Title Insurer Amrock’s Lawsuit Backfires to Tune of $706M
An affiliate of mortgage-lending firm Quicken Loans Inc. filed a fraud suit to back out of a software deal with a housing data-analytics firm, serving the complaint at a trade show in front of the startup’s customers and calling the project a bust.
A Texas jury didn’t buy it — and instead punished the affiliate with a verdict of almost three-quarters of a billion dollars.
Amrock Inc., which calls itself the biggest independent title-insurance and valuation firm in the U.S., accused San Francisco-based HouseCanary Inc. in 2016 of providing “completely unusable” software for appraisal and valuation services under a multimillion-dollar contract. Amrock’s attorney, Peter Wahby, didn’t pull any punches at the end of a six-week trial, telling jurors that HouseCanary’s code was like a car without an engine.
“That’s not what we contracted for,” Wahby, of Greenberg Traurig LLP in Dallas, said in his closing statement to the court, according to a transcript of the proceeding. “That’s not what they promised.”
But jurors didn’t see it that way. After deliberating for three hours, the 12-person panel this week unanimously rejected Amrock’s claims. Instead, jurors found Amrock actually tapped HouseCanary’s proprietary data and technology “with malice” to secretly develop competing software. In doing so, the jury found, Amrock violated a “strict” non-disclosure agreement, as well as a 2015 master licensing deal between the two firms.
The result stunned Detroit-based Amrock and its lawyers: $706 million in damages were awarded to HouseCanary, dwarfing the original $5 million annual fee that Amrock had tried to avoid with its lawsuit. The jury included “exemplary” and punitive damages to punish the company’s conduct.
At the heart of the case was HouseCanary’s trade secrets, which it describes in court papers as “highly valuable proprietary software, algorithms, models, data, reports, forms, data sources, knowhow, techniques, and methods relating to various aspects of real estate valuation.”
The startup argues its services are so unique and beneficial to the industry that Amrock and Quicken both sought to gain access to its technology under “the guise of licensing and business partnership,” though Quicken isn’t named as a defendant in the complaint.
“This verdict is a travesty of justice,” Amrock Chief Executive Officer Jeff Eisenshtadt said in an email. “Amrock will appeal and explore all avenues to ensure justice and sanity are applied to the facts of this case.”
Eisenshtadt blamed the outcome in part on a “professional plaintiff law firm” that had “spun a distorted and twisted counterclaim narrative.”
But HouseCanary’s attorney, Max Tribble, said the high damages showed the strength of his case. He said the award was particularly large because Amrock’s witnesses were repeatedly shown to be untruthful, with their own internal documents used against them during cross-examinations.
“The trial lasted so long in large part because of the lengthy process of proving point by point that almost everything they said was untrue,” Tribble, of Susman Godfrey LLP in Houston, said in a phone call. “The whole trial would have taken five days if everyone had just gotten up there and told the truth.”
In Tribble’s closing statement, he sought to underscore the allegedly false testimony by reminding jurors about one of Amrock’s claims — that a non-disclosure agreement between the companies wasn’t valid because Amrock — then known as Title Source — hadn’t signed it. But during the trial, he said, a signed version of the deal was produced by HouseCanary.
“They had it the whole time, and yet they’re arguing in this case ‘Oh, Title Source never signed it,'” Tribble told the jury, according to the transcript. “I mean, how much of a waste of time? How many days did we waste on that?”
HouseCanary boasts in court papers that its services can help avoid another housing bubble by doing away with improper valuations, and boost profit for companies in the industry at the same time. That helped the company raise $68 million from investors including Alphabet Inc. Executive Chairman Eric Schmidt’s family office, former Commerce Secretary Penny Pritzker’s PSP Growth/PSP Capital and Alpha Edison.
Amrock is a unit of Detroit-based Rock Holdings, which owns companies including Quicken and LowerMyBills. Quicken said in a statement that neither it nor Rock Holdings were subject to liability in the case.
“Quicken Loans and Rock Holdings Inc. were never a party to the contract at issue and there was never a single claim filed against Quicken Loans or Rock Holdings, Inc. in this lawsuit,” according to the statement.
On the last day of trial, after Tribble reminded the jury of what he called lie after lie after lie, Wahby urged jurors to carefully consider his argument too, comparing the dispute to pancakes made with batter that’s a little too thin.
“No matter how thin that pancake gets, no matter how runny you make it, there is always a second side to that pancake,” he said. “There is always a second side.”
The jury flipped the pancake.
The case is Title Source Inc. v. HouseCanary Inc., 2016CI06300, 73rd Judicial District Court of Bexar County, Texas (San Antonio).