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Judge Tosses Extortion Lawsuit Against Yelp

By MARCUS WOHLSEN   04/ 1/11 08:20 PM ET   AP

SAN FRANCISCO -- A federal judge who dismissed a class-action lawsuit accusing consumer review website Yelp of extortion is giving plaintiffs a month to refile their complaint.

Judge Marilyn Hall Patel ruled last week that the original suit failed to back up small business owners' claims that Yelp was manipulating user reviews to force them to advertise on the site.

Plaintiffs claimed that negative reviews reappeared after they refused to buy advertising. They alleged account executives with the San Francisco-based company said they could control which reviews appeared if businesses bought ads.

Yelp denied the claims and said the business owners misunderstood how the site works. The company says the site automatically filters reviews that appear untrustworthy, such as those from competitors or the businesses themselves.

"Plaintiffs do not appear to argue that Yelp ever explicitly threatened to harm their businesses, through manipulating user reviews, if they refused to purchase advertising," Patel wrote in her order to dismiss. Instead, she writes that the plaintiffs alleged actions by Yelp that implied a threat.

"These theories of extortion ... are insufficient to survive a motion to dismiss," she wrote.

Plaintiffs have 30 days to refile. Messages left with the lead attorney for plaintiffs were not immediately returned.

Several lawsuits that were brought together in the class action were filed early last year. They followed on the heels of a lengthy 2009 expose in the East Bay Express, a San Francisco Bay area alternative weekly, that detailed gripes of local business owners who said they had come under pressure from the site's ad sales representatives.

The first suit was filed by the owner of a Long Beach animal hospital who said he started getting calls from Yelp after users had left negative reviews. The owner said he was told that if he advertised Yelp would hide or lower negative reviews on his page and let him choose the order of the reviews.

In response, Yelp CEO Jeremy Stoppelman wrote on the website's blog that advertisers don't receive preferential treatment.

"The allegations are disappointing, not only because they are false, but because they ignore empirical evidence in favor of conspiracy theories," he wrote.

Since the first lawsuit was filed in February 2010, Yelp's monthly traffic has nearly doubled from 28 million monthly visitors to 50 million, the company said in a statement responding to the suit's dismissal.

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Filed by Catharine Smith  |  Report Corrections