New Witnesses May Upset $740 Million Judgment

Published in Courthouse News Service on Dec. 19, 2018.

The San Antonio judge who issued Bexar County’s largest-ever tort judgment this year — a nearly $740 million award to a San Francisco software startup that successfully counter-sued a major title insurer for theft of trade secrets — is considering whether to order another trial in light of new testimony from witnesses who say the underlying contract in dispute was the result of unlawful collusion.

Amrock, a real estate services firm formerly known as Title Source Inc., accused HouseCanary of selling “unusable” housing valuation services in 2016, but found itself on the hook for $706 million in damages in March this year when a Texas jury found it guilty of defrauding HouseCanary of its data and models for Amrock’s own real estate algorithms. Bexar County Judge David Canales raised that figure to just under $740 million when he added interest and attorney’s fees in a final judgment entered Oct. 25.

The multimillion-dollar backfire wasn’t the first twist in this case, which took a turn just one day after the jury had rendered its verdict. Anthony Roveda, a former HouseCanary employee, used an anonymous email account to contact Amrock CEO Jeff Eisenshtadt, telling him “there was collusion among some of [Amrock’s] people” and the HouseCanary leadership.

Now Roveda and three other ex-employees are being questioned before Judge Canales to determine whether their newly sworn testimony warrants a new trial — whether jurors would have reached a different opinion had they considered their statements. The eight-hour hearings began Monday and are to conclude Thursday, though Canales could rule on the motion at any time before then.

Their testimony is “entirely new,” said Randy Mastro, an Amrock attorney.

“There was no evidence presented to the jury, or knowledge by Amrock, of the collusion that had occurred here: a secret relationship that involved fiduciary breaches to the detriment of Amrock that was never before the jury because it was … only revealed by these whistleblower witnesses,” Mastro said in a telephone interview Tuesday.

The witnesses said they repeatedly heard HouseCanary CEO Jeremy Sicklick speak of arrangements he’d made with an Amrock appraiser, Jordan Petkovski.

In an Oct. 29 status conference held for federal litigation over these same issues, Sicklick testified that Petkovski had proposed a position and salary, as well as equity in the company, to Sicklick in 2014, prior to the companies signing the 2015 contract over which Amrock originally sued. In that hearing, Sicklick denied any interest in the proposal.

At the heart of the original lawsuit lie automated valuation models (AVMs): extrapolations that appraise real estate property by analyzing variables such as historical price data, tax assessments, sales history and past lending transactions. HouseCanary entered into an agreement to provide Amrock with its proprietary appraisal technology in 2015, but the new witnesses are taking Amrock’s side, saying the startup had little to offer and much to gain from the $5 million annual contract.

“It was evident to me that during the time I worked at HouseCanary there was never a working version of the app,” Roveda testified in a sworn declaration. On Tuesday, he expressed skepticism toward the jury’s trade-secrets theft verdict: “From my knowledge of the stuff I was working with and touching at HouseCanary, there wasn’t anything to steal.”

Robert Walker, another witness, a real estate analyst who has worked with AVM technologies since 1991, said HouseCanary “had very little data” when he joined the company in 2015.

“Many times, HouseCanary compared themselves to Zillow,” Walker said in court Tuesday. “Zillow is a well-known AVM provider. But it’s like comparing your performance to the dumbest kid in class.”

Both witnesses testified that Sicklick was counting on Petkovski to join HouseCanary, frequently uttering phrases such as “When Jordan gets here…” in anticipation of the appraisal work Petkovski would accomplish. Walker said he put two and two together.

“You have to test your AVMs with Bank of America, Wells Fargo and your customers; there’s a gestation period that can last two or three years,” he said on the stand. “I’d never heard a company the size of [Amrock] adopt a vendor so fast.”

HouseCanary attorneys grilled Roveda over the circumstances of his termination, his dealings in the housing industry since leaving HouseCanary and the information from which he based his sworn testimony. HouseCanary’s lead counsel Max Tribble capitalized on Tuesday’s cross-examinations in an emailed statement.

“Amrock has claimed these individuals ‘have nothing to gain’ from their testimony, only appearing out of a sense of civic duty. Yet on cross-examination, Amrock’s ‘star’ witness, Anthony Roveda, admitted that three weeks after he signed a declaration trashing HouseCanary’s technology, his startup business all of a sudden entered into a Nondisclosure Agreement and began discussing a business relationship with new potential customer Quicken Loans,” also owned by Amrock’s parent company Rock Holdings, Tribble wrote. “Another new witness, Rob Walker, admitted that Amrock is a significant customer of his company — something he never disclosed in his declaration in this case.”

The unusually large damages award attracted attention from tort reform advocates such as the blog Judicial Hellhole and Forbes columnist Richard Epstein, who wrote that “only in fairy tales does a party get a hundredfold return from failing to keep its own contractual obligations.”

Press freedom advocates, including the Reporters Committee for Freedom of the Press, as well as the Houston Forward Times newspaper, have also come down against HouseCanary for retroactively sealing exhibits containing contract information and other business details the company would prefer not be public. Judge Canales originally declined to seal the documents, but reversed course, ultimately sealing 13 of them.

“Once you tell a secret, it is no longer secret,” wrote J. Carl Cecere, the attorney representing Houston Forward Times, in a guest column for the San Antonio Express-News. “There are laws that permit restricting the public from accessing certain information, such as trade secrets, that need to remain secret to remain legally protected. Yet HouseCanary opted not to avail itself of those protections, and now it is too late.”