Comparing their “zestimates” – proprietary online estimates of homes’ values – to editorials published by newspapers or ratings and reviews of various products and services published in print and online, the operators of real estate website Zillow have asked a Chicago federal judge to dismiss a class action lawsuit brought by a north suburban lawyer and the owners of a Schaumburg-based home development company accusing Zillow of improperly hampering their efforts to sell their homes for what the plaintiffs believe they are worth.
On June 13, Zillow Inc. filed its motion to dismiss the lawsuit brought by Glenview attorney Barbara Andersen on behalf of named plaintiffs Vipul Patel, Bhasker Patel, Jyotsna Patel and CastleBldrs.com Inc., a Schaumburg-based home building company.
Andersen and the Patels had initially filed the lawsuit in Cook County Circuit Court in mid-May. She has since been joined in the action by attorneys David A. Novoselsky, of Waukegan, and Charles Jeffrey Thut, of the firm of Noonan Perillo and Thut, of Waukegan, representing the Patels.
Zillow removed the case to federal court on May 25, and followed that with the dismissal request.
The lawsuit centers on Zillow’s practice of using a computer algorithm, incorporating public information and other available data, to peg the value of millions of homes in the Chicago area and throughout the U.S., and publishing that estimated value on its website as a dollar amount known as a “zestimate.”
The lawsuit alleges the zestimates for homes are inaccurate, leading potential home buyers to believe a home may be worth more or less than it actually is, harming home sellers seeking to secure a sale amount close to their homes’ actual market value.
The Patels’ class action lawsuit came about three weeks after Andersen personally filed suit in Cook County court against Zillow, asking the court to step in to order Zillow to adjust the zestimate for her home to better reflect what she believes her home is worth.
Both lawsuits specifically allege Zillow has violated Illinois law by providing home appraisals without a license, and has violated homeowners’ “seclusion” by publishing an estimate of their homes’ value without their knowledge or consent.
In a memorandum accompanying its motion to dismiss, however, Zillow argues its zestimates are constitutionally protected speech, akin to other speech courts have declared to be protected under the U.S. Constitution’s First Amendment, such as journalistic opinion columns, online lawyer ratings, Better Business Bureau business ratings or statements by a credit rating service about a company’s bonds and securities.
“Home buyers and sellers are not Zillow’s clients,” Zillow wrote in its memorandum. “Instead, like a financial journalist, Zillow is speaking about property owners rather than speaking to them or speaking on their behalf.
“Zillow is therefore ‘entitled to robust protection under the First Amendment—just as any person is,’” Zillow added, citing the 2014 decision by the U.S. 9th Circuit Court of Appeals in the case of Pickup v. Brown.
Further, Zillow called “absurd” the plaintiffs’ contention the company is required under Illinois law to obtain an appraiser’s license to publish home value estimates, saying such an interpretation of the law “would make any person who shares an ‘opinion of value’ about a piece of real estate (but who is not holding herself out as an appraiser or offering appraisal services) subject to the criminal penalties of the statute.”
Zillow argued the state law in question, the Illinois Real Estate Appraiser Licensing Act, “applies to appraisals conducted for the specific purpose of supporting real estate financings.”
The plaintiffs’ reading of the law, Zillow said, “would run afoul of the First Amendment. If a newspaper publishes an opinion piece stating that homes in a new development are likely worth less than the builder claims, is that an ‘appraisal’ and barred by (state law)? Plainly not.”
Zillow is represented in the action by attorneys Rebecca S. Engrav and Eric D. Brandfonbrener, of Perkins Coie LLP, with offices Seattle and Chicago, respectively, and attorney Eugene Volokh, of the firm of Mayer Brown LLP, of Chicago.