A federal court judge concluded on Friday that in regard to REX’s false advertising claims against Zillow, the firm has proven “falsity.” The ruling came after REX filed a motion for summary judgement on the matter.
In his order, Judge Thomas Zilly of the U.S. District Court for the Western District of Washington wrote that “for the purposes of REX’s Lanham Act Claim, the court concludes that ‘falsity’ has been established as a matter of law.”
The Lanham Act states that anyone who uses false or misleading facts or misrepresents the nature of goods or services, “shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.”
In REX’s Lanham Act portion of its lawsuit, the firm alleges that Zillow “falsely labeled REX listings as ‘Other Listings’ rather than ‘Agent Listings’ when REX’s listings were in fact offered by licensed real estate agents,” according to earlier court documents.
“It is literally false not to characterize REX’s listings as ‘Agent Listings.’ Placing REX listings in the ‘Other listings’ category when juxtaposed with “Agent Listings” as the only other option is also literally false by necessary implication. Zillow’s display is not only false, it is also misleading.”
Originally filed by REX in March 2021, the suit alleges that changes made to Zillow’s website “unfairly hides certain listings, shrinking their exposure and diminishing competition among real estate brokers.”
Two months prior, in January 2021, Zillow began moving homes out of its initial search results for sellers who chose not to use agents adhering to the NAR and local multiple listing service (MLS) practices.
REX ceased its brokerage operations in mid-May of 2022.
According to earlier court filings from Zillow, the listing giant changed its website after making the decision to swap to the “gold standard source of listings data,” the Internet Data Exchange (IDX) feed that the multiple listing services use. Zillow said that it joined the MLSs to guarantee access to the IDX feeds.
However, according to REX, in January 2021, in some states, including Washington, the firm employed licensed brokers and agents, which should have qualified REX’s listings as “agent listings.”
“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 reads.
When Zillow launched its two-tab design, the company also created an “FAQ” page clarifying the differences between the tabs. REX pointed out that the FAQ page “did not indicate that the ‘Other listings’ tab might include homes for sale by agents or brokers who were not MLS members,” and that it “failed to define MLS or to clarify that some licensed real estate agents and brokers do not belong to an MLS.”
In his ruling, Zilly wrote: “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. When used in contrast to ‘agent listings,’ the phrase ‘other listings’ can only be understood as indicating those listings ‘remaining or not included’ in or ‘distinct’ or ‘different’ from agent listings, or in other words, non-agent listings.”
In an emailed statement, attorneys at Boies Schiller representing REX, said: “We believe the judge’s ruling on the Lanham Act will help us move the case and is in the best interest of the consumer.”
This ruling came just days after Zilly dismissed all antitrust allegations made by REX against NAR and Zillow.
“Last week’s antitrust ruling showed that REX’s primary claim was without merit. This victory was a big step towards us prevailing in this case given their main argument has been tossed. We look forward to presenting our case in court on these remaining claims,” Will Lemke, Zillow’s manager of corporate communications, wrote in an email. “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.”
The suit is scheduled to head to trial on Sept. 18.
This story was updated to include commentary from Zillow.