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Judge tosses class action suit against Zillow

Rules Zillow did not defraud investors by not revealing CFPB investigation

A federal judge dismissed a securities fraud class action suit against Zillow Group Inc. on Tuesday.

The suit alleged that the real estate giant defrauded investors by not disclosing that the Consumer Financial Protection Bureau was investigating its co-marking program for possible violations of the Real Estate Settlement Procedures Act.

U.S. District Judge John C. Coughenour tossed out the suit, stating that the investor plaintiffs, in their attempt to prove that Zillow knowingly violated RESPA, actually proved otherwise.

“The Court concludes that the allegations in the amended complaint, taken collectively, support a contrary and more compelling inference—that Defendants believed the co-marketing program did not violate RESPA,” Coughenour wrote.

Coughenour said the plaintiffs can file again if they can prove that Zillow designed the program to intentionally violate the Real Estate Settlement Procedures Act; that it instructed third parties to commit RESPA violations; that it made false or misleading statements about the program being in compliance with RESPA; and that its false statements led to the alleged loss in stock value.

The decision comes after it was revealed in June that the CFPB had closed its three-year investigation into Zillow’s co-marketing program.

Under the program, lenders paid Zillow to show their ads alongside a real estate agent, making it appear as though the lenders or agents were endorsing one another. At issue was whether Zillow’s program violated regulations against kickbacks by enabling lenders and agents to funnel business to each other.

A spokesperson for Zillow said the company was pleased that the court dismissed the meritless suit.

“We are pleased that the court agreed with our motion to dismiss the claims of this lawsuit, which we believe to be without merit,” the spokesperson said. “Our mission has always been to arm consumers with information that helps them make decisions when finding their next home, which this program does by providing consumers with an easy, transparent way to connect with agents and lenders.” 



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