A judge dismissed a class-action lawsuit against Zillow and a real estate brokerage, saying that lawyers representing homebuyers who used Zillow’s mortgage services or were referred to agents through the portal’s lead-selling service did not meet the legal standard to move forward.
Plaintiffs had alleged that Zillow’s practices were deceptive, violating RESPA, racketeering and consumer protection laws.
Judge James Robart of the federal Western District of Washington said he would allow plaintiffs another shot to amend “deficiencies” in their lawsuit, but wrote in a 32-page order that the lawsuit failed to show that Zillow engaged in a conspiracy with real estate teams or engaged in practices that were “likely to mislead a reasonable consumer.”
“Because Zillow discloses the challenged conduct in its (terms of use) and other consumer-facing notices, and because Plaintiffs fail to establish that the Zillow Defendants’ conduct is likely to mislead a reasonable consumer, the court determines that such conduct is neither deceptive nor unfair under (the relevant consumer protection law),” Robart wrote.
The ruling represents a significant win for Zillow, even if it does not fully end the litigation, which was filed last year by one of the same class-action firms behind the original commission lawsuits.
In a statement, a Zillow spokesperson said the ruling “confirms” that the allegations in the lawsuit are “completely baseless.”
“Zillow’s tools are free, optional and transparent—buyers choose how and whether to use them,” the spokesperson added. “Zillow will continue building tools that give consumers more transparency and choice in the home-buying process.”
Zillow has consistently defended its business practices, even as some companies have shifted away from the “lead diversion” model of selling leads to buyer agents. The portal is involved in several other high-profile lawsuits, recently winning another (procedural) legal victory in a lawsuit filed by the FTC over its deal with rival Redfin.
In a blog post on its website after the ruling, Zillow further pointed to its many disclosures regarding the issues raised in the lawsuit, which describe “partner” agent relationships and detail other practices.
While allowing the plaintiffs a chance to address the issues he identified, Robart detailed many other issues with the lawsuit’s claims, including that many plaintiffs had already passed the statute of limitations for their accusations.
He also threw out RESPA accusations, and said plaintiffs failed to “allege facts” supporting accusations that Zillow customers paid higher commissions, “steered” consumers or that the program inflated property costs.
“Plaintiffs fail to plead specific facts showing how Defendants’ practices actively undermined the home-buying process, restricted informed lender choice, or eroded trust in real estate professionals,” Robart wrote.
The practices highlighted in the lawsuit, however, were also recently highlighted by federal lawmakers, who asked the FTC to investigate business models that are “deceptive or insufficiently transparent.”
This is a developing story. Stay tuned to RISMedia for updates.
Editor’s note: this story was updated with comments from a Zillow spokesperson on July 28.
