Levitt v. Yelp! Inc., No. 11-17676 (9th Cir. 2014)
Annotate this CasePlaintiffs, small business owners, filed a class action suit alleging that Yelp, an online forum, extorted or attempted to extort advertising payments from them by manipulating user reviews and penning negative reviews of their businesses. Plaintiffs filed suit against Yelp for violations of California's Unfair Competition Law (UCL), Cal. Bus. & Prof. Code 17200 et seq.; civil extortion; and attempted civil extortion. The district court dismissed the suit for failure to state a claim. The court concluded that Yelp's manipulation of user reviews, assuming it occurred, was not wrongful use of economic fear, and that the business owners pled insufficient facts to make out a plausible claim that Yelp authored negative reviews of their businesses. Therefore, the court agreed with the district court that these allegations did not support a claim for extortion. The court held that, to state a claim of economic extortion under both federal and California law, a litigant must demonstrate either that he had a pre-existing right to be free from the threatened harm, or that the defendant had no right to seek payment for the service offered. Given these stringent standards, plaintiffs failed to sufficiently allege that Yelp wrongfully threatened economic loss by manipulating user reviews. None of the business owners have stated a claim of "unlawful" conduct on the basis of extortion. Therefore, the court dismissed the separate claims of civil extortion and attempted civil extortion. Further, plaintiffs' UCL claim failed under the "unfair" practices prong. Accordingly, the court affirmed the judgment of the district court.
Court Description: California Unfair Competition Law / Civil Extortion. The panel affirmed the district court’s dismissal of an action by small business owners alleging that Yelp! Inc. extorted or attempted to extort advertising payments from them by manipulating user reviews and penning negative reviews of their businesses in violation of California state law. The panel held that the business owners failed to state a claim for extortionate, and therefore unlawful, business practices in violation of California’s Unfair Competition Law because, under the Hobbs Act and California law, unless a person has a pre-existing 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. The panel held that, given these stringent requirements, the business owners failed sufficiently to allege that Yelp wrongfully threatened economic loss by manipulating user reviews. In addition, the business owners did not allege sufficient facts to support their claim that Yelp authored negative user reviews of their businesses. The panel held that the business owners also failed to state a claim for unfair business practices in violation of the UCL. In addition, the business owners failed to state a claim for civil extortion or attempted civil extortion under California law.
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