Jaeger v. Zillow Group Inc, 644 F.Supp.3d 857

Background

Zillow launched an iBuyer business, "Zillow Offers," and promoted reliance on its Zestimate pricing model and increased automation to scale home purchases and drive growth.
Between mid‑2021 and August 2021, Zillow implemented "Project Ketchup," reportedly adding human-driven pricing "overlays" that raised offers materially above algorithm recommendations (400–800 basis points), increasing purchase volume but causing overpayment.
Project Ketchup allegedly led Zillow to cut renovation scopes and lower contractor payments, producing contractor refusals, renovation backlogs, higher holding/financing costs, and operational stress.
Plaintiff Jeremy Jaeger (putative class) sued under § 10(b)/Rule 10b‑5 and § 20(a), alleging Defendants made false/misleading statements about (i) reliance on and improvements to algorithms, (ii) durability of cost/operational improvements, and (iii) consumer demand driving inventory growth.
Defendants moved to dismiss for failure to state a claim; the court denied the motion in large part, but held one statement (CAC ¶ 192) was forward‑looking and protected by the PSLRA safe harbor and dismissed claims tied to it without prejudice.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
PSLRA safe‑harbor for forward‑looking statements	Jaeger: statements about "durable" unit economics were not purely forward‑looking and could be misleading	Zillow: statements are forward‑looking and/or accompanied by cautionary language, so protected	Court: CAC ¶ 192 is forward‑looking and PSLRA protects it (claims dismissed w/ leave to amend); other statements not protected
Falsity / omission (misleading statements)	Jaeger: Defendants misled by touting algorithmic automation and durable cost improvements while using manual overlays and unsustainable contractor cuts	Zillow: disclosures and boilerplate risk warnings were adequate; some statements were puffery	Court: Plaintiff plausibly pleaded falsity/omissions re algorithms, durability, and demand; statements were not mere puffery; dismissal denied
Scienter (knowledge or recklessness)	Jaeger: senior executives knew of Project Ketchup (FE testimony, company prominence of Zillow Offers) supporting intent/recklessness	Zillow: plausible nonculpable explanations and lack of direct proof of executives’ knowledge	Court: Holistic review of FE statements + core‑operations inference yields a strong inference of scienter at pleading stage
Loss causation and control person liability (§20(a))	Jaeger: corrective disclosures revealed truth, led to stock drops; executives exercised control over Zillow Offers	Zillow: stock movements recoveries or other factors negate loss causation; control not sufficiently pleaded	Court: Corrective partial disclosures and accompanying price declines plausibly plead loss causation; officer titles/responsibilities suffice to allege control; §20(a) claim survives

Key Cases Cited

Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must state plausible claim)
Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308 (2007) (holistic scienter inference standard)
Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund, 575 U.S. 175 (2015) (distinguishing opinions and statements of fact; forward‑looking context)
Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (2011) (when omission makes other statements misleading)
Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005) (loss causation requirement)
In re Daou Sys., Inc. Sec. Litig., 411 F.3d 1006 (9th Cir. 2005) (consideration of confidential witness statements)
In re NVIDIA Corp. Sec. Litig., 768 F.3d 1046 (9th Cir. 2014) (elements of § 10(b) claim)
Schueneman v. Arena Pharmaceuticals, Inc., 840 F.3d 698 (9th Cir. 2016) (duty not to mislead when touting positive info)
In re Gilead Sciences Securities Litigation, 536 F.3d 1049 (9th Cir. 2008) (pleading loss causation to permit discovery)
S. Ferry LP v. Killinger, 542 F.3d 776 (9th Cir. 2008) (core‑operations inference for scienter)