"Zestimates" are nonactionable opinion, but state law might govern alleged listing agent misrepresentation

Demetres v. Zillow, Inc., 2022 WL 4367597, No. 3:21cv00802 (JBA) (D. Conn. Sept. 21, 2022)

Demetres, a real estate salesperson/broker, alleged that Zillow violated the Lanham Act, the Sherman Act, and the Connecticut Unfair Trade Practices Act, and engaged in tortious interference with contractual relationships. The court dismissed some of the claims.

Demetres challenged Zillow’s use of Advertising Agents (real estate agents) and “Zestimates.” Zillow’s customers are real estate agents, and they allegedly pay Zillow “so they can be associated with properties [with] which they do not have a listing relationship ....” and “directly solicit [ ] prospective homebuyers [ ]via other agents’ exclusive listings.” This practice allegedly harms the listing agent and reroutes prospective homebuyers so they can’t reach the actual listing agents for properties that interest them. Agents found on Zillow allegedly have “a greater incentive to steer the buyer to a property other than the property that caused them to initiate the process in the first place.” And this allegedly increases the number of dual agency situations “without the careful disclosures normally required.”

As for Zestimates, these are Zillow’s “own, self-devised, internally-standardized opinion of the value of the particular property.” Zestimates allegedly competes for a “listing price that is developed through proper industry appraisal standards; and also through the listing agent’s actual, personal, intimate knowledge of the property in question and the neighborhood where it is situated.” Demetres alleged broken agreements with property sellers and buyers as a result of Zestimates.

Falsity: First, Zestimates weren’t plausibly alleged to be literally or impliedly false. The complaint didn’t identify specific advertising statements that would plausibly misrepresent what the Zestimates were, “or even a particular home estimate produced by the Zestimate tool that allegedly conflicts with the real market value.” The facts alleged didn’t establish falsifiability—only Zillow’s “opinion of the value of properties.” Demetres argued that consumers viewed a Zestimate as a factual statement of the home’s value due to Zillow’s popularity and influence in the housing market. But Demetres didn’t allege that the Zestimates were an incorrect estimate of the property’s value— “only that it was different from her own appraisal as the listing agent.”

However, Demetres did plausibly allege that using Advertising Agents on its site created a false impression that the agents who pay Zillow for access were the listing agents for a given property, misrepresenting Zillow’s relationship with listing agents and the Advertising Agents alike. “For example, when a consumer views a particular property it may be offered what appears to be a URL link to reach the listing agent, but when it is clicked on the consumer is again sent straight to a screen asking it to provide lead information to an Advertising Agent.” In short, “displaying an option for a customer to contact a listing agent, which does not in fact allow the customer to contact the listing agent, is a falsity actionable under the Lanham Act.”

But was that material? In the Second Circuit, that’s a question of whether it’s a misrepresentation of an “inherent quality or characteristic,” but it’s really just materiality.

The court thought that this wasn’t material, but conflated false advertising and false association (which was plausibly alleged). Zillow arguably presents itself as a resource to consumers when in fact, it is an advertising platform for agents, but that’s true of almost all websites. Dismissed. (This seems like a fixable problem with an amended complaint if it’s essentially bait and switch: consumers want help with that particular listing and don’t get it/get someone who may charge them more.)

Sherman Act: failed because it’s an antitrust claim (deficient market definition/conspiracy allegations/monopoly power allegations).

CUTPA: Covers both deceptiveness and unfairness. Unfairness under CUTPA requires consideration of

(1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise—in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; [and] (3) whether it causes substantial injury to consumers, [competitors or other businesspersons].

Can Zestimates be unfair if they are opinions? The court thought the answer was no. But the ad relationships with agents plausibly violated CUTPA by creating a false impression that they were the listing agents for a given property. And plaintiff alleged an ascertainable loss thereby.

Tortious interference was also plausibly alleged; “Plaintiff was not required to include proof at the motion to dismiss stage that actual contracts exist.”