LOS ANGELES (CN) - A disgruntled restaurant owner can pursue claims that Yelp misrepresents how well it filters out biased customer reviews, an appeals court ruled.
In 2005, Yelp introduced filtering software to address the problem of biased reviews from paid reviewers, family members and relatives of business owners and competitors. Filtered reviews are not used to calculate a business's rating and do not appear on its main page.
Business owners can view filtered reviews and post responses on a special page for such reviews, but cannot alter or delete ratings that appear on their main page.
Mammoth Lakes businessman James Demetriades sued Yelp in 2012, claiming that the Yelp advertising he bought for one of his restaurants did not work as advertised.
Among other things, Demetriades claimed Yelp's filters suppressed many trustworthy reviews, let unfiltered posts show up on his business page, and did not catch posts from biased reviewers.
According to Demetriades' complaint, Yelp's filters also let a reviewer named Travis I. post false allegations against Demitriades's businesses and caught several positive reviews on grounds that they were supposedly made by someone associated with his restaurants.
Demetriades asked a court to bar Yelp from making misleading statements about the efficacy of its filters and stating that all unfiltered reviews were unbiased.
But Yelp moved to strike Demetriades' complaint, arguing that its statements about its software's filtering abilities are protected speech activities under California's anti-SLAPP statute.
The company also claimed Demetriades failed to show actual injury and lacked standing to pursue claims that the anti-SLAPP statute's commercial speech exemptions applied. A reasonable person would understand that its statements about the filter were not guarantees of perfect performance, Yelp argued.
Los Angeles County Superior Court Judge Yvette M. Palazuelos sided with Yelp in 2013, finding the company's claims about its filters qualified as free speech and that Demetriades failed to prove the anti-SLAPP commercial speech exemption.
But a panel for the Second Appellate District revived Demetriades' claims last week, agreeing that Yelp's statements about the efficacy and quality of its filters are commercial speech since it made those statements to promote its advertising services. The anti-SLAPP statute does not apply to statements made by people or businesses to promote their goods and services or to attract customers, the appeals court said.
"Although Yelp's website is a public forum and contains matters of public concern in its reviews of restaurants and other businesses, its statements about its review filter - as opposed to the content of the reviews themselves - are commercial speech about the quality of its product (the reliability of its review filter) intended to reach third parties to induce them to engage in a commercial transaction (patronizing Yelp's website, which patronage induces business on Yelp to purchase advertising," Judge Jeffrey Johnson wrote for the panel. [Parentheses in original.]
"Yelp's statements about the efficacy of its review filter consist of representations of fact about its services, and are not mere puffery or opinion," Johnson continued, noting that unlike vague, subjective statements, statements that make specific claims about a product's characteristics or performance are actionable since they are meant to induce potential customers to buy Yelp's advertising services.
"Thus, it is illogical to conclude that Yelp's statements that all reviews on its website are filtered are intended to mean anything other than that," Johnson wrote. "If Yelp intended the statements as puffery or opinion, in the context of Yelp's advertising-driven website such statements would have limited utility; thus Yelp would have had no legitimate purpose in making those statements about its review filter."
Yelp's statements also qualify as commercial speech because the intended audience is businesses that would consider buying the services, according to the ruling.
Johnson noted that Demetriades does not want to stop Yelp from using its filters, but instead to remove the allegedly inaccurate statements about their efficacy. If Demetriades obtains an injunction against Yelp, it would not interfere with Yelp's ability to advertise or users' ability to post reviews, Johnson said.
The judges also shot down Yelp's claim that the Federal Communications Decency Act blocks Demetriades's claims because Demetriades does not want to hold Yelp reliable for statements made by third parties, but "for its own statements regarding the accuracy of its filter," according to the ruling.
Demetriades is represented by Robert Waxman and David Tarlow with Ervin, Cohen & Jessup of Beverly Hills. Laura Brill and Nicholas Daum with Kendall, Brill & Klieger argued for Yelp.
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