Plaintiff James Demetriades, who operates restaurants in Mammoth Lakes, filed a complaint seeking an injunction under the unfair competition law (UCL; Bus. & Prof. Code, § 17200 et seq.) and the false advertising law (FAL); Bus. & Prof. Code, § 17500 et seq.) to prevent defendant Yelp, Inc. (Yelp), the operator of a popular online Web site that contains customer reviews of businesses, from making claims about the accuracy and efficacy of its "filter" of unreliable or biased customer reviews. The trial court granted Yelp's special motion to strike plaintiff's complaint under Code of Civil Procedure section 425.16,
Yelp operates a Web site that serves as a free social media Web site and search engine. Yelp is available to the public at no charge and has no registration requirement. Users who register may post reviews about local businesses, and can rate a business using a star rating of one to five stars, with five stars being the highest rating. Yelp's Web site draws tens of millions of people each month who search for and review the public ratings of businesses. As of September 2012, users had posted approximately 33 million reviews to Yelp's Web site, and according to Google analytics, Yelp had 84 million monthly unique visitors during the third quarter of 2012. Yelp sells advertising on its site to generate revenue, and in the first three quarters of 2012 Yelp generated $91 million in revenue from advertising.
Yelp constantly battles the problem of unreliable reviews, which generally are reviews written by friends, employees or relatives of the business being reviewed, paid reviews, and negative reviews written by business competitors. As a result, Yelp developed filtering software with the aim of identifying reviews likely to be unreliable. Yelp started using the filter in 2005, and has worked on improving it since then. The Yelp filter applies uniform rules to all reviews and does not favor advertisers over nonadvertisers; Yelp does not use filtered reviews in calculating a business's rating on Yelp; the filtered reviews do not appear on the main page, but are viewable on a special "filtered review page"; and business owners can freely post responses to reviews they receive on Yelp and can contact reviewers privately to engage in further dialogue. To promote the filter's integrity, Yelp businesses cannot delete, change, or reorder ratings or reviews. Yelp admits that its filter is not foolproof, and Yelp expressly tells users that "the filter sometimes affects perfectly legitimate reviews and misses some fake ones, too. After all, legitimate reviews sometimes look questionable, and questionable reviews sometimes look legitimate." Plaintiff, when purchasing advertising on Yelp, acknowledged in the advertising contract that Yelp's filtering software sometimes made mistakes. According to Yelp, in addition to relying on the filter, a site user can judge how much weight to give to any particular review by viewing the reviewer's profile, reading the reviewer's reviews, and assessing statistics regarding such reviews.
In 2010, Yelp created a cartoon video to educate and contribute to the ongoing public dialog about the integrity of online reviews.
On May 3, 2012, plaintiff filed this action, alleging causes of action for unfair competition and false advertising under the UCL and FAL.
Plaintiff alleged that Yelp engaged in false advertising by claiming that each user review passed through a "filter" that gave consumers "the most trusted reviews." According to plaintiff, Yelp advertised that:
1. "Yelp uses a filter to give consumers the most trusted reviews";
3. "Rest assured that our engineers are working to make sure that whatever is up there is the most unbiased and accurate information you will be able to find about local businesses";
4. "Yelp is always working to do as good a job as possible on a very complicated task — only showing the most trustworthy and useful content out there"; and
5. "Yelp has an automated filter that suppresses a small portion of reviews — it targets those suspicious ones you see on other sites." (Boldface omitted.)
Plaintiff asserted these statements were misleading and untrue. Plaintiff asserted that Yelp did not use the filter to give consumers the most trusted reviews and the filter did not accurately separate the most trustworthy reviews from unreliable reviews, nor did the filter only post reviews from trusted sources. Instead, Yelp's automated filter suppressed more than only a small portion of reviews; allowed posts of the "most entertaining" reviews to be shown on the unfiltered portion of the Web site, regardless of the source; allowed posts of reviews to be shown on the unfiltered portion of a local business page regardless of whether the source was trustworthy or unbiased; and suppressed a substantial portion of reviews that were unbiased and trustworthy. Further, plaintiff asserted that Yelp's Web site contained reviews from persons who were "specifically and demonstrably biased against the businesses which they review." Based on plaintiff's background in software, plaintiff did not believe Yelp's filter was capable of distinguishing between trustworthy and untrustworthy reviews.
