special Master, but that Order specifically allows revision of the Special Master s Lovejoy Declaration Ex. at. PLAINTIFFS OPPOSITION TO ZILLOW S MOTION TO STRIKE -

9 0 0 orders by the trial court judge based on the records of the case. The letter, once submitted, is a record of the case. Zillow is simply wrong. Indeed, motions for reconsideration based on newly-learned evidence are allowed with the court s discretion. Martini v. Post, Wn. App., (0) (affirming reversal of summary judgment based on new evidence). While Zillow would surely like to bury the whistleblower letter and its damaging admissions of Zillow s misdeeds, the Court may properly consider the letter. In fact, the local rules, which Zillow erroneously contends discourage supplemental materials (Br. at ), allow the Court to impose terms and otherwise order to allow the supplemental material. Here, the fact that the Plaintiffs received the letter after they filed the instant motions warrant the supplemental filing. Zillow s remaining case citations are far off base. Zillow cites Powell v. Rinne for the proposition that the court may strike or disregard evidence that is untimely, improperly structured, not based on personal knowledge, or is defective. (Br. at ). But Powell concerns a home foreclosure where the defendant submitted an appraisal moments before the hearing, which was eight months after the notice of forfeiture, and years after continued missed payments and failure to pay taxes. Powell v. Rinne, Wash.App., 00-0 (). The situation is not even close to what occurred here. And Zillow s reliance on Metcalf v. State (regarding a DMV proceeding to revoke a driver s license), and State v. Payne (regarding an appeal of a child molestation conviction), are equally inapplicable. Neither is in the discovery context and both concern evidence admitted in a proceeding where a final determination had been made. These cases are far afield from this situation. C. The Whistleblower Letter is Relevant to the Instant Motions. The plaintiffs motions seek to revise the Special Master s orders on third-party subpoenas that severely limited the scope of the documents to be produced. The whistleblower Zillow seeks the unnecessary and unusual alternate relief that the Court remand the matter back to the Special Master. (Zillow Br. at ). All that will do is further delay the proceedings, and further delay the production of relevant evidence to Plaintiffs, which has been Zillow s strategy all along. The Court has a full record and ability to give whatever weight it so desires to the letter in ruling on the instant motions. Further delay is not required. Indeed it would be reversible error to preclude discovery on claims and allegations directly at issue in the operative complaint. PLAINTIFFS OPPOSITION TO ZILLOW S MOTION TO STRIKE -

10 0 0 letter brings to light what plaintiffs have feared all along the defendants have not been forthcoming with their production of relevant documents. Due to defendants continued resistance to a fulsome production, the plaintiffs must be allowed to get complete discovery from the third parties Trulia, Goldman Sachs, and J.P. Morgan. Illiana Surgery and Medical Center LLC v. Hartford Fire Ins. Co., No. :0 cv, 0 WL, at * (N.D. Ind. March, 0) (given defendant s reluctance to produce discovery and attempts to hide information, plaintiffs duplicative discovery requests by subpoena are warranted); Future Commc'ns, Inc. v. Hightower, 00 WL, at * (Ohio Ct. App. May, 00) (finding substantial need for information from third party by subpoena because information could not be obtained from defendants after repeated attempts). First, the letter casts doubt on Zillow s testimony, as well as what it will produce, regarding its acquisition of Trulia. Zillow and Samuelson have denied that Samuelson tipped Zillow, and that Zillow acted on that tip. Sub.. Rascoff Decls. at SM00-0 and SM (both denying that he received a tip from Samuelson and acted on that tip); SM (sealed) (citing Rascoff and Samuelson testimony denying a tip regarding the Trulia acquisition). These denials are in the record and were surely relied on by the Special Master when limiting the scope of discovery allowed to proceed against the third parties. But the whistleblower impugns anything Rascoff and Samuelson say. In previous declarations, Samuelson has averred that he complied with the Court s preliminary injunction. Sub., Samuelson Jan. 0, 0 Decl. Re Opposition to Contempt,,. Rascoff did the same. Sub. 0, Rascoff Jan., 0 Decl. Re Mot. to Increase Bond,, and (stating Samuelson was placed on leave, cannot engage in any efforts to obtain direct feeds, and has been isolated, at home, and detached completely from work. ). But the letter contends that Samuelson was absolutely working during the injunction, was absolutely careful so he would not be caught, provides specifics of Samuelson s meetings in private hotel rooms during conferences with Mr. Beardsley who was hired (along with Samuelson) to obtain direct feeds PLAINTIFFS OPPOSITION TO ZILLOW S MOTION TO STRIKE -

