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Real Estate Corporate

Judge grants Move/NAR motion for contempt, prompts investigation into “Samuelson Memo”

Errol Samuelson became a Zillow exec the same day he left Move, leading to a drawn out legal battle between the companies, with a contempt of court charge now at the forefront.

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King County Superior Court’s Judge John H. Chun has granted a motion for contempt filed by Move, Inc. and the National Association of Realtors (NAR) against Zillow, Inc. and Errol Samuelson. This marks the latest in the drawn out drama after Samuelson left Move, Inc. abruptly without notice last year to become competitor, Zillow’s Chief Industry Development Officer.

The contentious departure spurred an ongoing lawsuit, and last summer, Washington State Superior Court Judge Barbara Linde granted a preliminary injunction in the case of Move, Inc. and the National Association of REALTORS® et al. vs. Zillow, Inc. and Errol Samuelson et al.

What the injunction prohibits

At the time, Judge Linde found Samuelson to have misappropriated trade secrets by acquiring it using improper means, and by copying it without authorization. It also enjoined Samuelson, a former Move employee, from using and sharing any trade secret and confidential information gained while employed at Move, Inc., and from specific activities relating to his new position.

The injunction prohibits activities relating to obtaining direct data feeds of listing data, prohibits activities relating to developing contact relationship management (CRM) tools, and prohibits activities which would circumvent ListHub.

Judge Chun orders an investigation

Judge Chun has granted Move and NAR’s motion for contempt of court, ruling that further investigation into a memo written by Samuelson is warranted. Within the month, Zillow is required to produce for deposition all employees related to the creation, distribution, and implementation of what court documents refer to as the “Samuelson Memo.”

Court documents do not include the memo, and we have reached out to Zillow and Errol directly to obtain a copy, but with this case ongoing, it is unlikely that a lawyer will allow it, whether information is redacted or not.

When contacted for comment or information on the Samuelson Memo, Move declined to comment, as is their policy for ongoing legal matters.

What now?

Because there is so much that the original injunction prohibited Samuelson from doing, it is difficult to speculate as to what the Samuelson Memo contains. On March 30th, Move/NAR will go before the judge for their opening brief, Zillow follows on April 6th, and Move/NAR will enter their reply on April 10th. Then, on April 24th, Zillow is ordered to show cause as to why they should not be held in contempt for violating the preliminary injunction.

Court records refer to redacted and unredacted versions of the memo, which is not part of the public record, but the judge will likely issue a ruling late April or early May, which will indicate which rule Samuelson broke, if any at all.

Final analysis: If these allegations are true, it is shocking that any moves would be made to make any waves, given how heated Zillow’s talent grab has been for the industry.

#SamuelsonMemo

Full court document available here.

UPDATE: Zillow tells us, “To be clear, what the court granted was Move’s request for further investigation and a hearing. For context, Errol has been on leave since July 1.
Beyond that, we cannot comment on this litigation.”

Lani is the Chief Operating Officer at The Real Daily and sister news outlet, The American Genius, and has been named in the Inman 100 Most Influential Real Estate Leaders several times, co-authored a book, co-founded BASHH and Austin Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

Real Estate Corporate

Has REX Homes finally ceased operations?

After two rounds of layoffs, a restructure to join MLSs, and swirling rumors regarding leadership, staffers tell us the company has crumbled.

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Empty office REX Homes

Real estate brokerage REX Homes became famous in recent years for spearheading an anti-trust lawsuit against Zillow and the National Association of Realtors, accusing them of being a ‘cartel’ to edge out non-MLS participants. But it appears that as of today, the company has ceased operations.

Numerous staff reached out to us directly to indicate the company’s last day was Tuesday and that a companywide call on Friday outlined the end of REX Homes. While the entity of the brokerage still exists, we are told there are no longer offices, staff, leadership, or agents.

Staff at the Austin, TX and Woodland Hills, CA offices (both in Texas) have confirmed that as of today, the doors are literally closed. It is unclear what REX’s plans are for wrapping up any current contracts that haven’t closed.

The company’s website remains live with no notification of any service interruptions and there have been no changes to the faces that appear on the staffing page.

Many Glassdoor users have begun leaving reviews asserting that operations have ceased. To thicken the mystery, we’ve already seen several recent reviews disappear, but it is unclear if that is Glassdoor or REX’s doing.

Several LinkedIn users formerly employed at REX Homes are putting their #OpenToWork signs up, stating the company has closed – some indicate departments dissolving, others that the entire company has collapsed.

What has been especially interesting with this company is staff’s consistent fears of CEO Jack Ryan, consistently citing a fear of retribution not just professionally, but personally, and several told us we should worry about our own personal safety, having been the only news outlet covering REX’s unraveling.

Also consistent is that everyone we’ve spoken to in the last year has cited an imminent demise of the company as a whole.

In August of 2021, REX Homes laid off 60 staff without severance, and on October 7th, 2021, REX Homes had their second round of layoffs – both times, staff said they were not initially given severance pay, but report to us that after our coverage, they began seeing payment.

Also in October of last year, they shut down their New York and Chicago offices, and announced internally that they would be joining MLSs. They called it a restructure. The joining of any MLS shocked many as the premise of their structure was always that their magical proprietary tech as well as their bypassing of the MLSs to save consumers thousands of dollars.

They earned several rounds of private equity funding and never went public. Several staff told us that going IPO had been a talking point from Ryan, often used to lure them to the company in the first place and accept lower pay with the idea that shares would soon be coming their way.

