A federal judge in Newark has tossed a property owner’s lawsuit claiming real estate website Zillow violates antitrust law by making deals with some companies to hide its property value estimates.
The plaintiff, who was attempting to sell an eight-bedroom house in Cresskill, New Jersey, with Manhattan views for $7 million, said in the suit that buyers were put off by Zillow’s $3.3 million estimate of the property’s fair market value, displayed next to the list price. The company’s approximations of market value, calculated by an algorithm based on publicly available data, are called Zestimates.
The suit claimed Zillow had illegal agreements with certain real estate companies, such as Century 21, Coldwell Banker, Sotheby’s International, The Corcoran Group and Weichert Realty, to move its Zestimates to a less-prominent place on their listings. When the plaintiff contacted Zillow and asked to move the Zestimate for the property to a less-prominent spot, Zillow refused.
But U.S. District Judge John Michael Vazquez dismissed the suit without prejudice Thursday. He said the plaintiff, a company called EJ MGT LLC, failed to meet its initial burden to show that the alleged agreement had an adverse, anti-competitive effect within the relevant geographic market. The plaintiff failed to analyze, much less cite, any relevant authority regarding the fact that Zestimates are not completely omitted from the alleged co-conspirators’ listings, Vazquez said. In that respect, the case concerns the prominence of certain information, as opposed to its complete omission.
What’s more, in its opposition to Zillow’s motion to dismiss, the plaintiff took a position inconsistent with the complaint, Vazquez said. In the complaint, the plaintiff said Zillow’s Zestimates are unreliable and inaccurate, and that the company’s agreements with certain realtors create a competitive disadvantage for those sellers whose Zestimate is displayed directly under the list price.
Yet in its opposition, the plaintiff says the Zestimates reflect “critical” price information and that consumers are harmed by “suppressing [this] price-related information from consumers’ view,” according to Vazquez.
“This is an entirely new theory of liability that was not pleaded in the complaint. As a result, the court is unable to conduct the appropriate analysis in light of the motion to dismiss,” Vazquez said.
The judge also dismissed the plaintiff’s claim under the New Jersey Consumer Fraud Act without prejudice on finding that Zestimates are nonactionable opinions. He cited a 2017 case from the Northern District of Illinois and its subsequent U.S. Court of Appeals for the Seventh Circuit affirmation, which rejected attacks on the validity of Zestimates and deemed them nothing more than an opinion.
Vazquez also dismissed without prejudice the plaintiff’s claims for slander of title and product disparagement. The judge said that because Zillow discloses an error rate of 7.9 percent for its Zestimates and the fact that renovations of properties is not considered in setting value, the plaintiffs appear to argue that Zestimates are false. But such disclosures result in the disclosure of accurate, not false information, Vazquez said.
The plaintiff claims that certain individuals raised concerns about the listing price of the Creskill house in light of the Zestimate. But the court could not consider that information because it was included as an exhibit to its brief opposing dismissal, and not in the original complaint, Vazquez said.
Vazquez also dismissed without prejudice the plaintiff’s claim for tortious interference with prospective economic advantage. He rejected the plaintiff’s claim that it “reasonably anticipated” that it would be able to sell the house “for a price at or reasonably near” the asking price. “This allegation is insufficient,” Vazquez said.
The plaintiff relied on a 1952 Appellate Division ruling to support its claim that Zillow interfered with its right to conduct negotiations to sell the property, but Vazquez said that reliance was misplaced. The 1952 case identified a specific buyer who was interested in a property and likely would have purchased it if not for the defendant’s interference. But the plaintiff in the Zillow case does not identify any specific buyer, Vazquez said.
Vazquez gave the plaintiff 30 days to file an amended complaint.
The lawyer for the plaintiff, Edward Grossi of Javerbaum Wurgaft Hicks Kahn Wikstrom & Sinins in Springfield, said he will refile.
“I’m happy we were provided with an an opportunity to amend, to address areas in the complaint that the court felt needed clarification,” Grossi said in a statement. “We are not necessarily focused on the inaccuracy of Zestimates, but rather on the ‘Zestimate agreements’ which allowed certain brokers to alter the display of Zestimates on their Zillow listings. The court found that we plausibly alleged the existence of these agreements for purposes of this motion.”
Grossi said his client has not found a buyer for the Cresskill property. He said Zillow appears to have ended its alleged practice of making special arrangements with certain real estate companies to conceal their Zestimates.
Although the Zestimate on the Cresskill property was $3.3 million at the time the suit was filed in January 2018, it had reached $5.3 million as of Friday.
James Richter of Winston & Strawn in New York, who represented Zillow, said he was not authorized to comment.