11 0 0 from MLSs, and that Rascoff knew all about Samuelson s efforts because he personally approves the expense reports and pays attention to the details. The letter contradicts what Samuelson and Rascoff have told this Court, and raises serious doubts about defendants desire to comply with the requirements of the legal process. If they failed to comply with the Court s preliminary injunction order, why would they bother with basic discovery obligations. The trial court has wide discretion to assess the credibility of witnesses, and the whistleblower letter affects the witnesses credibility for purposes of this discovery motion. State v. Tyler, Wash. d 0, (0) ( Credibility judgments are left to the trial court ). For those reasons, the whistleblower letter is directly relevant to the third party discovery motions now before the Court. Moreover, the letter contains damning admissions regarding defendant (and former Move executive) Curt Beardsley that he stole complete copies of Move databases and has been using those databases from a Google Docs account while working for Zillow. That information is being hidden from plaintiffs. If it was known by Mr. Crocker, then it was surely known by others at Zillow and likely by Beardsley s cohort Samuelson, and maybe other Zillow executives. Yet plaintiffs have received nothing in discovery regarding those shocking facts. Zillow has not produced one document regarding Beardsley s use of stolen Move databases, or that Beardsley uses a Google Docs account to store the Move databases off-site. In fact, Zillow loudly denied that discovery into non-zillow gmail or storage accounts were necessary, and that it had produced everything in its possession during plaintiffs motion to compel on this very issue which was granted. Zillow still never produced or disclosed the Google Docs account or its contents despite the fact that it appears to have been well-known around Zillow. These deficiencies cast serious doubts on the sufficiency of what Zillow, Samuelson, and Beardsley have given their lawyers for production, or outright hidden from their lawyers. Presumably, the third parties will not be so willing to engage in such devious behavior. Similarly, the letter sheds light on what it calls illegal activities to steal Plaintiffs data, scrape the realtor.com website, and a ListHub replacement product, which are directly relevant to PLAINTIFFS OPPOSITION TO ZILLOW S MOTION TO STRIKE - 0

12 plaintiffs claims against the defendants. But not one document has been provided regarding those topics. Lastly, the letter raises an issue regarding a ListHub replacement product. Plaintiffs contend that Zillow s acquisition of Retsly, which Samuelson withheld as an opportunity while a Move executive so that he could save the opportunity for Zillow, was for ListHub replacement. That issue is one of the topics in the subpoenas to the investment banks that was quashed by the Special Master, and is now at issue in plaintiffs motion. See April, 0, Mot. to Revise (Investment Banks) at. III. CONCLUSION 0 Because the whistleblower letter contains information relevant to the instant motions, and the Court can decide what weight it decides to give the admissions in that letter with respect to the pending motions, Zillow s unusual request to strike evidence during this discovery motion should be denied. DATED April, 0, at Seattle, Washington. 0 /s/jack M. Lovejoy Jack M. Lovejoy, WSBA No. Lawrence R. Cock, WSBA No. 0 Attorneys for Plaintiffs CABLE, LANGENBACH, KINERK & BAUER, LLP 000 Second Avenue, Suite 00 Seattle, Washington 0-0 (0) -00 phone (0) -0 facsimile lrc@cablelang.com jlovejoy@cablelang.com PLAINTIFFS OPPOSITION TO ZILLOW S MOTION TO STRIKE -

13 Rick Stone (pro hac vice) Brent Caslin, WSBA No. David Singer (pro hac vice) Nick Saros (pro hac vice) Attorneys for Plaintiffs JENNER & BLOCK West Fifth Street, Suite 00 Los Angeles, CA 00 () -00 phone () - facsimile rstone@jenner.com bcaslin@jenner.com dsinger@jenner.com nsaros@jenner.com 0 0 PLAINTIFFS OPPOSITION TO ZILLOW S MOTION TO STRIKE -

14 0 0 CERTIFICATE OF SERVICE I hereby certify that on April, 0, I electronically filed the foregoing with the Clerk of the Court using the Court s CM/ECF System which will send notification of such filing to the following individuals registered to receive electronic notices by transmission at the addresses provided thereto. CM/ECF Participants: David J. Burman Susan E. Foster Kathleen M. O Sullivan Katherine G. Galipeau Counsel for Zillow, Inc. Clemens H. Barnes Estera Gordon Counsel for Errol Samuelson I further certify that I served a copy of the foregoing to the following non-registered CM/ECF attorneys via electronic mail: Judith B. Jennison Perkins Coie LLP jjennison@perkinscoie.com Counsel for Zillow, Inc. Daniel Oates Miller Nash Graham & Dunn LLP dan.oates@millernash.com Counsel for Errol Samuelson I declare under penalty of perjury under the laws of the State of Washington that the foregoing is true and correct. DATED at Seattle, Washington on April, 0. /s/ Janet Petersen Janet Petersen, Legal Assistant CABLE, LANGENBACH, KINERK & BAUER, LLP 000 Second Avenue, Suite 00 Seattle, Washington 0-0 (0) -00 phone (0) -0 facsimile jpetersen@cablelang.com PLAINTIFFS OPPOSITION TO ZILLOW S MOTION TO STRIKE -