Saying plaintiffs had effectively pleaded themselves out of court, a Chicago federal judge has slammed the door on an attempted class action lawsuit accusing operators of real estate website Zillow of breaking state consumer fraud and deceptive practices laws by using their “Zestimates” – an online home value estimation tool – as a “marketing gimmick” to drive business to Zillow’s preferred real estate agents and undercut home sellers’ ability to sell their home for what they believe it should be worth.
On May 7, U.S. District Judge Amy J. St. Eve dismissed with prejudice the lawsuit brought by against Seattle-based Zillow Inc. by Glenview attorney Barbara Andersen and Waukegan attorneys David Novoselsky and Charles Jeffrey Thut on behalf of named plaintiffs Vipul Patel, Bhasker Patel and Jyotsna Patel, and their business CastleBlders.com, of Schaumburg.
“These threadbare allegations – examined in Plaintiffs’ favor – fail to present sufficient facts to plausibly suggest that Zestimates will cause consumers not to buy Plaintiffs’ properties and that Plaintiffs will not be able to sell their homes at their true market value,” Judge St. Eve wrote.
C. Jeffrey Thut
“In sum, Plaintiffs’ speculative allegations based on marketplace confusion do not sufficiently identify future harm.”
The lawsuit landed in federal court last year. Initially, Andersen had filed a similar suit individually in Cook County Circuit Court, accusing Zillow of interfering in her attempt to sell her home by allegedly pegging the value of her home too low using the “Zestimate,” the company’s proprietary online property price estimating tool.
She withdrew her complaint, however, and opted 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 in the case by Novoselsky and Thut, and Zillow removed the case to federal court.
The lawsuit centered on Zillow’s practice of using its computer algorithm to estimate 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 alleged the Zestimates 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.
However, last August, the judge rejected plaintiffs’ arguments, dismissing with prejudice their further assertions that Zillow was violating state law by essentially appraising real estate without a license. The judge also dismissed the plaintiffs’ assertion that Zillow uses its Zestimates system to pressure home sellers into hiring real estate agents preferred by Zillow.
However, the judge granted the plaintiffs the chance to amend their lawsuit to address her findings. The plaintiffs did so, but the judge said their new complaint does not fix what the judge found to be the plaintiffs’ faulty arguments.
In their amended complaint, the plaintiffs again sought to accuse Zillow of violating state consumer fraud and deceptive practices laws, maintaining their claims the company uses Zestimates as a bait-and-switch tactic, to essentially “funnel” home sellers to Zillow’s preferred agents, by allegedly artificially suppressing the Zestimate on a home until the owners agreed to work with one of Zillow’s “premier” agents, who had paid to advertise through Zillow’s “Seller Boost” marketing program.
And the plaintiffs continued to maintain Zillow misleads consumers into believing Zestimates are somehow akin to a true appraisal, and reflects actual market value.
Judge St. Eve, however, rejected these assertions. While acknowledging the Zestimate is a marketing tool used by Zillow, the judge said any “confusion” among consumers caused by Zillow’s use of Zestimates does not meet the legal standard needed to sustain the plaintiffs’ legal claims under the state fraud and deceptive practice laws.
“In short, that Zillow’s alleged marketing gimmick may be insincere does not support a ‘bait and switch’ claim under the (Illinois Deceptive Trade Practices Act) – even when drawing all reasonable inferences – because Plaintiffs do not allege that Zillow baited them with a product or service and then switched to a more expensive one,” the judge wrote.
By demonstrating from the start their knowledge of Zillow’s mode of operations, the judge said the plaintiffs have essentially “pleaded themselves out of court by alleging facts that defeat their claim,” regarding Zillow’s alleged consumer deception.
“Plaintiffs’ allegations show that they were abundantly aware of the alleged deceptive conduct,” the judge said. “… Simply put, Zillow’s conduct did not proximately cause any injury to Plaintiffs because its conduct did not deceive Plaintiffs in the first instance.”
Zillow is represented in the action by attorneys with the firm of Perkins Coie LLP, of Seattle and Chicago, and of Mayer Brown LLP, of Chicago.