Vipul Patel v. Zillow, Inc. ( 2019 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 18-2130
VIPUL B. PATEL, et al.,
Plaintiffs-Appellants,
v.
ZILLOW, INC., and ZILLOW GROUP, INC.,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 17-CV-4008 — Amy J. St. Eve, Judge.
____________________
ARGUED OCTOBER 29, 2018 — DECIDED FEBRUARY 8, 2019
____________________
Before BAUER, EASTERBROOK, and SCUDDER, Circuit Judges.
EASTERBROOK, Circuit Judge. A Zestimate is an estimated
value for real estate, available on the Zillow web site for
about 100 million parcels. Zillow generates Zestimates by
applying a proprietary algorithm to public data, such as a
building’s location, tax assessment, number of rooms, and
the recent selling prices for nearby parcels. But because Zil-
low does not inspect the building, it cannot adjust for the
fact that any given parcel may be more a\ractive and be\er
2 No. 18-2130
maintained, raising its likely selling price, or the reverse. Zil-
low states that its median error (comparing a Zestimate with
a later transaction price) is less than 6%, though the Zesti-
mate is off by more than 20% in about 15% of all sales. Zil-
low informs users that none of the parcels has been inspect-
ed and that Zestimates may be inaccurate, though Zillow
touts them as useful starting points.
Plaintiffs filed this suit after learning that the Zestimates
for their parcels were below the amounts they hoped to real-
ize. For example, Vipul Patel listed his home with an asking
price of $1.495 million and contends that the Zestimate of
$1,333,350 scared away potential buyers. Plaintiffs asked Zil-
low either to increase the Zestimates for their parcels or re-
move them from the database. When it declined to take ei-
ther step, they filed this suit, under the diversity jurisdiction,
invoking the Illinois Real Estate Appraiser Licensing Act, 225
ILCS 458/1 to 458/999-99, which forbids the appraisal of real
estate without a license, and the Illinois Uniform Deceptive
Trade Practices Act, 815 ILCS 510/1 to 510/7, which forbids
unfair or misleading trade practices. Plaintiffs contend that a
Zestimate is an appraisal and not only unfair but also mis-
leading because (plaintiffs assert) it is inaccurate yet Zillow
does not accommodate requests for change or removal. The
suit began in state court and was removed to federal court
under the diversity jurisdiction. The district court dismissed
all of plaintiffs’ claims for failure to state a claim on which
relief may be granted. See Fed. R. Civ. P. 12(b)(6). 2017 U.S.
Dist. LEXIS 134785 (N.D. Ill. Aug. 23, 2017); 2018 U.S. Dist.
LEXIS 76245 (N.D. Ill. May 7, 2018). The court’s first opinion
dismisses the licensing claim with prejudice, and the second
terminates all other claims.
No. 18-2130 3
The district court’s comprehensive opinions make it un-
necessary for us to write at length. We offer only a few
words to supplement the district judge’s analysis and indi-
cate which parts of it undergird our decision.
The licensing claim failed in the district court for two
principal reasons. First, the judge concluded that an “auto-
mated valuation model” differs from an “appraisal” as a
ma\er of law under 225 ILCS 458/5-5(g). 2017 U.S. Dist.
LEXIS 134785 at *11–15. Second, the judge held that plaintiffs
lack a private right of action to enforce the appraisal statute.
Id. at *15–26. We affirm for the second reason and need not
consider the first.
The licensing statute omits a private right of action. In-
stead it makes unlicensed appraisal a Class A misdemeanor
(first offense) and a Class 4 felony for any repetition. 225
ILCS 458/5-5(a). An administrative agency may impose fines
of up to $25,000 per unlicensed appraisal, see §458/1-10,
458/15-5(a), and issue cease-and-desist le\ers that can be en-
forced by injunctions, see §458/15-5(d). Illinois courts create
a non-statutory private right of action “only in cases where
the statute would be ineffective, as a practical ma\er, unless
such action were implied.” Me:ger v. DaRosa, 209 Ill. 2d 30,
39 (2004) (citation omi\ed). The district court found that the
multiple means of enforcing the licensing act, and the stiff
penalties for noncompliance, show that a private action is
not necessary to make the statute effective. We concur.
As for the trade practices act, the district judge was right
to observe that the statute deals with statements of fact,
while Zestimates are opinions, which canonically are not ac-
tionable. See, e.g., Sampen v. Dabrowski, 222 Ill. App. 3d 918,
924–25 (1st Dist. 1991) (where a valuation is explicitly la-
4 No. 18-2130
beled an estimate, there is no deception); Hartigan v. Maclean
Hunter Publishing Corp., 119 Ill. App. 3d 1049, 1059 (1st Dist.
1983) (“If clearly labeled as an opinion a qualitative evalua-
tion of worth is not a violation of the Act. The Act prohibits
deception rather than error.”). Plaintiffs want us to brush
this rule aside because, they say, Zillow refuses to alter or
remove Zestimates on request. This does not make a Zesti-
mate less an opinion, however. And plaintiffs are mistaken
to think that the accuracy of an algorithmic appraisal system
can be improved by changing or removing particular esti-
mates.
Suppose plaintiffs are right to think that the Zestimates
for their properties are too low. Removing them from the da-
tabase would skew the distribution, because all mistakes
that favored property owners would remain, not offset by er-
rors in the other direction. Potential buyers would be made
worse off. Suppose instead that plaintiffs are wrong—that
they have overestimated the value of their properties, while
the Zestimates are closer to the truth. Then removing them
from the database would not just skew the distribution but
also increase the average error of estimates. Potential buyers
of plaintiffs’ properties would be deprived of valuable
knowledge. Finally, suppose that plaintiffs are behaving
strategically—that they know the Zestimates to be accurate
(or at least closer to the likely sales price than are plaintiffs’
asking prices). Then removing their parcels from the data-
base, or “correcting” the Zestimates to match plaintiffs’ ask-
ing prices, would degrade the accuracy of the database as a
whole without any offse\ing benefits to the real-estate mar-
ket. In general, the accuracy of algorithmic estimates cannot
be improved by plucking some numbers out of the distribu-
tion or “improving” others in ways that depart from the al-
No. 18-2130 5
gorithm’s output. The process is more accurate, overall,
when errors are not biased to favor sellers or buyers.
That Zillow sells ads to real estate brokers does not affect
the statutory analysis. Having labeled Zestimates as esti-
mates (something built into the word “Zestimate”), Zillow is
outside the scope of the trade practices act. Almost all web
sites, like almost all newspapers and magazines, try to fi-
nance their operations by selling ads. That they do so with-
out telling customers exactly what pitches are being made to
potential advertisers does not convert a declared estimate
into an inaccurate statement of fact.
In addition to the trade practices act, plaintiffs invoke the
Illinois Consumer Fraud and Deceptive Business Practices
Act, 815 ILCS 505/1 to 505/12. The district court’s second
opinion shows that this claim fails for essentially the same
reasons as the trade practices act claim fails, and for the fur-
ther reason that plaintiffs are not buyers of real estate. 2018
U.S. Dist. LEXIS 76245 at *20–26. The subject does not require
additional discussion.
AFFIRMED