In particular, plaintiff asserted that while Rafters received 102 reviews on Yelp, 50 of those reviews were filtered. In addition, a reviewer named "Travis I." made false statements about plaintiff's restaurants, yet Yelp's filter did not catch those reviews. Plaintiff reported Travis I.'s reviews to Yelp, but Yelp did not take any action. In April 2012, plaintiff complained to Yelp about reviews of the Rafters and Red Lantern, demanded changes in the display, threatened litigation aimed at public disclosure of Yelp's software, and sought the identity of the reviewer named Travis I. who had posted negative
Plaintiff suffered injury from the acts of Yelp, including spending money to purchase advertising from Yelp based on Yelp's representations that user reviews were filtered. Plaintiff sought an injunction to stop Yelp from continuing to engage in untrue and misleading representations.
Yelp demurred to the complaint, arguing that the proper plaintiff was MEMP, the entity that directly owned the restaurants. Yelp also filed a motion to strike under section 425.16. On September 7, 2012, plaintiff, without changing his status as an individual plaintiff, filed a first amended complaint (FAC) alleging that, among other things, plaintiff did not seek monetary damages of any kind under the UCL or FAL. Plaintiff sought an order enjoining Yelp from making any statements concerning its filter which were untrue or misleading, filtering user reviews on the Yelp Web site while falsely advertising that the unfiltered reviews posted were fair, trustworthy, or unbiased.
Yelp filed a second motion to strike, arguing that plaintiff's complaint targeted protected activity under section 425.16, subdivision (e)(3) and (4) and by his complaint, plaintiff sought to interfere with both Yelp's review publishing process and Yelp's ability to offer opinions about that process, which conduct interfered with Yelp's free speech rights and targeted speech that appeared in a public forum and was a matter of public interest.
Further, Yelp argued that plaintiff would not prevail on the merits because plaintiff had suffered no injury and thus lacked standing under both the UCL and FAL; even if plaintiff had suffered injury in the form of purchasing advertising, the facts showed that plaintiff did not individually purchase the advertising for Rafters. Further, the Communications Decency Act of 1996 (CDA), title 47 United States Code section 230, precluded liability because the CDA provided that "[n]o 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" (47 U.S.C. § 230(c)(1)) and "[n]o cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with" (id., § 230(d)(3)) the
Plaintiff's opposition detailed that plaintiff was the manager of an entity that owned three Mammoth Lakes restaurants: Jimmy's Taverna, Rafters, and Red Lantern. Plaintiff instructed Jack Carter, the restaurant manager of Rafters, to obtain advertising on Yelp for Rafters. Plaintiff relied on Yelp's statements concerning its filter in purchasing advertising, but soon realized that Yelp's representations concerning its filter were not accurate because of the 102 reviews Rafters received, 50 had been filtered. Further, Rafters received unfiltered negative reviews from a reviewer who made false statements about the restaurant, yet Yelp's filter did not catch these false reviews.
Addressing the merits of Yelp's motion to strike, plaintiff argued that the commercial speech exemption of section 425.17, subdivision (c), applied to Yelp's statements.
On January 25, 2013, the trial court granted Yelp's special motion to strike. The trial court found that Yelp met its initial burden of establishing that its statements arose from protected activity because statements regarding the filtering of reviews on a social media site such as Yelp are matters of public interest and are therefore protected. Further, plaintiff failed to establish the public interest exemption of section 425.17, subdivision (b) applied because the action was not brought solely in the public interest as plaintiff had a personal financial stake in the case based on negative reviews. The court found plaintiff also failed to show the commercial speech exemption of section 425.17, subdivision (c) applied because the statements regarding the reviews did not relate to the selling of advertising and plaintiff failed to show that the statements were statements of fact and not opinion or puffery. Finally, the court found plaintiff failed to establish a probability of prevailing on the merits because plaintiff, who was not the owner of the restaurants, lacked standing and Yelp's alleged misrepresentations were puffery and opinion.
Plaintiff argues that under section 425.17, if an action is prosecuted solely in the public interest or against a person engaged in the business of selling or leasing goods or services who makes statements about those goods and services, the action is not subject to the provisions of section 425.16 as a SLAPP suit. (§ 425.17, subds. (b), (c).) First, plaintiff argues that this action was brought in the public interest because the FAC alleges Yelp engaged in the advertising alleged with the intent to induce members of the public to visit its Web site and view advertisements and reviews and that Yelp engaged in false advertising to the public, including plaintiff; furthermore, the action, if successful, will enforce an important right and confer a benefit upon the public because it will put an end to Yelp's false advertising and unfair competition. Second, plaintiff argues that Yelp's commercial speech is exempted from the protections of the anti-SLAPP statute because the action arises out of Yelp's false statements concerning the accuracy and superiority
Yelp counters that plaintiff has failed to show the public interest exemption of section 425.17, subdivision (b) applies because here plaintiff seeks relief different from or greater than members of the public at large; rather, the FAC discloses that plaintiff has a significant private interest; in addition, the action will not benefit the public because the only issue at stake is plaintiff's personal interest; and plaintiff's financial interest in Rafters is substantial and thus he can meet the burdens of litigation. Further, plaintiff has failed to establish that the commercial speech exemption applies because (1) although Yelp sells advertising, it is primarily engaged in providing a free public forum for members to read and write reviews about local business, services, and other entities; (2) the statements made do not concern commercial speech because they are not directed at advertising; and (3) the intended audience of the statements is not an actual or potential buyer or consumer because the intended audience is potential reviewers, not buyers of advertising; (4) the statements are not statements of fact, but are puffery because the statements make clear the filtering software is not perfect. Finally, Yelp asserts that plaintiff did not suffer actual economic injury and has no standing because the owner of the restaurants is MEMP.
