Zillow has emerged victorious in a federal jury trial, as it was cleared of allegations that it made deceptive changes to its online agent listings that led to the downfall of rival company REX-Real Estate Exchange Inc. The nine-member jury rejected REX’s false advertising claim under the Lanham Act against Zillow, stating that the changes made by Zillow did not harm REX. However, the jury did find that Zillow violated the Washington Consumer Protection Act, but Zillow successfully defended itself against this claim.
REX had filed a lawsuit in federal court in Seattle, claiming that Zillow’s website redesign in 2021 placed REX’s agent listings under a less prominent tab, making it difficult for potential homebuyers to find them. REX argued that this change ultimately led to its business closure in 2022. Zillow, on the other hand, explained that the redesign was necessary to comply with the National Association of Realtors’ rule of keeping information from multiple-listing services separate from other sources.
During closing arguments, Zillow’s counsel, John Jurata Jr. of Dechert LLP, emphasized that REX was not harmed by the listing change, as its information was never removed from Zillow’s site. Jurata further stated that REX’s demise was a result of poor management, cash flow issues, and expansion into new markets, which were already affecting the company before Zillow made any website changes. He argued that the correlation between the website change and REX’s closure did not imply causation.
REX’s counsel, David Boies of Boies Schiller Flexner LLP, countered by claiming that Zillow had agreed to include REX’s agents on its website. However, the redesign added a two-tab option that mislabeled REX’s listings and buried them, effectively making them invisible to homebuyers. Boies asserted that REX was a rapidly growing company on the verge of going public through a special purpose acquisition company deal, but the redesign caused a significant drop in revenue, leading to the collapse of the SPAC deal and ultimately the closure of REX.
Prior to the trial, U.S. District Judge Thomas S. Zilly ruled that REX’s antitrust claims against Zillow and the National Association of Realtors were unfounded. The judge stated that the two-tab property listings on Zillow’s website and the no-commingling rule of the National Association of Realtors were not part of an antitrust scheme against REX. As a result, the judge dismissed the National Association of Realtors entirely from REX’s lawsuit.
In addition to the false advertising claim under the Lanham Act, Zillow also faced a claim of unfair and deceptive actions in violation of the Washington Consumer Protection Act. While the jury found Zillow in violation of this act, the company successfully argued its affirmative defense to the claim.
This legal victory for Zillow reinforces the company’s position that its website redesign did not intentionally harm REX or contribute significantly to its closure.
Source: News Bloomberg Law