Does a web site’s manipulation of publicly available positive and negative reviews rise to the level of extortion? In a September 2, 2014 opinion, the Ninth Circuit said not necessarily. In affirming the district court’s dismissal, the Ninth Circuit in Levitt v Yelp, No. 11-17676, stated that “unless a person has a preexisting right to be free of the threatened economic harm, threatening economic harm to induce a person to pay for a legitimate service is not extortion.” Id. at 13.
Plaintiffs—all small business owners—filed suit under California’s Unfair Competition Law, alleging that Yelp! actively pushed negative reviews to the top of the results queue for businesses that did not advertise with Yelp!. In addition, plaintiffs alleged that Yelp! would remove positive reviews altogether to give the businesses an overall lower “star” rating. Finally, plaintiffs alleged that Yelp! itself wrote negative reviews of the businesses. If the business owners were to advertise with Yelp!, the complaint stated, Yelp! would massage the reviews to improve the “star” rating and ensure potential customers would see more favorable reviews. Yelp! moved to dismiss arguing that the allegations in the complaints, even if true, could not support a cause of action.
The Ninth Circuit only considered plaintiffs’ Unfair Competition Law claim, which required a showing of acts or practices that are unlawful, unfair, or fraudulent. Extortion, as the court stated, is the obtaining of property from another induced by wrongful means, but according to the court, threats of economic harm are not generally considered harmful. Slip op. at 13. Because the business owners had no right to be free from negative reviews, no extortion existed under the Unfair Competition Law.
All may not be lost for business owners plagued by this issue, however. The Ninth Circuit, on several occasions in the opinion, hinted that there may be additional causes of action available to the plaintiffs, such as trade libel law, breach of contract, tort of civil extortion, and the Communications Decency Act (“CDA”). In addition, the Ninth Circuit pointed out that the plaintiffs brought forth no evidence of directly threatened economic harm (page 19) such as reputational harm (page 20). In short, plaintiffs failed to allege enough factual content.
In the past, Yelp! has successfully invoked the CDA’s safe harbor clause against charges of negative reviews. But at least one court has held that manipulation of third party content effectively ascribes authorship, at least in part, to the manipulator. See Doctor’s Assocs., Inc. v. QIP Holder LLC, Civ. No. 3:06-cv-1710 (VLB) (D. Conn. Feb. 19, 2010) (denying motion for summary judgment that Quiznos’ solicitation of disparaging videos about Subway were protected under CDA’s safe harbor).
As a side note, the California Governor recently signed into law California Assembly Bill 2365, legislation nicknamed the “Yelp bill,” which will prohibit businesses from including “no disparagement” clauses in their consumer contracts. The new law takes effect on January 1, 2015.
Seth Jaffe (seth.jaffe@nortonrosefulbright.com / +1 713 651 5370) is an associate in Norton Rose Fulbright’s Intellectual Property Practice Group.
