NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _____________

No. 21-1470 _____________

EJ MGT LLC, Appellant

v.

ZILLOW GROUP, INC.; ZILLOW, INC. _____________

On Appeal from the District Court for the District of New Jersey (D.C. Civil No. 2:18-cv-000584) District Judge: Honorable John M. Vazquez _____________

Submitted Pursuant to Third Circuit L.A.R. 34.1(a) November 16, 2021 _____________

Before: CHAGARES, BIBAS, and FUENTES, Circuit Judges

(Filed: December 3, 2021) ____________

OPINION * ____________

* This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7, does not constitute binding precedent. CHAGARES, Circuit Judge.

Appellant EJ MGT LLC (“EJ”) appeals the District Court’s dismissal of its

antitrust action with prejudice for lack of Article III standing or, in the alternative, lack of

antitrust standing. We agree that EJ lacks Article III standing to pursue its claims for

conspiracy to restrain trade, but we will nonetheless vacate the order of the District Court

and remand with instructions to dismiss the case without prejudice.

I.

We write primarily for the parties and recite only the facts essential to our

decision. Zillow, Inc. and Zillow Group, Inc. (together “Zillow”) operate a website that

displays information about residential properties in the United States. If a property is

listed for sale on Zillow, the listing will include the property’s listing price and a

“Zestimate.” The Zestimate is Zillow’s estimate of the property’s current market value

based on Zillow’s proprietary algorithm. The Zestimate is usually listed at the top of the

page immediately beneath the listing price, but preferred agents that are affiliated with

Zillow may enjoy a Zestimate suppression service, which moves the Zestimate to a less

prominent position on the page.

EJ owns an estate located at 142 Hoover Drive, Cresskill, New Jersey. After

listing the Hoover Drive property for sale on Zillow, EJ discovered that the Zestimate

was approximately $4 million less than the listing price. EJ requested that Zillow move

the Zestimate, but because EJ had engaged the services of a broker not affiliated with

2 Zillow, Zillow refused. EJ has been unable to sell the property and alleges that the

prominent Zestimate has price anchoring effects on potential buyers. 1

EJ filed this action on January 1, 2018. Zillow filed a motion to dismiss, which

the District Court granted without prejudice. The District Court also dismissed the first

amended complaint without prejudice. On June 1, 2020, EJ filed the second amended

complaint (“SAC”) alleging claims for conspiracy to restrain trade under the Sherman

Act and the New Jersey Antitrust Act. EJ alleged that Zillow illegally contracted with its

premier agents to move the location of the Zestimate, with the effect of tilting the

competitive field in favor of these agents at the expense of non-affiliated agents,

residential sellers such as EJ, and consumers in the real-estate market.

The District Court dismissed the SAC for lack of Article III standing and for lack

of antitrust standing. Because it had given EJ two prior opportunities to amend to resolve

these same deficiencies, the District Court concluded that further opportunity to amend

would be futile and dismissed the SAC with prejudice. EJ timely appealed.

II. 2

EJ invoked the District Court’s jurisdiction under

, 1337, and

1 As the District Court noted, there is some ambiguity as to whether the Zestimate for the Hoover Drive property still appears immediately under the listing price or whether, after EJ filed the complaint, Zillow moved the Zestimate to a “View Zestimate” link. 2 We have jurisdiction over the District Court’s dismissal of the SAC under

. Our review of a district court’s order granting a motion to dismiss is plenary. See Fowler v. UPMC Shadyside,

(3d Cir. 2009). Although we review the denial of leave to file an amended complaint for abuse of discretion, we review de novo the District Court’s determination that further amendment would be futile. See Maiden Creek Assocs., L.P. v. U.S. Dep’t of Transp.,

(3d Cir. 2016).

3 1367, but the District Court held that it lacked jurisdiction because EJ did not have

standing under Article III of the Constitution to pursue its claims. On appeal, EJ argues

that the District Court erred in holding that its injuries were not fairly traceable to the

Zestimate suppression agreements, and that, in any event, EJ had standing based on the

invasion of its statutory rights under antitrust law.

Article III limits the federal courts to adjudication of “Cases” and “Controversies.”

U.S. Const. art. III, § 2, cl. 1. To satisfy the case-or-controversy requirement, a plaintiff

must have Article III standing. Article III standing has three irreducible elements: “[t]he

plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the

challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable

judicial decision.” Spokeo, Inc. v. Robins,

(2016). The plaintiff bears

the burden of establishing each of these elements.

To establish the first element — that the plaintiff has suffered an injury in fact —

the plaintiff must allege an “invasion of a concrete and particularized legally protected

interest” resulting in actual or imminent harm. Blunt v. Lower Merion Sch. Dist.,

(3d Cir. 2014) (citing Lujan v. Defenders of Wildlife,

(1992)). The SAC identifies two alleged injuries in fact: (1) that EJ allegedly paid a

“supracompetitive quality-adjusted price and received a lower quality service” of

brokerage services, Appendix (“App.”) 120, 123; and (2) that EJ has sustained ongoing

costs and lost profits stemming from its inability to sell the property. The District Court

held that the SAC contained insufficient detail about the first injury and assumed without

deciding that EJ’s ongoing costs and lost profits could constitute an injury in fact.

