Wednesday, February 24, 2010

Class-Action Lawsuit Filed Against Yelp

By Kathleen Richards
Wed, Feb 24, 2010 at 11:37 AM

A class-action lawsuit was filed against Yelp by two firms in Los Angeles federal court yesterday. The lawsuit alleges unfair business practices against the San Francisco-based user-generated review site, and, in particular, that the company “runs an extortion scheme in which the company’s employees call businesses demanding monthly payments, in the guise of ‘advertising contracts,’ in exchange for removing or modifying negative reviews appearing on the website,” according to the official press release.

Yelp

Last year, the Express published two articles detailing similar extortion claims by local business owners, which were cited in the lawsuit announcement. In this case, the plaintiff — a veterinary hospital in Long Beach — had contacted Yelp and asked that the company remove an allegedly false and defamatory review from its web site. After refusing, Yelp then had its sales representatives call the hospital and demand a roughly $300 per month payment in exchange for “hiding or removing the negative review,” according to the release.

Gregory S. Weston, managing partner of the Weston Firm, one of two firms that filed the lawsuit, Cats and Dogs Animal Hospital Inc. v. Yelp Inc., said his client was never contacted by Yelp sales reps until the hospital contacted the company about the false review. Sales reps then contacted the hospital “almost immediately. And they were very frequent and high pressure,” he said.

Yelp continues to deny such allegations. And in response to the lawsuit, the company told TechCrunch: “The allegations are demonstrably false, since many businesses that advertise on Yelp have both negative and positive reviews. … While we haven’t seen the suit in question, we will dispute it aggressively.”

Feeling helpless against damaging reviews, some business owners and individuals have filed lawsuits against Yelp, but the online site has always been protected from liability of third-party content under Section 230 of the Communications Decency Act. But, following publication of our articles, Yelp decided to allow business owners to respond to reviews if they signed up for a free business-owner account.

Yet this lawsuit has nothing to do with defamation, says Weston. “The lawsuit is not about what people say about Yelp but about Yelp’s attempts to say, ‘Give us money and then we’ll take down these negative reviews,’” he said.

Weston added that a lawsuit is the only way to stop this practice. “My client contacted Yelp many times,” he said. “Trying to negotiate before filing suit would be fruitless because this is a very widespread practice. Your article didn’t get them to change their practice. … I think they need to be forced by a federal judge to stop the practices.” Weston cited the Napster case as evidence that it’s possible for a judge to order web sites to change their practices.

Yelp has 21 days following the lawsuit filing to respond. Weston says they plan to obtain and comb through Yelp’s sales e-mails. “We’ll probably also see evidence that Yelp executives knew of this and didn’t care and were more concerned with covering it up than stopping the practice,” he said.

A class-action suit can have more than one lead plaintiff, he noted. “I’m happy to take their call.”

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