[T]he jury’s $706 award bears no established rational connection to the alleged violation, or even to the entire value of HouseCanary.

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“Jackpot jury.” 

That term instantly resonates negatively with most Americans, and rightfully so. 

It captures the egregiously unfair but all-too-common occurrence of rogue juries awarding litigants and their aggressive lawyers windfall judgments untethered to applicable law or facts, or judgments that dwarf any actual damages suffered by the lucky parties. 

A Texas state court was the jurisdiction offering a recent textbook example that demands reversal. 

In March of last year, a jury in San Antonio inexplicably awarded a $706 million decision in favor of tech startup HouseCanary, Inc., and against Amrock, Inc., a title insurance and real estate valuation provider. 

Here’s the backstory.  The verdict actually stems from a fairly unexceptional 2016 lawsuit by Amrock (which back then went by the name Title Source, Inc.) against HouseCanary for breach of contract.  In a nutshell, the two parties had entered into a contractual arrangement whereby Amrock would utilize HouseCanary’s real estate data, appraisal software and automated valuation models.  HouseCanary is one among several companies that attempt to automate the home appraisal process, which traditionally relied upon manual accumulation and home inspections.  Amrock sued for $5 million, alleging that the product provided by HouseCanary was so incomplete as to be unworkable. 

HouseCanary countersued, alleging that Amrock improperly used HouseCanary’s technology to create its own automated valuation model and downloaded HouseCanary’s home valuation reports in order to reverse-engineer its own product. 

That’s where things went haywire, in the form of the jury’s incomprehensible award in favor of HouseCanary. 

Specifically, the jury awarded $706 million to HouseCanary, which included $471 million in punitive damages and $235 million for trade secret misappropriation. 

That nine-figure award is indefensible and unjust for several straightforward reasons.  First, that amount constitutes over 10 times the amount of capital that HouseCanary had cumulatively raised in its entire history since its founding in 2013.  Second, HouseCanary never established significant sales to other market buyers to substantiate the value of its product that Amrock allegedly misappropriated.  Indeed, HouseCanary was attempting to obtain new venture capital to sustain its business, using the Amrock contract to attract it.  HouseCanary never demonstrated how it was capitalizing on its supposed product value beyond its relationship with Amrock. 

Accordingly, the jury’s $706 award bears no established rational connection to the alleged violation, or even to the entire value of HouseCanary. 

For its part, in recent years, the United States Supreme Court has consistently held that runaway jury awards violate the Constitution when they’re out of proportion to any actual harm inflicted.  That’s particularly true in cases of “entirely economic” harm, which is logically “less worthy of punishment than harm to health and safety.” 

The Supreme Court is unable, however, to police every instance of lower court jackpot justice.  For that reason, it’s important in our judicial and constitutional system that trial and appellate judges exercise control in instances like this of outrageous jury awards. 

But now there’s more. 

In addition to the illogically disproportionate award, sworn testimony from whistleblowers catalog an array of misconduct by HouseCanary that arose after the conclusion of the trial.  Amrock obtained affidavits from HouseCanary executives that HouseCanary Chief Executive Officer Jeremy Sicklick persuaded former Amrock executives to misrepresent the viability and legitimacy of HouseCanary’s claimed product offering. 

In other words, the asset upon which the entire award was based might have constituted an illusion.  As Amrock attorney Randy Mastro explained, “This shocking verdict is now wholly undermined for many reasons by several former HouseCanary executives who have come forward for the first time, as a matter of conscience, to blow the whistle on this fraud.”  Mastro continued, “The jury in this case was simply duped and misled.  Had it known the truth, no reasonable jury would have rendered this unprecedented verdict.  The deception, collusion and coverup that occurred here require a new trial so that the truth can be told and justice served.” 

Amrock has moved for a new trial based upon that evidence of misconduct, and will almost certainly appeal any remaining award balance accordingly. 

As a matter of public policy, moreover, it should be noted that jackpot awards don’t merely constitute unfairness and reduce confidence in our judicial system.  They also impose a significant chilling effect on commerce and our economy, as legal scholar Richard Epstein recently explained: 

No party could ever afford to enter into a transaction or sue for its breach if exposed to damages worth huge multiples of any contract value.  Duplicative damages are likewise forbidden, lest a party profit excessively when it suffers from any alleged legal wrong.  Finally, punitive damages are hugely disfavored, except in cases of egregious misconduct…

The fundamental unfairness of the jury’s award in the Amrock/HouseCanary case is thus obvious.  Hopefully, the appeals court recognizes that injustice and reverses the verdict.  If not, the responsibility will fall upon higher courts to step in.  Either way, our judicial system cannot tolerate this miscarriage of justice.