Yelp Sued for Allegedly Manipulating Ratings to Extort Advertising Revenue, but Lawsuit was Tossed Because Even Wrongful Motive Does Not Defeat Immunity of ISP Under Statute

In the third amended complaint (“TAC”) of a consolidated class action, Plaintiffs Boris A. Levitt and Wheel Techniques (“Wheel Tech.”) et al. alleged that Wheel Tech. noticed negative reviews on its Yelp page which did not correspond with its records of actual customers.  At around the same time, Wheel Tech. received sales calls from Yelp requesting that Wheel Tech advertise.  Later, Wheel Tech. called Yelp to ask why a competitor had a high rating on Yelp and was told that the competitor advertised and that “we work with your reviews if you advertise with us.”  After refusing to advertise again, Wheel Tech. alleged that its 1-star review was moved to the top of the business page “within minutes” as a threat to induce Wheel Tech. to advertise.

Apart from Wheel Tech.’s allegations, Plaintiffs alleged that “approximately 200 Yelp employees or individuals acting on behalf of Yelp have written reviews of businesses on Yelp.”  Plaintiffs also alleged that Yelp’s CEO admitted to a New York Times blog that “Yelp has paid users to write reviews.”  Among the causes of action, Plaintiffs sued Yelp for civil extortion and attempted civil extortion.

As it had successfully done in connection with the second amended complaint (“SAC”), Yelp moved to dismiss the TAC on the grounds that Plaintiffs failed to plead sufficient facts to constitute a plausible cause of action and that even if the allegations were true, the Communications Decency Act (“CDA”), 47 U.S.C. § 230(c), provided Yelp with immunity.  The Court agreed with Yelp on both grounds.  [Levitt et al. v. Yelp, N.D. Cal. (Oct. 26, 2011)]

Quoting from the order dismissing the SAC without prejudice, the Court stated:  “Despite these allegations, however, it remains ‘entirely speculative that Yelp manufactures its own negative reviews or deliberately manipulates reviews to the detriment of businesses who refuse to purchase advertising,’ and ‘[t]he [TAC] provides no basis from which to infer that Yelp authored or manipulated the content of the negative reviews complained of by plaintiffs.’”  The Court went on:  “That Yelp employees have written reviews, even for pay, does not raise more than a mere possibility that Yelp has authored or manipulated content related to Plaintiffs in furtherance of an attempt to ‘extort’ advertising revenues.”  The Court cited Ashcroft v. Iqbal, 129 S.Ct. 1937, 1950 (2009) (“[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not `show[n]’—`that the pleader is entitled to relief.'”) (quoting Fed. R. Civ. P. 8(a)(2)).

Supporting its second ground granting the motion to dismiss, in relevant part, Section 230(c)(1) of the CDA provides: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”  Although the Court was “sympathetic to the ethical underpinning of Plaintiffs’ argument” of extortion based on “Yelp’s alleged manipulation of their review pages — by removing certain reviews and publishing others or changing their order of appearance” — it held that Section “230(c)(1) contains no explicit exception for impermissible editorial motive.”  The Court went on to to rule that Yelp’s manipulation of its star rating system as alleged also did not fall outside the ambit of the immunity provided by Section 230(c)(1) because its ratings were based on input by other content providers.  Accordingly, the Court held that the alleged conduct was immunized thereunder and dismissed the TAC with prejudice.

Update:  In its decision on September 2, 2014, the U.S. Court of Appeals for the Ninth Circuit upheld the ruling of the District Court.

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About Craig McLaughlin

I am an intellectual property attorney and trial lawyer with an office in Southern California. I enjoy representing clients and also enjoy flyfishing, skiing, golf, writing this blog and photography (see blog header). My website is: http://www.smartpropertylaw.com
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