Extortion Lawsuit Against Yelp Dismissed By Ninth Circuit

In Levitt v. Yelp! Inc., decided on September 2, 2014, the Ninth Circuit Court of Appeals affirmed the dismissal of an economic extortion suit against Yelp. The lawsuit, filed as a class action, accused Yelp of extorting or attempting to extort advertising payments from businesses by manipulating user reviews and creating fake negative reviews about the businesses.

For the uninitiated, Yelp is a website that allows consumers to post reviews and rank businesses on a scale of one to five stars. Other consumers often consult Yelp to form an opinion as to whether a particular business is reputable or not. However, Yelp also allows the same businesses that are being reviewed an opportunity to advertise on its website for up to $1,200 per month. The lawsuit alleged that Yelp created negative reviews of their businesses and manipulated review and ratings content to induce them to purchase advertising.

The Ninth Circuit agreed with the district court that these allegations did not state a claim support for extortion. Specifically, it ruled that Yelp's manipulation of user reviews, assuming it occurred, was not wrongful and also that the business owners pled insufficient facts to make out a claim that Yelp authored fake negative reviews of their businesses (even though Yelp’s owner admitted this was a general practice of Yelp’s). Under this ruling, a business has no pre-existing right to have positive reviews appear on a website—that right is contractual, not extortionate, in nature.

The Ninth Circuit stated there is “no claim that it is independently wrongful for Yelp to post and arrange actual user reviews on its website as it sees fit. The business owners may deem the posting or order of user reviews as a threat of economic harm, but it is not unlawful for Yelp to post and sequence the reviews.” As for the fake reviews Yelp allegedly instructed its employees to post, the Ninth Circuit found the pleadings to be too vague with respect to identifying specific fake reviews.

Takeaway: The Ninth Circuit’s ruling is primarily a factual ruling, not a legal one, so it does not preclude future lawsuits over similar conduct by Yelp (or other consumer review or consumer gripe sites). This is demonstrated by the Ninth Circuit’s conclusion: “We emphasize that we are not holding that no cause of action exists that would cover conduct such as that alleged, if adequately pled. But for all the reasons noted, extortion is an exceedingly narrow concept as applied to fundamentally economic behavior. The business owners have not alleged a legal theory or plausible facts to support the theories they do argue.”

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