Above: the Everett McKinley Dirksen United States Courthouse in Chicago.
CHICAGO—Zillow Chief Financial Officer Jeremy Hofmann testified Wednesday afternoon that a permanent loss of Midwest Real Estate Data (MRED)’s listing feed could trigger what he called a “downward spiral” for Zillow’s business, as testimony continued in the preliminary injunction hearing between Zillow, MRED and Compass.
The session followed a morning that opened with dueling arguments over market power and testimony from Zillow’s Chief Industry Development Officer Errol Samuelson.
Judge John Tharp is weighing whether to lift the temporary restraining order (TRO) that has blocked Zillow from implementing its rules as it relates to MRED’s listings since May, with a ruling expected in the weeks following the hearing. Zillow is seeking a court order preventing MRED from cutting off its listing feed (again) while the litigation plays out, claiming that it will be “irreparably harmed” without court intervention.
Simultaneous post-hearing briefs from both sides are due July 9, with responses due July 13. Tharp’s decision on the preliminary injunction will follow those briefs.
Zillow’s CFO warns of a “downward spiral”
Hofmann testified about the financial stakes of losing MRED listing access in Chicagoland, tying it to Zillow’s new Preview product, which he described as an “antidote” to private listing-network marketing because it keeps pre-market listings publicly visible on Zillow, Trulia and Realtor.com.
A source familiar with Compass’s legal strategy told RISMedia after the hearing that Compass believes Samuelson’s previous testimony acknowledging fully private listings do not violate the company’s policy will undercut this message.
The source also noted that Zillow generally has a high bar to meet for a court order to block MRED (and Compass) in the case, pointing out that Compass itself failed to reach that high bar when the roles were essentially reversed.
Zillow, for its part, said in a blog post that the rule it is defending in court is ”a straightforward consumer protection policy,” an argument Compass is trying to undercut.
Hofmann, focusing on the alleged harm created by MRED and Compass’s actions, said losing MRED’s feed would cut off Preview’s “ability to be successful” in Chicago and laid out a cascading harm theory, with fewer listings leading to fewer consumers, fewer real estate agents and reduced revenue across Zillow’s premier-agent, new construction, rental and software businesses.
He called the compounding effect a “downward spiral for the business,” driven by the loss of network effects tied to Zillow’s audience.
Hofmann testified that during the roughly two days MRED’s feed was down before the TRO restored access, Zillow saw a “lot of confusion” among consumers and agents and an uptick in calls to its customer-care channels.
The source familiar with Compass’s legal strategy said that both Compass and Zillow appear to agree that MLSs are monopolies. The source pointed out that Zillow acknowledged creating direct feeds with brokers, however, making the arguments of harm less compelling in this case.
MRED’s CTO and Compass RVP
MRED Managing Director and Chief Technology Officer Chris Haran testified that hours after MRED and Compass’s April 24 partnership announcement, he emailed Compass SVP Ashton Alexander about the feed-suspension process, but denied knowing at the time that there was an intention to “provoke a suspension” of Zillow’s data.
Compass Regional Vice President Fran Broude, who oversees Compass’s midwest brokerage operations and has sat on MRED’s board for much of the past 16 years, was cross-examined by Zillow counsel Bonnie Lau.
She testified that she terminated Compass Illinois’s direct broker feed to Zillow in February on her legal team’s recommendation, after being told that “Robert/Ashton has directed us to cancel our direct broker feed to Zillow”—referring to CEO Robert Reffkin and SVP Ashton Alexander.
Broude also testified that Compass had pre-drafted marketing materials for a possible suspension, including posts stating “Compass has homes not on Zillow,” but said she had “greatly hoped” the suspension wouldn’t happen.
A large part of Zillow’s lawsuit involves proving that Compass and MRED illegally conspired to harm its business, and took actions that were not independent or purely in their own self interest. In its blog post, Zillow pointed to internal documents and communications that were produced by Broude which it characterized as evidence both of a conspiracy between MRED and Compass, as well as the messy rollout of their partnership.
Compass specifically added banned listings from other parts of the country into MRED’s system after the partnership, according to Zillow, and asked MRED to follow up with Zillow when they didn’t appear on the portal—a process Zillow described as “laundering” those banned listings.
Independent broker’s testimony
McColly Real Estate broker Ron McColly, testifying for MRED and also cross-examined by Lau, initially said he was not an expert in online marketing for residential real estate, then asked, “Can I talk to my attorney?” After a break, he reversed course and claimed expert status, despite acknowledging no academic coursework, publications or peer-reviewed work on the subject.
“I just didn’t want to be self-grandiose,” McColly said after changing his answer—eliciting scattered snickers from the courtroom audience.
McColly testified that MRED’s private listing network has produced higher sale prices than open-MLS listings, though his only support was MRED’s own materials—he said his broader views were “basically formed up here,” gesturing to his head. He also testified his brokerage’s website couldn’t display a “coming soon” listing unless his agents contacted the Compass agent directly.
Testimony is expected to continue Thursday with Compass CEO Robert Reffkin, MRED CEO Rebecca Jensen and expert witnesses Lawrence Wu and Debra Aron.
This is a developing story. Stay tuned to RISMedia for updates.
Jesse Williams contributed to this reporting.