We conclude that plaintiff's action is squarely within the commercial speech exemption of section 425.17, subdivision (c) and reverse.
Yelp contends that the business entity, MEMP, that owns the restaurants receiving reviews on its Web site is the proper party plaintiff in this action, because it is the party who has suffered alleged damages based on fraudulent reviews. While we agree the proper plaintiff to this action is the entity suffering damages, this defect in naming the real party in interest is not fatal to this action.
Substitution of new plaintiffs requires leave of court pursuant to section 473. Although there is a policy of great "liberality" in permitting amendments to pleadings, the trial court must consider various factors, including whether the substitution would prejudice the defendant (e.g., by delaying trial, or increasing discovery burden). (Royal Thrift & Loan Co. v. County Escrow, Inc. (2004) 123 Cal.App.4th 24, 41-42 [20 Cal.Rptr.3d 37]; Jensen v. Royal Pools, supra, 48 Cal.App.3d at p. 721.) Here, the current plaintiff, though an individual and not the business entity that is the direct owner of the restaurants, does not appear to have had an inappropriate motive in naming himself as plaintiff.
An order granting or denying a motion to strike under the anti-SLAPP statute is appealable. (§ 425.16, subd. (j).) On appeal, we exercise our independent judgment to determine whether the litigation arises out of protected activity and whether the plaintiff is likely to prevail. (Kashian v. Harriman (2002) 98 Cal.App.4th 892, 906, 120 Cal.Rptr.2d 576.)
Section 425.17, subdivision (c) provides in relevant part that "Section 425.16 does not apply to any cause of action brought against a person primarily engaged in the business of selling or leasing goods or services ... [¶] (1) The statement or conduct consists of representations of fact about that person's or a business competitor's business operations, goods, or services,
The legislative history indicates this legislation is aimed squarely at false advertising claims and is designed to permit them to proceed without having to undergo scrutiny under the anti-SLAPP statute. Proponents of the legislation argued that corporations were improperly using the anti-SLAPP statute to burden plaintiffs who were pursuing unfair competition or false advertising claims. The proponents noted that law seminars were being conducted on the unfair competition law, "encouraging corporations to use the SLAPP motions as [a] new litigation weapon to slow down and perhaps even get out of litigation." (See Sen. Rules Com., Off. of Sen. Floor Analyses, Unfinished Business Analysis of Sen. Bill No. 515 (2003-2004 Reg. Sess.) as amended July 8, 2003, p. 7; Sen. Com. on Judiciary, Analysis of Sen. Bill No. 515 (2003-2004 Reg. Sess.) as amended May 1, 2003, p. 5.)
Thus, an editorial layout in a magazine that placed a cigarette ad near depictions of the plaintiff was not commercial speech within the section 425.17, subdivision (c) exemption. (Stewart v. Rolling Stone LLC (2010) 181 Cal.App.4th 664, 676 [105 Cal.Rptr.3d 98].) The plaintiff, a rock musician, asserted that a cigarette ad placed near an editorial layout constituted misappropriation of his name, misappropriation of his right to publicity, and unfair business practices under the UCL. (Stewart, at p. 674.) The court rejected the plaintiff's contention that the action was within the subdivision (c) exemption: "It is true that defendants are `primarily engaged in the business of selling goods,' however, as plaintiffs concede, the goods [defendants] sell are copies of Rolling Stone magazine, not Camel cigarettes. More significantly, the statement or conduct at issue here did not consist of `representations of fact about the business operations, goods or services' of Rolling Stone or of any of defendants' business competitors. Instead, the representation at the center of this lawsuit is the representation that plaintiffs and their fellow musicians endorse the sale and use of Camel cigarettes. Accordingly, the first condition set forth in section 425.17, subdivision (c), is not satisfied with respect to defendants and this limited exemption is therefore inapplicable." (Stewart, at pp. 676-677.)
