Zillow Group Inc. is seeking to have dismissed a consolidated class action lawsuit filed against the company last November.
In a motion filed this week in federal court in the Western District of Washington, attorneys argued that it is axiomatic that securities laws do not insulate investors from stock downturns caused by unforeseeable events, nor do they provide insurance against risks that have been disclosed to investors at the time they purchased securities.
The plaintiffs have alleged in their suit against Zillow and its top executives that the company made false and misleading statements, failed to disclose risks, and caused the plaintiffs to suffer significant losses and damages as a result of the failed Zillow Offers instant-buying venture.
The plaintiffs said that when the company announced in October that it was going to pause buying any more homes in October 2021, Class A stocks fell 9.4% to close at $85.46 a share and that Class C stocks fell the same percentage and closed at $86 per share.
Then in November, when the company announced it would exit the program and take a $304 million write-down on inventory and reduce its workforce by 25%, the Class A stocks fell an additional 23% to $65.86 a share and Class C stocks fell 25% to $65.47 a share.
In its motion for dismissal, Zillow’s attorneys argued that the company made it clear from the beginning of Zillow Offers in 2018 that the program was inherently risky and that, with the onset of the global pandemic in 2020, risk became even greater with the unforeseen and unprecedented volatility in home values.
Still, the lawyers argued, Zillow officials consistently disclosed the challenges, inherent price risks, the difficulty to accurately price homes, and the shortage of labor and materials for needed improvements to homes the company had purchased.
As a result, lawyers said, the plaintiffs have failed to prove that the company deliberately overpaid for houses, made misstatements concerning operational improvements, and other allegations made in the complaint.
Oral arguments are scheduled for Oct. 14.
Attorneys for the plaintiffs and Zillow officials were not immediately available for comment.
