While the adage “you win some, you lose some” may air on the side of cliche, it’s rather appropriate when looking at the continued courtroom volley that has taken place in some of the real estate industry’s most prominent lawsuits.
Take the ongoing saga between Zillow and REX Real Estate, for example. After securing a significant victory over REX, Zillow was hit with a setback as the same judge sided with REX on its false advertisement claims against the real estate giant.
U.S. District Court Judge Thomas Zilly said that Zillow falsely labeled REX’s listings when it changed its website layout to include a two-tab design in its home search feature.
“The Court must conclude that ‘Agent Listings’ and ‘Other Listings’ are literally false by necessary implication,” Zilly said in an Aug. 18 court order granting REX’s partial summary judgment on the brokerage’s Lanham Act claim against Zillow.
“When the labels are viewed side-by-side, the unambiguous assertion is that one tab includes homes listed for sale by agents and the second tab contains all other listings, i.e., homes for sale by their owners or by non-agents,” the court order continued.
The ruling came mere days after Zilly dismissed REX’s antitrust claims against Zillow and the National Association of REALTORS® (NAR). While that ultimately removed NAR as a defendant in the lawsuit, Zillow was left to contest three additional claims accusing the real estate giant of false advertisement, defamation and unfair or deceptive practices.
The ruling comes a couple of weeks before Zillow and REX are slated to head into a two-week jury trial to hash out the remaining claims of the legal battle brewing since early 2021.
At the time, Zillow had expanded from solely being a real estate search portal to a buying and selling entity. That shift included joining Multiple Listing Services (MLS) and gathering listing data from the IDX feeds.
The transition came with a website redesign that included its new two-tab design, which Zillow claimed was done to comply with NAR’s optional no-comingling rule, which lets local associations choose whether non-MLS content can appear with theirs or whether it has to be posted separately.
REX claimed that it was harmed by Zillow’s two-tab design because its listings, which aren’t tied to an MLS, were placed in the “Other Listings” category.
The court noted that upon labeling the tabs, Zillow had also published an FAQ page that articulated the differences in its tabs. It explains that “Agent Listings” are properties listed by real estate agents in the MLS,” and are not FSBOs, non-MLS auctions or foreclosures—which it slates for its “Other Listings” tab.
Based on Zilly’s court order, Zillow seemingly erred in not indicating that “Other Listings” may include homes for sale by non-MLS affiliated agents and brokers—which provides for REX’s agents.
“By relegating REX’s listings to the “Other Listings” tab, Zillow falsely stated by necessary implication that REX was not (or did not employ) an agent,” read the filing.
According to the filing, Zillow argued that because it didn’t explicitly say REX was not an agent or label the secondary tab “non-agent listings,” the company’s statements were not false.
However, Zilly seemed to shoot that claim in his order.
“Zillow’s focus on what the tab labels did not say, as opposed to what they did say, is improper; the absence of particular untruths tells us nothing about the veracity of the factual information that is actually present,” Zilly wrote.
The court document acknowledged that when Zillow implemented the tab design two years ago, REX employed licensed agents and brokers in various states, which qualified its listings as “Agent Listings,” as opposed to FSBO or non-agent listings that garnered the “Other Listing” designation.
“Nevertheless, REX’s for-sale listings were relegated, along with FSBO and non-MLS listings, to the ‘Other Listings’ page because REX’s brokers and agents were not members of the MLSs from which Zillow was receiving IDX feeds,” the filing said.
While Zilly’s recent ruling represents a setback for Zillow ahead of its trial, the real estate giant is still confident that it will prevail, especially following the dismissal of the antitrust allegations, with the company claiming that the ruling “showed that REX’s primary claim was without merit.”
“This victory was a big step toward us prevailing in this case, given their main argument has been tossed,” said Zillow spokesperson Will Lemke in an emailed statement sent to RISMedia.
Initially, REX had filed its lawsuit against Zillow and NAR with claims that the duo conspired to restrict competition, even going as far as referring to Zillow’s efforts to comply with NAR’s policy as the portal giant joining an alleged “cartel” that ultimately harmed REX’s business to the point where the Texas-brokerage had to shutter its residential real estate operations.
Ultimately, that was shot down after Zilly’s Aug. 16 ruling poked holes in the argument.
“We look forward to presenting our case in court on these remaining claims,” Lemke said. “We believe customers understand the two-tab system and are confident that the evidence will show that REX’s business failed for reasons unrelated to Zillow.”
REX did not reply to RISMedia’s requests for comments on this story.