Between the August and October layoffs, they closed their Series D round of funding, but never disclosed the amount, closing date, or investor. It is therefore unclear how their investors feel about the company’s status, but it is also possible that they’re who initiated the pulling of the plug.

It is also unclear what this means for their ongoing lawsuit against Zillow and NAR and how a non-existent company can pursue a class action lawsuit, but no filings have been made in the past week regarding the case.

As with all REX stories, we have reached out for comment. Because we track all emails, we have always seen them open every press inquiry within seconds, but it is of note that our current request for comment has yet to be viewed

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Real Estate Corporate

Zillow seeks a patent to fill out forms electronically – sounds familiar…

(TECHNOLOGY) In yet another broad patent application, Zillow is aiming for ownership of the ability to fill out “transactional documents” electronically.

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In yet another obscenely broad patent application, Zillow is aiming for ownership of the ability to fill out “transactional documents” electronically.

The official patent application describes “generating electronic transactional documents using a form generating system” and “using a design tool that allows a user to place data entry fields over an image or snapshot of a transactional document.”

If that sounds familiar, it’s because virtually every website that allows customers to e-sign anything already does this. Some concerns also address the fact that services such as DocuSign – a service in which both Google and NAR invested – and even Google Forms might fall under this category.

Should Zillow see this patent approved, it could spell disaster for a huge operational segment of any real estate sale: the actual signing of a contract.

What’s odd about this patent application is the bizarre, gaslighting-lite language it uses to pitch the idea of something that is already used widely on the internet. In the background section, the patent claims that “Most of the time the parties are not in the same physical location when the offers, counteroffers, and acceptances are signed. Fax machines are often used to facilitate the process, as well as emailing scanned documents.”

The background continues with, “Sellers, buyers, and their agents are often not in the same contemporaneous physical location. Therefore, signed documents are often faxed between parties, with original signed copies being retained for the closing.”

Using the implied inconvenience of a physical fax machine as an argument for the efficacy of electronic documents makes sense, albeit in an obvious kind of way; however, using this argument to support the notion that Zillow should be able to claim a patent that gives them domain overall electronic forms in the real estate microcosm seems particularly villainous.

It’s also worth noting that, should this patent be granted any time soon, the likelihood that the world will still be in the grips of the COVID-19 pandemic is high. From the patent office’s standpoint, restricting the remote signature options of any real estate firm not affiliated with Zillow during a period of time in which purchasing property is already laborious and dangerous shouldn’t even be an option.

Time will tell whether or not Zillow is successful in achieving its bid for e-signing. Other document-signing services may be able to dispute the patent, but Zillow’s history of scooping up unlikely patents is undoubtedly on their side.

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Real Estate Corporate

Zillow hit with another lawsuit after iBuying collapse, claiming they misled investors

(REAL ESTATE) Stockholders are suing, alleging that Zillow publicly praised the iBuying program despite knowing it was dying, and they claim to “suffer significant damages.”

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Zillow landing page on laptop

Zillow Group was hit late Thursday with yet another investor lawsuit on the heels of the collapse of their iBuying program (“Zillow Offers”). Hillier v. Zillow Group, Inc. et al in the Western Washington District Court is seeking class action status in this federal securities lawsuit, alleging that Zillow failed to disclose to investors that they did not have the ability to price homes for their Zillow Offers program, and that paired with a known supply and labor shortage, led to an inventory backlog.

The suit claims that under these conditions, Zillow (ZG) knew they would have to end the iBuying program, which would hurt their bottom line, something investors were not made aware of. In fact, this suit notes that company leadership continued to speak positively in public, making “materially false and/or misleading statements” about the program despite their overpaying for numerous homes and selling them at a loss.

In the Notice of Related Cases filed, Braua v. Zillow Group, Inc., et al., and Silverberg v. Zillow Group Inc., et al. were cited, both of which are seeking damages for allegations of misleading investors. The Hillier suit is specifically seeking to certify a class of Zillow stock buyers who made purchases from Aug. 7, 2020, and Nov. 2, 2021.

The new lawsuit outlines the following (our words, not theirs):

  • Zillow launched the home buying program in 2018 to rapidly flip properties.
  • By close of 2019, they were in 22 markets, and the program accounted for half of their annual revenue ($1.4B).
  • On August 05, 2021, the company released Q2 earnings, citing $772M from the iBuying program, roughly 60% of their annual revenue. In the release, Defendant Rich Barton said that their “iBuying business, Zillow Offers, continues to accelerate as we offer more customers a fast, fair, flexible and convenient way to move” and “is proving attractive to sellers even in this sizzling-hot seller’s market.”
  • In October, RBC Capital Markets began cooling on Zillow, lowering their price target for the stock, warning that Zillow Offers would likely miss quarterly expectations, dragging ZG down from $91.40 on October 01 to $85.68 on October 04.
  • Shortly thereafter, in October 2021, Zillow announced they would be halting the program through year’s end, and stocks continued to slip.
  • In November, the company released their Q3 financials and simultaneously declared an end to the program and a 25% workforce cut.

It appears that the crux of the Hillier case is that leadership continued to praise the program even as it declined, right up until the Q3 earnings statements went public and it could no longer sustain the program.

“As a result of defendants’ wrongful acts and omissions, and the resulting declines in the market value of the company’s securities, plaintiff and other members of the class have suffered significant damages,” the suit concludes.

As recently as this week, InvestorPlace said, “it’s going to be a while before ZG stock could make a comeback,” noting that Zillow’s house is not in order.

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