Boris Levitt v. Yelp! Inc.

Rule of Law:

Unless a person has a pre-existing right to be free of threatened economic harm, threatening such harm to induce payment for a legitimate service does not constitute extortion under the Hobbs Act or California law, but rather falls under the category of 'hard bargaining.'

Facts:

• Yelp! Inc. provides an online directory where registered users post reviews and rank businesses on a scale of one to five stars, from which Yelp assigns an overall star rating.
• Yelp uses an automated filtering software that removes or re-orders user reviews, stating its purpose is to protect against fake reviews and that it affects both positive and negative reviews.
• Yelp offers businesses advertising opportunities for a monthly fee, which provides benefits such as higher placement in search results, removal of competitor advertisements, and enhanced page listings.
• Boris Levitt's furniture restoration business experienced several positive reviews disappearing from his Yelp page, causing his overall star rating to decline, shortly after he declined a Yelp sales representative's invitation to advertise.
• Cats and Dogs Animal Hospital, Inc. received negative reviews, followed by frequent, high-pressure calls from Yelp sales representatives who allegedly offered to 'hide negative reviews' or 'place them lower' if the hospital purchased advertising, which Cats and Dogs declined.
• John Mercurio, owner of Wheel Techniques, observed negative reviews appear on his Yelp page and alleged that a one-star review moved to the top of his page 'within minutes' after he declined an advertising offer, having previously been told that Yelp 'work[s] with your reviews if you advertise with us.'
• Dr. Tracy Chan, a dentist, received calls from a Yelp sales representative who allegedly offered 'lots of benefits,' including 'keeping Chan’s business ratings high by hiding or burying bad reviews,' if she advertised with Yelp; two or three days after she initially declined, nine 5-star reviews disappeared from her page, causing her overall rating to drop.
• Dr. Chan later purchased advertising 'out of fear of further manipulations,' after which her overall rating increased and various five-star reviews were reinstated; however, when she subsequently declined to increase advertising and then cancelled her contract, positive reviews again disappeared and were replaced with negative ones.

Procedural Posture:

• Boris Levitt, Cats and Dogs Animal Hospital, Inc., John Mercurio, and Dr. Tracy Chan (the business owners) filed a class-action lawsuit against Yelp! Inc. in the United States District Court for the Northern District of California.
• The business owners alleged violations of California’s Unfair Competition Law (UCL), civil extortion, and attempted civil extortion.
• The District Court dismissed the business owners’ Second Amended Complaint for failure to state a claim, ruling that theories of extortion for failure to remove negative user reviews were covered by Yelp’s immunity under the Communications Decency Act of 1996, there were insufficient facts to infer that Yelp authored or manipulated negative reviews and ratings, and there were insufficient factual allegations to infer communication of an extortionate threat.
• After the business owners amended their complaint to their Third Amended Complaint to address these deficiencies, the District Court again dismissed it for failure to state a claim, finding allegations of Yelp manufacturing negative reviews 'entirely speculative' and claims based on Yelp’s purported manipulation of user-generated content immunized by the CDA.
• The business owners, as Plaintiffs-Appellants, appealed the District Court's dismissal to the United States Court of Appeals for the Ninth Circuit, with Yelp! Inc. as Defendant-Appellee.