Securities Litigation Over Failed iBuyer Models Heads to Trial
The U.S. Supreme Court declined to hear Zillow Group’s appeal of a 2021 securities class action, allowing the case to proceed to trial in Washington state federal court. Investors sued the Seattle-based company after its stock fell in November 2021, when Zillow shut down its home-flipping division Zillow Offers and disclosed $300 million in quarterly losses and a 25 percent workforce reduction. The lawsuit alleges company executives made misleading statements about the unit’s performance in preceding months, painting an overly positive picture despite struggles forecasting home prices.
Zillow’s legal team argued the company disclosed all risks associated with entering the home-flipping business and that the venture simply failed despite good-faith efforts. The 9th U.S. Circuit Court of Appeals upheld class certification in 2023, ruling that November 2021 disclosures revealed new information about pricing-model failures that earlier statements may have obscured. The case turns on “price-maintenance” claims, where plaintiffs allege companies made false statements not to inflate stock prices but to prevent declines.
Zillow asked the Supreme Court to resolve a circuit split over how closely related corrective disclosures must be to earlier alleged misstatements to certify a class. The U.S. Chamber of Commerce and other business groups filed supporting briefs, arguing the 9th Circuit ruling deviates from Supreme Court precedent and exposes companies to excessive litigation. Steve Berman of Hagens Berman, representing the plaintiff class, said his firm looks forward to trial. Zillow did not comment on the denial.
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