Weekly Real Estate News
Summary
A federal judge denied Zillow’s motion to dismiss an agent antitrust lawsuit challenging alleged ties among its referral programs, Zillow Home Loans and Follow Up Boss.
A federal judge has rejected Zillow’s attempt to end a proposed class action brought by real estate agents who accuse the company of using its power in home search and lead generation to pressure agents toward Zillow Home Loans and other Zillow-owned services.
U.S. District Judge James L. Robart on Sept. 28 denied Zillow’s motion to dismiss the amended complaint in Dupuis et al. v. Zillow Group Inc. et al., allowing federal and state antitrust claims, consumer-protection claims and an unjust-enrichment claim to move forward. The case is pending in the U.S. District Court for the Western District of Washington.
The ruling is not a finding that Zillow violated antitrust or consumer-protection law. At the motion-to-dismiss stage, the question is whether the plaintiffs have alleged legally sufficient claims that can proceed. Robart concluded that they had. Zillow disputes the allegations and says it will continue defending the case.
The allegations center on Zillow’s agent-referral ecosystem
The lawsuit began in January when Washington real estate agent Stephanie Dupuis and her company, Sound Music I Inc., sued Zillow Group and several affiliates. The original federal complaint alleged that Zillow used its position in online real estate search to impose costly referral terms and pressure participating agents to generate mortgage preapprovals through Zillow Home Loans.
An amended complaint filed in May added plaintiffs Brian Graham and Anna Alvarez. The plaintiffs challenge practices involving Zillow’s Preferred and Flex agent programs, Zillow Home Loans and Follow Up Boss, the customer relationship management platform Zillow acquired in 2023.
According to the complaint, agents participating in Zillow’s referral ecosystem can pay Zillow referral fees of 35% to 40% of their commission on Zillow-generated transactions. The plaintiffs contend those fees exceed what they describe as a typical market referral fee of roughly 20% to 25%. Those figures are allegations, not findings by the court.
The plaintiffs also allege that Zillow conditions the quantity and quality of client connections on performance metrics that include Zillow Home Loans preapprovals, and that participating agents can face reduced lead flow or removal from the program if they do not meet those targets. They further allege that use of Follow Up Boss became mandatory for Preferred agents and that Dupuis paid roughly $500 a month for the software.
Why the claims survived
Robart concluded that the plaintiffs had adequately pleaded a relevant real estate-search market and Zillow’s alleged power within it. The amended complaint places Zillow’s share of that market at 61% to 64%, relying in part on Zillow marketing materials. Again, the percentage is an allegation accepted as plausible for purposes of deciding the dismissal motion, not a final determination of Zillow’s market share.
The court also allowed the plaintiffs’ tying theory to proceed. The plaintiffs contend that access to valuable Zillow client referrals is effectively conditioned on adoption or use of Zillow-affiliated mortgage and software products. In discussing the allegations, Robart wrote that conditioning client referrals on Zillow Home Loans adoption could plausibly deprive agents and consumers of the ability to substitute independent lending products.
The court also rejected, at this stage, Zillow’s argument that agents could avoid any alleged coercion by leaving its ecosystem. The order said the plaintiffs plausibly alleged that Zillow’s position in home search made participation important to independent agents seeking access to prospective buyers.
Robart did not decide whether those allegations are true. Zillow can continue contesting the asserted market definition, market-share figures, alleged tying arrangement, claimed damages and other elements as the litigation progresses.
Zillow says the claims are “fundamentally flawed”
Zillow has denied wrongdoing throughout the case. In its public response to the litigation, the company has maintained that its Preferred agent program operates transparently and that Zillow Home Loans preapprovals are free and nonbinding.
After the Sept. 28 ruling, a Zillow spokesperson said the company continues to believe the plaintiffs’ claims are “fundamentally flawed.” Zillow said buyers remain in control of which agent and lender they use and that the company will “continue to vigorously defend ourselves.”
A separate Zillow mortgage case is on a different track
The Dupuis litigation is distinct from the Taylor-Armstrong consumer case, which also involves allegations concerning Zillow Home Loans. WRE News reported Sept. 22 that Zillow had asked Robart to permanently dismiss the amended Taylor-Armstrong case after an earlier version was dismissed.
That distinction matters. Taylor-Armstrong was brought by homebuyers and includes claims under the Real Estate Settlement Procedures Act. Dupuis is brought by real estate agents and focuses heavily on antitrust theories tied to Zillow’s agent programs, referrals and affiliated services.
The Sept. 28 ruling means the agent case now moves beyond Zillow’s effort to dispose of it at the pleading stage. The plaintiffs still must prove their allegations, and class certification has not been granted. The next phases could bring a more detailed examination of Zillow’s referral economics, agent performance requirements and the relationship among its home-search, mortgage and software businesses.