4 At a minimum, EJ has pled that it has been financially harmed as a result of its

inability to sell the Hoover Drive property, including its “lost profits and continuing

carrying costs such as property taxes, insurance, landscaping, utilities, and other expenses

related to owning an investment property.” App. 122. These injuries are sufficient for

the purposes of Article III standing. See Cottrell v. Alcon Lab’ys,

(3d

Cir. 2017) (“Typically, a plaintiff’s allegations of financial harm will easily satisfy each

of these components, as financial harm is a classic and paradigmatic form of injury in

fact.” (citation, quotation marks, and alterations omitted)).

However, as the District Court found, the SAC does not adequately allege that

EJ’s economic injuries are fairly traceable to the Zestimate suppression agreements. This

Court has observed that “traceability requires, at a minimum, that the defendant’s

purported misconduct was a ‘but for’ cause of the plaintiff’s injury.” Finkelman v. Nat’l

Football League,

(3d Cir. 2016). Conclusory allegations about the

effect of prominent negative pricing information are repeated throughout the SAC, but

the District Court correctly noted that EJ’s causation argument implicitly rests on the

assumption that Zestimates are routinely lower than the listing price for homes on Zillow.

There are no allegations in the SAC to support this assumption.

EJ argues that the District Court erred in attributing its failure to sell the Hoover

Drive property to the discrepancy between the listing price and the Zestimate, as opposed

to Zillow’s refusal to suppress the Zestimate. In doing so, EJ argues, the District Court

improperly required EJ to “disprove each and every conceivable alternate causation

theory.” EJ Br. 27. Not so. The District Court correctly observed that the SAC did not

5 sufficiently allege that the Zestimate suppression agreements were a but-for cause of EJ’s

injuries. In the SAC, EJ included allegations concerning two potential buyers who were

“confronted with the prominent Zestimate” and “were turned off from considering a

potential purchase of the property based on the discrepancy between the listing price and

the Zestimate.” App. 33. That allegation specifically attributes the losses of these sales

to the value of the Zestimate, not the placement. The SAC further alleges that since

2017, the brokers that have had “the benefit of Zestimate Suppression through the

Zestimate Agreements have sold at least eight high-end homes in the town of Cresskill,

as compared to just two such sales by Unaffiliated Brokers that [did] not have the benefit

of Zestimate Suppression, with an approximate average listing period of 13 months.”

App. 148. But the SAC does not include sufficient detail to support an inference that

these properties were comparable to the Hoover Drive property, nor the most important

detail — whether the Zestimates for these properties were higher or lower than the listing

price — and therefore cannot support an inference that Zestimate suppression was a but-

for cause of EJ’s injury. Without having shown causation, EJ cannot establish that it has

Article III standing to pursue damages for its economic injuries.

Finally, EJ argues that the SAC alleges violations of its statutory rights, which

alone are sufficient to confer Article III standing. EJ contends that, in entering into the

Zestimate suppression agreements, Zillow has “tilt[ed] the competitive playing field” and

degraded the quality of brokerage services consumed by EJ, EJ. Br. 30, the consumption

of which is “in and of itself [] a harm,” EJ Reply 19. Non-economic harms can in some

instances serve as injuries sufficient to confer Article III standing, see In re Google Inc.

6 Cookie Placement Consumer Priv. Litig.,

(3d Cir. 2015), but standing

“requires a concrete injury even in the context of a statutory violation,” Spokeo,

. Assuming the consumption of lower quality services constitutes such an injury,

as the District Court recognized, the SAC does not allege in any non-conclusory manner

that EJ consumed lower quality brokerage services at supracompetitive prices. The SAC

does not include information on how much EJ paid for brokerage services or allege what

made the price “supracompetitive.” App. 15. The only elaboration the SAC provides on

this point is that the “lower quality of broker service . . . is evidenced by [EJ’s] inability

to sell its property . . . .” App. 143. That circular reasoning is plainly insufficient, as it

does not explain how the price that EJ paid was supracompetitive as adjusted for the

quality of the brokerage services it consumed. 3

* * * * *

EJ lacks Article III standing to pursue its antitrust claims, and therefore the SAC

was properly dismissed pursuant to Federal Rule of Civil Procedure 12(b)(1). However,

because “the absence of standing leaves the court without subject matter jurisdiction to

reach a decision on the merits, dismissals ‘with prejudice’ for lack of standing are

generally improper.” Ellison v. Am. Bd. of Orthopaedic Surgery,

(3d

Cir. 2021) (citation omitted). That is the case here, and we therefore cannot affirm the

District Court’s dismissal with prejudice.

3 Because we conclude that the District Court lacked subject matter jurisdiction, we do not reach the issue of whether EJ has antitrust standing to bring its conspiracy to restrain trade claims.

7 III.

For the foregoing reasons, we will vacate the order of the District Court and

remand with instructions to dismiss the case without prejudice pursuant to Federal Rule

of Civil Procedure 12(b)(1).

8