Demetres v. Zillow, Inc.
| Decision Date | 21 September 2022 |
| Docket Number | CIVIL 3:21cv00802 (JBA) |
| Parties | AUDREY DEMETRES, Plaintiff, v. ZILLOW, INC., Defendant. |
| Court | U.S. District Court — District of Connecticut |
RULING ON MOTION TO DISMISS
This is a putative class action[1] for compensatory and punitive damages in which the Plaintiff, Audrey Demetres, alleges that the Defendant, Zillow, Inc.'s (“Zillow”) on-line home buying platform utilizes unfair and deceptive tactics resulting in the Plaintiff's financial losses. Plaintiff brings this action pursuant to the Lanham Act, 15 U.S.C § 1125(a), the Sherman Act, 15 U.S.C. §§ 1 and 2, the Connecticut Unfair Trade Practices Act, 42 Conn. Gen Stat §110a, et seq., and under the common law tortious interference with contractual relationships. Zillow has filed a motion to dismiss the amended complaint. For the reasons that follow, the motion is granted in part and denied in part.
Plaintiff Demetres “is a real estate salesperson and/or real estate broker” residing in Fairfield, Connecticut. (Am. Compl. [Doc. # 5] ¶ 47.) Defendant is a corporation that “operates the nation's dominant home buying platform at Zillow.com, which purports to make the process of buying and selling residential real estate less complicated and lower priced.” (Id. ¶¶ 1, 49.) According to Plaintiff, Defendant misuses its platform in two ways: through its featuring of Advertising Agents, and through its use of “Zestimates.”
First, Plaintiff alleges that its “market dominance gives [Zillow] the power to tilt the real-world playing field in favor of its own favored customers.” (Id. ¶ 7.) Defendant's customers are not homebuyers, but rather real estate agents (“Advertising Agents,” as Plaintiff refers to them) who pay a fee to Defendant “so they can be associated with properties [with] which they do not have a listing relationship ....” (Id. ¶ 7-8.) According to the amended complaint, this practice “allows [Defendant] to artificially confer upon its paying customers the ability for them to do what they otherwise cannot do, which is to directly advertise to and directly solicit [] prospective homebuyers []via other agents' exclusive listings.” (Id. ¶ 18.)
Plaintiff alleges that Zillow provides this benefit to the Advertising Agents to the detriment of both the listing agent and prospective homebuyers, the latter of which “are deliberately re-routed in their attempts to reach the actual listing agents for properties they are interested in, away from the agents with the most connection to the property.” (Id. ¶ 12.) Such a “scheme causes the buyer to end up with an agent who - not being the listing agent -has 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.” (Id. ¶ 23.) The “Advertising Agents have more, and a higher percentage of, buyer broker and dual agency transactions compared to nonparticipating agents.” (Id. ¶ 29.) As a result, a consumer “enters into a commercial setting -defendant's dominant, prevailing digital platform - where he or she is substantially more likely to participate in a dual agency dynamic without the careful disclosures normally required.” (Id. ¶ 32.)
As a result of Defendant's deceptive practices, Plaintiff has suffered “the loss of clients, sales, commissions and revenue.” (Id. ¶ 11.) The Amended Complaint alleges that Defendant's conduct has “further caused market confusion and economic harm to consumers,” (id.), because it “restricts the marketplace to the detriment of all consumers and participants in the residential real estate market.” (Id. ¶ 20.)
Second, in addition to redirecting home buyers to its Advertising Agents, Defendant publishes “its own manufactured, artificial real estate market in the form of [its] Zestimate program.” (Id. ¶ 35.) A Zestimate consists of Defendant's “own, self-devised, internally-standardized opinion of the value of the particular property.” (Id. ¶ 36.) The amended complaint alleges that the Zestimate program “illegally competes with the actual[] 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.” (Id.) Plaintiff has suffered broken agreements with property sellers and buyers as a result of Defendant's Zestimates. (Id. ¶ 37.)