Thus, Yelp's statements that "Yelp uses a filter to give consumers the most trusted reviews"; "All reviews that live on people's profile pages go through a remarkable filtering process that takes the reviews that are the most trustworthy and from the most established sources and displays them on the business page. This keeps the less trustworthy reviews out so that when it comes time to make a decision you can make that using information and insights that are actually helpful"; "Rest assured that our engineers are working to make sure that whatever is up there is the most unbiased and accurate information you will be able to find about local businesses"; "Yelp is always working to do as good a job as possible on a very complicated task — only showing the most trustworthy and useful content out there"; and "Yelp has an automated filter that suppresses a small portion of reviews — it targets those suspicious ones you see on other sites" are more than puffery, they are statements of fact. Yelp's statements are factual because they are intended to induce consumer reliance on Yelp's reviews by making specific and detailed statements intended to induce reliance, such as: the filter "give[s]" consumers the "most trusted" reviews, and Yelp's engineers (a word inspiring confidence) are working to provide the "most unbiased and accurate" information available. Although in making these statements, Yelp may use words of emphasis ("remarkable filtering process," "most trustworthy," "most established sources"), Yelp's specific representations about the accuracy of its review filter go beyond mere expressions of opinion or puffery and hyperbole; rather Yelp speaks with the authority of a Web site that intends to attract users with the accuracy of its filter.
Yelp's audience consists of reviewers, readers of reviews, and businesses that may or may not purchase advertising on Yelp's Web site. Although Yelp only receives direct revenue from those businesses that advertise, such businesses would not be advertising on Yelp without the potential benefit they could obtain from users' reviews and without assurances that potential patrons of their business establishments would be reading only reliable reviews. Further, as Yelp's revenue stream indicates, Yelp is primarily in the business of providing advertising to businesses; the user reviews of businesses are a device whereby prospective users and reviewers are attracted to Yelp's Web site. Thus, Yelp's statements about the accuracy and performance of its review filter are designed to attract users and ultimately purchasers of advertising on its site.
We note that by his complaint plaintiff does not seek to stop Yelp's use of the filter, or obtain information on the mechanics of the filter. Instead, plaintiff seeks to enjoin commercial statements of ostensible fact that plaintiff alleges are false and misleading. Thus, to the extent plaintiff were to obtain the relief sought (an injunction), such relief would not interfere with Yelp or its users' commercial speech: Users can continue to post and read reviews; Yelp can continue to solicit advertising based upon the content of its site (user reviews and business advertising); and Yelp can continue to use its review filter. Narrowly targeted injunctive relief will not affect the content of Yelp's reviewers' statements or the availability of Yelp's reviewers' statements.
As we conclude that plaintiff has established his action is subject to the exemption of section 425.17, subdivision (c), we need not consider the applicability of the exemption of section 425.17, subdivision (b) under the first prong analysis, and also need not consider the second prong of the section 425.16 analysis, namely, whether plaintiff has a reasonable likelihood of prevailing on the merits.
Yelp asserts that the CDA, title 47 United States Code section 230, bars plaintiff's claims because it provides protections for editorial functions exercised by Web site operators with regard to third party material; courts uniformly hold that claims based on a Web site's editorial decisions (publication, or failure to publish, certain third party conduct) are barred by section 230.
Title 47 United States Code section 230, part of the CDA, provides in relevant part, "[n]o 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." (47 U.S.C. § 230(c)(1).) However, as this language demonstrates, Yelp's argument is misplaced. Nowhere does plaintiff seek to enjoin or hold Yelp liable for the statements of third parties (i.e., reviewers) on its Web site. Rather, plaintiff seeks to hold Yelp liable for its own statements regarding the accuracy of its filter.
The order is reversed, and plaintiff shall be given an opportunity to move to amend his complaint to substitute the real party in interest in this action as plaintiff. James Demetriades is to recover his costs on appeal.
Chaney, Acting P. J., and Miller, J.,
California's FAL makes it "unlawful for any person, ... corporation ..., or any employee thereof with intent directly or indirectly to dispose of real or personal property or to perform services, ... or to induce the public to enter into any obligation relating thereto, to make or disseminate ... before the public in this state, ... in any newspaper or other publication ... or in any other manner or means whatever ... any statement, concerning that real or personal property or those services ... which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading...." (Bus. & Prof. Code, § 17500.) As with the UCL, an action for violation of the FAL may be brought either by a public prosecutor or by any person acting for the interests of itself, its members or the general public who has suffered injury in fact, and the remedies available to a successful private plaintiff include restitution and injunctive relief. (Bus. & Prof. Code, §§ 17204, 17535.) A "person" is defined as any individual, partnership, firm, association, or corporation. (§ 17506.)