Saying the plaintiffs are asking the court to misread and misapply an Illinois state law, a Chicago federal judge has crashed a class action lawsuit against Zillow, which had accused the operators of the real estate website of essentially appraising property without a license, and then using their online home value estimate tool as a marketing ploy to drive business by hampering home sellers’ efforts to sell their home for what they believe it should be worth.

On Aug. 23, U.S. District Judge Amy J. St. Eve dismissed in its entirety the lawsuit brought against Zillow Inc. by Glenview attorney Barbara Andersen and Waukegan attorneys David Novoselsky and Charles Jeffrey Thut, on behalf of named plaintiffs, Schaumburg residents Vipul Patel, Bhasker Patel and Jyotsna Patel, and their business Castle

A similar lawsuit was first brought by Andersen individually in Cook County Circuit Court accusing Seattle-based Zillow of interfering in her attempt to sell her home by setting Zillow’s proprietary online property price estimating tool, known as a “zestimate,” too low.

She eventually withdrew that complaint, however, opting instead to file a class action, also in Cook County court, against the company on behalf of the Patels. She was eventually joined as counsel on the case by Novoselsky and Thut, and Zillow removed the case to federal court.

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, or “zestimate.”

The Patels’ suit alleges the zestimates for homes are inaccurate, leading potential 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.

Further, they allege Zillow’s publication of zestimates is a violation of a state law regulating real estate appraisers, as they accuse Zillow of essentially appraising real estate without a license.

They also specifically alleged Zillow’s zestimates intruded on their rights to seclusion and privacy.

In reply, Zillow asked the court to dismiss the case, saying zestimates are constitutionally protected speech, akin to other speech courts have declared to be protected, 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 or securities.

Zillow called the contention it is operating as an unlicensed appraiser “absurd,” saying such an interpretation would mean anyone who offers an opinion about a home’s value could be violating the law.

Judge St. Eve largely sided with Zillow’s reading of the law, noting the “plain meaning” of the Illinois law at the heart of the plaintiffs’ complaint, the Illinois Real Estate Appraiser Licensing Act (IREALA), upends their contentions.

The requirements of that law, she noted, specifically do not apply to “the procurement of an automated valuation model.”

“Plaintiffs do not dispute Zillow’s definition of ‘procure’ nor its contention that Zestimates are an ‘Automated Valuation Model,’” St. Eve wrote.  “Accordingly, based on the clear text of the statute, IREALA does not apply to Zillow’s Zestimates.”

While plaintiffs attempted to argue the law was intended to apply to “an automated valuation model by a financial institution for the purpose of internal loan underwriting,” St. Eve said such an interpretation reads language into the law that is not there.

“… The Court may not edit the text of the statute as Plaintiffs request,” St. Eve wrote.

Further, she said, the Illinois law at question also does not even give the plaintiffs the right to press their lawsuit against Zillow, as the law leaves enforcement of appraiser licensing requirements to state officials and county prosecutors.

“In short, an implied private right of action is unnecessary under IREALA, which provides a robust enforcement scheme to carry out the Illinois legislature’s express goal of ‘evaluat[ing] the competency of persons engaged in the appraisal of real estate and to license and regulate those persons for the protection of the public,’” St. Eve wrote.

The judge dismissed this aspect of the Patels’ case with prejudice.

Judge St. Eve also brushed aside the plaintiffs’ privacy- and intrusion-related concerns, noting Zillow merely uses publicly-available information when calculating its zestimates.

“Zestimates … are not unlawful under IREALA,” she said. “Additionally, even if they were, the publication of unlawful information alone says nothing about whether there was a highly offensive intrusion to glean the information ultimately published. Moreover, the type of information regarding homes available on Zillow - for example, an image of the home, its size, its estimated market value, and related property tax information - is publicly available. Thus, the alleged intrusion based on gleaning information about Plaintiffs’ property is not highly offensive or objectionable.”

And she said the plaintiffs’ attempts to assert Zillow used its zestimates to pressure home sellers into hiring real estate agents approved by Zillow were also rickety, resting solely on “conclusory claims” not backed by evidence.

“Outside of conclusory claims, viewing the allegations in the light most favorable to Plaintiffs, they do not plead sufficient facts to plausibly claim that Zestimates cause consumers to avoid Plaintiffs’ properties to the extent that Plaintiffs cannot sell their homes at their true market value,” St. Eve wrote.

She dismissed the remaining counts in the case without prejudice. The judge gave the plaintiffs until Sept. 15 to file an amended complaint.

Zillow was represented in the action by attorneys with the firm of Perkins Coie LLP, of Seattle and Chicago, and of Mayer Brown LLP, of Chicago.  

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Organizations in this Story

Cook County Circuit Court Mayer Brown Noonan Perillo & Thut Perkins Coie U.S. District Court for the Northern District of Illinois

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