Zillow Group Inc. has agreed to pay $15 million to settle a class action lawsuit originally filed six years ago by shareholders who accused the company of failing to disclose a federal investigation into its co-marketing program with lenders and real estate agents.
Judge John C. Coughenour, of the U.S. District Court for the Western District of Washington at Seattle, signed an order on April 3 granting preliminary approval for the settlement, “subject to further consideration at a hearing” that is scheduled to be held on Aug. 8.
The co-marketing program that prompted the lawsuits is still active. It allows mortgage lenders to pay part of agents' costs for advertising monthly Zillow websites. The plaintiffs in the lawsuits claimed the program violated the federal Real Estate Procedures Act (RESPA), and that Zillow violated the Securities and Exchange Act by artificially inflating its stock by failing to reveal the severity of a Consumer Financial Protection Bureau probe into the program.
The CFPB’s investigation into the program ended without Zillow facing any enforcement action.
The original lawsuit, Vargosko vs. Zillow Group Inc., was filed in August 2017 in California. That was followed by a second lawsuit, Shotwell vs. Zillow Group Inc., filed in September 2017 in Seattle. The cases were consolidated in the Seattle court in January 2018.
The plaintiffs filed an amended complaint for the consolidated case in February 2018, and Zillow followed by filing a motion to dismiss the case in April of that year. In October 2018, the court granted the motion to dismiss the case, dismissing with prejudice its claims of violating the Securities & Exchange Act but allowing the plaintiffs to amend their complaint over claims of violations of the Exchange Act.
The plaintiffs refiled their claims in November 2018, and while Zillow again filed a motion to dismiss, the court dismissed the motion and allowed the case to proceed.
It took three tries to reach the settlement, with mediation sessions in October 2020 and January 2022 both failing. Direct settlement discussions that began in the summer of 2022 and a meeting on Oct. 11, 2022, ultimately resulted in a settlement in principle, which was filed with the court on March 31.
Although it has agreed to the settlement, Zillow has denied and continues to deny “any and all allegations of fault, liability, wrongdoing, or damages whatsoever arising out of any of the conduct, statements, acts, or omissions alleged, or that could have been alleged,” according to the settlement agreement.
Zillow continues “to believe the claims asserted against them in the action are without merit and have agreed to enter into the settlement set forth in this stipulation solely to avoid the expense, time and uncertainty associated with the action,” the agreement states."
The plaintiffs state that while they believe their case has merit, they also believe “the settlement set forth in this stipulation is fair, adequate, reasonable, and in the best interests of the class.”
The court said it will consider comments and/or objections to the settlement that are filed at least 21 days before the hearing in scheduled for August.
A spokesperson for Zillow said only that the the company is "pleased that the parties have reached a resolution of this matter. "