The combination of Defendant's Zestimate program and its collection of fees from Advertising Agents results in, inter alia, “de facto listing agreements,” deception of agents, sellers and purchasers, publication of listings on the Multi Listing Services (“MLS”)[2] in violation of agency policy and without being properly licensed, access to confidential information through purchase of other digital platforms, monopolization of the real estate market and “dominance, control and overarching pursuit of participation in every aspect of the market.” (Id. ¶¶ 33-34.)
“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Sarmiento v. United States, 678 F.3d 147, 152 (2d Cir. 2012) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The complaint must be interpreted liberally, all allegations must be accepted as true, and all inferences must be made in the plaintiff's favor. Heller v. Consolidated Rail Corp., 331 F. App'x. 766, 767 (2d Cir. 2009) (quoting Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002)). Motions to dismiss “assess the legal feasibility of a complaint” and are not the place to “assay the weight of the evidence which might be offered in support” of the merits. Ontario Teachers' Pension Plan Bd. v. Teva Pharm. Indus. Ltd., 432 F.Supp.3d 131, 151 (D. Conn. 2019) (quoting Ryder Energy Distribution Corp. v. Merrill Lynch Commodities Inc., 748 F.2d 774, 779 (2d Cir. 1984)). But a complaint that only “offers ‘labels and conclusions'” or “naked assertions devoid of further factual enhancement” will not survive a motion to dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 557 (2007)). Rather, a complaint must plead factual allegations that “raise a right to relief above the speculative level,” Twombly, 550 U.S. at 555, and must be “plausible on its face,” id. at 570.
Jurisdiction is proper pursuant to the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332 (d)(2). Plaintiff has pled that the aggregate amount in controversy will be at least $5,000,000, and because Plaintiff's domicile is in Connecticut, and Zillow is a corporate citizen of Washington, Plaintiff has satisfied the requirements for minimal diversity under (d)(2)(A). (Am. Compl. ¶ 40-43).
As standing is a “threshold matter we must resolve before reaching the merits,” Fair Hous. in Huntington Comm. v. Town of Huntington, 316 F.3d 357, 361 (2d Cir.2003), the Court begins its analysis with Defendant's motion to dismiss for lack of standing. Defendant views the amended complaint as lacking any “factual allegations relating to Plaintiff's alleged harm or injury,” that establish standing such as “dates, names, amounts, or other factual allegations supporting that she actually lost sales commissions due to any alleged conduct by Defendant.” (Def.'s Mem. [Doc. # 7-1] at 7-8.) According to Defendant, the Amended Complaint “does not provide any detail concerning the specific ‘property listings' that appeared on Defendant's website, the specific Premier Agents who allegedly benefited as a result of the alleged misconduct, or any actual injury or loss she suffered as a result of Defendant's actions,” nor “allegations relating to any agreements that were allegedly terminated due to the Zestimates.” (Id. at 9.) Defendant also contends that allegations based on Zestimates cannot serve as the basis for Plaintiff's claims because “courts have already held that Zestimates are merely Defendant's ‘best estimates' of property values, and as Plaintiff admits, nothing more than Defendant's ‘opinion,'” (Id.) and Plaintiff “admits it was her refusal to list the subject properties at Zestimate amounts, rather than the Zestimates themselves, that caused her” alleged losses. (Def.'s Reply at 3.)
Plaintiff distinguishes the precedent cited by reference to her allegations concerning Defendant's “comprehensive attempt . . . to control the real estate market,” coupled with statements that her actual clients broke listing agreements specifically because she would not recommend the Zestimate, as sufficient to confer standing. (Pl.'s Opp'n [Doc. # 10] at 910.) She further claims that the “breadth” of the amended complaint's allegations present “an intangible threat of potential harm” sufficient to support Article III standing. (Id. at 11.)
A party seeking to invoke a federal court's jurisdiction must “have standing-the personal interest that must exist at the commencement of the litigation.'” Carter v HealthPort Techs., LLC, 822 F.3d 47, 55 (2d Cir. 2016). The Supreme Court has recognized that “the ‘irreducible constitutional minimum' of standing consists of three elements.” Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). “The plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Id. (quoting Lujan, at 560-61; Friends of the Earth, Inc. v. Laidlaw Environmental Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000)). “[A]t the pleading stage, the plaintiff must ‘clearly . . . allege facts...
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