Property data provider HouseCanary Inc. filed for bankruptcy to buy time to collect more than $260 million from affiliates of Rocket Mortgage, which were accused of stealing a computer model used to quickly value homes for real estate investors and mortgage brokers.
HouseCanary filed for Chapter 11 protection Tuesday in New Jersey after twice winning jury verdicts against Rocket subsidiary Amrock. The latest came in March, when a Texas state court jury awarded HouseCanary $175 million. The company says that after adding interest and other costs, it could collect more than $260 million if the second verdict is not overturned.
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The jury found that Amrock defrauded the company by misappropriating its trade secrets, according to bankruptcy court documents. The first verdict was overturned on appeal and sent back for a retrial. Amrock has vowed to also appeal the latest decision, according to court papers.
A representative of Rocket Mortgage did not reply to a request for comment.
HouseCanary is also fighting with a lender over a defaulted $30 million loan that came due in January, Chief Executive Officer Chris Rediger said in a court filing. The San Francisco-based company sought bankruptcy protection to prevent the lender from seizing HouseCanary and selling its operations before it can collect on the Amrock jury verdict, Rediger said.
Founded in 2013 as a real estate technology firm, HouseCanary operates an artificial intelligence-powered analytics platform covering more than 136 million residential properties in the US.
In 2014, the company began negotiating with Quicken Loans, as Rocket Mortgage was then known, over a potential deal to let Amrock use HouseCanary's software to value homes. After evaluating the software for at least 120 days, Amrock signed a limited deal with HouseCanary and then developed its own competing model, according to a lawsuit filed in federal court in Texas. HouseCanary claimed that model was built using its intellectual property.
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HouseCanary plans to borrow as much as $15 million to help it continue operating while in bankruptcy. The company has 37 employees, most of whom work remotely, and contracts to provide property valuation services, data and forecasting to financial institutions, mortgage lenders, investment banks and other real estate investors.
The bankruptcy case is HouseCanary New Jersey, Inc. 26-20766, US Bankruptcy Court, District of New Jersey.
